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		Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Statements of Financial Position			F-3
Consolidated Statements of Financial Performance			F-4
Consolidated Statements of Cash Flows			F-5
Consolidated Statements of Changes in Stockholders’ Equity			F-6
Notes to Consolidated Financial Statements			F-7

F-1

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F-2

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							As at 30 June
							2005				2004
			Notes				$				$
Current Assets
Cash assets				17(a)				12,892,061				31,350,656
Receivables				6				709,418				340,482
Other				7				322,933				38,958
Total Current Assets								13,924,412				31,730,096
Non-Current Assets
Property, plant and equipment, net				8				3,273,663				669,699
Intangible assets				9				55,927,494				7,934,622
Goodwill, net				9				8,909,744				—
Other, net				7				—				32,641
Total Non-Current Assets								68,110,901				8,636,962
Total Assets								82,035,313				40,367,058
Current Liabilities
Payables				10				1,967,718				1,844,960
Payables, related party				10, 21(f)				50,102				37,144
Provisions				11				29,879				56,011
Total Current Liabilities								2,047,699				1,938,115
Total Liabilities								2,047,699				1,938,115
Net Assets								79,987,614				38,428,943
Equity
Parent entity interest
	Contributed equity			12(a)				107,883,835				49,957,982
	Reserves			13				20,761				78,220
	Deficit accumulated prior to development stage			14				(3,813,181	)			(3,813,181	)
	Deficit accumulated during development stage			14				(24,103,801	)			(9,377,278	)
Total parent entity interest								79,987,614				36,845,743
Total outside equity interest				15				—				1,583,200
Total Equity								79,987,614				38,428,943

F-3

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																		Period from
																		Inception of
																		Development Stage
						Years Ended 30 June												(1 Dec 2000)
																		to 30 June
						2005				2004				2003				2005
		Notes				$				$				$				$
Revenues from ordinary activities			3				828,976				381,679				110,675				2,351,075
Depreciation and amortization expense							(1,029,382	)			(39,360	)			(37,835	)			(1,156,849	)
Research and development expense			4				(8,287,930	)			(7,011,666	)			(4,586,182	)			(23,243,409	)
Interest expense							—				(5,635	)			—				(5,635	)
Employee benefits expense							(1,040,007	)			(1,238,381	)			(522,977	)			(3,281,475	)
Foreign currency (loss)/ gain, net							(1,623,484	)			1,461,368				(1,203	)			(163,111	)
Corporate office expenses							(3,973,892	)			(1,066,981	)			(318,806	)			(7,350,373	)
Loss from ordinary activities before income tax							(15,125,719	)			(7,518,976	)			(5,356,328	)			(32,849,777	)
Income tax expense relating to ordinary activities			5				—				—				—				—
Net loss before outside equity interest							(15,125,719	)			(7,518,976	)			(5,356,328	)			(32,849,777	)
Net loss attributable to outside equity interest			15				399,196				3,835,771				2,591,175				8,745,976
Net loss attributable to members of the parent entity							(14,726,523	)			(3,683,205	)			(2,765,153	)			(24,103,801	)
(Decrease)/increase in foreign currency translation reserve arising on translation of self-sustaining foreign operations							(350,287	)			77,985				(31,765	)			(301,367	)
Total revenue, expense and valuation adjustments attributable to members of the parent entity recognized directly in equity							(350,287	)			77,985				(31,765	)			(301,367	)
Total changes in equity other than those resulting from transactions with owners as owners							(15,076,810	)			(3,605,220	)			(2,796,918	)			(24,405,168	)
Loss per share (basic and diluted)			20				(0.07	)			(0.03	)			(0.03	)			(N/A	)

F-4

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																		Period from
																		Inception of
																		Development Stage
						Years Ended 30 June												(1 Dec 2000)
																		to 30 June
						2005				2004				2003				2005
		Notes				$				$				$				$
Cash flows from operating activities
Payments to suppliers and employees							(4,815,520	)			(2,044,430	)			(787,216	)			(8,002,194	)
Interest received							667,310				326,576				110,675				1,357,745
Interest paid							—				(6,782	)			—				(6,782	)
Research and development expenditure							(8,318,054	)			(6,124,304	)			(3,878,326	)			(21,126,373	)
Income tax paid							—				—				—				—
Other receipts							161,666				27,474				—				191,269
Net cash used in operating activities			17	(b)			(12,304,598	)			(7,821,466	)			(4,554,867	)			(27,586,335	)
Cash flows from investing activities
Purchase of property, plant and equipment							(3,410,218	)			(527,168	)			(52,956	)			(4,837,357	)
Proceeds from sale of property, plant and equipment							—				—				—				702,554
Cash paid for equity increase in controlled entities							(4,644,964	)			—				(622,656	)			(7,068,020	)
Net cash held by subsidiaries on acquisition							—				—				623,664				3,152,962
Net cash used in investing activities							(8,055,182	)			(527,168	)			(51,948	)			(8,049,861	)
Cash flows from financing activities
Proceeds from issue of ordinary shares							3,666,500				36,506,617				900,000				46,542,787
Payment of share issue costs							(27,422	)			(2,150,819	)			(47,433	)			(2,381,469	)
Equity contributions from outside equity interest							—				2,597,649				—				5,508,030
Net cash provided by financing activities							3,639,078				36,953,447				852,567				49,669,348
Net (decrease)/ increase in cash held							(16,720,702	)			28,604,813				(3,754,248	)			14,033,152
Cash at the beginning of the financial period							31,350,656				1,180,134				5,051,509				597,000
Effect of exchange rate changes on the balance of cash held in foreign currencies							(1,737,893	)			1,565,709				(117,127	)			(1,738,091	)
Cash at the end of the financial period			17	(a)			12,892,061				31,350,656				1,180,134				12,892,061

F-5

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										Deficit
										Accumulated				Deficit
										Prior to				Accumulated
						Contributed				Development				During
		Number of				Equity				Stage				Development Stage				Reserves				Total
		Shares				$				$				$				$				$
Balance at inception of development stage (1 December 2000)			62,329,947				6,060,181				(3,813,181	)			—				—				2,247,000
Shares issued, net of issue costs			20,218,535				6,047,668				—				—				—				6,047,668
Net loss			—				—				—				(738,501	)			—				(738,501	)
Foreign currency translation adjustment			—				—				—				—				29,300				29,300
Balance, 30 June 2001			82,548,482				12,107,849				(3,813,181	)			(738,501	)			29,300				7,585,467
Shares issued, net of issue costs			13,298,500				2,541,767				—				—				—				2,541,767
Net loss			—				—				—				(2,190,419	)			—				(2,190,419	)
Foreign currency translation adjustment			—				—				—				—				2,700				2,700
Balance, 30 June 2002			95,846,982				14,649,616				(3,813,181	)			(2,928,920	)			32,000				7,939,515
Shares issued, net of issue costs			8,069,231				952,568				—				—				—				952,568
Net loss			—				—				—				(2,765,153	)			—				(2,765,153	)
Foreign currency translation adjustment			—				—				—				—				(31,765	)			(31,765	)
Balance, 30 June 2003			103,916,213				15,602,184				(3,813,181	)			(5,694,073	)			235				6,095,165
Shares issued, net of issue costs			50,021,572				34,355,798				—				—				—				34,355,798
Net loss			—				—				—				(3,683,205	)			—				(3,683,205	)
Foreign currency translation adjustment			—				—				—				—				77,985				77,985
Balance, 30 June 2004			153,937,785				49,957,982				(3,813,181	)			(9,377,278	)			78,220				36,845,743
Shares issued for cash, net of issue costs			15,570,000				3,666,500				—				—				—				3,666,500
Shares issued as consideration for acquisition, net of issue costs			49,804,381				54,259,353				—				—				—				54,259,353
Net loss			—				—				—				(14,726,523	)			—				(14,726,523	)
Foreign currency translation adjustment			—				—				—				—				(350,287	)			(350,287	)
Option premium reserve adjustment			—				—				—				—				292,828				292,828
Balance, 30 June 2005			219,312,166				107,883,835				(3,813,181	)			(24,103,801	)			20,761				79,987,614

F-6

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1.	Background and Summary of Significant Accounting Policies

F-7

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(a)	Principles of consolidation

F-8

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(b)	Foreign currencies

	Translation of Foreign Currency Transactions

	Translation of Accounts of Overseas Operations

(c)	Cash assets

(d)	Receivables

(f)	Recoverable amount

(g)	Property, plant and equipment

	Cost

F-9

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	Depreciation

		Lesser of the lease term and
Leasehold improvements		the useful economic life
Plant and equipment			3 years

(h)	Operating leases

(i)	Intangibles

	Intellectual Property

(j)	Research and development costs

F-10

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(k)	Trade and other payables

(l)	Provisions

(m)	Contributed equity

(n)	Revenue recognition

(o)	Taxes

	•	where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
	•	receivables and payables are stated with the amount of GST included.

F-11

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(p)	Employee entitlements

	•	wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and
	•	other types of employee entitlements;

(q)	Loss per share

(r)	Acquisitions

2.	Purchase price allocation

F-12

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Cash		$	4,323,622
Fair value of shares issued			54,286,776
Fair value of options issued			292,828
Direct acquisition costs			321,342
Total cost of acquisition			59,224,568

							Acquired Interest
Item			Total Fair Value				55.28%
Cash assets			$	520,173			$	287,552
Receivables			$	198,239			$	109,587
Property, plant and equipment			$	600,640			$	332,034
Creditors			$	(1,462,721	)		$	(808,592	)
Intangible assets
	License		$	64,400,000			$	35,600,320
	Patents		$	25,000,000			$	13,820,000
Total							$	49,340,901
Consideration							$	59,224,568
Initial goodwill arising under A-GAAP							$	9,883,667

3.	Revenue from ordinary activities

		Years Ended 30 June
		2005				2004				2003
		$				$				$
Revenues from ordinary activities
Interest income on bank deposits			667,310				325,479				110,675
Other revenue			161,666				56,200				—
Total revenue from ordinary activities			828,976				381,679				110,675

F-13

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4.	Expenses and (Losses)/ Gains

(a)	Expenses

			Years Ended 30 June
			2005				2004				2003
			$				$				$
Depreciation and amortisation of non-current assets
Borrowing costs				11,520				11,520				9,600
Goodwill on acquisition				973,923				—				—
Plant and equipment				36,839				23,683				18,502
Leasehold improvements				7,100				4,157				9,733
				1,029,382				39,360				37,835
Included in research and development costs:
	Plant and equipment			569,071				287,702				258,432
	Leasehold improvements			18,717				—				—
	Other non-current assets			18,130				19,666				19,433
Total depreciation and amortisation of non-current assets				1,635,300				346,728				315,700
Write off of borrowing costs				1,919				—				—
Operating lease charges(i)				97,738				95,772				36,569
Research and development costs				8,287,930				7,011,666				4,586,182

(i)	Excludes operating lease charges classified as “research and development.”

(b)	(Losses)/ Gains

Net loss on disposal of property, plant and equipment			(6,910	)			—				—
Foreign currency (loss)/ gain, net			(1,623,484	)			1,461,368				(1,203	)

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5.	Income tax

			Years Ended 30 June
			2005				2004				2003
			$				$				$
Prima facie income tax benefit calculated at 30% on the loss from ordinary activities before income tax				(4,537,716	)			(2,255,693	)			(1,606,899	)
Tax effect of permanent differences
	Goodwill amortization			292,177				—				—
	Other items (net)			3,866				10,637				52,782
Income tax benefit attributable to ordinary activities				(4,241,673	)			(2,245,056	)			(1,554,117	)
Future income tax benefit not brought to account				4,241,673				2,245,056				1,554,117
Income tax expense				—				—				—
Future income tax benefit from tax losses not brought to account at balance date as realization of the benefit is not virtually certain (at 30%)				9,291,377				5,049,704				2,892,095

	(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realized;
	(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
	(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

6.	Receivables

		As at 30 June
		2005				2004
		$				$
Current
Indirect tax			709,418				340,482

F-15

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7.	Other assets

		As at 30 June
		2005				2004
		$				$
Current
Prepayments			322,933				38,958
Non-current
Loan facility arrangement costs(i)			34,559				34,559
Accumulated amortization			(34,559	)			(21,120	)
			—				13,439
Other non-current assets(ii)			53,061				58,301
Accumulated amortization			(53,061	)			(39,099	)
			—				19,202
			—				32,641

(i)

Loan facility arrangement costs were incurred in connection with the September 2002 agreement with Global Emerging Markets (“GEM”), a New York based private equity group, for a fully underwritten US$7.5 million equity line of credit facility. Such costs were being amortized on a straight-line basis over the three-year term of the facility. As part of the commitment fee, pSivida issued to GEM 2,000,000 options to acquire shares in pSivida at 20 cents each, expiring on 31 December 2004. Additionally, a commitment fee equivalent to 1.67% of the total value of the facility was payable by the Company to GEM on the proceeds of any drawdowns. The facility was terminated during the year ended 30 June 2005 with no drawdowns having been made.

(ii)	Other non-current assets comprises the fair value of non-cash consideration in pSiOncology made by minority shareholders. This amount has been amortized over three years on a straight line basis.

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8.	Property, plant and equipment, net

			As at 30 June
			2005				2004
			$				$
Plant and equipment
	At cost			2,439,455				1,360,533
	Accumulated depreciation			(1,119,916	)			(699,938	)
				1,319,539				660,595
Leasehold improvements
	At cost			155,799				14,214
	Accumulated depreciation			(30,188	)			(5,110	)
				125,611				9,104
Construction in progress(i)
	At cost			1,828,513				—
Total property, plant and equipment
	At cost			4,423,767				1,374,747
	Accumulated depreciation			(1,150,104	)			(705,048	)
				3,273,663				669,699

(i)	Construction in progress for 30 June 2005 relates to the construction of a new production facility in Germany, which was completed subsequent to year end.

F-17

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(a)	Reconciliations

			As at 30 June
			2005				2004
			$				$
Plant and equipment
	Carrying amount at beginning of year			660,595				400,549
	Additions			1,358,690				549,880
	Disposals			(6,910	)			—
	Depreciation			(605,910	)			(311,385	)
	Net foreign currency movements			(86,926	)			21,551
	Carrying amount at end of year			1,319,539				660,595
Leasehold improvements
	Carrying amount at beginning of year			9,104				3,736
	Additions			146,977				9,525
	Depreciation			(25,817	)			(4,157	)
	Net foreign currency movements			(4,653	)			—
	Carrying amount at end of year			125,611				9,104
Construction in progress
	Carrying amount at beginning of year			—				—
	Additions			1,904,551				—
	Net foreign currency movements			(76,038	)			—
	Carrying amount at end of year			1,828,513				—

Intellectual property — at cost(i)			55,927,494				7,934,622
Goodwill on acquisition(ii)			9,883,667				—
Accumulated amortization — goodwill			(973,923	)			—
			64,837,238				7,934,622

(i)	The intellectual property comprises the licence to develop applications for BioSilicontm and the related patents. As described in Note 1(i), amortization of this asset will commence on commercial production of related products, which had not commenced at 30 June 2005.
(ii)	Goodwill on acquisition relates to the acquisition of the remaining outside equity interest in pSiMedica in August 2004. Refer to Note 2.

F-18

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10.	Payables

		As at 30 June
		2005				2004
		$				$
Current
Trade creditors			806,047				1,162,281
Accruals			994,444				565,456
Payroll taxes payable			167,227				117,223
Amounts payable to directors and director-related entities			38,253				29,910
Amounts payable to other related parties			11,849				7,234
			2,017,820				1,882,104

Current
Provision for employee entitlements			29,879				56,011

		Consolidated
		2005				2004
		Number				Number
Number of employees at end of financial year			36				20

F-19

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12.	Contributed equity

(a)	Contributed equity

		As at 30 June
		2005				2004
		$				$
Ordinary shares, fully paid			107,883,835				49,957,982

(b)	Movements in share capital

			Years ended 30 June
			2005				2004				2005				2004
			Number				Number				$				$
Balance at beginning of year				153,937,785				103,916,213				49,957,982				15,602,183
Issued during the year
	Consideration for acquisition			49,804,381				—				54,286,776				—
	Share placements			—				38,000,000				—				33,946,640
	Share purchase plan			—				3,891,572				—				933,977
	Options exercised			15,570,000				8,130,000				3,666,500				1,626,000
	Share issue costs			—				—				(27,423	)			(2,150,818	)
Balance at end of year				219,312,166				153,937,785				107,883,835				49,957,982

F-20

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								Issue price				Total
Date		Details		Number				$				$
4 Aug 2003		Share purchase plan, net of $1,679 issue costs			3,891,572			$	0.24				932,298
20 Aug 2003		Exercise of options			650,000			$	0.20				130,000
27 Aug 2003		Exercise of options			650,000			$	0.20				130,000
28 Aug 2003		Exercise of options			1,725,000			$	0.20				345,000
8 Sep 2003		Exercise of options			1,000,000			$	0.20				200,000
3 Oct 2003		Exercise of options			1,000,000			$	0.20				200,000
6 Oct 2003		Private placement, net of $338,400 issue costs			13,000,000			$	0.50				6,161,600
24 Dec 2003		Exercise of options			30,000			$	0.20				6,000
6 Jan 2004		Exercise of options			475,000			$	0.20				95,000
4 Feb 2004		Exercise of options			2,000,000			$	0.20				400,000
20 Apr 2004		Private placement, net of $1,523,865 issue costs			19,375,000			US$	0.80				19,413,109
23 Apr 2004		Private placement, net of $286,875 issue costs			5,625,000			US$	0.85				6,222,791
3 May 2004		Exercise of options			300,000			$	0.20				60,000
19 May 2004		Exercise of options			300,000			$	0.20				60,000
Year ended 30 June 2004					50,021,572								34,355,798
14 Jul 2004		Exercise of options			50,000			$	0.20				10,000
5 Aug 2004		Shares issued as consideration for acquisition, net of $27,422 issue costs			49,804,381			$	1.09				54,259,353
6 Aug 2004		Exercise of options			250,000			$	0.20				50,000
13 Aug 2004		Exercise of options			200,000			$	0.20				40,000
17 Aug 2004		Exercise of options			150,000			$	0.20				30,000
20 Aug 2004		Exercise of options			300,000			$	0.20				60,000
27 Aug 2004		Exercise of options			100,000			$	0.20				20,000
8 Oct 2004		Exercise of options			450,000			$	0.20				90,000
27 Oct 2004		Exercise of options			100,000			$	0.40				40,000
11 Nov 2004		Exercise of options			450,000			$	0.20				90,000
14 Dec 2004		Exercise of options			8,650,000			$	0.20				1,730,000
14 Dec 2004		Exercise of options			1,550,000			$	0.40				620,000
14 Dec 2004		Exercise of options			150,000			$	0.50				75,000
14 Dec 2004		Exercise of options			150,000			$	0.65				97,500
31 Dec 2004		Exercise of options			2,470,000			$	0.20				494,000
31 Dec 2004		Exercise of options			550,000			$	0.40				220,000
Year ended 30 June 2005					65,374,381								57,925,853

F-21

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Table of Contents

(c)	Share options

										Balance at								Exercised				Forfeited
										beginning of				Issued during				during the				during the				Balance at
		Exercise				Expiry				year				the year				year				year				end of year
		Price				Date				Number				Number				Number				Number				Number
Unlisted options		$	0.20				31/12/04				12,570,000				—				(12,570,000	)			—				—
Unlisted options		$	0.50				31/12/04				150,000				—				(150,000	)			—				—
Unlisted options		$	0.65				31/12/04				150,000				—				(150,000	)			—				—
Unlisted options *		$	0.40				31/12/04				2,200,000				—				(2,200,000	)			—				—
Unlisted options *		$	0.20				31/12/04				500,000				—				(500,000	)			—				—
Unlisted options *		$	0.61				31/12/07				4,395,000				—				—				(20,000	)			4,375,000
Unlisted options **		$	1.09				5/8/08				—				2,050,000				—				—				2,050,000
Unlisted options *		$	1.18				5/8/09				—				9,114,537				—				(59,824	)			9,054,713
Unlisted options *		$	1.02				31/12/08				—				200,000				—				—				200,000
Unlisted options *		$	0.80				31/12/08				—				115,000				—				—				115,000
Unlisted options *		$	0.80				31/3/10				—				3,202,000				—				(25,000	)			3,177,000
											19,965,000				14,681,537				(15,570,000	)			(104,824	)			18,971,713

*	Options issued pursuant to the Company’s Employee Share Option Plan (ESOP).

**	2,050,000 options issued as payment of share issue costs to consultants not under the ESOP

		Number of				Weighted Average
Range of Exercise Price		Options				Exercise Price
$0.00 to $0.10			—				—
$0.10 to $0.25			—				—
$0.25 to $0.50			—				—
$0.50 to $0.70			4,375,000			$	0.61
$0.70 to $0.90			3,292,000			$	0.80
$0.90 to $1.10			2,250,000			$	1.08
$1.10 and above			9,054,713			$	1.18
			18,971,713			$	0.97

	Employee share option plan (ESOP)

F-22

---

Table of Contents

						2005				2004				2003
						Number				Number				Number
Balance at beginning of financial year			i				7,095,000				2,700,000				2,200,000
Granted during financial year			ii				12,631,537				4,395,000				520,000
Exercised during financial year			iii				(1,050,000	)			—				—
Transferred and exercised during financial year			iv				(1,650,000	)			—				—
Forfeited during financial year			v				(104,824	)			—				(20,000	)
Balance at end of financial year			vi				16,921,713				7,095,000				2,700,000

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2005

Number

Date

Date

Date

$

Issued 31 December 2001

2,200,000

31/12/01

13/10/03

31/12/04

$

0.40

Issued 1 November 2002

500,000

1/11/02

1/11/03

31/12/04

$

0.20

Issued 21 October 2003

250,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

250,000

21/10/03

21/7/04

31/12/07

$

0.61

Issued 21 October 2003

2,345,000

21/10/03

21/4/04

31/12/07

$

0.61

Issued 21 October 2003

350,000

21/10/03

21/1/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/05

31/12/07

$

0.61

7,095,000

F-23

---

Table of Contents

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2005

Number

Date

Date

Date

$

Issued 5 August 2004

175,000

5/8/04

5/8/04

5/8/09

$

1.18

Issued 5 August 2004

50,000

5/8/04

5/8/05

5/8/09

$

1.18

Issued 5 August 2004

8,889,537

5/8/04

5/8/04

5/8/09

$

1.18

Issued 22 April 2005

200,000

22/4/05

22/4/05

22/4/10

$

1.02

Issued 22 April 2005

115,000

22/4/05

22/4/05

31/12/08

$

0.80

Issued 22 April 2005

50,000

22/4/05

22/4/06

31/3/10

$

0.80

Issued 22 April 2005

450,000

22/4/05

22/4/05

31/3/10

$

0.80

Issued 22 April 2005

2,252,000

22/4/05

22/4/06

31/3/10

$

0.80

Issued 22 April 2005

450,000

22/4/05

22/4/07

31/3/10

$

0.80

12,631,537

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2004

Number

Date

Date

Date

$

Issued 21 October 2003

250,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

250,000

21/10/03

21/7/04

31/12/07

$

0.61

Issued 21 October 2003

2,345,000

21/10/03

21/4/04

31/12/07

$

0.61

Issued 21 October 2003

350,000

21/10/03

21/1/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/05

31/12/07

$

0.61

4,395,000

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2003

Number

Date

Date

Date

$

Issued 1 November 2002

520,000

1/11/02

1/11/03

31/12/04

$

0.20

520,000

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2005

Number

Date

Date

Date

$

Issued 31 December 2001

(550,000

)

31/12/01

13/10/03

31/12/04

$

0.40

Issued 1 November 2002

(500,000

)

1/11/02

1/11/03

31/12/04

$

0.20

(1,050,000

)

F-24

---

Table of Contents

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2005

Number

Date

Date

Date

$

Issued 31 December 2001

(1,650,000

)

31/12/01

13/10/03

31/12/04

$

0.40

(1,650,000

)

																		Exercise
						Grant				Vesting				Expiry				Price
Options — Series 2005		Number				Date				Date				Date				$
Issued 21 October 2003			(20,000	)			21/10/03				21/4/04				31/12/07			$	0.61
Issued 5 August 2004			(59,824	)			5/8/04				5/8/04				5/8/09			$	1.18
Issued 22 April 2005			(25,000	)			22/4/05				22/4/06				31/3/10			$	0.80
			(104,824	)

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2003

Number

Date

Date

Date

$

Issued 1 November 2002

(20,000

)

1/11/02

1/11/03

31/12/04

$

0.20

(20,000

)

F-25

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Table of Contents

																		Exercise
						Grant				Vesting				Expiry				Price
Options — Series 2005		Number				Date				Date				Date				$
Issued 21 October 2003			250,000				21/10/03				21/10/03				31/12/07			$	0.61
Issued 21 October 2003			250,000				21/10/03				21/7/04				31/12/07			$	0.61
Issued 21 October 2003			2,325,000				21/10/03				21/4/04				31/12/07			$	0.61
Issued 21 October 2003			350,000				21/10/03				21/1/04				31/12/07			$	0.61
Issued 21 October 2003			400,000				21/10/03				21/10/03				31/12/07			$	0.61
Issued 21 October 2003			400,000				21/10/03				21/10/04				31/12/07			$	0.61
Issued 21 October 2003			400,000				21/10/03				21/10/05				31/12/07			$	0.61
Issued 5 August 2004			175,000				5/8/04				5/8/04				5/8/09			$	1.18
Issued 5 August 2004			50,000				5/8/04				5/8/05				5/8/09			$	1.18
Issued 5 August 2004			8,829,713				5/8/04				5/8/04				5/8/09			$	1.18
Issued 22 April 2005			200,000				22/4/05				22/4/05				22/4/10			$	1.02
Issued 22 April 2005			115,000				22/4/05				22/4/05				31/12/08			$	0.80
Issued 22 April 2005			50,000				22/4/05				22/4/06				31/3/10			$	0.80
Issued 22 April 2005			450,000				22/4/05				22/4/05				31/3/10			$	0.80
Issued 22 April 2005			2,227,000				22/4/05				22/4/06				31/3/10			$	0.80
Issued 22 April 2005			450,000				22/4/05				22/4/07				31/3/10			$	0.80
			16,921,713

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2004

Number

Date

Date

Date

$

Issued 31 December 2001

2,200,000

31/12/01

13/10/03

31/12/04

$

0.40

Issued 1 November 2002

500,000

1/11/02

1/11/03

31/12/04

$

0.20

Issued 21 October 2003

250,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

250,000

21/10/03

21/7/04

31/12/07

$

0.61

Issued 21 October 2003

2,345,000

21/10/03

21/4/04

31/12/07

$

0.61

Issued 21 October 2003

350,000

21/10/03

21/1/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/03

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/04

31/12/07

$

0.61

Issued 21 October 2003

400,000

21/10/03

21/10/05

31/12/07

$

0.61

7,095,000

Exercise

Grant

Vesting

Expiry

Price

Options — Series 2003

Number

Date

Date

Date

$

Issued 31 December 2001

2,200,000

31/12/01

13/10/03

31/12/04

$

0.40

Issued 1 November 2002

500,000

1/11/02

1/11/03

31/12/04

$

0.20

2,700,000

F-26

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Table of Contents

(d)	Terms and conditions of contributed equity

F-27

---

Table of Contents

(e)	Shares and options issued after report date

13.	Reserves

		2005				2004
		$				$
Foreign currency translation			(272,067	)			78,220
Option premium			292,828				—
			20,761				78,220

(a)	Foreign currency translation reserve

		2005				2004
		$				$
Balance at beginning of year			78,220				235
(Gain)/loss on translation of foreign controlled entities			(350,287	)			77,985
Balance at end of year			(272,067	)			78,220

(b)	Option premium reserve

Balance at beginning of year			—				—
Increase on issue of options			292,828				—
Balance at end of year			292,828				—

14.	Accumulated deficit

(a)	Deficit accumulated prior to development stage

Balance at end of year			(3,813,181	)			(3,813,181	)

F-28

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Table of Contents

(b)	Deficit accumulated during development stage

		2005				2004
		$				$
Balance at beginning of year			(9,377,278	)			(5,694,073	)
Net loss attributable to members of the Company			(14,726,523	)			(3,683,205	)
Balance at end of year			(24,103,801	)			(9,377,278	)

15.	Outside equity interest

Balance at beginning of year			1,583,200				204,354
Share of subsidiary acquisition			—				3,622,319
Share of current period loss (through the acquisition date)			(399,196	)			(3,835,771	)
Share of foreign currency translation reserve			79,361				90,489
Effect of change in shareholding			(1,263,365	)			1,501,809
Balance at end of year			—				1,583,200

16.	Investments in controlled entities

						Ownership Interest
		Country of				2005				2004
		incorporation				%				%
pSiMedica Limited(i)			UK				100				44.72
pSiOncology Pte Ltd (ii)			Singapore				100				44.72
AION Diagnostics Limited (iii)			Australia				100				—
pSivida UK Limited (iii)			UK				100				—
pSivida Inc (iii)			USA				100				—

(i)		Consolidation occurs due to the Company controlling more than 50% of the voting rights in pSiMedica.
(ii)		100% owned subsidiary of pSiMedica Limited.
(iii)		These companies were incorporated during the year ended 30 June 2005 as wholly owned subsidiaries of pSivida.

F-29

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Table of Contents

17.	Notes to the statement of cash flows

(a)	Reconciliation of cash

		2005				2004
		$				$
Cash on hand			1,637,560				665,355
Deposits at call			11,254,501				30,685,301
			12,892,061				31,350,656

(b)	Reconciliation of loss from ordinary activities after related income tax to net cash flows used in operating activities

			Years ended 30 June
			2005				2004				2003
			$				$				$
Loss from ordinary activities after tax				(15,125,719	)			(7,518,976	)			(5,356,328	)
Non-cash items:
Depreciation and amortization				1,635,300				346,728				315,700
Write off of borrowing costs				1,919				—				—
Loss on disposal of property, plant and equipment				6,910				—				—
Shares issued in lieu of cash				—				—				100,000
Foreign exchange loss/ (gain)				1,623,484				(1,461,368	)			1,203
Changes in net assets and liabilities
(Increase)/decrease in assets:
	Trade and other receivables			(408,904	)			(238,081	)			23,511
	Prepayments			(290,102	)			(12,061	)			(6,172	)
	Deferred assets			—				—				(34,559	)
Increase/ (decrease) in liabilities:
	Trade and other creditors			222,635				1,062,292				401,778
	Provisions			29,879				—				—
Net cash flows used in operating activities				(12,304,598	)			(7,821,466	)			(4,554,867	)

(c)	Non-cash financing and investing activities

F-30

---

Table of Contents

Cash			623,664
Other non-current assets			63,615
Net assets acquired			687,279
Less minority interests			(64,623	)
Net assets acquired			622,656
Goodwill arising			—
Net cash effect: Cash consideration paid			(622,656	)
Cash included in net assets acquired			623,664
Net cash received on purchase of subsidiary			1,008

18.	Expenditure commitments

Operating leases (non-cancellable)
Year ended 30 June
	2006		$	325,509
	2007			119,424
	2008			2,946
	Thereafter			—
				447,879

19.	Subsequent events

F-31

---

Table of Contents

20.	Loss per share

			2005				2004				2003
			$				$				$
Net loss before outside equity interest				(15,125,719	)			(7,518,976	)			(5,356,328	)
Adjustments:
	Net loss attributable to outside equity interest			399,196				3,835,771				2,591,175
Loss used in calculating basic and diluted loss per share				(14,726,523	)			(3,683,205	)			(2,765,153	)

F-32

---

Table of Contents

			Number				Number				Number
Weighted average number of ordinary shares used in calculating basic loss per share				207,802,540				126,990,066				101,281,292
Effect of dilutive securities:
	Share options			—				—				—
Adjusted weighted average number of ordinary shares used in calculating basic and diluted loss per share				207,802,540				126,990,066				101,281,292

Share options			18,971,713				19,965,000				23,700,000

21.	Director and executive disclosures

(a)	Details of specified directors and specified executives

	•	Dr Roger Brimblecombe — Non-Executive Chairman
	•	Mr Gavin Rezos — Managing Director
	•	Dr Roger Aston — Director, Strategy
	•	Mr Stephen Lake — Non-Executive Director (appointed 30 July 2004)
	•	Ms Alison Ledger — Non-Executive Director (appointed 30 July 2004)
	•	Mrs Nadine Donovan — Former Finance Director (resigned 30 July 2004)

	•	Prof Leigh Canham — Chief Scientific Officer, pSiMedica Limited
	•	Mr Aaron Finlay — Company Secretary, Chief Financial Officer
	•	Dr Anna Kluczewska — Managing Director, AION Diagnostics Limited
	•	Mr Steve Connor — Operations Director, pSiMedica Limited
	•	Dr Jill Ogden — Commercialization Director, pSiMedica Limited

F-33

---

Table of Contents

(b)	Remuneration of specified directors and specified executives

(i)	Remuneration policy

										Post
		Primary								Employment								Equity								Total
		Salary								Super-				Other				Options*								Cash-based
		and Fees				Bonus				annuation				Benefits				(ii)				Total				Remuneration
		$				$				$				$				$				$				$
2005
Dr R Brimblecombe			224,459				25,000				—				—				229,296				478,755				249,459
Mr G Rezos			348,062				75,000				10,905				—				1,361,127				1,795,094				433,967
Dr R Aston			315,683				25,000				8,438				1,189				558,592				908,902				350,310
Mr S Lake			22,917				—				—				—				91,718				114,635				22,917
Ms A Ledger			27,500				—				2,475				—				91,718				121,693				29,975
Mrs N Donovan			2,083				—				188				—				—				2,271				2,271
Total			940,704				125,000				22,006				1,189				2,332,451				3,421,350				1,088,899
2004
Dr R Brimblecombe			152,992				—				—				—				145,200				298,192				152,992
Mr G Rezos			363,881				250,000				27,320				—				435,600				1,076,801				641,201
Dr R Aston			302,822				40,000				40,711				—				181,500				565,033				383,533
Mrs N Donovan			90,325				—				2,250				—				127,050				219,625				92,575
Total			910,020				290,000				70,281				—				889,350				2,159,651				1,270,301

*	These options had no taxable value at the date of issue.

F-34

---

Table of Contents

										Post
		Primary								Employment								Equity								Total
		Salary								Super-				Other				Options*								Cash-based
		and Fees				Bonus				annuation				Benefits				(ii)				Total				Remuneration
		$				$				$				$				$				$				$
2005
Prof L Canham			193,780				—				22,553				6,056				353,524				575,913				222,389
Mr A Finlay			144,572				32,500				13,135				—				370,396				560,603				190,207
Dr A Kluczewska			208,333				10,000				—				—				299,808				518,141				218,333
Mr S Connor			181,146				—				21,738				10,612				143,751				357,247				213,496
Dr J Ogden			169,816				—				20,378				6,060				143,751				340,005				196,254
Total			897,647				42,500				77,804				22,728				1,311,230				2,351,909				1,040,679
2004
Dr A Kluczewska			143,600				25,000				—				—				295,572				464,172				168,600
Prof L Canham			180,537				—				35,410				3,832				—				219,779				219,779
Mr S Connor			176,773				—				23,683				6,941				—				207,397				207,397
Dr R Saffie			130,742				—				15,441				2,307				—				148,490				148,490
Dr J Ogden			102,873				—				11,581				3,072				—				117,526				117,526
Total			734,525				25,000				86,115				16,152				295,572				1,157,364				861,792

*		These options had no taxable value at the date of issue.
(i)		Bonuses were paid in cash on 17 March 2005 as part of an annual staff review. Bonuses were determined based on a review of staff performance conducted by the remuneration committee.
(ii)		During the year options were granted to directors and specified executives in August 2004 in respect of the pSiMedica acquisition and April 2005 in respect of annual performance reviews, pursuant to the Company’s Employee Share Option Plan, which have been included as equity options remuneration above. These options have been valued using the Black Scholes Option Valuation Model, which takes into account time value and the volatility of the stock price.
		A total of 8,251,000 options were issued to directors and employees in August 2004. The options are exercisable at $1.18, being an 8% premium to the share price at the time of the grant, and may be exercised between the date of grant and expiry on 5 August 2009.
		A total of 3,152,000 options were issued to employees in April 2005. The options are exercisable at $0.80, being a 7% premium to the share price at the time of the grant. The options are subject to varying vesting and performance conditions and expire on 31 March 2010.

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(c)	Remuneration options granted and vested during the year

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	Share options issued by pSivida Limited

														Terms and Conditions for Each Grant
																		Value of
														Value Per				Underlying				Exercise
														Option at				Share at				Price Per
		Vested				Granted								Grant Date**				Grant Date				Share				Vesting
		Number				Number				Grant Date				$				$				$				Date				Expiry Date
Specified directors
Dr R Brimblecombe			500,000				500,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
Mr G Rezos			2,750,000				2,750,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
Dr R Aston			1,000,000				1,000,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
Mr S Lake			200,000				200,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
Ms A Ledger			200,000				200,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
Total			4,650,000				4,650,000
Specified executives
Prof L Canham			700,000				700,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
			—				125,000	*			22 Apr 05			$	0.26			$	0.75			$	0.80				22 Apr 06				31 Mar 10
Mr A Finlay			700,000				700,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
			—				200,000				22 Apr 05			$	0.26			$	0.75			$	0.80				22 Apr 06				31 Mar 10
Dr A Kluczewska			100,000				100,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
			—				125,000				22 Apr 05			$	0.26			$	0.75			$	0.80				22 Apr 06				31 Mar 10
			400,000
Mr S Connor			300,000				300,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
			—				125,000	*			22 Apr 05			$	0.26			$	0.75			$	0.80				22 Apr 06				31 Mar 10
Dr J Ogden			300,000				300,000				5 Aug 04			$	0.46			$	1.09			$	1.18				5 Aug 04				5 Aug 09
			—				125,000	*			22 Apr 05			$	0.26			$	0.75			$	0.80				22 Apr 06				31 Mar 10
Total			2,500,000				2,800,000

	Share options issued by AION Diagnostics Limited

														Terms and Conditions for Each Grant
																		Value of
														Value Per				Underlying				Exercise
														Option at				Share at				Price Per
		Vested				Granted								Grant Date**				Grant Date				Share				Expiry
		Number				Number				Grant Date				$				$				$				Date
Specified directors
Mr G Rezos			—				250,000	*			3 Feb 05			$	0.40			$	0.40				Nil				3 Feb 08
Dr R Aston			—				250,000	*			3 Feb 05			$	0.40			$	0.40				Nil				3 Feb 08
Total			—				500,000
Specified executives
Prof L Canham			—				65,840	*			3 Feb 05			$	0.40			$	0.40				Nil				3 Feb 08
Mr A Finlay			—				98,760	*			3 Feb 05			$	0.40			$	0.40				Nil				3 Feb 08
Dr A Kluczewska			—				395,040	*			3 Feb 05			$	0.40			$	0.40				Nil				3 Feb 08
Total			—				559,640

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	*	Vesting of these options is subject to performance conditions. Performance conditions for executive staff and directors include specific criteria relating to the employee’s role within the Company. Performance conditions for other staff require the satisfactory performance of their role.

**	Options have been valued using the Black Scholes Option Valuation Model, which takes into account time value and the volatility of the stock price.

(d)	Shares issued on exercise of remuneration options

						Amount Paid				Amount Unpaid
		Shares Issued				Per Share				Per Share
		Number				$				$
Specified directors
Mrs N Donovan			250,000			$	0.20				—
			150,000			$	0.40				—
Total			400,000

(e)	Specified directors’ and specified executives’ equity holdings

	Fully paid ordinary shares of pSivida Limited

		Balance at				Granted as				Net Other				Balance at
		1 July 2004				Remuneration				Change				30 Jun 2005
		Number				Number				Number				Number
Specified directors
Dr R Brimblecombe			320,833				—				124,234				445,067
Mr G Rezos			10,895,657				—				423,625				11,319,282
Dr R Aston			3,090,833				—				4,002,753				7,093,586
Mr S Lake*			—				—				—				—
Ms A Ledger*			2,000,000				—				(100,000	)			1,900,000
Mrs N Donovan**			54,333				—				—				54,333
Total			16,361,656				—				4,450,612				20,812,268
Specified executives
Prof L Canham			—				—				3,909,579				3,909,579
Mr A Finlay			—				—				—				—
Dr A Kluczewska			—				—				—				—
Mr S Connor			—				—				189,000				189,000
Dr J Ogden			—				—				—				—
Total			—				—				4,098,579				4,098,579

	*	Opening balance at date of appointment

**	Closing balance at date of resignation

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	Share options issued by pSivida Limited

		Balance at				Granted As				Net Other				Balance at
		1 July 2004				Remuneration				Change				30 Jun 2005
		Number				Number				Number				Number
Specified directors
Dr R Brimblecombe			1,000,000				500,000				(550,889	)			949,111
Mr G Rezos			5,450,000				2,750,000				(4,228,970	)			3,971,030
Dr R Aston			4,500,000				1,000,000				(3,950,889	)			1,549,111
Mr S Lake*			—				200,000				42,061				242,061
Ms A Ledger*			—				200,000				—				200,000
Mrs N Donovan**			850,000				—				—				850,000
Total			11,800,000				4,650,000				(8,688,687	)			7,761,313
Specified executives
Prof L Canham			—				825,000				39,289				864,289
Mr A Finlay							900,000				—				900,000
Dr A Kluczewska			1,200,000				225,000				—				1,425,000
Mr S Connor			—				425,000				19,645				444,645
Dr J Ogden			—				425,000				129,708				554,708
Total			1,200,000				2,800,000				188,642				4,188,642

	*	Opening balance at date of appointment

**	Closing balance at date of resignation

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	Share options issued by AION Diagnostics Limited

		Balance at				Granted As				Net Other				Balance at
		1 July 2004				Remuneration				Change				30 Jun 2005
		Number				Number				Number				Number
Specified directors
Dr R Brimblecombe			—				—				—				—
Mr G Rezos			—				250,000				—				250,000
Dr R Aston			—				250,000				—				250,000
Mr S Lake*			—				—				—				—
Ms A Ledger*			—				—				—				—
Mrs N Donovan**			—				—				—				—
Total			—				500,000				—				500,000
Specified executives
Prof L Canham			—				65,840				—				65,840
Mr A Finlay			—				98,760				—				98,760
Dr A Kluczewska			—				395,040				—				395,040
Mr S Connor			—				—				—				—
Dr J Ogden			—				—				—				—
Total			—				559,640				—				559,640

	*	Opening balance at date of appointment

**	Closing balance at date of resignation

(f)	Other transactions with specified directors

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22.	Auditor’s remuneration

		2005				2004				2003
		$				$				$
Amounts received or receivable for:
An audit or review of the statutory financial report of the Company			24,240				16,500				16,000
Other services in relation to the Company			1,020				6,000				4,628
			25,260				22,500				20,628
Amounts received or due and receivable by the auditors other than the statutory auditors of pSivida for:
An audit or review of the financial statements of subsidiary entities			42,423				30,393				38,600
Audit services in relation to US SEC and NASDAQ requirements on listing and annual lodgements			638,768				—				—
Other services in relation to the Company			14,432				—				—
			695,623				30,393				38,600

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23.	Segment information

(a)	Business segment — primary segment

(b)	Geographic segment — secondary segment

								United
				Australia				Kingdom				Singapore				Unallocated				Eliminations				Consolidated
				$				$				$				$				$				$
Segment revenues from external customers
	Year ended 30 June
		2005			—				161,666				—				667,310				—				828,976
		2004			888				55,312				—				325,479				—				381,679
		2003			25,065				72,729				12,881				—				—				110,675
Segment assets
	As at 30 June
		2005			11,429,117				68,660,341				1,934,243				—				(21,135	)			82,002,566
		2004			29,733,723				8,145,493				3,299,932				—				(812,090	)			40,367,058
Acquisition of segment assets
	Year ended 30 June
		2005			56,920				61,176,255				20,836				—				—				61,254,011
		2004			4,901,489				3,696,463				—				—				(5,501,723	)			3,096,229
Goodwill, net
	As at 30 June
		2005			—				8,909,744				—				—				—				8,909,744
		2004			—				—				—				—				—				—
Long lived assets
	As at 30 June
		2005			82,292				3,171,902				19,469				—				—				3,273,663
		2004			69,313				600,386				—				—				—				669,699

24.	Financial instruments

(a)	Significant accounting policies

(b)	Interest rate risk

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																						Weighted
						Floating				Fixed												Average
						Interest				Interest				Non-Interest								Interest
						Rate				Rate				Bearing				Total				Rate
		Notes				$				$				$				$				%
2005
Financial assets
Cash assets			17(a)				12,528,926				200,000				163,135				12,892,061				2.87
Receivables			6				—				—				709,418				709,418				n/a
							12,528,926				200,000				872,553				13,601,479
Financial liabilities
Payables			10				—				—				2,017,820				2,017,820				—
2004
Financial assets
Cash assets			17(a)				31,350,656				—				—				31,350,656				4.4
Receivables			6				—				—				340,482				340,482				n/a
							31,350,656				—				340,482				31,691,138
Financial liabilities
Payables			10				—				—				1,882,104				1,882,104				—

(c)	Fair values

(d)	Credit risk exposure

25.	Additional Company information

	Level 12, BGC Centre
	28 The Esplanade
	Perth WA 6000
	Australia
	Tel: 61 8 9226 5099

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26.	Impacts of adopting Australian equivalents to International Financial Reporting Standards (unaudited)

(a)	Management of the transition to AIFRS

(b)	The likely impacts of AIFRS on the results and financial position of the Company

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(c)	Adjustments to balance sheet items under AIFRS (net of tax)

(d)	Adjustments to current year loss under AIFRS (net of tax)

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(e)	Other impacts

(f)	Acquisition of minority interest

27.	Reconciliation to US GAAP

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	•	Deferred tax liability for acquired intangible assets — Previously, deferred taxes were not recorded on the intangible assets acquired in connection with the step acquisition of pSiMedica as the book to tax basis differences were deemed to be permanent as the amortization of the related intangibles is not deductible for income tax purposes. The Company has subsequently concluded that, although under tax law, it will not receive a tax deduction in the future for recovery of the intangible assets, recognition of a deferred tax liability on the acquired intangibles is nevertheless required under US GAAP because it is assumed for financial reporting purposes that the Company will generate future revenues at least equal to the recorded amount of the investment, and recovery will result in future taxable amounts.
	•	Valuation allowance for deferred income tax assets — Previously in establishing a valuation allowance, the Company fully reserved the total balance of the deferred income tax assets related to tax loss carryforwards as it was deemed more likely than not that the deferred tax assets would not be realized. As a result of the recognition of the US GAAP deferred tax liabilities in connection with the step acquisition of pSiMedica as per the above, the Company has reevaluated the recoverability of the deferred income tax assets, taking into consideration the reversal of taxable temporary differences under US GAAP.
	•	Amortization of intangible assets — Where the recognition of a deferred tax liability for acquired intangible assets as per the above resulted in additional basis of the related intangible, the additional basis is being amortized over the remaining estimated useful life of the intangible asset for US GAAP purposes.

		Years Ended 30 June
		2004				2003
		$				$
US GAAP net loss, as previously reported			(6,059,011	)			(3,288,418	)
Correction to deferred income taxes, net			1,318,950				1,216,235
Correction to intangible amortization expense			(279,913	)			(196,420	)
US GAAP net loss, as restated			(5,019,974	)			(2,268,603	)
US GAAP basic and diluted loss per share, as previously reported		$	(0.05	)		$	(0.03	)
US GAAP basic and diluted loss per share, as restated		$	(0.04	)		$	(0.02	)

		30 June				1 July
		2004				2004
		$				$
US GAAP total equity, as previously reported			34,819,468				5,204,116
Correction to deferred income taxes, net			3,674,230				2,355,280
Correction to intangible amortization expense			(698,993	)			(419,080	)
US GAAP total equity, as restated			37,794,705				7,140,316

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							Years Ended 30 June
							2005				2004				2003
							$				$				$
											(As restated)				(As restated)
Net loss in accordance with A-GAAP								(14,726,523	)			(3,683,205	)			(2,765,153	)
US GAAP adjustments:
Share-based compensation expense				(a)
	Options issued to consultants							(156,204	)			(250,933	)			(54,951	)
	Options issued to directors, executives and employees							(125,018	)			(448,920	)			(10,000	)
Intangible assets
	Fair value of shares issued as consideration — amortization expense			(b)				(18,198	)			(18,198	)			(18,198	)
	Direct acquisition costs — amortization expense			(c)				(9,357	)			(9,357	)			(9,357	)
	Amortization of intangible assets			(d)				(5,749,870	)			(650,140	)			(451,606	)
	Sales of stock by subsidiaries — amortization expense			(f)				(39,232	)			15,840				20,847
	In-process research and development			(g)				—				(1,035,018	)			—
Gross-up attributable to deferred tax liability — amortization expense				(h)				(335,617	)			(279,913	)			(196,420	)
Reversal of goodwill amortization				(e)				973,923				—				—
Deferred income taxes				(h)				3,645,504				1,318,950				1,216,235
Outside equity interest — US GAAP adjustments				(i)				(20,920	)			20,920				—
Net loss in accordance with US GAAP								(16,561,512	)			(5,019,974	)			(2,268,603	)
Loss per share in accordance with US GAAP:
	Basic and diluted							$(0.08	)			$(0.04	)			$(0.02	)
	Weighted average shares — basic and diluted							207,802,540				126,990,066				101,281,292

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							30 June
							2005				2004
							$				$
											(As
											restated)
Total equity in accordance with A-GAAP								79,987,614				38,428,943
US GAAP adjustments:
Intangible assets
	Fair value of shares issued as consideration			(b)				142,546				160,744
	Direct acquisition costs			(c)				73,292				82,648
	Amortization of intangible assets			(d)				(7,357,007	)			(1,607,137	)
	Sales of stock by subsidiaries			(f)				312,335				351,568
	In-process research and development			(g)				(1,035,018	)			(1,035,018	)
	Gross-up attributable to deferred tax liability			(h)				(1,034,610	)			(698,993	)
Goodwill
	Fair value of shares issued as consideration			(b)				8,267,528				—
	Reversal of amortization			(e)				973,923
Deferred income taxes				(h)				7,319,734				3,674,230
Outside equity interest				(i)
	Consolidated statement of financial position classification							—				(1,583,200	)
	US GAAP adjustments							—				20,920
Total equity in accordance with US GAAP								87,650,337				37,794,705

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				Years Ended 30 June
				2005				2004
				$				$
								(As
								Restated)
Balance in accordance with US GAAP, beginning of year					37,794,705				7,140,316
Issuance of shares in connection with acquisition, net of issue costs					62,526,881				—
Issuance of shares in connection with private placements, net of issue costs					—				31,797,500
Issuance of shares in connection with share purchase plan, net of issue costs					—				932,298
Issuance of shares in connection with exercise of options					3,666,500				1,626,000
Issuance of options in connection with acquisition					292,828				—
Issuance of options to consultants for services rendered		(a)			156,204				250,933
Issuance of options to directors, executives and employees		(a)			125,018				448,920
Gain on sales of stock by subsidiaries		(f)			—				540,727
Foreign currency translation adjustment					(350,287	)			77,985
Net loss in accordance with US GAAP					(16,561,512	)			(5,019,974	)
Balance in accordance with US GAAP, end of year					87,650,337				37,794,705

(a)	Share-based compensation

	Options issued to consultants

	•	The Company issued 2,640,000 share options to outside consultants during the year ended 30 June 2005, consisting of 2,275,000 options in August 2004 and 365,000 options in April 2005. Of the options issued in August 2004, 2,050,000 were issued as payment of share issue costs, and therefore, have no impact on net loss or total equity as the fair value was accounted for as a reduction of the proceeds of the share issuance.

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	•	The Company issued 500,000 share options to an outside consultant during the year ended 30 June 2004 as an incentive for future performance.
	•	The Company issued 2,000,000 share options to GEM during the year ended 30 June 2003, pursuant to an agreement for a fully underwritten $7.5 million equity line of credit.

	•	risk-free interest rate of 5.36% for fiscal 2005, 5.55% for fiscal 2004 and 5.31% for fiscal 2003;
	•	no dividends;
	•	expected volatility of 57% for fiscal 2005 and 70% for fiscal 2004 and 2003;
	•	expected life of 2 years for 2005, 2.5 years for 2004 and 1.6 years for 2003.

		Years Ended 30 June
		2005								2004								2003
						Weighted								Weighted								Weighted
						Average								Average								Average
						Exercise								Exercise								Exercise
		Number of				Price				Number of				Price				Number of				Price
		Options				$				Options				$				Options				$
Outstanding at beginning of year			500,000				0.61				2,000,000				0.20				—				—
Granted			2,640,000				1.07				500,000				0.61				2,000,000				0.20
Exercised			—								(2,000,000	)			0.20				—
Forfeited			(10,000	)			1.18				—								—
Expired			—								—								—
Outstanding at end of year			3,130,000				1.00				500,000				0.61				2,000,000				0.20
Exercisable at end of year			3,055,000				1.00				250,000				0.61				2,000,000				0.20

			2005								2004								2003
Weighted average grant date fair value
	Exercise price exceeds market price			$0.38								$0.50								$0.03
	Exercise price equals market price			$0.40								—								—

	Options issued to directors, executives and employees

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	•	pSivida issued 12,041,537 share options under the ESOP to directors, executives and employees during the year ended 30 June 2005, consisting of 8,889,537 options in August 2004 and 3,152,000 options in April 2005.

	•	Of the options issued in August 2004, 638,537 options were issued to directors, executives and employees in consideration for the waiver of their rights under outstanding options previously issued by pSiMedica, and were accounted for as part consideration for the acquisition of pSiMedica.
	•	No compensation cost was recognized for the remaining 8,251,000 options issued in August 2004 because the exercise price exceeded the quoted market price on the measurement date, corresponding to the date of grant.
	•	The vesting of 2,032,000 of the options issued in April 2005 is conditional upon the achievement of performance conditions. Under US GAAP, these options are considered variable plan options as the number of shares the individuals are entitled to receive is not known at the date of grant. Compensation cost is computed on the date of grant based on management’s estimate of the number of shares that will eventually be issued upon the achievement of the specific performance criteria and adjusted at each statement of financial position date (up to the vesting date) for changes in the estimate of the number of the shares and the quoted market price of the shares. No compensation cost was recognized for these options during the year because the exercise price exceeded the quoted market price as of 30 June 2005.
	•	No compensation cost was recognized for the remaining 1,120,000 options issued in April 2005 because the exercise price exceeded the quoted market price on the measurement date, corresponding to the date of grant

	•	pSivida issued 3,895,000 share options under the ESOP to directors, executives and employees during the year ended 30 June 2004. No compensation cost was recognized for such options because the exercise price exceeded the quoted market price on the measurement date, corresponding to the date of grant.
	•	pSivida issued 520,000 share options under the ESOP to employees during the year ended 30 June 2003. The share options vested one year from the date of grant subject to the option holders having satisfied defined performance criteria. Under US GAAP, these options are considered variable plan options as the number of shares the individuals are entitled to receive is not known at the date of grant. Compensation cost is computed on the date of grant based on management’s estimate of the number of shares that will eventually be issued upon the achievement of the specific performance criteria and adjusted at each statement of financial position date (up to the vesting date) for changes in the estimate of the number of the shares and the quoted market price of the shares. 500,000 of the share options vested during the year ended 30 June 2004.
	•	pSivida issued 2,200,000 share options under the ESOP to directors, executives and employees during the year ended 30 June 2002. The vesting of these share options is conditional upon a share performance measure. Under US GAAP, these options are considered variable plan options as the number of shares the individuals are entitled to receive are not known at the date of grant. As the share performance measure is beyond the control of the Company, any resulting compensation

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		expense is recognized under APB 25 when the target is achieved. During the year ended 30 June 2004, all options vested as the share performance target was met, and accordingly, the Company recognized compensation expense under APB 25 based on the excess of the quoted market price on the vesting date over the exercise price of the share options.

		Years Ended 30 June
		2005								2004								2003
						Weighted Average								Weighted Average								Weighted Average
		Number of				Exercise Price				Number of				Exercise Price				Number of				Exercise Price
		Options				$				Options				$				Options				$
Outstanding at beginning of year			6,595,000				0.52				2,700,000				0.36				2,200,000				0.40
Granted			12,041,537				1.08				3,895,000				0.61				520,000				0.20
Exercised			(1,050,000	)			0.30				—				—				—
Transferred			(1,650,000	)			0.40				—				—				—
Forfeited			(104,824	)			0.98				—				—				(20,000	)			0.20
Expired			—								—				—				—
Outstanding at end of year			15,831,713				0.97				6,595,000				0.52				2,700,000				0.36
Exercisable at end of year			12,754,713				1.01				5,795,000				0.49				—				—

			2005				2004				2003
Weighted average grant date fair value
	Exercise price exceeds market price		$	0.42			$	0.37				—
	Exercise price less than market price			—				—			$	0.45

	•	pSiMedica issued 30,300 and 12,000 share options to directors, executives and employees during the years ended 30 June 2004 and 2003, respectively. The Company recognized compensation expense for 3,375 options issued during the year ended 30 June 2004 based on the excess of the estimated fair value of stock over the exercise price on the date of grant. No compensation cost was recognized for the remaining 26,925 options issued during the year ended 30 June 2004 and all 12,000 options issued during the year ended 30 June 2003 because the exercise price exceeded the estimated fair value on the date of grant for these options.
	•	pSiMedica issued 29,900 and 26,600 share options to directors, executives and employees during the years ended 30 June 2004 and 2003, respectively. The share options vest three years from the date of grant subject to the option holders having satisfied defined performance criteria. Under US GAAP, these options are considered variable plan options as the number of shares the individuals are entitled to receive are not known at the date of grant. Compensation cost is computed on the date of grant based on management’s estimate of the number of shares that will eventually be

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		issued upon the achievement of the specific performance criteria and adjusted at each statement of financial position date (up to the vesting date) for changes in the estimate of the number of the shares and the estimated fair value of the shares.

		Years Ended 30 June
		2005								2004								2003
						Weighted								Weighted								Weighted
						Average								Average								Average
		Number of				Exercise								Exercise								Exercise
		Options				Price				Number of				Price				Number of				Price
						£				Options				£				Options				£
Outstanding at beginning of year			98,800				9.66				38,600				6.25				—				—
Granted			—				—				60,200				11.84				38,600				6.25
Exchanged for pSivida options			(98,800	)			9.66				—				—				—				—
Outstanding at end of year			—				—				98,800				9.66				38,600				6.25
Exercisable at end of year			—				—				—				—				—				—

			2005				2004				2003
Weighted average grant date fair value
	Exercise price exceeds market price			N/A			$	9.79				—
	Exercise price equals market price			N/A				—			$	10.32
	Exercise price less than market price			N/A			$	13.20				—

	•	AION Diagnostics issued 1,200,000 share options to directors, executives and employees during the year ended 30 June 2005. The options vest subject to various milestone-based vesting conditions. Under US GAAP, these options are considered variable plan options as the number of shares the individuals are entitled to receive are not known at the date of grant. Compensation cost is computed on the date of grant based on management’s estimate of the number of shares that will eventually be issued upon the achievement of the specific performance criteria and adjusted at each statement of financial position date (up to the vesting date) for changes in the estimate of the number of the shares and the estimated fair value of the shares. For those options with performance conditions beyond the control of AION Diagnostics, any resulting compensation expense is recognized under APB 25 when the target is achieved.

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		Year Ended
		30 June 2005
						Weighted
						Average
						Exercise
		Number of				Price
		Options				$
Outstanding at beginning of year			—				—
Granted			1,200,000				0.00
Outstanding at end of year			1,200,000				0.00
Exercisable at end of year			—				—

		2005
Weighted average grant date fair value
Exercise price less than market price		$	0.29

			Year Ended 30 June
			2005				2004				2003
			$				$				$
							(As restated)				(As restated)
US GAAP net loss, as reported				(16,561,512	)			(5,019,974	)			(2,268,603	)
Add: Stock-based employee compensation expense included in US GAAP reported net loss, net of related tax effects				125,018				448,920				10,000
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect				(4,537,993	)			(975,468	)			(190,003	)
US GAAP pro forma net loss				(20,974,487	)			(5,546,522	)			(2,448,606	)
US GAAP loss per share
	Basic and diluted — as reported		$	(0.08	)		$	(0.04	)		$	(0.02	)
	Basic and diluted — pro forma		$	(0.10	)		$	(0.04	)		$	(0.02	)

	•	risk-free interest rate of 5.36% for fiscal 2005, 5.55% for fiscal 2004, and 5.31% for fiscal 2003 ;
	•	no dividends;
	•	expected volatility of 57% for fiscal 2005 and 70% for fiscal 2004 and 2003;

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	•	expected life of 2.5 years for 2005, 2.5 years for 2004 and 1.6 years for 2003.

(b)	Fair value of shares issued as consideration

(c)	Direct acquisition costs

(d)	Amortization of intangible assets

(e)	Goodwill

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(f)	Sales of stock by subsidiaries

	•	On 7 March 2002, pSiMedica issued a total of 400,000 ordinary shares (as adjusted for a 100 to 1 share split) to pSivida and another shareholder at £5 ($13.61) per share, resulting in a total of £2,000,000 ($5,443,658) cash consideration. This issuance increased pSivida’s direct ownership interest in pSiMedica from 40.05% to 42.85%.
	•	On 13 October 2003, pSiMedica issued a total of 237,342 preference shares to pSivida and another shareholder at £12.64 ($30.47) per share, resulting in a total of £3,000,000 ($7,232,401) cash consideration. This issuance increased pSivida’s direct ownership interest in pSiMedica from 42.85% to 46.25%.
	•	On 1 March 2004, pSiOncology issued a total of 2,769 shares to pSiMedica and other minority shareholders at SGD$1,000 ($761.61) per share, resulting in a total of SGD$2,769,000 ($2,108,911). This issuance increased pSivida’s direct ownership interest in pSiOncology from 38.56% to 42.26%.
	•	On 24 May 2004, pSiMedica issued 56,954 ordinary shares to the minority shareholders of pSiOncology at £12.64 ($32.29) per share in consideration for the minority interest in pSiOncology, resulting in a total of £719,899 ($1,838,822) non-cash consideration. This issuance decreased pSivida’s direct ownership interest in pSiMedica from 46.25% to 44.72%.

(g)	In-process research and development

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(h)	Deferred income taxes

(i)	Outside equity interest

(j)	Loss per share

(k)	Consolidated statement of financial performance classification differences

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(l)	Consolidated statement of comprehensive loss

		Years Ended 30 June
		2005				2004				2003
		$				$				$
Net loss in accordance with A-GAAP			(14,726,523	)			(3,683,205	)			(2,765,153	)
Other comprehensive (loss)/income:			—				—				—
Foreign currency translation adjustment, net of tax of $0			(350,287	)			77,985				(31,765	)
Comprehensive loss in accordance with A-GAAP			(15,076,810	)			(3,605,220	)			(2,796,918	)

(m)	Income tax

		Years Ended 30 June
		2005				2004				2003
		$				$				$
Australia			(7,590,833	)			(637,675	)			(855,756	)
United Kingdom			(6,076,779	)			(5,736,347	)			(4,054,871	)
Singapore			(1,458,107	)			(1,144,954	)			(445,701	)
			(15,125,719	)			(7,518,976	)			(5,356,328	)

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		Years Ended 30 June
		2005				2004
		$				$
Deferred tax assets
Net operating loss carryforwards			9,291,377				5,049,704
Provision accruals			8,964				—
Other			4,147				2,189
Total gross deferred tax assets			9,304,488				5,051,893
Deferred tax liabilities
Prepayments			96,880				8,687
Net deferred tax asset			9,207,608				5,043,206
Valuation allowance			(9,207,608	)			(5,043,206	)
Net recorded deferred taxes			—				—

28.	Recently issued but not yet adopted US Pronouncements

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                                                                    Exhibit 4.6
                                    FORM OF
                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement, dated as of December 30, 2005, (this
"Agreement"), is entered into by and among pSivida Limited, an Australian
corporation ("Issuer"), and the securityholders of Control Delivery Systems,
Inc., a Delaware corporation (the "Company"), named on the signature pages
hereto (each a "Holder" and collectively, the "Holders").

                                    RECITALS

     A. WHEREAS, Issuer is a party to that certain Agreement and Plan of Merger,
dated as of October 3, 2005 (the "Merger Agreement") that provides, among other
things, that (i) pSivida Inc., a Delaware corporation and a wholly-owned
subsidiary of Issuer ("Merger Subsidiary"), will be merged with and into the
Company (the "Merger") with the Company continuing as the surviving corporation
(the "Surviving Corporation"), and (ii) immediately after the Merger, Issuer
will own all of the issued and outstanding equity interests of the Surviving
Corporation.

     B. WHEREAS, subject to the terms and conditions of the Merger Agreement, at
the effective time of the Merger (the "Closing"), the Holders shall receive or
become entitled to receive American Depositary Shares of Issuer ("ADSs").

     C. WHEREAS, as a condition precedent to the consummation of the
transactions contemplated by the Merger Agreement, Issuer has agreed to grant
the Holders certain registration rights, as set forth herein, with respect to
the Registrable Securities (as defined herein).

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto agree as follows:

          1. Definitions.

          (a) Each capitalized term used but not defined herein shall have the
meaning ascribed to such term in the Merger Agreement.

          (b) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

          (c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

          (d) "Registrable Securities" means all of the ADSs issued to a Holder
pursuant to the Merger Agreement, such number and type of securities to be
equitably adjusted in the event of a stock split, stock dividend, combination,
reclassification, merger or reincorporation.



          (e) "Registration Expenses" means all expenses incident to Issuer's
performance of, or compliance with, this Agreement, including, without
limitation, all registration, filing, listing and NASD fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
expenses of counsel for Issuer and of its independent public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, but excluding underwriting
discounts and commissions, and transfer taxes, if any.

          (f) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

          (g) "Rule 415" shall mean Rule 415 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

          (h) "Transfer" shall mean any sale, assignment, conveyance, exchange,
pledge, hypothecation, gift, disposal of or other parting with any indicia or
aspect of title, ownership or possession, including without limitation, the
withdrawal from the depositary of the underlying ordinary shares of pSivida
Limited represented by one or more ADSs.

          2. Shelf Registration Statement for Holders. Issuer shall use its
commercially reasonable efforts to prepare and file with the Commission a
"shelf" registration statement under the Securities Act for an offering to be
made on a continuous basis pursuant to Rule 415 covering, along with any other
securities that Issuer shall choose to include, all of the Registrable
Securities held by a Holder or permitted transferee or assignee pursuant to
Section 8 (the "Shelf Registration Statement"). Issuer shall use its
commercially reasonable efforts to cause the Shelf Registration Statement (a) to
become effective on or prior to one hundred eighty (180) days following the
closing of the Merger (the "Required Registration Date") and (b) to remain
effective for a period ending on the earliest to occur of (i) two (2) years from
the date of effectiveness (subject to extension for any "black-out" period
permitted by Section 6(a) or suspensions permitted by Section 3(f) hereof), or
(ii) the first date (x) on which each Holder of Registrable Securities would be
eligible to sell publicly, pursuant to Rule 144 within the volume limitations
contained in subsection (e)(1)(i) of Rule 144, 110% of the Registrable
Securities then held by such Holder, or (y) on which all Registrable Shares have
been sold (the "Registration Rights Period"). The Shelf Registration Statement
when declared effective (including the documents incorporated therein by
reference) will comply as to form with all applicable requirements of the
Securities Act and the Exchange Act. Notwithstanding the foregoing, Issuer shall
have no obligation to include any of the Registrable Securities of any Holder in
any Shelf Registration Statement pursuant to this Agreement when such Holder
would be eligible to sell publicly, pursuant to Rule 144 within the volume
limitations contained in subsection (e)(1)(i) of Rule 144, 110% of the
Registrable Securities then held by such Holder.



          3. Registration Procedures - Issuer. In connection with its
obligations contained in Section 2 hereof, Issuer will, subject to the terms and
conditions of this Agreement:

          (a) subject to any "black-out" period permitted by Section 6(a),
prepare and file with the Commission such amendments and supplements to the
Shelf Registration Statement and any prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the end of the
Registration Rights Period;

          (b) furnish to each Holder of Registrable Securities covered by the
Shelf Registration Statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, in each case, as such Holder may reasonably request;

          (c) use its commercially reasonable efforts to register or qualify,
prior to the effective date of such registration, all Registrable Securities
covered by the Shelf Registration Statement under such securities or blue sky
laws of such jurisdictions as each Holder thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the securities owned by such Holder, except
that Issuer shall not for any such purpose be required to: (i) qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this Section 3(c) be obligated to be so qualified,
(ii) subject itself to taxation in any such jurisdiction, or (iii) consent to
general service of process in any such jurisdiction;

          (d) use its commercially reasonable efforts to obtain all legal
opinions and auditors' consents as may be required by applicable law.

          (e) use its commercially reasonable efforts to cause, prior to the
effective date of the Shelf Registration Statement, all Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Holder or Holders thereof to consummate the disposition of such Registrable
Securities;

          (f) (i) immediately notify each Holder of Registrable Securities
covered by the Shelf Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event or the existence of any condition as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made, or,
if in the opinion of counsel for Issuer, it is necessary to supplement or amend
such prospectus to comply with law and, after such notice,



(ii) except for periods described in Section 6 hereof or the time period for
filing with the Commission information referred to in Section 3(a) hereof has
not expired, promptly prepare and furnish to each Holder a supplement or
amendment to such prospectus or otherwise update such prospectus so that such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Issuer will extend the Registration
Rights Period by the number of days during the period from and including the
date of giving such notice to and including the date when the Holders shall have
received copies of the revised prospectus;

          (g) use its best efforts to list or admit all Registrable Securities
covered by such registration statement on any securities exchange on which any
of the Registrable Securities are then listed or any other trading market on
which any of the Registrable Securities are then admitted for trading; and
provide and cause to be maintained a depositary for all Registrable Securities;
and

          (h) pay all Registration Expenses relating to any such registration.

          4. Failure to Register. In addition to any other remedies available to
Holders under this Agreement or at law or equity, if no Shelf Registration
Statement has been declared effective by the Required Registration Date or such
Shelf Registration Statement is not available with respect to all Registrable
Securities at any time on or after the Required Registration Date and during the
Registration Rights Period (except during any "black-out" period permitted by
Section 6(a) or any suspension permitted by Section 3(f) hereof) the Issuer
shall cause to be wire transferred to an account specified by each Holder on the
last business day of each month an amount, in immediately available United
States funds, equal to:

               1/30% x ND x MV

               Where:

               ND = the number of days in such month that the Shelf Registration
                    Statement has not been declared effective by the Required
                    Registration Date or the Shelf Registration Statement is not
                    available with respect to Registrable Securities that Issuer
                    is then required to register pursuant to Section 2 or that
                    may not otherwise be sold by such Holder immediately
                    pursuant to Rule 144 without compliance with the
                    registration requirements of the Securities Act ("Non-Rule
                    144 Stock"); and

               MV = the average of the closing price of Parent ADSs on The
                    Nasdaq National Market for each of the ten (10) trading days
                    ending on the trading day that is four (4) full trading days
                    prior to the Closing Date of the Merger multiplied by the
                    average number of shares of Non-Rule 144 Stock held by
                    Holders on each of the days included in "ND" above.



          5. Registration Procedures - Holders. Each Holder of Registrable
Securities agrees as follows:

          (a) that upon receipt of any notice from Issuer of the happening of
any event of the kind described in Section 3(f), such Holder will forthwith
discontinue such Holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) and, if so directed by Issuer, will deliver to
Issuer all copies, other than permanent file copies, then in such Holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice, and

          (b) that it will immediately notify Issuer, at any time when a
prospectus relating to the registration of such Registrable Securities is
required to be delivered under the Securities Act, of the happening of any event
as a result of which information previously furnished by such Holder to Issuer
in writing for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.

          6. Black-Out Periods for Holders; Standstill.

          (a) No Holder shall offer to sell or sell any Registrable Securities
pursuant to the Shelf Registration Statement, and Issuer shall not be required
to supplement or amend any Registration Statement or otherwise facilitate the
sale of Registrable Securities pursuant thereto, during the 30-day period (or
such lesser number of days until Issuer makes a relevant public disclosure or
otherwise gives Holders notice of the termination of such period) immediately
following the receipt by each Holder of a certificate of an authorized officer
of Issuer to the effect that Issuer has determined in good faith that such
offer, sale, supplement or amendment is likely to (i) interfere with or have a
detrimental effect on the negotiation or completion of any material transaction
that is being contemplated by Issuer (whether or not a final decision has been
made to undertake such transaction) at the time the right to delay is exercised,
or (ii) involve initial or continuing disclosure obligations that are likely to
have a detrimental effect on the Issuer or its stockholders. Any period
described in this Section 6(a) during which Holders are not able to sell shares
of Registrable Securities pursuant to the Shelf Registration Statement is herein
referred to as a "black-out" period. Issuer shall notify each Holder of the
expiration or earlier termination of any "black-out" period (the nature and
pendency of which need not be disclosed during such "black-out" period). The
Issuer may exercise the rights provided by this Section 6(a) with respect to no
more than an aggregate of sixty (60) days within any 365-day period; provided,
(x) that no "black-out" period shall exceed thirty (30) consecutive days and (y)
that the Issuer may not exercise the rights provided by this Section 6(a) for
more than an aggregate of thirty (30) days within the first six months following
the effectiveness of the Shelf Registration Statement.

          (b) No Holder shall offer to sell or Transfer any Registrable
Securities, pursuant to the Shelf Registration Statement or otherwise, during
the six (6) month period immediately following the Closing. Notwithstanding the
foregoing, a Holder may transfer Registrable Securities during such period (i)
as a bona fide gift or gifts, provided that the donee or donees



thereof agree to be bound in writing by the restrictions set forth herein, (ii)
to any trust for the direct or indirect benefit of the Holder or the immediate
family of Holder, provided that the trustee of the trust agrees to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value, or (iii) to an Affiliate,
partner, member or stockholder of the Holder or, with respect to any Holder that
is an institutional investor, to another institutional investor under common
management with such Holder, provided that the transferee agrees to be bound in
writing by the restrictions set forth herein, or (iv) with the prior written
consent of Issuer.

          (c) No Holder shall offer to sell or Transfer any of any of the
ordinary shares underlying the Registrable Securities (other than to an
Affiliate, partner, member or stockholder of the Holder or to an institutional
investor under common management with such Holder in compliance with the terms
of Section 8 herein), including through trading on the Australian Stock
Exchange, at any time prior to the earlier of: (a) the Issuer's subsequent
lodgement with the Australian Securities and Investments Commission of a
prospectus under the Corporations Act for fully paid ordinary shares of the
Issuer (such prospectus incorporating the Shelf Registration Statement or
extracts of the Shelf Registration Statement as deemed appropriate by the
Issuer); or (b) the date which is 12 months after the closing of the Merger. The
Issuer shall, on or prior to the Required Registration Date lodge such
prospectus.

          (d) Each Holder hereby agrees that, at the request of and for the
benefit of the underwriter or underwriters of any underwritten public offering
of ADSs or other securities of the Issuer for the account of the Issuer, for a
period beginning seven days immediately preceding and ending not more than
ninety (90) days following the effective date of the registration statement used
in such offering, such Holder will not offer, sell, contract to sell, pledge, or
otherwise dispose of, directly or indirectly, any ADSs or securities convertible
into or exchangeable or exercisable for any ADSs (other than any transfers of a
Holder to any Affiliate, partner, member or stockholder of such Holder (each of
whom shall have furnished to the Issuer and the underwriters its written consent
to be bound by the terms of this Agreement pursuant to Section 8)), enter into a
transaction which would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of the ADSs, whether any such aforementioned
transaction is to be settled by delivery of the ADSs or such other securities,
in cash or otherwise, or publicly disclose the intention to make any such offer,
sale, pledge or disposition, or to enter into any such transaction, swap, hedge
or other arrangement, without, in each case, the prior written consent of such
underwriter or underwriters; provided, however, that such Holder is at the time
of such public offering an officer or director of the Issuer or is the holder of
more than 5% of the outstanding capital stock of Issuer and that all officers
and directors and all holders of more than 5% of the outstanding capital stock
of the Issuer enter into lock-up agreements with such underwriter or
underwriters for the same period and on the same terms.

          7. Indemnification.

          (a) Indemnification by Issuer. Issuer will, and hereby does, to the
full extent permitted by law indemnify and hold harmless each participating
Holder of any Registrable Securities covered by any registration statement filed
pursuant to Section 2 hereof, from and against any losses, claims, damages or
liabilities, joint or several (or actions or proceedings,



whether commenced or threatened, in respect thereof, whether or not such Holder
is a party thereto, and including reasonable costs of investigation and legal
expenses) (collectively, "Claims"), to which such Holder may become subject
under the Securities Act or otherwise, insofar as such Claims arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto (if used during the period Issuer is required to keep the
registration statement current) or any documents incorporated therein
(collectively, "Registration Documents"), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of a prospectus or
preliminary prospectus, in light of the circumstances in which they were made),
and Issuer will reimburse such Holder for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that Issuer shall not be liable in any such case
to the extent that any such Claim or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any such Registration Document in reliance upon and in conformity with
written information furnished to Issuer by such Holder for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder and shall
survive the Transfer of such securities by such Holder.

          (b) Indemnification by the Holders. Each Holder will, if Registrable
Securities held by such Holder are included in any registration statement filed
pursuant to Section 2 hereof, indemnify the Issuer, each of its directors,
officers, legal counsel, and accountants, each Holder and each of their
officers, directors and partners, and each person controlling such Holder (to
the extent such Holder's Registrable Securities were included in such
registration), against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Issuer, its directors, officers, partners, legal counsel, and accountants,
the Holders, or control persons, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Issuer by such Holder and stated to be specifically
for use therein; provided, however, that the obligations of such Holder
hereunder will be limited to an amount equal to the net proceeds to such Holder
(after deducting any underwriter's discounts and commissions and all other
expenses paid by such Holder in connection with the registration in question)
and shall not apply to amounts paid in settlement of any such claims, losses,
damages or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld).

          (c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
Claim referred to in the preceding subdivisions of this Section 7, such
indemnified party will, if a claim in respect thereof



is to be made against an indemnifying party, give written notice to the latter
of the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall consent to entry of any judgment or
enter into any settlement of any pending or threatened proceeding in respect of
which an indemnified party is or could have been a party and indemnity could
have been sought under Section 7(a) without the consent of the indemnified party
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.

          8. Transfer or Assignment of Registration Rights. The rights and
obligations provided by this Agreement may be transferred or assigned by any
Holder in connection with the transfer of such Holder's Registrable Securities
to an Affiliate, partner, member or stockholder of such Holder or, with respect
to any Holder that is an institutional investor, to another institutional
investor under common management with such Holder, and any such transferee shall
be deemed a Holder hereunder; provided that no Holder may assign its rights
hereunder unless (i) its proposed assignee assumes all of the obligations of
such Holder hereunder and (ii) Issuer is given written notice prior to any said
transfer or assignment, containing the name and address of any such transferee.

          9. Sales Pursuant to Rule 144. Each of the parties hereto acknowledges
that the registration benefits provided in this Agreement will not affect the
ability of the Holders to sell Registrable Securities pursuant to Rule 144
rather than pursuant to the Shelf Registration Statement.

          10. Reports under the Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit such
Holder to sell securities of the Issuer to the public without registration and
with a view to making it possible for Holders to register the Registrable
Securities pursuant to a registration statement on Form S-3 or Form F-3, as
applicable, the Issuer agrees to use its commercially reasonable efforts to:

          (a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

          (b) file with the Commission in a timely manner all reports and other
documents required of the Issuer under the Securities Act and the Exchange Act;
and

          (c) furnish to any Holder promptly upon request, to the extent
necessary in order to enable such Holder to avail itself of any rule or
regulation of the Commission that permits the



selling of any such securities without registration, a written statement by the
Issuer as to its compliance with the reporting requirements of Rule 144 (at any
time after the termination of the trading restrictions contained in Section
6(b)), the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), or as to its qualification as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies).

          11. Termination of Registration Obligation. Any and all other
provisions of this Agreement notwithstanding, in the event that the Issuer
becomes a domestic U.S. issuer and as part of such transaction issues to all
Holders securities in consideration of the Registrable Securities (the
"Equivalent Securities") in a transaction that is registered under the
Securities Act such that the Equivalent Securities are freely tradable under the
Securities Act, then this Agreement will terminate upon the issuance of such
registered Equivalent Securities and the rights and obligations of all parties
hereunder shall cease, provided that any payment obligations then owing under
Sections 3(h), 4 or 7 of this Agreement shall not be affected by such
termination and such provisions shall remain in full force and effect with
respect to such accrued obligations.

          12. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (a) if
personally delivered, when so delivered, (b) if mailed, three (3) business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below, (c) if given by telex or telecopier, once such notice or other
communication is transmitted to the telex or telecopier number specified below
and the appropriate answer back or telephonic confirmation is received, provided
that such notice or other communication is promptly thereafter mailed in
accordance with the provisions of clause (b) above, or (d) if sent through an
overnight delivery service in circumstances in which such service guarantees
next day delivery, the day following being so sent:

               (i) If to Issuer:

               pSivida Limited
               Level 12, BGC Centre
               28 The Esplanade, Perth
               WA 6000 Australia
               GPO Box 2535
               Perth, WA 6831
               Attention: Gavin Rezos
               Facsimile No.: +61 8 9226 5499

               with a copy (which shall not constitute notice) to Parent's
               Counsel:
               Curtis, Mallet-Prevost, Colt & Mosle LLP
               101 Park Avenue
               New York, NY 10178
               Attention: Lawrence Goodman, Esq.
               Facsimile No.: (212) 697-1559



               (ii) If to Holders:

               To the address set forth on the signature pages hereto.

     In the event that any of the Holders identified in this Agreement transfers
Registrable Securities to a new Holder in accordance with Section 8 above,
Issuer may provide notice to such Holder through notifying the original Holder
identified herein. Any party may give any notice, request, demand, claim or
other communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.

          13. Amendments. No change or modification of this Agreement or waiver
of any provision hereof shall be valid, binding or enforceable as against (a)
Issuer, unless the same shall be in writing and signed by Issuer, and (b) any
Holder, unless the same shall be in writing and signed by Holders who own, in
the aggregate, at least fifty per cent (50%) of the total number of Registrable
Securities that Issuer is then required to register pursuant to Section 2 hereof
at the time of such amendment; provided, however, that any such amendment or
waiver that affects one Holder in a way that is materially adverse to such
Holder relative to all other Holders cannot be effected without the written
consent of such Holder and no additional or expanded obligations may be imposed
on any Holder without the consent of such Holder.

          14. No Waivers. No waiver by a party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent occurrence. No failure or delay by a party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.

          15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, provided that no registration rights will be transferred
other than in accordance with Section 8 hereof.

          16. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of New York.

          17. Counterparts. This Agreement may be signed in any number of
counterparts and the signatures delivered by telecopy, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.

          18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the



subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.

          19. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.

          20. Severability. If any provision of this Agreement, or the
application thereof to any person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.

          21. Third Party Beneficiaries. No provision of this Agreement shall
create any third party beneficiary rights in any person.

                            [Signature pages follow.]



          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                        ISSUER

                                        PSIVIDA LIMITED


                                        By: /s/ Gavin Rezos
                                            ------------------------------------
                                        Name: Gavin Rezos
                                        Title: Chief Executive Officer and
                                               Managing Director


                                        By: /s/ Aaron Finlay
                                            ------------------------------------
                                        Name: Aaron Finlay
                                        Title: Chief Financial Officer and
                                               Company Secretary



                             HOLDERS' SIGNATURE PAGE

                                     TO THE

                          REGISTRATION RIGHTS AGREEMENT

     EXECUTED this _______ day of ____________, 2006


SIGN HERE: X
             ------------------------   ----------------------------------------
                                        Exact Number of Registrable Securities

- -------------------------------------   ----------------------------------------
Print name exactly as it should         Enter number of ADSs of pSivida Limited
appear in the Shelf Registration        (other than Registrable Securities) that
Statement                               you own.

IF AN ENTITY, ADD:

                                        Have you or your organization had any
By:                                     position, office or other material
    ---------------------------------   relationship within the past three (3)
Title:                                  years with pSivida Limited or its
       ------------------------------   affiliates? Check one:

                                        [ ] Yes

ALL HOLDERS:                            [ ] No

Address: ____________________________   If "Yes" please describe: ______________

_____________________________________   ________________________________________

_____________________________________   ________________________________________

Fax: ________________________________

                                                                    EXHIBIT 4.12

                                                                  EXECUTION COPY


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                              AMENDED AND RESTATED

                                LICENSE AGREEMENT

                                     BETWEEN

                         CONTROL DELIVERY SYSTEMS, INC.

                                       AND

                           BAUSCH & LOMB INCORPORATED

  THIS AGREEMENT IS CONFIDENTIAL AND SHALL NOT BE DISCLOSED TO ANY THIRD PARTY
    EXCEPT IN ACCORDANCE WITH THE PROCEDURES SPECIFIED IN ARTICLE 32 HEREOF.

                         Dated as of December 9th, 2003



                                TABLE OF CONTENTS



                                                                                                             Page
                                                                                                             ----
                                                                                                          
Article 1. Definitions:..................................................................................       1

        1.1     Active Commercialization or Actively Commercializing.....................................       1
        1.2     Affiliate................................................................................       1
        1.3     Amendment Date...........................................................................       2
        1.4     ANDA.....................................................................................       2
        1.5     ARMD.....................................................................................       2
        1.6     Base Royalty.............................................................................       2
        1.7     Clinical IP..............................................................................       2
        1.8     Commercialize, Commercializing or Commercialization......................................       2
        1.8A    Co-Owned Patents.........................................................................       2
        1.9     Confidential Information.................................................................       2
        1.10    Develop, Developing or Development.......................................................       2
        1.11    DME......................................................................................       2
        1.12    DR.......................................................................................       2
        1.13    Eligible Licensed Product................................................................       3
        1.14    First Generation Exclusive Licensed Product..............................................       3
        1.15    FDA......................................................................................       3
        1.16    Generic Product..........................................................................       3
        1.17    Improvement..............................................................................       3
        1.18    IND......................................................................................       3
        1.19    Invention................................................................................       3
        1.20    Issued Patent Claim......................................................................       3
        1.21    Know-how.................................................................................       3
        1.22    Licensed Field...........................................................................       3
        1.23    Licensed Patents.........................................................................       3
        1.24    Licensed Product.........................................................................       4
        1.25    Licensed Territory.......................................................................       4
        1.26    Licensee Improvement.....................................................................       4
        1.27    Licensee Improvement Application.........................................................       4
        1.28    Licensee Improvement Patent..............................................................       4
        1.29    Licensor Improvement Product.............................................................       4
        1.29A   Licensor Improvement.....................................................................       4
        1.29B   Licensor Improvement Patents.............................................................       5
        1.30    Milestone Payment........................................................................       5
        1.31    NDA......................................................................................       5
        1.32    Net Sales................................................................................       5
        1.33    Non-Exclusive Licensed Product...........................................................       5
        1.34    Original Effective Date..................................................................       6
        1.35    Other Technology.........................................................................       6
        1.36    Patent Rights............................................................................       6
        1.37    Person...................................................................................       6
        1.38    Regulatory Approval......................................................................       6
        1.39    Right of Access to Clinical IP...........................................................       6





                                                                                                           
        1.40    Sublicense...............................................................................       6
        1.41    Sublicensee..............................................................................       6
        1.42    Target Market............................................................................       6
        1.43    Term of this Agreement...................................................................       6
        1.44    Third Party Licensed Product.............................................................       7
        1.45    Total Relevant Sales.....................................................................       7
        1.46    UKRF.....................................................................................       7
        1.47    UKRF Licenses............................................................................       7
        1.48    Uveitis Base Royalty Product.............................................................       7
        1.49    Uveitis Product..........................................................................       7
        1.50    Valid Claim..............................................................................       7
        1.51    Vitrasert Licensed Product...............................................................       7

Article 2. Granting Clause:..............................................................................       8

        2.1     License Grant............................................................................       8
        2.2     Sublicensing.............................................................................       8
        2.3     Non-suit.................................................................................       9
        2.4     Non-assert of Know-how...................................................................      10
        2.5     Non-Compete..............................................................................      10
         (a)    Non-Compete for Uveitis Product..........................................................      10
         (b)    Non-Compete for First Generation Exclusive License Product...............................     101
        2.6     Licensor Disclosure of Inventions........................................................      12
        2.7     Licensee Disclosure of Inventions........................................................      12
        2.8     Co-Owned Patents.........................................................................      13
        2.9     Licensee Non-suit........................................................................      13
        2.10    Licensee Covenant Not to File............................................................      13
        2.11    Frustration Regarding Vitrasert Product..................................................      13

Article 3. Royalties and Repayment Obligations...........................................................      13

        3.1     Running Royalties........................................................................      13
        3.2     Royalty Step-Down for Generic Competition................................................      15
        3.3     Royalties Payable Only Once..............................................................      16
        3.4     Timing of Royalty Payments...............................................................      16
        3.5     Withholding Taxes........................................................................      16
        3.6     Intentionally Omitted....................................................................      16
        3.7     Repayment of Advanced Amount.............................................................      16
        3.8     Royalty Calculation......................................................................      18

Article 4. License and Maintenance Fees..................................................................      18

        4.1     License and Maintenance Fees.............................................................      18

Article 5. Development of Licensed Products..............................................................      18

        5.1     Joint Diligence Obligation...............................................................      18
        5.2     Licensee's General Diligence Obligations.................................................      18
        5.3     (a) Licensee's Specific Diligence Obligations - Uveitis..................................      18
        5.3     (b) Licensee's Specific Diligence Obligations - Other First Generation
                Exclusive Licensed Product...............................................................      18





                                                                                                            
        5.4     Licensee's Specific Diligence Obligations - Non-Exclusive Licensed Products..............      19
        5.5     Failure to Comply with Diligence Obligations.............................................      19

Article 6. Marketing Obligations.........................................................................      19

Article 7. Reporting and Accounting Provisions:..........................................................      20

        7.1     Royalty Report...........................................................................      20
        7.2     Record Keeping by Licensee...............................................................      20
        7.3     Termination Report.......................................................................      20

Article 8. Ownership:....................................................................................      21

        8.1     Ownership................................................................................      21
        8.2     Inventorship.............................................................................      21
        8.3     Licensee Improvements....................................................................      21

Article 9. Filing and Maintenance of Patents:............................................................      23

Article 10. Enforcement of Intellectual Property Rights:.................................................      24

        10.1    Notice to Licensor.......................................................................      24
        10.2    Right to Bring Suit - Licensor; Settlement...............................................      24
        10.3    Right to Bring Suit - Licensee...........................................................      24
        10.4    UKRF.....................................................................................      25
        10.5    Expense..................................................................................      25

Article 11. Term; Termination:...........................................................................      27

        11.1    Expiration of Royalty Obligations........................................................      27
        11.2    Term.....................................................................................      27
        11.3    Termination by Licensor..................................................................      27
        11.4    Termination by Licensee..................................................................      28
        11.5    Bankruptcy...............................................................................      29
        11.6    Effect of Termination....................................................................      29
        11.7    Grant Back...............................................................................      29

Article 12. Ownership of Clinical IP:....................................................................      30

        12.1    Clinical IP Outside Licensees License Rights.............................................      30
        12.2    Clinical IP-Cooperation..................................................................      30

Article 13. University of Kentucky Research Foundation Licenses:.........................................      30

Article 14. Indemnification:.............................................................................      31

        14.1    Indemnification of Licensee..............................................................      31
        14.2    Indemnification of Licensor..............................................................      31
        14.3    Limitation of Liability..................................................................      32
        14.4    Procedure for Indemnification............................................................      32
        14.5    Insurance................................................................................      32

Article 15. Trademarks:..................................................................................      32

Article 16. Representations and Warranties:..............................................................      33

        16.1    Representations and Warranties of Both Parties...........................................      33





                                                                                                            
        16.2    Representations and Warranties of Licensor...............................................      33

Article 17. Warranty Disclaimer:.........................................................................      34

Article 18. Operations in Compliance with Law:...........................................................      35

Article 19. Infringement of Third Party's Patents:.......................................................      35

Article 20. Force Majeure:...............................................................................      37

Article 21. Choice of Law/Forum:.........................................................................      37

Article 22. Dispute Resolution:..........................................................................      37

Article 23. Notices:.....................................................................................      38

Article 24. Merger Clause:...............................................................................      39

Article 25. Integration Clause:..........................................................................      39

Article 26. Severability Clause:.........................................................................      39

Article 27. No Waiver:...................................................................................      40

Article 28. Transferability of Rights and Obligations:...................................................      40

Article 29. Patent Marking:..............................................................................      40

Article 30. Publicity:...................................................................................      40

Article 31. Independent Contractors:.....................................................................      40

Article 32. Confidentiality:.............................................................................      40

        32.1    Confidentiality..........................................................................      40
        32.2    External Disclosure......................................................................      41

Article 33. Relinquishment:..............................................................................      42

        33.1    UKRF Letter Agreement....................................................................      42
        33.2    Covenant Not to Compete..................................................................      42

Article 34. No Limit to Remedies:........................................................................      42

Article 35. Counterparts:................................................................................      42

Article 36. Transition Obligations:......................................................................      42

        36.1    Clinical/Trial Agreements................................................................      42
        36.2    Clinical Activities Data.................................................................      43
        36.3    Transition Space.........................................................................      43
        36.4    Insurance................................................................................      43




EXHIBITS
- --------
Exhibit 1.14         -    First Generation Exclusive Licensed Product
                          Specifications/Drawings
Exhibit 1.23(a)      -    Licensed Patents, Patent Applications and IDFs
Exhibit 1.23(b)      -    Excluded Patents, Patent Applications and IDFs
Exhibit 1.33         -    Non-Exclusive Licensed Product
Exhibit 1.47         -    UKRF Licenses
Exhibit 2.3          -    Non-Suit Excluded Patents, Patent Applications and
                          IDFs
Exhibit 2.8          -    Licensee Patents
Exhibit 2.9          -    Licensee Non-suit
Exhibit 2.10         -    Licensee IDFs; Covenant Not to File
Exhibit 3.7.3        -    Form of Option
Exhibit 3.7.4        -    Form of Promissory Note
Exhibit 4.1          -    Milestone Payments
Exhibit 5.3          -    Due Diligence Obligations for First Generation
                          Exclusive Licensed Products (Non-Uveitis Indications)
Exhibit 5.4          -    Due Diligence Obligations for Non-Exclusive Licensed
                          Products
Exhibit 16.1(vi)     -    Litigation, Proceedings, Governmental Investigations
Exhibit 16.2(iii)    -    Exceptions to Ownership of Licensed Patents
Exhibit 16.2(v)      -    Licensor Disclosees
Exhibit 36.1A        -    Clinical Agreements
Exhibit 36.1B        -    Trial Agreements


                     AMENDED AND RESTATED LICENSE AGREEMENT

THIS AMENDED AND RESTATED LICENSE AGREEMENT ("Agreement"), effective as of the
9th day of December, 2003 (the "Amendment Date"), is made between Control
Delivery Systems, Inc., a corporation organized and existing under the laws of
the State of Delaware and having its principal place of business at 400 Pleasant
Street, Watertown, Massachusetts 02472-2234 ("Licensor") and Bausch & Lomb
Incorporated, a corporation organized and existing under the laws of the State
of New York and having its principal place of business at One Bausch & Lomb
Place, Rochester, New York 14604 ("Licensee"). Collectively, Licensor and
Licensee are "Parties" and, individually, a "Party."

                                    RECITALS

WHEREAS, the Parties have entered into, and performed in part under, the License
Agreement between Licensor and Licensee, dated June 9, 1999, as amended January
1, 2001, December 31, 2001, and April 14, 2003 (the "1999 Agreement"), and the
License and Development Agreement dated December 31, 1992, between Licensor and
Licensee, as the assignee of ChironVision Corporation (formerly Chiron
IntraOptics, Inc.) ("Chiron"), as amended August 16, 1993, March 30, 1995, June
23, 1995, and December 31, 1997 (the "Vitrasert Agreement"); and

WHEREAS, the Parties have determined to change, in part, the nature of their
relationship with respect to the development, manufacturing and licensing of
products under the 1999 Agreement and with respect to intellectual property
rights and other matters reflected in this Agreement; and

WHEREAS, the Parties wish to amend and restate their intentions into a single
agreement, all to effect the foregoing changes.

NOW THEREFORE, in consideration of the mutual promises set forth below, the
Parties agree as follows:

ARTICLE 1. DEFINITIONS:

In addition to the terms defined elsewhere in this Agreement, the following
terms shall have their associated meanings.

   1.1 Active Commercialization or Actively Commercializing. "Active
   Commercialization" and "Actively Commercializing" means: (a) Licensee
   diligently conducting clinical trials for Uveitis Base Royalty Product; or
   (b) with respect to a Uveitis Base Royalty Product for which clinical trials
   are complete, Licensee diligently obtaining Regulatory Approval; or (c) with
   respect to a Uveitis Base Royalty Product that has received Regulatory
   Approval in one or more markets, Licensee diligently Commercializing such
   product in such markets; all in active furtherance of Licensee's diligence
   obligations pursuant to Articles 5 and 6 of this Agreement.

   1.2 Affiliate. "Affiliate" of any Party means any Person that is controlled
   by, controls, or is under common control with such Party, for so long as such
   control relationship continues to exist. "Control" as used in this definition
   means the possession, directly or indirectly, of the



   power to direct or cause the direction of the management of a Person, whether
   through ownership of voting securities, by contract, or otherwise.

   1.3 Amendment Date. "Amendment Date" shall mean December 9th, 2003.

   1.4 ANDA. "ANDA" means an Abbreviated New Drug Application and all associated
   documents and components thereof, required to be filed with the FDA in order
   to obtain approval to market a particular product in the United States.

   1.5 ARMD. "ARMD" means age-related macular degeneration.

   1.6 Base Royalty. "Base Royalty" means a running royalty rate of [*] of Net
   Sales, provided that, as set forth in Section 3.8, the  amount of royalties
   due and owing pursuant to Section 3 shall be subject to Licensee's right of
   recoupment as follows: if the Advanced Amount has not been fully repaid by
   Licensor to Licensee as required hereunder, the amount of any royalties that
   might otherwise be due and owing from Licensee to Licensor under this
   Agreement shall in all instances be the amount determined in accordance with
   Article 3, less the Unpaid Advanced Amount at the time of such determination.

   1.7 Clinical IP. "Clinical IP" means (i) all pre-clinical and clinical
   protocols, studies, data and results and study-related forms, materials and
   reports (e.g., investigator brochures, informed consent forms, data safety
   monitoring board related documents, patient recruitment related materials,
   biocompatibility studies, animal studies, safety studies, and chemistry,
   manufacturing and control data) used in or resulting from any pre-clinical or
   clinical study or trial and any audits of any pre-clinical or clinical study
   or trial of any First Generation Exclusive Licensed Product or the Vitrasert
   Licensed Product in the Licensed Field, and (ii) all INDs, NDAs, any unfiled
   applications, components or materials normally associated with an IND or NDA,
   regulatory filings or applications comparable to INDs or NDAs in any foreign
   jurisdictions, and other regulatory applications and approvals regarding any
   First Generation Exclusive Licensed Product or the Vitrasert Licensed Product
   in the Licensed Field.

   1.8 Commercialize, Commercializing or Commercialization. "Commercialize",
   "Commercializing" or "Commercialization" means the sale, offering for sale,
   distribution, or marketing, of a product.

   1.8A Co-Owned Patents. "Co-Owned Patents" is defined in Section 2.8 of this
   Agreement.

   1.9 Confidential Information. "Confidential Information" is defined in
   Article 32 of this Agreement.

   1.10 Develop, Developing or Development. "Develop", "Developing" or
   "Development" means performance of human clinical trials for a product.

   1.11 DME. "DME" means diabetic macular edema.

   1.12 DR. "DR" means diabetic retinopathy.

   [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
   TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
   THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND
   EXCHANGE ACT OF 1934, AS AMENDED.

                                      -2-



   1.13 Eligible Licensed Product. "Eligible Licensed Product" is defined in
   Section 3.2 of this Agreement.

   1.14 First Generation Exclusive Licensed Product. "First Generation Exclusive
   Licensed Product" shall mean a product, other than the Vitrasert Licensed
   Product, that is an implant that is required to be surgically inserted
   through an incision of at least 2 mm (and which cannot be inserted through an
   incision of less than 2 mm) in the scelera into the vitreous, is secured in
   the posterior of the eye, cannot be injected, and uses a reservoir design
   that generally conforms to the drawings and specifications (and any prior
   iterations thereof in whole or in part) shown in Exhibit 1.14. An example of
   such a design is that which is currently used in clinical trial #005 and #002
   for DME and clinical trial #001 for Uveitis.

   1.15 FDA. "FDA" means the United States Food and Drug Administration.

   1.16 Generic Product. "Generic Product" is defined in Section 3.2 of this
   Agreement.

   1.17 Improvement. "Improvement" means any Invention which is a development,
   enhancement, improvement, invention, modification, derivative or new use of a
   Licensed Product, [*].

   1.18 IND. "IND" means an Investigational New Drug Application and associated
   documents, components thereof, or corresponding applications and associated
   documents for devices or combination products, required to be filed with the
   FDA in order to obtain approval to commence human clinical trials of product
   in the United States.

   1.19 Invention. "Invention" shall mean any invention or discovery.

   1.20 Issued Patent Claim. "Issued Patent Claim" is defined in Section 1.50 of
   this Agreement.

   1.21 Know-how. "Know-how" means unpatented information, whether or not
   patentable, including, without limitation, technical information, processes,
   formulae, trade secrets, materials, designs, drawings and data.

   1.22 Licensed Field. "Licensed Field" means with respect to: (a) the First
   Generation Exclusive Licensed Products, any and all use for the treatment,
   prevention and/or diagnosis of any disease, disorder and/or condition of the
   human eye; (b) Non-Exclusive Licensed Products, any and all use for the
   treatment, prevention and/or diagnosis in humans of [*] (c) Vitrasert
   Licensed Product, any and all use for the prevention and treatment of
   cytomegalovirus retinitis in humans; and (d) all Licensed Products, any and
   all research in non-human eyes.

   1.23 Licensed Patents. "Licensed Patents" shall mean all: (1) patents issued
   to or licensed by Licensor on or before June 18, 2003, as set forth in
   Exhibit 1.23(a), other than those specific patents listed on Exhibit 1.23(b);
   (2) patent applications filed by Licensor on or before June 18,

   [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
   TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
   THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND
   EXCHANGE ACT OF 1934, AS AMENDED.

                                      -3-



   2003, as set forth in Exhibit 1.23(a), other than those specific patent
   applications listed on Exhibit 1.23(b); (3) patent applications filed by
   Licensor after June 18, 2003, to the extent directed to the specific
   inventions made before June 18, 2003, and disclosed in the invention
   disclosure forms set forth in Exhibit 1.23(a), other than those specific
   invention disclosure forms listed on Exhibit 1.23(b); and (4) all patents and
   patent applications claiming priority to the patents or patent applications
   set forth in (1) - (3) above, including (i) any continuation,
   continuation-in-part (to the extent the claims are specifically directed to
   the subject matter in the patent or patent application to which it claims
   priority), divisional, reissue, reexamination, or renewal with respect to any
   of the foregoing, and (ii) any corresponding patent, utility model, inventor
   certificate, registration or the like in any country of the world with
   respect to the foregoing; provided, however, that notwithstanding anything to
   the contrary in this Section 1.23 or elsewhere in this Agreement, Licensed
   Patents shall not include any patent or patent application, or any claim
   thereof, that is directed to inventions made by Licensor after June 18, 2003.
   Exhibit 1.23(a) shall be updated from time to time by Licensor to incorporate
   the patent application serial numbers for the patent applications referenced
   in subsection (3) above. For the purposes of this Section 1.23, patents,
   patent applications, Patent Rights and Inventions shall only mean patents,
   patent applications, Patent Rights and Inventions of Control Delivery
   Systems, Inc., and shall not include patents, patent applications, Patent
   Rights and Inventions of a third party acquiree or transferor, or a third
   party merger or consolidation partner, of or with Control Delivery Systems,
   Inc., or a third party acquiror or transferee of substantially all of the
   assets or stock of Control Delivery Systems, Inc.'s opthalmics business.

   1.24 Licensed Product. "Licensed Product" means First Generation Exclusive
   Licensed Product, Vitrasert Licensed Product, and Non-Exclusive Licensed
   Product.

   1.25 Licensed Territory. "Licensed Territory" means the world.

   1.26 Licensee Improvement. "Licensee Improvement" is defined in Section
   8.3(a) of this Agreement.

   1.27 Licensee Improvement Application. "Licensee Improvement Application" is
   defined in Section 8.3(a) of this Agreement.

   1.28 Licensee Improvement Patent. "Licensee Improvement Patent" is defined in
   Section 8.3(b) of this Agreement.

   1.29 Licensor Improvement Product. "Licensee Improvement Product" is defined
   in Section 8.3(b) of this Agreement.

1.29A Licensor Improvement. "Licensor Improvement" means any Improvement
created, invented or discovered by Licensor, after June 18, 2003 and before
[*], provided, however, that in the event of (i) any transfer by
Licensee of substantially all of the assets or stock of Licensee's proprietary
(branded and/or generic) ophthalmic pharmaceutical business; or (ii) any
transfer by Licensor of substantially all of the assets or stock of Licensor's
ophthalmics business, "Licensor Improvement" shall only include Improvements
created, invented or discovered by Licensor after June 18, 2003 and before the
earlier of (x) the effective date of such transfer or (y) [*]. For
the purposes of this Section 1.29A,

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -4-



Improvements shall only mean Improvements of Control Delivery Systems, Inc., and
shall not include Improvements of a third party acquiree or transferor, or a
third party merger or consolidation partner, of or with Control Delivery
Systems, Inc., or a third party acquiror or transferee of substantially all of
the assets or stock of Control Delivery Systems, Inc.'s opthalmics business.

1.29B Licensor Improvement Patents. Any patent application filed by Licensor to
the extent it claims a Licensor Improvement, and any issued patents or patent
applications to the extent they claim priority thereto.

   1.30 Milestone Payment. "Milestone Payment" is defined in Article 4 of this
   Agreement.

   1.31 NDA. "NDA" means a New Drug Application and all associated documents,
   components thereof, or corresponding applications and associated documents
   for devices or combination products, required to be filed with the FDA in
   order to obtain approval to market a particular product in the United States.

   1.32 Net Sales. "Net Sales" means, in any case where a Licensed Product is
   sold or commercially disposed of for value by Licensee or any Sublicensee in
   an arm's length transaction with a third party (other than an Affiliate of,
   respectively, Licensee or Sublicensee), the gross invoice price for such
   Licensed Product, less the following: (i) discounts, chargebacks, Medicare or
   other government rebates, and rebates to purchasers actually taken or
   allowed; (ii) credits or allowances given or made for rejections or return of
   any previously sold Products actually taken or allowed; (iii) to the extent
   included in such gross invoice price any tax or government charge imposed on
   the production, import, export, sale, delivery or use of such Products,
   including, without limitation, any value added or similar tax or government
   charge, but not including any tax levied with respect to income; and (iv) to
   the extent included in such gross invoice price any reasonable and documented
   packaging and distribution charges. Net Sales shall also include and be
   deemed to have been made with respect to (a) any Licensed Product not sold or
   otherwise transferred to any third party but rather used by Licensee or any
   Sublicensee to provide a commercial service and (b) any other transfer of a
   Licensed Product for less than arm's length value other than intercompany
   transfers where the transferee is not the end user. The amount of any Net
   Sale as defined in the preceding sentence shall be imputed using the price or
   prices at which the Licensed Product at issue is then being sold in
   transactions covered by the first sentence of this Section or, if no such
   transactions have occurred, on a reasonable basis to be determined at the
   time by the Parties. Notwithstanding any other provision of this Section, Net
   Sales shall not include the transfer without consideration of any Licensed
   Product by Licensee or any Sublicensee (x) for use in any clinical trial or
   in any preclinical or other research, (y) as detailing samples or other use
   to promote additional Net Sales in amounts consistent with the normal
   business practices of Licensee or any Sublicensee, or (z) for compassionate
   use.

   1.33 Non-Exclusive Licensed Product. "Non-Exclusive Licensed Product" means a
   product (a) that meets the following criteria: (i) uses as its active
   ingredient only one or more of the active ingredients set forth in column A
   of Exhibit 1.33, and no others, and (ii) uses one of the delivery systems in
   column B of Exhibit 1.33, and (iii) uses one of the methods of delivery set
   forth in column C of Exhibit 1.33; and (iv) uses one of the anchoring methods
   set forth in

                                      -5-



   column D of Exhibit 1.33; and (v) is applied in one of the locations set
   forth in column E of Exhibit 1.33; and (vi) is approved, or is designed to be
   approved, for the treatment of one or more of the indications set forth in
   Column F of Exhibit 1.33, and no others; and (b) the manufacture, use, sale,
   offering for sale or importing of which, absent the license granted by
   Licensor to Licensee herein, would infringe any Valid Claim included in any
   Licensed Patent or Licensor Improvement Patent. Notwithstanding the
   foregoing, Non-Exclusive Licensed Product shall exclude First Generation
   Exclusive Licensed Product.

   1.34 Original Effective Date. "Original Effective Date" means December 31,
   1992, for rights and obligations hereunder related to Vitrasert Licensed
   Product and June 9, 1999, for all other rights and obligations hereunder.

   1.35 Other Technology. "Other Technology" means Patent Rights owned or
   controlled by Licensor and not included as a Licensed Patent or Licensor
   Improvement Patent.

   1.36 Patent Rights. "Patent Rights" means any and all forms of patents issued
   or granted anywhere in the world, including, without limitation, utility,
   model and design patents, patents of addition, patents of importation or
   innovation, improvement patents, reissued and reexamined patents, all
   renewals and extensions thereof, and all applications for such patents
   (including original, divisional, continuation and continuation-in-part
   applications) pending before any national Patent Office and which have not
   been abandoned or expired.

   1.37 Person. "Person" means any individual, partnership, association,
   corporation, trust, or other legal person or entity.

   1.38 Regulatory Approval. "Regulatory Approval" means (a) approval by the FDA
   of an NDA and satisfaction of any related applicable FDA requirements (if
   any) or (b) in any country other than the United States, approval by
   regulatory authorities having jurisdiction over such country of a single
   application or set of applications comparable to an IND, NDA, and
   satisfaction of any related applicable regulatory and notification
   requirements, if any, together with any other approvals necessary to make and
   sell pharmaceuticals or delivery systems in such country.

   1.39 Right of Access to Clinical IP. "Right of Access to Clinical IP" means
   the right to reference, cross-reference, review, have access to, incorporate
   and use Clinical IP in any regulatory, applications or filings or for any
   research or development purpose.

   1.40 Sublicense. "Sublicense" means any sublicense of, or other agreement
   permitting the commercial exploitation of, some or all of the rights granted
   to Licensee under this Agreement.

   1.41 Sublicensee. "Sublicensee" means any Person to whom Licensee grants a
   Sublicense.

   1.42 Target Market. "Target Market" means each of the [*].

   1.43 Term of this Agreement. "Term of this Agreement", "term of this
   Agreement", or "Term" shall mean the period beginning on the Original
   Effective Date and continuing only for so long as (a) Licensee has any right
   to exercise any of its rights with respect to any Licensed Patent or Licensor
   Improvement Patent in the Licensed Territory, or (b) royalty payments are


[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -6-



   due under this Agreement, unless earlier terminated by Licensor or Licensee
   as provided herein.

   1.44 Third Party Licensed Product. "Third Party Licensed Product" means a
   First Generation Exclusive Licensed Product or a Non-Exclusive Licensed
   Product, the therapeutic effect of which is derived in part from any
   proprietary product, compound, method or process in-licensed or acquired by
   Licensee from an unaffiliated third party on an arm's length basis; provided
   that such First Generation Exclusive Licensed Product or Non-Exclusive
   Licensed Product is subject to a running royalty equal to the Base Royalty.

1.44A Third Party Licensor Improvement Product. "Third Party Licensor
Improvement Product" is defined in Section 8.3(d) of this Agreement.

   1.45 Total Relevant Sales. "Total Relevant Sales" is defined in Section 3.2
   of this Agreement.

   1.46 UKRF. "UKRF" means University of Kentucky Research Foundation.

   1.47 UKRF Licenses. "UKRF Licenses" mean the licenses set forth in Exhibit
   1.47.

   1.48 Uveitis Base Royalty Product. "Uveitis Base Royalty Product" means a
   Uveitis Product the Net Sales of which bear, or for a product that has not
   yet received Regulatory Approval, will bear, the Base Royalty payable to
   Licensor that is not subject to any royalty reduction or offset under this
   Agreement.

   1.49 Uveitis Product. "Uveitis Product" means any product which has received
   or is designed to receive Regulatory Approval to treat Uveitis.

   1.50 Valid Claim. "Valid Claim" means (i) a claim of an issued and unexpired
   patent which has not been held permanently revoked, unenforceable or invalid
   by a decision of a court or other governmental agency of competent
   jurisdiction, unappealed or unappealable within the time allowed for appeal,
   and which has not been admitted to be invalid or unenforceable through
   reissue or disclaimer or otherwise (an "Issued Patent Claim"), and/or (ii) a
   pending claim of any pending patent application which has been filed and
   continues to be prosecuted in good faith and is not abandoned or finally
   disallowed without the possibility of appeal or refiling (a "Pending Claim");
   provided, however, that, with respect to any Licensed Product or Licensor
   Improvement Product, no Pending Claim which has not become an Issued Patent
   Claim shall continue to constitute a Valid Claim for more than five years
   following the first approved commercial sale of the first Licensed Product or
   Licensor Improvement Product which qualifies as a Licensed Product or
   Licensor Improvement Product solely as a result of such Pending Claim.

   1.51 Vitrasert Licensed Product. "Vitrasert Licensed Product" means the
   product that has received FDA regulatory approval pursuant to application
   #20-569 as approved on March 4, 1996, and the manufacture, use, sale, or
   importation of which would, absent the license granted by Licensor to
   Licensee herein, infringe any Valid Claim included in the Licensed Patents.

                                      -7-



ARTICLE 2. GRANTING CLAUSE:

2.1   License Grant.

2.1.1 License to First Generation Exclusive Licensed Product and Vitrasert
      Licensed Product. Licensor grants to Licensee, and Licensee accepts, an
      exclusive, royalty-bearing, worldwide right and license, with exclusive
      right to sublicense, under Licensor's interest (i.e., subject to the UKRF
      Licenses) in the Licensed Patents and Licensor Improvement Patents, solely
      to make, have made, use, sell, offer to sell, and import First Generation
      Exclusive Licensed Products and Vitrasert Licensed Product in the Licensed
      Field.

2.1.2 License to Non-Exclusive Licensed Product. Licensor grants to Licensee,
      and Licensee accepts a non-exclusive, royalty-bearing, worldwide right and
      license, without the right to sublicense, under Licensor's interest (i.e.,
      subject to the UKRF Licenses) in the Licensed Patents and Licensor
      Improvement Patents solely to make, have made (including by
      manufacturers), use, sell, offer to sell, have sold (including by
      distributors), and import Non-Exclusive Licensed Products in the Licensed
      Field.

2.1.3 Intentionally Omitted.

2.1.4 No License. Nothing in this Agreement shall be construed as granting a
      license, whether express, implied or by operation of law, to Licensee
      under any Patent Rights, Know-how, or other proprietary rights owned,
      acquired or controlled by Licensor other than the rights expressly granted
      by Licensor to Licensee in this Agreement, including, without limitation,
      Sections 2.3 and 2.8. Licensee shall have no rights in any Other
      Technology or in any inventions disclosed in any patents, patent
      applications or invention disclosure forms listed in Exhibit 1.23(b),
      regardless of whether such Other Technology or such inventions disclosed
      in Exhibit 1.23(b) incorporate, or are infringed by the use of, Licensor
      Know-how. This Agreement does not create, and shall under no circumstances
      be construed or interpreted as creating, an obligation on the part of
      Licensor to grant any license to Licensee other than as expressly set
      forth herein. Any further contract or license agreement between the
      Parties shall be in writing.

2.1.5 Reserved Rights. All rights not expressly granted to Licensee in this
      Agreement are reserved to Licensor for itself, its partners and Affiliates
      (other than Licensee) and other licensees and sublicensees.
      Notwithstanding the licenses granted in Article 2, Licensor hereby retains
      and reserves a royalty-free right and license to use and permit others to
      use the Licensed Patents and Licensor Improvement Patents for research,
      but not for making, using, selling, or importing any commercial products
      or processes for First Generation Exclusive Licensed Products and the
      Vitrasert Licensed Product, and for development purposes, subject in all
      cases to Section 2.5.

2.2   Sublicensing. Licensee shall have the right to grant Sublicenses under
the license granted pursuant to Section 2.1.1, provided, however, that any such
Sublicense shall not be inconsistent with the terms and conditions of this
Agreement and that Licensee shall be responsible for the operations of any
Sublicensee relative to this Agreement as if such operations were carried out by
Licensee itself, including (without limitation) the payment of any royalties
provided for

                                      -8-

   hereunder, regardless of whether the terms of any Sublicense provide for such
   amount to be paid by the Sublicensee directly to Licensor, but Sublicensees
   shall not be required to pay Milestones Payments pursuant to Article 4.

   2.3 Non-suit. While the licenses granted hereby only include rights to
   Licensed Patents and Licensor Improvement Patents as expressly stated in this
   Agreement, and do not include rights to Other Technology, Licensor shall not
   bring (and shall not authorize or assist a third party to bring) any action
   under Other Technology owned by Licensor or controlled and able to be
   licensed by Licensor to block Licensee or any Sublicensee from:

      (a) exercising its rights with respect to a Uveitis Base Royalty Product
that is an implant that is required to be surgically inserted through an
incision of at least 2 mm (and which cannot be inserted through an incision of
less than 2 mm) in the scelera into the vitreous, is secured by a suture
attaching a tab to the scelera in the posterior of the eye, uses the
reservoir/suture tab design currently used in clinical trial #001 for Uveitis,
uses fluocinolone acetonide as an active ingredient with no other active
ingredients, and generally conforms with the drawings and meets the
specifications shown in Exhibit 1.14 of this Agreement and any prior iterations
thereof, with only such modifications to the design that do not modify the
parameters set forth above and that are required to obtain Regulatory Approval
for the implant in the above clinical trials as a result of the current
stability issue or another safety issue that may arise during the course of such
clinical trials; and

      (b) exercising those rights (but only those rights) granted by Licensor to
Licensee pursuant to Section 2.1.1, provided that:

            (i) the Other Technology is filed on or before or claims priority to
      an application filed on or before December 31, 2004 (provided the non-suit
      only applies to the extent of claims directed to the subject matter in the
      application to which such Other Technology claims priority); and

            (ii) the Other Technology claims an invention for which Licensee,
      prior to any public disclosure of the Invention by the Licensor, has
      recorded an invention disclosure form including one or more claims to the
      same Invention, provided that such invention disclosure form has described
      such Invention with enough particularity to demonstrate that Licensee was
      in possession of the Invention at the time such invention disclosure form
      was recorded.

For the purposes of this Section 2.3, Other Technology shall not include those
patents, patent applications and invention disclosure forms set forth in Exhibit
2.3 (i.e., Licensor shall not be precluded from bringing an action based on
those patents, patent applications and invention disclosure forms set forth in
Exhibit 2.3). Also, for the purposes of this Section 2.3, the non-suit granted
herein shall not preclude Licensor from enforcing any of its rights in Other
Technology that are directed to the composition of active ingredients,
formulations, indications or novel polymers that are not limited in use or
application to First Generation Exclusive Licensed Products. For the purposes of
this Section 2.3, patents, patent applications, Patent Rights, Inventions and
Other Technology shall only mean patents, patent applications, Patent Rights,
Inventions and Other Technology of Control Delivery Systems, Inc., and shall not
include

                                      -9-


patents, patent applications, Patent Rights, Inventions and other technology of
a third party acquiree or transferor, or a third party merger or consolidation
partner, of or with Control Delivery Systems, Inc., or a third party acquiror or
transferee of substantially all of the assets or stock of Control Delivery
Systems, Inc.'s opthalmics business. The provisions of this Section 2.3 shall in
no way limit Licensee's rights under Licensor Improvement Patents as set forth
in this Agreement.

   2.4 Non-assert of Know-how. Licensor shall not bring (and shall not authorize
   or assist a third party to bring) any action against Licensee or a
   Sublicensee alleging misappropriation of Licensor's Know-how. Licensee shall
   not bring (and shall not authorize or assist a third party to bring) any
   action against Licensor or a sublicensee of Licensor alleging
   misappropriation of Licensee's Know-how. For the purposes of this Section,
   Licensor's Know-how shall be limited to Know-how known by Licensor as of June
   18, 2003, and Licensee's Know-how shall be limited to Know-how known by
   Licensee as of June 18, 2003. The prohibitions of this Section shall not
   apply to any action which the aggrieved Party may bring if such action is
   limited to the intentional and willful theft or misappropriation of the
   Know-how based on misappropriation actions occurring by the other Party
   solely after the Amendment Date. For the purposes of this Section 2.4,
   Know-how shall only mean Know-how of Control Delivery Systems, Inc., and
   shall not include Know-how of a third party acquiree or transferor, or a
   third party merger or consolidation partner, of or with Control Delivery
   Systems, Inc., or a third party acquiror or transferee of substantially all
   of the assets or stock of Control Delivery Systems, Inc.'s opthalmics
   business.

   2.5 Non-Compete.

   (a) Non-Compete for Uveitis Product. Licensor shall not Develop, or license a
   third party to Develop, a Uveitis Product, but only for so long as (1)
   Licensee is Actively Commercializing a Uveitis Base Royalty Product; and (2)
   Licensee is not Developing or Commercializing a Uveitis Product that is not a
   Uveitis Base Royalty Product. Licensor further agrees not to Commercialize,
   or license a third party to Commercialize, a Uveitis Product but only for so
   long as (3) Licensee is Actively Commercializing a Uveitis Base Royalty
   Product; and (4) Licensee is not Commercializing a Uveitis Product that is
   not a Uveitis Base Royalty Product. Notwithstanding the foregoing, the
   prohibitions under this Section 2.5(a) shall not apply to the Development and
   Commercialization activities of a third party acquiree or transferor, or a
   third party merger or consolidation partner, of or with Licensor, or a third
   party acquiror or transferee of substantially all of the assets or stock of
   Licensor's opthalmics business, provided that such acquiror, acquiree,
   transferor, transferee, or a merger or consolidation partner does not use in
   such Development or Commercialization activities for a Uveitis Product any
   (i) Licensed Patent or (ii) Know-how owned or controlled by Licensor as of
   the date of such acquisition, transfer, merger or consolidation. For the
   purposes of this Section 2.5(a), patents, patent applications, Patent Rights,
   Inventions and Know-how shall only mean patents, patent applications, Patent
   Rights, Inventions and Know-how of Control Delivery Systems, Inc., and shall
   not include patents, patent applications, Patent Rights, Inventions and
   Know-how of a third party acquiree or transferor, or a third party merger or
   consolidation partner, of or with Control Delivery Systems, Inc., or a third
   party acquiror or transferee of substantially all of the assets or stock of
   Control Delivery Systems, Inc.'s opthalmics business. In addition, the
   Parties

                                      -10-



      agree that whenever Licensee realizes revenue from Commercializing a
      Uveitis Product, Licensee will receive a royalty on such revenue.

   Licensee shall provide written notice to Licensor within ninety (90) days
   after: (x) Licensee's filing of an IND for a Uveitis Product that is not a
   Uveitis Base Royalty Product; (y) Licensee's ceasing to Actively
   Commercialize a Uveitis Base Royalty Product; and (z) Licensee's
   Commercialization of a Uveitis Product that is not a Uveitis Base Royalty
   Product. Such written notice shall set forth in reasonable detail the basis
   for Licensee's determination of whether a Uveitis Product is or is not a
   Uveitis Base Royalty Product.

   If Licensee no longer satisfies the requirements of Sections 2.5(a)(1), (2),
   (3) or (4) and Licensor has commenced animal pre-clinical trials, the
   restrictions of this Section 2.5 shall no longer be applicable to Licensor
   and shall thereafter terminate, regardless of whether Sections 2.5(a)(1),
   (2), (3) or (4) are subsequently satisfied by Licensee. Notwithstanding the
   foregoing, Licensor shall not be prohibited under this Section from
   Developing or Commercializing a product designed and approved for an
   indication other than Uveitis, regardless of whether such product is or could
   be subject to off-label or other unapproved sales or uses for the prevention,
   treatment or diagnosis of Uveitis.

   (b) Non-Compete for First Generation Exclusive Licensed Product. Licensor
   agrees that during the Term of this Agreement, Licensor shall not Develop or
   Commercialize a First Generation Exclusive Licensed Product so long as
   Licensee has exclusive rights to such First Generation Exclusive Licensed
   Product under this Agreement. Notwithstanding the foregoing, the prohibitions
   under this Section 2.5(b) shall not apply to the Development or
   Commercialization activities of a third party acquiree or transferor, or a
   third party merger or consolidation partner, of or with Licensor, or a third
   party acquiror or transferee of substantially all of the assets or stock of
   Licensor's opthalmics business, provided that such acquiror, acquiree,
   transferor, transferee, or a merger or consolidation partner does not use in
   such Development or Commercialization activities for a First Generation
   Exclusive Licensed Product any (i) Licensed Patent or (ii) Know-how owned or
   controlled by Licensor as of the date of such acquisition, transfer, merger
   or consolidation. In consideration of the non-compete as set forth in this
   Section 2.5(b), as well as all other rights granted and information provided
   by Licensor to Licensee under this Agreement with respect to First Generation
   Exclusive Licensed Products, including without limitation the rights granted
   pursuant to Sections 2.1.1, 2.2, 2.3, 2.4, 2.5 and 2.6 herein, the Parties
   agree that the royalty rate set forth in Section 3.1.1 reflects the value of
   all such rights granted and information provided and shall be paid whether or
   not such First Generation Exclusive Licensed Product is covered by a Valid
   Claim in the Licensed Patents or Licensor Improvement Patents, and whether or
   not such royalty payments under Section 3.1.1 extend beyond the term of any
   Licensed Patent or Licensor Improvement Patent containing Valid Claims
   covering such First Generation Exclusive Licensed Product. For the purposes
   of this Section 2.5(b), patents, patent applications, Patent Rights,
   Inventions and Know-how shall only mean patents, patent applications, Patent
   Rights, Inventions and Know-how of Control Delivery Systems, Inc., and shall
   not include patents, patent applications, Patent Rights, Inventions and
   Know-how of a third party acquiree or transferor, or a third party merger or
   consolidation partner, of or with Control Delivery Systems, Inc., or a third
   party acquiror or transferee of substantially all of the assets or stock of
   Control Delivery Systems, Inc.'s opthalmics business.

                                      -11-


   2.6 Licensor Disclosure of Inventions. Licensor represents that the patents,
   patent applications and invention disclosure forms listed on Exhibits 1.23(a)
   and (b) disclose all Inventions conceived or made by or on behalf of Licensor
   prior to June 18, 2003. Licensor agrees that any Invention conceived or made
   by or on behalf of Licensor prior to June 18, 2003, which is not listed on
   Exhibits 1.23(a) or (b) shall be deemed a Licensed Patent and added to
   Exhibit 1.23(a). For the purposes of this Section 2.6, patents, patent
   applications, Patent Rights and Inventions shall only mean patents, patent
   applications, Patent Rights and Inventions of Control Delivery Systems, Inc.,
   and shall not include patents, patent applications, Patent Rights and
   Inventions of a third party acquiree or transferor, or a third party merger
   or consolidation partner, of or with Control Delivery Systems, Inc., or a
   third party acquiror or transferee of substantially all of the assets or
   stock of Control Delivery Systems, Inc.'s opthalmics business.

   2.7 Licensee Disclosure of Inventions. Licensee represents that all
   Inventions conceived or made by or on behalf of Licensee after June 9, 1999,
   and before June 18, 2003, that: (a) directly relate to (i) treatment by (A)
   intraocular local delivery of an active ingredient into the eye, (B) local
   delivery of an active ingredient into the eye by injection into the scelera
   (provided that the foregoing in subparts (A) and (B) shall not include
   technology developed for the cataract, refractive surgical and contact lens
   businesses of Licensee), (ii) non-topical sustained ophthalmic release of an
   active ingredient (provided that the foregoing in this subsection (ii) shall
   not include technology developed for the cataract, refractive surgical and
   contact lens businesses of Licensee), (iii) co-drug modifications for
   altering the bioavailability or rate of release of a drug, where "co-drug" is
   defined as two or more pharmaceutically active ingredients that are linked by
   a covalent or ionic bond with each other, which bond dissolves in vivo, and
   where "co-drug" specifically excludes any natural extracts; or (iv) pro-drug
   modifications for altering the bioavailability or rate of release of a drug
   for non-topical applications; or (b) would interfere with the subject matter
   of, or dominate the practice of any invention disclosed in, Licensed Patents
   or invention disclosure forms disclosed in Exhibits 1.23(a) or (b) (all such
   inventions in subparts (a) and (b) of this Section 2.7 are referred to
   collectively as "Licensee Relevant Inventions") are disclosed in the
   invention disclosure forms and unpublished patent applications that have been
   disclosed to Licensor's counsel by Licensee. In addition to any other
   remedies available to Licensor, Licensee shall grant and hereby grants
   Licensor a world-wide perpetual, non-exclusive royalty-free license, with the
   right to sublicense, to use any Licensee Relevant Invention made by Licensee
   after June 9, 1999, and before June 18, 2003, that was not disclosed to
   Licensor's counsel by Licensee; provided, however, that such right and
   license shall be subject to Licensee's other rights hereunder, e.g., the
   exclusive rights granted under Section 2.1.1 and Section 2.5.

                                      -12-


   2.8 Co-Owned Patents. With respect to the patents and patent applications
   listed in Exhibit 2.8 and any inventions disclosed in the invention
   disclosure forms listed in Exhibit 2.8, including all Patent Rights in the
   foregoing (the "Co-Owned Patents"), Licensee shall assign and hereby assigns
   to Licensor a one-half interest in the Co-Owned Patents, and to the extent of
   Licensor's interest in the Co-Owned Patents, such Co-Owned Patents shall be
   deemed to be Licensed Patents, provided that Licensor's interest in the
   Co-Owned Patents shall be exclusively licensed to Licensee solely to make,
   have made, use, sell, offer to sell, and import Licensed Products in the
   field of ophthalmology, and further provided that such license shall (a)
   become non-exclusive in the event Licensee's rights to First Generation
   Exclusive Licensed Product become non-exclusive; and (b) terminate in the
   event this Agreement terminates. Licensee shall fully cooperate with
   Licensor, at Licensor's expense, with any activities necessary to perfect the
   rights assigned to Licensor, including the execution of assignments of any
   patents or patent applications or the filing of any patent applications.

   2.9 Licensee Non-suit. Licensee shall not bring (and shall not authorize or
   assist a third party to bring) any action under any patents or patent
   applications listed in Exhibit 2.9 or any Inventions disclosed in the
   invention disclosure forms listed in Exhibit 2.9, including all Patent Rights
   or other intellectual property rights in the foregoing, against Licensor or
   any sublicensee of Licensor.

   2.10 Licensee Covenant Not to File. Licensee shall not file (and shall not
   authorize or assist an Affiliate or other third party to file) an application
   for Patent Rights, either in the United States or in any other foreign
   jurisdiction, containing claims covering any inventions disclosed in the
   invention disclosure forms listed in Exhibit 2.10.

   2.11 Frustration Regarding Vitrasert Product. Subject to the last sentence of
   Section 14.1 of this Agreement, if any third party brings any cause of
   action, claim, or other challenge which has the result of frustrating in a
   material way the licensing of the intellectual property applicable to
   Licensee's rights with respect to the Vitrasert Licensed Product (a
   "Frustration Claim"), Licensor shall cooperate with Licensee in any
   reasonable arrangement designed to give Licensee as nearly as possible the
   same economic benefits with respect to a Vitrasert Licensed Product and to
   have Licensee assume the same obligations and expenses as if such Frustration
   Claim with respect to a Vitrasert Licensed Product had not occurred.

ARTICLE 3. ROYALTIES AND REPAYMENT OBLIGATIONS

  3.1 Running Royalties. Licensee shall pay running royalties to Licensor as
      follows:

3.1.1 Net Sales of First Generation Exclusive Licensed Products. Subject to
      Sections 3.2 and 3.3, on all Net Sales of First Generation Exclusive
      Licensed Products, Licensee shall pay to Licensor a running royalty rate
      equal to the Base Royalty.

3.1.2 Net Sales of Third Party Licensed Products. Subject to Section 3.3, on all
      Net Sales of any Third Party Licensed Product Licensee shall pay to
      Licensor a running royalty equal to the Base Royalty reduced by [*] of the
      amount of any running royalty payable or "deemed paid or payable" by
      Licensee with respect to such Net Sales to any third party licensor of
      proprietary technology or other proprietary property included in such
      Third

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -13-


      Party Licensed Product, provided, however, that the total running royalty
      due to Licensor with respect to such Net Sales shall in no event be less
      than [*] of the Base Royalty. Where Licensee acquires rights to a Third
      Party Licensed Product but doesn't pay a royalty based on net sales, units
      sold, etc., royalties "deemed paid or payable" shall be the imputed
      royalty paid by Licensee in connection with the payment of the purchase
      price or other consideration to acquire those rights needed to use the
      applicable proprietary product, compound, method, or process in such Third
      Party Licensed Product. Where Licensee acquires rights to such proprietary
      product, compound, method or process which permit Licensee to use such
      product, compound, method or process for purposes other than use in
      connection with such Third Party Licensed Product or where Licensee
      acquires the applicable proprietary product, compound, method or process
      in connection with the acquisition of any other rights or assets, a
      reasonably allocable share of such purchase price or other consideration
      shall be allocated to the right to use such product, compound, method or
      process in connection with such Third Party Licensed Product. The
      allocated portion of the purchase price or other consideration shall then
      be converted into an imputed royalty, taking into account all relevant
      factors, including, without limitation, the length of time over which
      Licensee may exercise the rights involved, the likely sales of such Third
      Party Licensed Product over such period of time, and/or other factors
      considered relevant at the time. In no event shall the deemed royalty so
      derived exceed the royalty that would have been paid for the rights
      involved in an arms-length transaction with such third party had Licensee
      licensed such rights for use in connection with such Third Party Licensed
      Product on a purely royalty-bearing basis. If Licensor and Licensee cannot
      agree on the amount of any deemed royalty, the issue shall be resolved by
      the dispute resolution provisions of this Agreement.

3.1.3 Net Sales of Vitrasert Licensed Products. Subject to Section 3.3, on all
      Net Sales of Vitrasert Licensed Product, Licensee shall pay to Licensor a
      running royalty equal to [*] of Net Sales. In addition to
      payment of the royalty under this Section 3.1.3, Licensee shall also pay
      to Licensor all amounts due to UKRF under the UKRF Licenses for Net Sales
      of Vitrasert Licensed Product.

3.1.4 Net Sales of Non-Exclusive Licensed Products. For Non-Exclusive Licensed
      Products, other than Third Party Licensed Products, Licensee shall pay to
      Licensor a running royalty rate equal to: (a) the Base Royalty on all Net
      Sales of Non-Exclusive Licensed Product employing a delivery system, which
      delivery system would, absent the license granted by Licensor to Licensee
      herein, infringe any Valid Claim included in a Licensed Patent or Licensor
      Improvement Patent; (b) [*] of Net Sales of Non-Exclusive Licensed Product
      that employs an anchoring method, which anchoring method would, absent the
      license granted by Licensor to Licensee herein, infringe only a Valid
      Claim of a Licensed Patent or Licensor Improvement Patent related to the
      anchoring method, and that is not subject to payment of a running royalty
      pursuant to Section 3.1.4(a); and (c) a royalty rate to be determined by
      arbitration through the American Arbitration Association ("AAA") for any
      Non-Exclusive Licensed Product that is not subject to payment of a running
      royalty pursuant to Sections 3.1.4(a) or 3.1.4(b) and which would, absent
      the license granted by Licensor to Licensee herein, infringe any Valid
      Claim included in a Licensed Patent or Licensor Improvement Patent,
      provided that such rate shall be not less than [*] of Net Sales and not
      greater than


      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
      TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
      WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
      SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.



                                      -14-


      [*] of Net Sales. For the purposes of the AAA arbitration, all Valid
      Claims included in any Licensed Patent or Licensor Improvement Patent
      shall be deemed valid and enforceable.

  3.2 Royalty Step-Down for Generic Competition.

      (a) Notwithstanding anything in this Agreement to the contrary, in each
country where (i) the making, using, selling, offering to sell or importing of a
particular Uveitis Base Royalty Product or a particular First Generation
Exclusive Licensed Product does not infringe a Valid Claim of a Licensed Patent
or a Licensor Improvement Patent; and (ii) such Uveitis Base Royalty Product or
First Generation Exclusive Licensed Product is no longer covered under
Hatch-Waxman, Orphan Drug, Pediatric, or other non-patent exclusivity, including
applicable similar standards outside the United States; and (iii) with respect
to First Generation Exclusive Licensed Product, such product is subject to a
running royalty equal to the Base Royalty, and is not subject to a royalty
reduction or offset, including without limitation an offset under Section 3.1.2
of this Agreement, then with respect to each such Uveitis Base Royalty Product
or First Generation Exclusive Licensed Product (each an "Eligible Licensed
Product") in such country, Licensee shall be entitled to a royalty adjustment
for each such Eligible Licensed Product as follows:

         If sales of Generic Product (as defined in subsection (b) below) in a
         particular fiscal quarter are greater than [*] of Total Relevant Sales
         (as defined in subsection (b) below) for a particular Eligible Licensed
         Product, then the running royalty on Net Sales of such Eligible
         Licensed Product in such fiscal quarter shall be [*].

      (b) For the purposes of this Section 3.2, "Generic Product" shall mean a
product or products sold by a third party without a license from Licensor that
has been approved under an ANDA pursuant to 21 U.S.C. Section 355(j) (or a
substantially similar application or filing in jurisdictions outside the United
States) that references safety and efficacy data of an Eligible Licensed
Product. For the purposes of this Section 3.2, "Total Relevant Sales" shall
mean, in a fiscal quarter, the total combined sales by all Persons, including
Licensee or Sublicensees, of (i) all Generic Product (with respect to a
particular Eligible Licensed Product); and (ii) the relevant Eligible Licensed
Product.

      (c) In the event of any adjustments to the running royalty pursuant to
this Section 3.2, Licensee shall provide to Licensor written notice of such
adjustment, along with reasonably detailed documentation (including market
reports and other data) supporting Licensee's determination of the Total
Relevant Sales. Such written notice and documentation shall be supplied to
Licensor with any Royalty Reports due to Licensor pursuant to Section 7.1, and
shall be subject to the record keeping and audit rights as set forth in Section
7.2. In addition, in the event Licensee has made an adjustment to the running
royalty of a Uveitis Base Royalty Product pursuant to this Section 3.2 such that
the running royalty for such Uveitis Base Royalty Product in a country is less
than the Base Royalty for two consecutive fiscal quarters, then Licensor shall
have the right, at its sole discretion, to Develop and Commercialize a Uveitis
Product in such country, notwithstanding the provisions of Section 2.5(a).
Licensor shall retain such right to Develop and Commercialize a Uveitis Product
in such country, even if the running royalty for


      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
      TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
      WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
      SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.



                                      -15-


such Uveitis Base Royalty Product in such country is equal to the Base Royalty
in subsequent fiscal quarters.

   3.3 Royalties Payable Only Once. Licensee's obligation to pay royalties under
   this Article 3 shall be imposed only once at the highest applicable royalty
   rate, with respect to any Net Sale of any Licensed Product. Only a single
   royalty shall be due and payable by Licensee under this Agreement with
   respect to a Licensed Product regardless of whether the Licensed Product is
   covered by more than one claim of a Licensed Patent or Licensor Improvement
   Patent and in no event will such royalty exceed [*].

   3.4 Timing of Royalty Payments. Within thirty (30) days after the end of each
   fiscal quarter of Licensee, Licensee shall pay to Licensor the royalty
   payment due for each such quarter in U.S. dollars, provided, however, that
   solely with respect to any royalty payment due with respect to Net Sales made
   pursuant to Sections 1.32(a) or (b) herein, such thirty (30) day period may
   be extended to such longer period as Licensee may reasonably require, not to
   exceed ninety (90) days, to determine the amount of such Net Sales for such
   fiscal quarter. If a Sublicensee adjusts any of its Net Sales for any
   applicable quarter on account of misreported or late-reported Net Sales,
   Licensee shall promptly pay (or cause the Sublicensee to pay) any royalties
   due within 30 days after such adjustment. If Net Sales are in a currency
   other than U.S. Dollars, the sales shall be converted from the currency of
   the country in which the sales were made into U.S. Dollars at the month-end
   exchange rate for such currency for such sales made during such month as
   determined by Licensee in accordance with its standard accounting policies
   and procedures consistently applied during each of Licensee's fiscal
   quarters. If any royalty or other amount due Licensor is in a non-U.S. Dollar
   currency, and Licensee or any Sublicensee is prohibited from exporting that
   currency from that jurisdiction, Licensee or such Sublicensee shall pay an
   amount equal to the royalty or other amount due in such blocked currency into
   a bank account of Licensor's choice in such jurisdiction, and such deposit
   shall be deemed to be full satisfaction of Licensee and Sublicensee's
   obligation to make the applicable payment to Licensor.

   3.5 Withholding Taxes. Licensee and Licensor shall use all commercially
   reasonable and legal efforts to reduce tax withholding on any payments to be
   made to Licensor hereunder. If Licensee concludes that, notwithstanding such
   efforts, tax withholding under the laws of any country is required with
   respect to any royalty payment to be made to Licensor under this Agreement,
   Licensee shall pay or cause its Sublicensee to pay any applicable withholding
   taxes imposed by any such political jurisdiction on such royalty payments,
   and the amount of any such payments shall be credited against Licensee's
   royalty obligation under this Agreement. Licensee shall promptly provide
   Licensor with, or promptly cause Licensor to be provided with, original
   receipts or other evidence sufficient to allow Licensor to obtain the
   benefits of any such tax withholding.

   3.6 Intentionally Omitted.

   3.7 Repayment of Advanced Amount. The Parties acknowledge that Licensee has
   made advances to Licensor (collectively, "Advanced Amount") totaling Ten
   Million Forty-Four Thousand Seven Hundred Nineteen Dollars ($10,044,719),
   which are still outstanding under the 1999 Agreement immediately preceding
   the Amendment Date. The Parties stipulate that



   [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
   TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
   THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND
   EXCHANGE ACT OF 1934, AS AMENDED.


                                      -16-


   the Advanced Amount constitutes all known financial liabilities of the
   Parties under all prior agreements between the Parties, including without
   limitation the 1999 Agreement, and no other amounts are due to Licensee by
   Licensor except as set forth in this Agreement. The Parties also acknowledge
   that the Advanced Amount is liquidated and that Licensee's right to payment
   of the Advanced Amount will not be subject to invocation of the dispute
   resolution procedure under Article 22. The Advanced Amount will be repaid and
   reduced as described in this Section 3.7. Any remaining amounts due after
   such repayment and reduction shall be the "Unpaid Advanced Amount." In
   addition, the Parties acknowledge that Licensor has provided services to
   Licensee between June 18, 2003, and the Amendment Date, for which Licensee
   will reimburse Licensor $250,000. The reimbursement of the $250,000 will be
   accomplished by reducing the Advanced Amount by $250,000 such that the Unpaid
   Advanced Amount hereby is reduced to $9,794,719. Licensor will repay, and, in
   addition to any other rights provided at law or equity, Licensee may recoup,
   such Unpaid Advanced Amount as follows:

3.7.1 Cash Payment. Licensor will pay Three Million Dollars ($3,000,000) to
      Licensee in cash promptly upon the execution of this Agreement. Licensor
      will wire transfer such amount to Licensee pursuant to Licensee's
      instructions, and this Agreement will not be effective until Licensee has
      actually received such payment. This payment shall reduce the Unpaid
      Advanced Amount.

3.7.2 Milestone/Royalty Recoupment. After the reduction described in the first
      paragraph of Section 3.7 and the payment described in Section 3.7.1, the
      Unpaid Advanced Amount will be reduced to $6,794,719. Licensee may further
      recoup the Unpaid Advanced Amount from (i) any Milestone Payments (as
      defined in Section 4.1), and (ii) royalty payments otherwise due Licensor
      hereunder in each case until the entire remaining Unpaid Advanced Amount
      has been fully repaid.

3.7.3 Equity Option. Licensor may make an optional payment of $1,000,000 (One
      Million Dollars) to Licensee by December 27, 2003, which payment, if made,
      shall reduce the Unpaid Advanced Amount. Effective upon such payment,
      Licensee shall grant to Licensor an option to acquire all of Licensee's
      holdings of Licensor's common stock (600,000 shares, collectively the
      "Stock") at an exercise price of $5.00 per share. This option must be in
      the form of Exhibit 3.7.3, and Licensee shall deliver the option
      certificate evidencing the option within 5 days of the payment that
      reduces the Unpaid Advanced Amount. Payments to Licensee as a result of
      exercising the option will not reduce the remaining Unpaid Advanced
      Amount, if any. The foregoing per share option price is not intended by
      the Parties to in any way represent the fair market value of such shares,
      and shall in no way be used by either Party to support a valuation of
      Licensor.

3.7.4 July 1, 2007. Irrespective of any other circumstances whatsoever, the
      Unpaid Advanced Amount, if any, shall be absolutely due and payable by
      Licensor to Licensee on July 1, 2007, and Licensor shall make immediate
      payment of such amount to Licensee without Licensee having to make any
      further demand or provide any further notice. Licensor will be liable for
      and shall pay a late charge equal to one and one-half (1.5) times the
      prime rate in effect as announced by Chase Manhattan Bank, N.A. from time
      to time on any outstanding balance of the Unpaid Advanced Amount remaining
      after July 1, 2007, until the entire Advanced Amount has been repaid in
      full to Licensee. The Parties agree that

                                      -17-


      as of the Amendment Date, Licensor shall execute a promissory note, the
      form of which is attached as Exhibit 3.7.4 (the "Note"), in the amount of
      the Unpaid Advanced Amount as of the Amendment Date (and as may be reduced
      pursuant to the terms of this Agreement and the terms of the attached
      Note).

   3.8 Royalty Calculation. In addition to any other rights provided at law or
   equity, if the Advanced Amount has not been fully repaid by Licensor to
   Licensee as required hereunder, the amount of any royalties that might
   otherwise be due and owing from Licensee to Licensor under this Agreement
   shall in all instances be the amount determined in accordance with the other
   Sections of this Article 3, less the amount of Unpaid Advanced Amount at the
   time of such determination.

ARTICLE 4. LICENSE AND MAINTENANCE FEES.

   4.1 License and Maintenance Fees. Licensee shall pay one-time license and
   maintenance fees ("Milestone Payments") for the achievement of certain goals
   set forth in Exhibit 4.1 to Licensor within ten (10) business days after each
   of the events specified in Exhibit 4.1.

ARTICLE 5. DEVELOPMENT OF LICENSED PRODUCTS

   5.1 Joint Diligence Obligation. Licensor and Licensee shall both use
   reasonable commercial efforts to comply with all diligence obligations under
   the UKRF Licenses to the extent required by the UKRF Licenses.

   5.2 Licensee's General Diligence Obligations. Licensee shall use commercially
   reasonable efforts to Develop and Commercialize First Generation Exclusive
   Licensed Products.

   5.3 (a) Licensee's Specific Diligence Obligations - Uveitis. Licensee agrees
   to the following specific obligations:

      (i)   Licensee shall file an NDA with respect to a First Generation
            Exclusive Licensed Product for Uveitis by the later of (a) [*] or
            (b) [*] then within a commercially reasonable time after [*] has
            been identified and found to be acceptable to the FDA, provided
            that Licensee has diligently pursued [*].

      (ii)  Licensee shall make the first commercial sale of a First Generation
            Exclusive Licensed Product for Uveitis in the United States within
            six (6) months after approval of an NDA for such First Generation
            Exclusive Licensed Product.

      (b) Licensee's Specific Diligence Obligations - Other First Generation
      Exclusive Licensed Product. In the event Licensee has failed to meet its
      diligence obligations with respect to First Generation Exclusive Licensed
      Product for Uveitis pursuant to Section 5.3(a) above, then Licensee agrees
      to the specific obligations with respect to at least one First Generation
      Exclusive Licensed Product for an indication other than Uveitis as set
      forth in Exhibit 5.3.

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -18-


   5.4 Licensee's Specific Diligence Obligations - Non-Exclusive Licensed
   Products. In addition to the general obligations set forth in Section 5.2,
   Licensee further agrees to the specific obligations with respect to
   Non-Exclusive Licensed Products set forth in Exhibit 5.4.

   5.5 Failure to Comply with Diligence Obligations.

      (a) If Licensee fails to meet its obligations under Article 5 with respect
to a First Generation Exclusive Licensed Product for Uveitis, and does not cure
such breach within 90 days after written notice from Licensor, Licensee shall
lose its exclusive rights with respect to First Generation Exclusive Licensed
Products for Uveitis. In addition, if Licensee fails to meet the specific
obligations as set forth in Section 5.3(b) for a First Generation Exclusive
Licensed Product for an indication other than Uveitis, and does not cure such
breach within 90 days after written notice from Licensor, Licensee shall lose
its exclusive rights with respect to First Generation Exclusive Licensed
Products.

      (b) If Licensee fails to meet its obligations under Article 5 with respect
to any Non-Exclusive Licensed Product and does not cure such breach within 90
days after written notice from Licensor, Licensee shall lose its rights with
respect to the applicable Non-Exclusive Licensed Product. For example, if the
diligence obligations as set forth in Exhibit 5.4 have not been met with respect
to a Non-Exclusive Licensed Product that (a) has [*] as an active ingredient;
(b) is [*]; (c) is [*]; (d) has a [*] delivery system; (e) is located [*]; and
(f) is for [*] indications, then Licensee would lose its rights with respect to
such Non-Exclusive Licensed Product ("Product A"). As a further example, if the
diligence obligations for the above Product A have been met, but any diligence
obligation has not been met with respect to a Non-Exclusive Licensed Product
that (a) has [*] as an active ingredient; (b) is [*]; (c) is [*]; (d) has a [*];
(e) is located [*]; and (f) is for [*] indications rather than [*] indications
("Product B"), then Licensee would not lose rights to Product A, but would lose
rights to Product B.

      (c) The parties agree that Licensee's failure to meet its diligence
obligations under Article 5 shall not constitute a basis for termination of this
Agreement under Section 11.3.2.

ARTICLE 6. MARKETING OBLIGATIONS. During the term of this Agreement, Licensee
and its Affiliates shall use commercially reasonable efforts, consistent with
the efforts expended by Licensee with respect to its own proprietary ophthalmic
products to:

      (i)   Market, sell, distribute, and support the First Generation Exclusive
            Licensed Product - Uveitis, including, without limitation,
            establishing, directly or through Sublicensees, an adequate sales
            force in each Target Market;

      (ii)  Obtain third party reimbursement for such Licensed Product, where
            applicable;

      (iii) Maintain and provide Licensor with such sales and other information
            customarily maintained by Licensee for purposes of monitoring sales
            progress on a country by country basis;

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -19-


      (iv)  Keep Licensor promptly and fully informed of developments in the
            markets where such Licensed Product is being sold; and

      (v)   Comply with export laws and restrictions and regulations of the
            Department of Commerce or other United States or foreign agency or
            authority.

      Nothing contained in this Article 6 shall limit any other obligations
Licensee may have under this Agreement.

ARTICLE 7. REPORTING AND ACCOUNTING PROVISIONS:

   7.1 Royalty Report. Licensee shall make written royalty reports ("Royalty
   Reports") to Licensor within thirty (30) days after the end of each fiscal
   quarter of Licensee during the term of this Agreement, stating in each such
   report the number, description, and aggregate Net Sales of each Licensed
   Product sold during the preceding three (3) fiscal months of Licensee and
   upon which a royalty is payable as provided in Article 3 (on a Licensed
   Product-by-Licensed Product basis; provided, however, that solely with
   respect to any report with respect to Net Sales made pursuant to Sections
   1.28(a) and (b) herein, such thirty (30) day period may be extended to such
   longer period as Licensee may reasonably require, not to exceed ninety (90)
   days, to determine the amount of such Net Sales for such fiscal quarter. The
   first such report shall include all such Licensed Products so sold prior to
   the date of such report. The first such report shall include all such
   Licensed Products so sold prior to the date of such report, provided that
   with respect to Vitrasert Licensed Product, the first such report after the
   Amendment Date shall reflect only the preceding fiscal months since the last
   such report for Vitrasert Licensed Product.

   7.2 Record Keeping by Licensee. Licensee shall keep records showing the sales
   of Licensed Products and Third Party Licensed Products in sufficient detail
   to enable the royalties payable hereunder to be determined. Licensee shall
   permit its books and records to be examined at Licensor's expense by an
   independent auditor chosen by Licensor and reasonably acceptable to Licensee
   during regular business hours and upon reasonable advance notice, but not
   later than two years following the rendering of any written report and no
   more often than once per calendar year. Such audit shall be permitted only to
   the extent necessary to verify the reports provided for in this Article 7.
   The auditor shall report to Licensor only the amount of royalty payable for
   the period under audit and shall keep confidential any information learned or
   obtained during the examination. If the audit shows an underpayment of more
   than the greater of (i) $50,000, or (ii) five percent (5%) of the amount
   otherwise due, Licensee shall reimburse Licensor for the reasonable costs of
   the audit. Licensee shall promptly remit any underpayment to Licensor. If the
   audit shows an overpayment, Licensor shall promptly pay such overpayment
   amount to Licensee upon request, or, at Licensee's election, Licensee may
   offset such amount against the next payment of royalties or other amounts due
   Licensor hereunder.

   7.3 Termination Report. Licensee also shall make a written report to Licensor
   within thirty (30) days after the date of any termination of this Agreement
   providing to Licensor the same information described in Section 7.1 with
   respect to any Net Sales which were not previously reported to Licensor.

                                      -20-


ARTICLE 8. OWNERSHIP:

   8.1 Ownership. Except as expressly provided otherwise in this Agreement,
   ownership of Inventions will be determined in accordance with United States
   patent law and related principles.

   8.2 Inventorship. Inventorship of all Inventions (including, without
   limitation, Improvements) made during the term of this Agreement will be
   determined in accordance with United States patent law and related
   principles.

8.3 Licensee Improvements.

      (a) Licensee Improvements. If Licensee files any patent application
("Licensee Improvement Application") for any Improvement created, invented or
discovered before [*] ("Licensee Improvement"), Licensee agrees to grant, and
hereby grants, to Licensor a non-exclusive, worldwide right and license, with
the right to sublicense, under Licensee's interest in such Licensee Improvement
Applications, and in any issued patents claiming priority thereto ("Licensee
Improvement Patent") or any patent applications claiming priority thereto, to
make, have made, use, sell, offer to sell, and import. For the sake of clarity,
a Licensee Improvement shall be any Improvement of a product, if the product
with respect to which the Improvement was made was a Licensed Product at the
time such Improvement was made. Licensee shall promptly notify Licensor of the
filing of such Licensee Improvement Application. Notwithstanding the foregoing,
in the event of (i) any transfer by Licensee of substantially all of the assets
or stock of Licensee's proprietary (branded and/or generic) ophthalmic
pharmaceutical business; or (ii) any transfer by Licensor of substantially all
of the assets or stock of Licensor's ophthalmics business, "Licensee
Improvement" shall only include Improvements created, invented or discovered
before the earlier of (x) the effective date of such transfer or (y) [*].

      (b) Royalties. Upon issuance of a Licensee Improvement Patent, and for so
long as the making, using, selling, offering to sell, or importing of the
Licensee Improvement covered by such Licensee Improvement Patent does not
infringe a Valid Claim of a Licensed Patent, Licensor Improvement Patent or
other Patent Rights of Licensor, Licensor will owe a royalty to Licensee equal
to the lesser of: (i) [*] of net sales of products the making, using, selling,
offering for sale or importing of which would infringe an Issued Patent Claim of
a Licensee Improvement Patent ("Licensor Improvement Product"), or (ii) [*] of
all running royalties received by Licensor based on net sales of Licensor
Improvement Product by licensees or sublicensees of Licensor. For the avoidance
of doubt, if the making, using, selling, offering to sell, or importing of such
Licensee Improvement infringes a Valid Claim of a Licensed Patent, Licensor
Improvement Patent or other Patent Rights of Licensor, then Licensor will not
owe a royalty to Licensee.

      (c) Net Sales. For the purposes of this Section 8.3, net sales means, in
any case where a Licensor Improvement Product is sold or commercially disposed
of for value by Licensor or any sublicensee of Licensor in an arm's length
transaction with a third party (other than an Affiliate of Licensor or
sublicensee of Licensor), the gross invoice price for such Licensor Improvement
Product, less the following: (i) discounts, chargebacks, Medicare or other

[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -21-


government rebates, and rebates to purchasers actually taken or allowed; (ii)
credits or allowances given or made for rejections or return of any previously
sold products actually taken or allowed; (iii) to the extent included in such
gross invoice price any tax or government charge imposed on the production,
import, export, sale, delivery or use of such products, including, without
limitation, any value added or similar tax or government charge, but not
including any tax levied with respect to income; and (iv) to the extent included
in such gross invoice price any reasonable and documented packaging and
distribution charges. Net sales shall also include and be deemed to have been
made with respect to (A) any Licensor Improvement Product not sold or otherwise
transferred to any third party but rather used by Licensor to provide a
commercial service and (B) any other transfer of a Licensor Improvement Product
for less than arm's length value other than intercompany transfers where the
transferee is not the end user. The amount of any net sale as defined in the
preceding sentence shall be imputed using the price or prices at which the
Licensor Improvement Product at issue is then being sold in transactions covered
by the first sentence of this Section or, if no such transactions have occurred,
on a reasonable basis to be determined at the time by the Parties.
Notwithstanding any other provision of this Section, net sales shall not include
the transfer without consideration of any Licensor Improvement Product by
Licensor (x) for use in any clinical trial or in any preclinical or other
research, (y) as detailing samples or other use to promote additional net sales
in amounts consistent with the normal business practices of Licensor, or (z) for
compassionate use.

      (d) Offsets. If (a) any Licensor Improvement Product is covered by an
issued patent or other intellectual property right held by one or more third
parties and it becomes necessary for Licensor to obtain a license from such
third party or parties under such patent, and/or other intellectual property
right and accordingly to pay royalties to such third party(ies) with respect to
any net sale or transfer of any Licensor Improvement Product or (b) the
therapeutic effect of any Licensor Improvement Product is derived in part from
any proprietary product, compound, method or process in-licensed or acquired by
Licensor from an unaffiliated third party on an arm's length basis (a "Third
Party Licensor Improvement Product"), then Licensor may reduce any royalty
otherwise due Licensee by [*] of the amount of royalty due to such third party,
but in no event to less than [*] of the royalty or other payment which may then
be due to Licensee. In addition, if Licensor is required to pay any an upfront
or similar fee to any third party(ies), Licensee shall share in the payment of
any such consideration which involves more than a running royalty as follows.
If, for example, Licensor is required to pay an upfront fee of $1 Million to a
third party, the total consideration then due under Section 8.3 to Licensee
shall be reduced by [*] until [*] of the upfront fee [*] has been recouped by
Licensor.

      (e) Royalties Payable Only Once. Licensor's obligation to pay royalties
under this Section 8.3 shall be imposed only once with respect to any net sale
of any Licensor Improvement Product. Only a single royalty shall be due and
payable by Licensor under this section 8.3 with respect to a Licensor
Improvement Product regardless of whether the Licensor Improvement Product is
covered by more than one claim of a Licensee Improvement Patent.

      (f) Timing of Royalty Payments. Within thirty (30) days after the end of
each fiscal quarter of Licensor, Licensor shall pay to Licensee the royalty
payment due for each such quarter in U.S. dollars, provided, however, that
solely with respect to any royalty payment due with respect to net sales made
pursuant to Sections 8.3(c)(A) or (B) herein, such thirty (30) day period


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -22-


may be extended to such longer period as Licensor may reasonably require, not to
exceed ninety (90) days, to determine the amount of such net sales for such
fiscal quarter. If consideration received by Licensor, or a sublicensee of
Licensor, pursuant to Section 8.3(c) is in a currency other than U.S. Dollars,
the consideration shall be converted from the currency of the country in which
the sales were made into U.S. Dollars at the month-end exchange rate for such
currency for such sales made during such month as determined by Licensor in
accordance with its standard accounting policies and procedures consistently
applied during each of Licensor's fiscal quarters. If any royalty or other
amount due Licensee is in a non-U.S. Dollar currency, and Licensor is prohibited
from exporting that currency from that jurisdiction, Licensor shall pay an
amount equal to the royalty or other amount due in such blocked currency into a
bank account of Licensee's choice in such jurisdiction, and such deposit shall
be deemed to be full satisfaction of Licensor's obligation to make the
applicable payment to Licensee.

      (g) Withholding Taxes. Licensee and Licensor shall use all commercially
reasonable and legal efforts to reduce tax withholding on any payments to be
made to Licensee pursuant to Section 8.3. If Licensor concludes that,
notwithstanding such efforts, tax withholding under the laws of any country is
required with respect to any royalty payment to be made to Licensee under this
Agreement, Licensor shall pay any applicable withholding taxes imposed by any
such political jurisdiction on such royalty payments, and the amount of any such
payments shall be credited against Licensor's royalty obligation under Section
8.3. Licensor shall promptly provide Licensee with, or promptly cause Licensee
to be provided with, original receipts or other evidence sufficient to allow
Licensee to obtain the benefits of any such tax withholding.

      (h) Expiration of Royalty Obligations. Subject to the next sentence, with
respect to Licensor Improvement Product, Licensor's obligation to pay a running
royalty shall terminate on a Licensor Improvement Product -by- Licensor
Improvement Product and country-by-country basis, upon the date that the last to
expire of any issued and enforceable Licensee Improvement Patent which covers
the manufacture, use, sale, or importing of such Licensor Improvement Product.
At the end of each such term, and on a country by country basis, Licensor shall
have a non-exclusive, worldwide, irrevocable, fully paid up license to make,
have made, use, offer to sell, sell, have sold (including through distributors),
and import such Licensor Improvement Product in such country. Notwithstanding
any other provision of this Agreement, the provisions of this Section 8.3 shall
survive any termination of this Agreement, except in the event Licensee
terminates this Agreement pursuant to Section 11.4.2 for Licensor's breach of
Section 8.3.

ARTICLE 9. FILING AND MAINTENANCE OF PATENTS:

Licensor shall in good faith file, prosecute, and maintain all Licensed Patents
in the Licensed Territory at its sole discretion and expense (except for
Co-Owned Patents for so long as Licensee has exclusive rights to First
Generation Exclusive Licensed Products), and except as follows. With respect to
Licensed Patents which include claims that cover First Generation Exclusive
Licensed Products, for so long as Licensee has exclusive rights to any First
Generation Exclusive Licensed Product, Licensor shall keep Licensee informed
with respect to the course and conduct of patent applications and prosecution
matters. With respect only to Licensed Patents which include claims that cover
First Generation Exclusive Licensed Products, Licensor shall use best efforts to
incorporate claims and arguments suggested by Licensee, provided said arguments
would not materially limit Licensor's ability to prosecute or enforce claims
directed to products

                                      -23-


and methods outside the definition of First Generation Exclusive Licensed
Products. Licensee represents, warrants and covenants that it will not make
suggestions for claims and arguments that, in good faith, Licensee knows or
should know would limit the scope of Licensed Patents so as to not cover
(directly or under the Doctrine of Equivalents) any product or method of use of
a product marketed or to be marketed by Licensee. Licensor shall prosecute and
maintain Licensed Patents in the [*]. At
Licensee's expense, Licensor will prosecute and maintain Licensed Patents in
[*] and any other countries as
Licensee may request. Notwithstanding the foregoing in this Article 9, Licensee
shall have the sole right to file, prosecute, and maintain the Co-Owned Patents
for so long as Licensee has exclusive rights to First Generation Exclusive
Licensed Products, provided that Licensee shall keep Licensor informed with
respect to the course and conduct of patent applications and prosecution
matters.

ARTICLE 10. ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS:

   10.1 Notice to Licensor. Licensee shall inform Licensor promptly in writing
   of any activity by a third party (an "Infringer"), if Licensee believes such
   activity might constitute infringement of any Licensed Patent in the Licensed
   Field, including details then known to Licensee, and provided that Licensee's
   failure to provide notice under this Section 10.1 shall not impact Licensee's
   rights under Section 10.6.

   10.2 Right to Bring Suit - Licensor; Settlement. With respect only to suits
   brought against Infringers by Licensor with respect to infringing products
   that fall within the definition of First Generation Exclusive Licensed
   Products for which Licensee has exclusive rights under this Agreement,
   Licensor shall consult with and keep Licensee informed of the progress of
   such proceedings, including, without limitation, furnishing copies of
   communications, pleadings and other documents and keeping Licensee informed
   of settlement efforts and developments, and Licensee shall be entitled to
   participate with counsel in such proceedings, but at its own expense. With
   respect only to suits brought against Infringers by Licensor with respect to
   infringing products that fall within the definition of First Generation
   Exclusive Licensed Products for which Licensee has exclusive rights under
   this Agreement, no settlement, consent, judgment, or other voluntary final
   disposition of a suit with respect to infringement of any Licensed Patent may
   be entered into without the consent of Licensee, which consent may only be
   withheld based on Licensee's reasonable business judgment. Notwithstanding
   the foregoing, Licensor shall not have the right to bring suit under any
   Co-Owned Patents for so long as Licensee has exclusive rights to First
   Generation Exclusive Licensed Products.

   10.3 Right to Bring Suit - Licensee. With respect only to Licensed Patents
   (except for Co-Owned Patents for so long as Licensee has exclusive rights to
   First Generation Exclusive Licensed Products) and with respect to infringing
   products that fall within the definition of First Generation Exclusive
   Licensed Products or the Vitrasert Licensed Product for which Licensee has
   exclusive rights under this Agreement, if Licensor has not taken legal action
   or been successful in obtaining cessation of the infringement within (a)
   ninety (90) days from the date of notice by Licensee; (b) thirty (30) days
   after Licensee notifies Licensor that Licensee would like to move for
   injunctive relief; or (c) ten (10) days before the expiration of a period of
   time set by applicable law in which action must be taken with respect to the
   alleged infringement (e.g., as may be required under the Hatch-Waxman Act and
   35 USC Section 271),


   [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
   TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
   THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND
   EXCHANGE ACT OF 1934, AS AMENDED.


                                   -24-


   Licensee has the right but not the obligation to bring suit against an
   Infringer at Licensee's own expense. This right of Licensee to bring suit, as
   well as to continue an existing suit, is also conditioned on all of the
   following requirements:

      (i)   If Licensee owns (or has licensed from a third party and has the
            right to enforce) any patent(s) that literally reads-on the
            allegedly infringing device or method (collectively, the "Accused
            Device") practiced by the Infringer, Licensee will include in the
            complaint one or more claims alleging infringement of all such other
            patent(s);

      (ii)  Licensee has provided evidence to Licensor that there is a good
            faith basis to believe that the Accused Device is being prepared for
            commercialization;

      (iii) Licensee will use reasonable efforts to keep Licensor reasonably and
            timely informed of the pre-litigation and litigation issues and
            strategy (including, without limitation, furnishing copies of
            communications, pleading, and other documents and keeping Licensor
            informed of settlement efforts and developments), and will use
            reasonable effort to obtain suggestions and strategy from Licensor,
            including during pre-trial motions and discovery;

      (iv)  In the instance of litigation issues and strategies pertaining to
            defenses or setting strategy for the scope of claims, Licensee shall
            incorporate all suggestions and strategy from Licensor as may be
            deemed appropriate in the reasonable business judgment of Licensor;
            and

Except for joining the legal actions described in this Section 10.3 as a party
at Licensee's request, Licensor shall have no obligation regarding such actions
unless required to participate by law or contract, but Licensor will provide
reasonable assistance at the request of Licensee as provided in Section 10.5
below. However, Licensor shall have the right to participate in any such actions
through its own counsel and at its expense.

No settlement, consent judgment or other voluntary disposition of a suit
(collectively, "Settlements") with respect to infringement of any Licensed
Patent (except for Co-Owned Patents for so long as Licensee has exclusive rights
to First Generation Exclusive Licensed Products) may be entered into without the
consent of Licensor, which shall not be unreasonably withheld or delayed, and
provided that no such consent shall be required where the impact of the
settlement, consent judgment or other voluntary disposition is limited to the
Licensed Field for First Generation Exclusive Licensed Product for which
Licensee has exclusive rights under this Agreement.

   10.4 UKRF. If neither Party commences actions or proceedings against
   Infringers or unauthorized users of any Licensed Patent or Know-how that has
   been licensed from UKRF within the time periods specified above, UKRF shall,
   at its expense, have the right to initiate and pursue such action and receive
   all resulting benefits.

   10.5 Expense. If either Party shall initiate or carry on legal proceedings
   against any Infringer as contemplated hereby, the other Party shall fully
   cooperate with and supply all assistance

                                      -25-


   reasonably required by the first Party. The first Party shall consult with
   and keep the other Party informed of the progress of such proceedings,
   including, without limitation, furnishing copies of communications, pleadings
   and other documents and keeping the other Party informed of settlement
   efforts and developments, and the other Party shall be entitled to
   participate with counsel in such proceedings, but at its own expense.

If Licensee initiates and carries on such proceedings, it may offset [*],
including reasonable legal expenses, incurred in regard thereto against any
payments owed to Licensor under Article 3 of this Agreement, provided, however,
that after the initiation of any such proceedings, no such payment shall be
reduced by more than [*].

Any award paid by any third party as a result of such proceedings (whether by
way of settlement or otherwise) shall be first applied to reimbursement of the
unreimbursed legal fees and expenses incurred by the Parties, pro rata in
proportion to such fees and expenses, then to the payment to Licensor of any
amounts that were offset against royalty or other payments as provided above,
and then the remainder shall be divided by the Parties pro rata in proportion to
the fees and expenses incurred by the Parties, after reimbursement by Licensor
of Licensee's expenses pursuant to the royalty off-set set forth above, in
connection with any action against the Infringer; provided, however, that each
Party (regardless of the extent, if any, to which such Party participates in
such action) shall be entitled, after reimbursement of any applicable expenses
and royalties as provided herein, to no less than [*] of any net recovery.

   10.6 Co-Owned Patents. Notwithstanding anything to the contrary in this
   Section 10.6, Licensee has the sole right, at Licensee's own expense, to
   bring and control any suits under the Co-Owned Patents against a third party
   for so long as Licensee has exclusive rights to First Generation Exclusive
   Licensed Products. Licensor shall have the right to participate in any such
   suits through its own counsel and at its expense. Licensor shall reasonably
   assist Licensee, with respect to such suits, at Licensee's request and
   expense. If required by law, Licensee may join Licensor as a party to any
   such suit, provided that Licensee shall hold Licensor harmless from, and
   indemnify Licensor against, any costs, expenses, or liability that Licensor
   incurs in connection with such suit. To the extent a suit is related to
   Co-Owned Patents and not any Licensed Patents, Licensor Improvement Patents
   or Other Technology, Licensee shall have the right to settle any such suit
   for so long as Licensee has exclusive rights to First Generation Exclusive
   Licensed Products. Any award paid by any third party as a result of such
   proceedings (whether by way of settlement or otherwise) (a) shall be first
   applied to reimbursement of the unreimbursed legal fees and expenses incurred
   by either Party pro rata in proportion to such fees and expenses, then (b)
   Licensor shall receive an amount equal to such reasonable approximation of
   the royalties that Licensee would have paid to Licensor if Licensee had sold
   the infringing products and services rather than the infringer. Any remaining
   amounts after reimbursement pursuant to (a) and (b) above shall be solely for
   the account of Licensee for proceedings under this Section 10.6.


   [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
   TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
   THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND
   EXCHANGE ACT OF 1934, AS AMENDED.

ARTICLE 11. TERM; TERMINATION:

   11.1 Expiration of Royalty Obligations. Subject to the next sentence, with
   respect to Non-Exclusive Licensed Products, Licensee's obligation to pay a
   running royalty shall terminate on a Licensed Product-by-Licensed Product
   and country-by-country basis, upon the date that the last to expire of any
   issued and enforceable Licensed Patent or Licensor Improvement Patent
   which covers the manufacture, use, sale, or importing of such
   Non-Exclusive Licensed Product in such country expires. At the end of each
   such term, and on a country by country basis, Licensee shall have a
   non-exclusive, worldwide, irrevocable, fully paid up license to make, have
   made, use, offer to sell, sell, have sold (including through
   distributors), and import such Licensed Products in such country. Subject
   to the next sentence, with respect to First Generation Exclusive Licensed
   Products, Licensee's obligation to pay a running royalty shall terminate
   on a Licensed Product-by-Licensed Product and country-by-country basis,
   upon the date that is the later of (i) the last to expire of any issued
   and enforceable Licensed Patent or Licensor Improvement Patent which
   covers the actual manufacture, use, sale, or importing of such Licensed
   Product in such country, or (ii) ten (10) years from the last new FDA or
   other comparable approval with respect to an indication for the applicable
   Licensed Product in the applicable country but in no event more than
   twenty (20) years from the date of the first FDA or comparable approval
   for the first indication with respect to such Licensed Product in such
   country. At the end of each such term, and on a country by country basis,
   Licensee shall have an irrevocable, fully paid up license under the
   Licensed Patents in the Licensed Field to make, have made, use, offer to
   sell, sell, and import such Licensed Product in such country.

   11.2 Term. This Agreement shall continue for the Term, unless earlier
   terminated by Licensor or Licensee as provided herein.

   11.3 Termination by Licensor. Licensor shall have the right to terminate
   this Agreement and the licenses granted hereunder upon the happening of
   any of the following events:

11.3.1 Failure to Pay. Licensee fails to pay or cause to be paid any royalty or
      other payment which has become due to Licensor under this Agreement,
      within thirty (30) days after receiving a written request from Licensor to
      make such payment or to cause such payment to be made; provided, however,
      that if any payment is disputed in good faith by Licensee, Licensee may
      delay paying the disputed portion of such payment by invoking the dispute
      resolution procedure set forth in Article 22. If the dispute resolution
      procedure results in a final determination that Licensee owes some or all
      of such disputed amount, Licensee shall pay such owed amount within thirty
      (30) days of the determination pursuant to Article 22 as provided therein,
      together with interest thereon from the date such amount was due at one
      and one-half (1.5) times the prime rate in effect at such determination as
      announced by Chase Manhattan Bank, N.A. In addition to any other
      termination rights Licensor may have under this Section, if Licensee fails
      to pay Licensor such owed amount within thirty (30) days of the final
      determination as set forth above, Licensor may, subject to the next
      sentence, terminate this Agreement upon thirty (30) days' written notice
      to Licensee. Notwithstanding the foregoing, if Licensee's failure to pay
      or cause to be paid royalties or other payments is limited to royalties or
      payments for: (a) a First Generation Exclusive Licensed Product, then
      Licensor's right to terminate pursuant to the provisions of this Section
      11.3.1 shall be limited to termination

                                      -27-


      of Licensee's rights to all First Generation Exclusive Licensed Product;
      (b) a Non-Exclusive Licensed Product, then Licensor's right to terminate
      pursuant to the provisions of this Section 11.3.1 shall be limited to
      termination of Licensee's rights to all Non-Exclusive Licensed Product;
      and (c) a Vitrasert Licensed Product, then Licensor's right to terminate
      pursuant to the provisions of this Section 11.3.1 shall be limited to
      termination of Licensee's rights to all Vitrasert Licensed Product;

11.3.2 Breach. Licensee has materially breached or materially defaulted under
      this Agreement as a result of a breach or default of any other provision
      of this Agreement and has not cured such breach or default within ninety
      (90) days after written notice from Licensor to Licensee specifying the
      nature of such breach or default in reasonable detail; provided, however,
      that if Licensee has invoked the dispute resolution procedure set forth in
      Article 22, this Agreement may not be terminated except in accordance with
      such Article; and further provided that if Licensee's material breach or
      default is limited to a material breach or default relating to: (a) First
      Generation Exclusive Licensed Product, then Licensor's right to terminate
      pursuant to the provisions of this Section 11.3.2 shall be limited to
      termination of (i) the specific First Generation Exclusive Licensed
      Product for which the breach or default occurred; or (ii) with respect to
      any further material breach or default thereafter, Licensee's rights to
      all First Generation Exclusive Licensed Product; (b) Non-Exclusive
      Licensed Product, then Licensor's right to terminate pursuant to the
      provisions of this Section 11.3.2 shall be limited to termination of (i)
      the specific Non- Exclusive Licensed Product for which the breach or
      default occurred; or (ii) with respect to any further material breach or
      default thereafter, Licensee's rights to all Non-Exclusive Licensed
      Product; and (c) Vitrasert Licensed Product, then Licensor's right to
      terminate pursuant to the provisions of this Section 11.3.2 shall be
      limited to termination of Licensee's rights to all Vitrasert Licensed
      Product; or

11.3.3 Bankruptcy. The filing of a bankruptcy petition by or against the
      Licensee, the entry by Licensee into a trust deed, creditor's arrangement
      or comparable proceeding, or the appointment of a receiver for
      substantially all of the assets or business of Licensee that is not
      dismissed within ninety (90) days from the date of such filing or
      appointment.

   11.4 Termination by Licensee. Licensee shall have the right to terminate
   this Agreement and the licenses granted hereunder upon the happening of
   any of the following events:

11.4.1 Without Cause. Licensee may terminate this Agreement at any time without
      cause in its entirety or with respect to a Vitrasert Licensed Product or a
      Non-Exclusive Licensed Product on ninety (90) days' written notice to
      Licensor. Upon termination of this Agreement in its entirety, Licensee
      shall remain liable for all Milestone Payments, royalty payments, and
      other payments under this Agreement falling due before the end of the
      first ninety (90) days after Licensor's receipt of the notice of
      termination without cause. Thereafter, for an additional ninety (90) days
      (for a total of one hundred eighty (180) days after Licensor's receipt of
      the notice of termination), Licensee shall continue to be liable for all
      payments, including, but not limited to, royalty payments, due under the
      Agreement, excluding Milestone Payments. Upon termination of this
      Agreement with respect to a Vitrasert Licensed Product or a Non-Exclusive
      Licensed Product, Licensee shall remain liable for all payments then due
      with respect to such Licensed

                                      -28-


      Product(s), and thereafter Licensee shall have the right for one hundred
      eighty (180) days to sell off any inventory of such Licensed Product(s),
      and shall remain liable for the royalties due, if any, with respect to
      such sales.

11.4.2 Breach. Licensee may terminate this Agreement if Licensor has materially
      breached or defaulted under any provision of this Agreement and has not
      cured such breach or default within ninety (90) days after written notice
      from Licensee to Licensor specifying the nature of such breach or default
      in reasonable detail; provided, however, that if Licensor has invoked the
      dispute resolution procedure set forth in Article 22, this Agreement may
      not be terminated except in accordance with such Article.

      11.5 Bankruptcy. All rights and licenses granted under or pursuant to this
      Agreement by one Party to the other are, for all purposes of Section
      365(n) of Title 11 of the United States Code ("Title 11"), licenses of
      rights to "intellectual property" as defined in Title 11. During the term
      of this Agreement each Party shall create and maintain current copies to
      the extent practicable of all such intellectual property. If a bankruptcy
      proceeding is commenced by or against one Party under Title 11, the other
      Party shall be entitled to a copy of any and all such intellectual
      property and all embodiments of such intellectual property, and the same,
      if not in the possession of such other Party, shall be promptly delivered
      to it (a) upon such Party's written request following the commencement of
      such bankruptcy proceeding, unless the Party subject to such bankruptcy
      proceeding, or its trustee or receiver, elects within thirty (30) days to
      continue to perform all of its obligations under this Agreement, or (b) if
      not delivered as provided under clause (a) above, upon such other Party's
      request following the rejection of this Agreement by or on behalf of the
      Party subject to such bankruptcy proceeding. If Licensee has taken
      possession of all applicable embodiments of the intellectual property of
      Licensor pursuant to this Section 10.5 and the trustee in bankruptcy of
      Licensor does not reject this Agreement, Licensee shall return such
      embodiments upon request. If Licensor seeks or involuntarily is placed
      under Title 11 and the trustee rejects this Agreement as contemplated
      under 11 U.S.C. 365(n)(1), Licensee hereby elects, pursuant to Section
      365(n) to retain all rights granted to Licensee under this Agreement to
      the extent permitted by law.

      11.6 Effect of Termination. Upon termination of this Agreement for any
      reason, nothing herein shall be construed to release either Party from any
      obligation that matured prior to the effective date of such termination.
      The provisions of the following Sections shall survive termination of this
      Agreement for any reason: Article 1, Sections 2.4, 2.7, 2.8 (except as set
      forth therein), 2.9, 2.10, 3.5, 3.7, 7.2, 7.3, 8.1, 8.2, 8.3 (except where
      termination of this Agreement is pursuant to Section 11.4.2 for Licensor's
      breach of Sections 8.3), Sections 11.1, 11.3, 11.4, 11.5, 11.6, 11.7,
      Articles 12, 14, 15, 16, 17, 21, 22, 23, 24, 25, 26, 27, 28, 30, 31, 32,
      34, 35 and 36. Licensee and any Sublicensee may, after a termination, sell
      all Licensed Products which are in inventory at the time of termination
      and complete and sell Licensed Products which Licensee can clearly
      demonstrate were in the process of manufacture at the time of such
      termination, provided that Licensee shall pay to Licensor any royalties or
      other payments due on the sale of such Licensed Products and shall submit
      reports, in accordance with this Agreement.

      11.7 Grant Back. Except under the circumstances described in the last
      sentence of this Section, solely for the purpose of enabling Licensor and
      its licensees to continue the

                                      -29-


   development and commercialization of First Generation Exclusive Licensed
   Products to which Licensee no longer has rights, Licensee shall grant to
   Licensor a fully paid-up, irrevocable, non-exclusive, worldwide license,
   with the right to grant sublicenses under the Licensee Patents (as defined
   below), if any, to make, have made, use, sell, and import any First
   Generation Exclusive Licensed Product that is at the time being
   commercialized (other than a Third Party Licensed Product) and for no
   other purpose. For purposes of the foregoing, "Licensee Patent" means any
   Patent Right existing at the time of termination of this Agreement which
   would block Licensor from practicing any Patent Right included in the
   Licensed Patents. Licensor shall not be entitled to any grant back under
   this Section if this Agreement is terminated by Licensee under Section
   11.4.2 or 11.5 or if Licensee's obligation to pay royalties has expired
   pursuant to Section 11.1.

ARTICLE 12. OWNERSHIP OF CLINICAL IP:

   12.1 Clinical IP Outside Licensees License Rights. Subject to any rights
   or restrictions imposed by applicable third parties, and to protections
   for Confidential Information herein, Licensee shall provide Licensor with
   a Right of Access to Clinical IP, provided that Licensor shall not use
   such Clinical IP for a Licensed Product in the Licensed Field so long as
   Licensee has a license for such Licensed Product under this Agreement.

   12.2 Clinical IP-Cooperation. Licensee shall use commercially reasonable
   efforts, and shall reasonably cooperate with Licensor, to provide Licensor
   with such waivers, irrevocable cross reference letters, assignments,
   and/or other reasonable documentation as may be necessary or useful for
   Licensor's full exercise of any Right of Access to Clinical IP granted by
   Licensee to Licensor pursuant to this Article 12.

ARTICLE 13. UNIVERSITY OF KENTUCKY RESEARCH FOUNDATION LICENSES:

Licensor shall maintain the UKRF Licenses in full force and effect, including
(without limitation) making all royalty payments. Licensor shall not, after the
Amendment Date, amend or modify the UKRF Licenses without Licensee's prior
written consent, which consent shall not be unreasonably withheld or delayed,
provided, however, that after providing prior written notice to Licensee,
Licensor may amend or modify the UKRF Licenses without Licensee's prior written
consent so long as such amendment would not have an adverse impact on Licensee's
rights or increase the cost to Licensee of exercising such rights.
Notwithstanding the foregoing, if UKRF delivers a notice of nonpayment of
royalties or of any other breach of any of the UKRF Licenses to Licensor,
Licensor shall immediately notify Licensee and Licensee shall have the right to
make such payments directly to UKRF or otherwise to cure such breach. In
addition, Licensor shall inform UKRF of the existence of this Agreement and
request UKRF to send a copy of all default notices to Licensee simultaneously
with any notice of default to Licensor and to permit Licensee to assume, upon
receipt of written notice from Licensee to UKRF, Licensor's obligations under
the UKRF License(s) to which such default notice applies. Licensee shall have
the right to offset the payments made to UKRF and the cost of curing any default
under any of the UKRF Licenses against future royalties or other payments due
Licensor under this Agreement as provided in Article 19.

                                      -30-


ARTICLE 14. INDEMNIFICATION:

   14.1 Indemnification of Licensee. Subject to Sections 14.2 and 14.3,
   Licensor shall indemnify, defend and hold Licensee and each of its
   officers, directors, employees, agents and consultants (each a "Licensee
   Indemnitee") harmless from and against all third party costs, claims,
   suits, expenses (including reasonable attorneys' fees and expenses,
   whether incurred as a result of a third party claim or a claim to enforce
   this provision), damages, and, solely with respect to the Vitrasert
   Licensed Product, any amounts paid by Licensee to a third party pursuant
   to any agreement between Licensee and the third party for the manufacture,
   distribution, promotion, or sale of the Vitrasert Licensed Product (a
   "Vitrasert Third Party Loss") (collectively, including a Vitrasert Third
   Party Loss, "Losses") to the extent arising out of or resulting from (i)
   any material breach or failure by Licensor in the performance or
   non-performance of its obligations or covenants under this Agreement; (ii)
   any breach by Licensor of any representation or warranty hereunder; (iii)
   the manufacture, marketing, possession, use, sale or other disposition by
   Licensor or any of its sublicensees other than Licensee or any Sublicensee
   of any Licensed Product (except to the extent where such Losses arise or
   result from any negligence of Licensee (or any contract manufacturer of
   Licensee) in the manufacture of any such Licensed Product or the failure
   of Licensee (or any contract manufacturer of Licensee) to manufacture such
   Licensed Product in accordance with GMPs); (iv) FDA enforcement actions,
   inspections, product recalls or market withdrawals relating to a Licensed
   Product to the extent arising out of or resulting from Licensor's
   marketing, possession, use, sale or other disposition of the Licensed
   Product; and (v) any material breach or failure by Licensor in the
   performance of any Clinical Agreement or Trial Agreement except for (a)
   the payment obligations expressly assumed by Licensee pursuant to Article
   36, and (b) breaches of a Clinical Agreement or Trial Agreement to the
   extent resulting from a delay by Licensee in providing notice of
   termination or assignment and assumption to third parties pursuant to
   Article 36. Notwithstanding the foregoing or anything else in the
   Agreement to the contrary, Licensee's remedies under this Section 14.1 or
   any other provision of this Agreement, including without limitation
   Section 2.11, for any Vitrasert Third Party Loss and for Frustration
   Claims pursuant to Section 2.11 herein, shall be limited to, in the
   aggregate, and satisfied solely out of, the amount of royalties for
   Vitrasert Licensed Products received by Licensor after the date of
   Licensor's receipt of written notice from Licensee of such Frustration
   Claim or Vitrasert Third Party Loss specifying the nature and amount of
   the claim or loss in reasonable detail.

   14.2 Indemnification of Licensor. Subject to Sections 14.1 and 14.2,
   Licensee shall indemnify, defend and hold Licensor and each of its
   officers, directors, employees, agents and consultants (each a "Licensor
   Indemnitee") harmless from and against all Losses to the extent arising
   out of or resulting from (i) any material breach or failure by Licensee in
   the performance or non-performance of its obligations or covenants under
   this Agreement; (ii) any breach by Licensee of any representation or
   warranty hereunder; (iii) the manufacture, marketing, possession, use,
   sale or other disposition of any Licensed Product by Licensee or any
   Sublicensee (except to the extent where such Losses arise or result from
   any negligence of Licensor (or any contract manufacturer of Licensor) in
   the manufacture of any such Licensed Product or the failure of Licensor
   (or any contract manufacturer of Licensor) to manufacture the Licensed
   Product in accordance with GMPs); and (iv) FDA enforcement actions,
   inspections, product recalls or market withdrawals relating to a Licensed
   Product to the extent

                                      -31-


   arising out of or resulting from Licensee's marketing, possession, use,
   sale or other disposition of the Licensed Product or the failure of
   Licensee (or any contract manufacturer of Licensee) to manufacture the
   Licensed Product in accordance with GMPs or the specifications for the
   Licensed Product.

   14.3 Limitation of Liability. Except where a Party commits a willful,
   intentional breach of any material provision of this Agreement, no
   breaching Party shall be responsible or liable under any provision of this
   Agreement or under any contract, theory of negligence or strict liability,
   or under any other legal or equitable theory for any resulting indirect,
   special, incidental, consequential, punitive, or exemplary damages of the
   other Party, including (without limitation) damages such as lost revenues
   or profits and damage to goodwill or reputation. Nothing in this Section
   shall relieve any Party of any obligation with respect to any third party
   claim.

   14.4 Procedure for Indemnification. If an event occurs which a Party
   believes requires indemnification (Indemnification Event"), the Party
   seeking indemnification ("Indemnified Party") shall give prompt written
   notice to the other Party ("Indemnifying Party") providing reasonable
   details of the nature of the event and the basis of the indemnity claim.
   The Indemnifying Party shall then have the right, at its expense and with
   counsel of its choice, to defend, contest, or otherwise protect against
   any such action. The Indemnified Party shall also have the right, but not
   the obligation, to participate at its own expense in the defense with
   counsel of its choice. The Indemnified Party shall cooperate as requested
   by the Indemnifying Party to assist it in defending or contesting any such
   action. If the Indemnified Party fails to promptly notify the Indemnified
   Party of the occurrence of an Indemnification Event, to the extent, but
   only to the extent, that such failure results in a material adverse effect
   on the Indemnifying Party, the Indemnified Party shall not be entitled to
   indemnification with respect to such Indemnification Event. If the
   Indemnifying Party fails within thirty (30) days after receipt of such
   notice: (a) to notify the Indemnified Party of its intent to defend, or
   (b) to defend, contest, or otherwise protect against such suit, action,
   investigation, claim or proceeding, or fails to diligently continue to
   provide such defense after undertaking to do so, the Indemnified Party
   shall have the right, upon ten (10) days' prior written notice to the
   Indemnifying Party, to defend, settle and satisfy any such suit, action,
   claim, investigation or proceeding and recover the costs of the same from
   the Indemnifying Party.

   14.5 Insurance. To the extent required by the UKRF Licenses, Licensee will
   maintain product liability insurance, with an endorsement naming UKRF, the
   University of Kentucky, its Board of Trustees, agents, officers, and
   employees as additional insureds covering liabilities for the production,
   manufacture and/or sale of the Licensed Product by Licensee or any
   Sublicensee. The policy of insurance shall contain a provision of
   non-cancellation except upon the provision of thirty (30) days' notice to
   the University of Kentucky. Policy limits shall be not less than
   $1,000,000 per occurrence.

ARTICLE 15. TRADEMARKS:

Licensee shall own the logos, trade names, copyrights, trademarks, and other
commercial symbols ("Marks") developed or used in connection with any and all
Licensed Products. During and after the term of this Agreement, Licensor shall
not directly or indirectly contest the

                                      -32-


ownership, validity or originality of the Marks for the Licensed Products, the
Third Party Licensed Products, and the goodwill represented by any of the
foregoing Marks. Licensor will not use any name or other symbol confusingly
similar to or, in the reasonable judgment of Licensee, suggestive of any of the
foregoing Marks. If Licensor learns of any unauthorized use of any such Marks it
shall promptly inform Licensee in writing.

ARTICLE 16. REPRESENTATIONS AND WARRANTIES:

   16.1 Representations and Warranties of Both Parties. As of the Amendment
   Date, each Party hereby represents and warrants to the other Party that:

      (i)   It is a corporation duly organized, validly existing, and in good
            standing under the laws of the jurisdiction of its incorporation.

      (ii)  It has all requisite corporate power and authority and is free to
            enter into this Agreement and to perform its obligations hereunder
            without the need for any other action or consent;

      (iii) It has taken all corporate and other action to authorize the
            execution and delivery of this Agreement, any other documents
            executed and delivered in connection herewith and the performance of
            its obligations hereunder and thereunder, all of which shall be
            valid, binding and enforceable in accordance with its or their
            terms;

      (iv)  The execution, delivery, and performance of this Agreement (a) will
            not violate or require it to obtain any consent or approval, to make
            any filing or to provide any notice, or (b) will not conflict with
            or result in a breach of any agreement or other instrument to which
            it is a party or by which it is bound;

      (v)   It is not a party to any agreement with any third party which is in
            conflict with the rights granted to the other pursuant to this
            Agreement, including, without limitation, with respect to the
            Licensed Patents; and

      (vi)  Except as described in Exhibit 16.1(vi), there is no litigation,
            proceeding, or governmental investigation to which it is a party
            pending or threatened against it, or, to its knowledge, against any
            third party, as to which there is a likelihood of an outcome(s) that
            would, individually or in the aggregate, reasonably be expected to
            delay or otherwise materially impair its ability to perform its
            obligations contemplated by this Agreement.

16.2 Representations and Warranties of Licensor. Licensor hereby represents and
warrants to Licensee as of the Amendment Date that:

      (i)   The UKRF Licenses set forth in Exhibit 1.47 are the only UKRF
            Licenses, all of which are in full force and effect and have not
            been amended or modified without Licensee's written consent;
            Licensor has complied with all provisions of the UKRF Licenses;
            Licensor owes no royalty or other payment to UKRF or any affiliate
            of UKRF under the UKRF Licenses and there does not exist any event
            of

                                      -33-


            default with respect to Licensor under any of the UKRF Licenses
            which, after notice or lapse of time or both, would constitute an
            event of default with respect to Licensor;

      (ii)  Licensor has all rights and consents necessary to grant the rights
            and licenses granted to Licensee under this Agreement;

      (iii) Except for the Co-Owned Patents, and as described in Exhibit
            16.2(iii), Licensor warrants that it owns the entire right, title,
            interest in and to the Licensed Patents and that the entire interest
            is not encumbered in any manner;

      (iv)  Licensor has made written request of all patent counsel engaged by
            Licensor for all opinions of counsel, clearances, studies, licenses,
            and agreements relating to Licensed Products, and has provided
            Licensee with all information relating to Licensed Products received
            by Licensor as of the Amendment Date in response to such requests
            and further, has provided Licensor all other formal written opinions
            of counsel, licenses, and agreements relating to First Generation
            Exclusive Licensed Products;

      (v)   The Persons who are listed on Exhibit 16.2(v) are all of the
            officers, employees, and consultants of Licensor as of the Amendment
            Date. Except as set forth in Exhibit 16.2(v), each of such Persons
            has signed a confidentiality and invention disclosure and assignment
            agreement (a) which requires such individual to observe
            confidentiality restrictions at least as strict as those between the
            Parties, and (b) which results in Licensor having unrestricted
            ownership of any intellectual property created by such individual
            during his or her employment or engagement by Licensor, including
            (without limitation) all intellectual property created or developed
            by such individual before the date of this Agreement during such
            employment or engagement; and

      (vi)  Licensor has not received any written communication from a third
            party that a Licensed Product may or actually does infringe or
            otherwise violate any intellectual property right of such third
            party. Licensor's officers as of the Amendment Date have not
            received any oral communication from a third party that a Licensed
            Product may or actually does infringe or otherwise violate any
            intellectual property right of such third party.

As used in this Agreement, (i) "to Licensor's knowledge" (or any equivalent
term) means to the best actual knowledge, as of the date of this Agreement, of
Licensor and its officers after diligent investigation, without commissioning
special searches or studies, and (ii) "to Licensee's knowledge" (or any
equivalent term) means to the best actual knowledge, as of the date of this
Agreement, of Licensee and its officers after diligent investigation, without
commissioning special searches or studies.

ARTICLE 17. WARRANTY DISCLAIMER:

EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES,
AND HEREBY DISCLAIMS, ANY EXPRESS OR IMPLIED WARRANTY INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED

                                      -34-


WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT WITH RESPECT TO ANY OF THE RIGHTS OR INTERESTS GRANTED
HEREUNDER, INCLUDING WITHOUT LIMITATION THOSE WITH RESPECT TO THE LICENSED
PATENTS OR LICENSOR IMPROVEMENT PATENTS OR KNOW-HOW OR ANY LICENSED PRODUCT.

ARTICLE 18. OPERATIONS IN COMPLIANCE WITH LAW:

Up to the date of this Agreement, each Party has complied, and in exercising the
rights granted to each Party by this Agreement, each Party shall comply, in all
material respects with all applicable laws, including, without limitation, the
requirements of 35 U.S.C. Section 200 et seq. and all regulations promulgated
thereunder, as amended, and any similar or successor statutory regulations
(collectively, the "Federal Patent Policy"). To the extent that any Licensed
Patent or Licensor Improvement Patent claims an invention subject to Federal
Patent Policy, the license granted to Licensee hereunder with respect to such
Licensed Patent or Licensor Improvement Patent may be subject to any
royalty-free, non-exclusive license granted to the United States Government
pursuant to 35 U.S.C. Section 204(c)(4).

ARTICLE 19. INFRINGEMENT OF THIRD PARTY'S PATENTS:

Licensee shall promptly send Licensor a copy of any notice or communication from
a third party alleging that Licensee's exercise of its rights under this
Agreement infringe or otherwise violate such third party's intellectual property
rights ("Notice"). Licensor shall have the first right, but shall not be
obligated, to respond to the Notice. If Licensor does not elect to respond,
Licensor shall promptly inform Licensee and Licensee may respond to the Notice.
If Licensee defends such proceedings, it may offset [*], including reasonable
legal expenses, incurred in regard thereto against any payments owed to Licensor
under Article 3, provided, however, that no such payment shall be reduced by
more than [*] by any such offset [*]. Licensee shall continue to perform its
reporting obligations under Article 7 and otherwise continue to perform its
obligations hereunder.

Licensee shall not settle any infringement, misappropriation, or other claim
subject to this Article 19 without the consent of Licensor.

If any Licensed Product is covered by an issued patent or other intellectual
property right held by one or more third parties and it becomes necessary for
Licensee to obtain a license from such third party or parties under such patent,
and/or other intellectual property right and accordingly to pay royalties to
such third party(ies) with respect to any Net Sale of any Licensed Product, then
Licensee may reduce any royalty otherwise due Licensor by [*] of the amount of
royalty payment due to such third party, but in no event to less than [*] of the
royalty which may then be due to Licensor. In addition, if Licensee is required
to pay any an upfront or similar fee to any third party(ies), Licensor shall
share in the payment of any such consideration which involves more than a
running royalty as follows. If, for example, Licensee is required to pay an
upfront fee of $1 Million to a third party, the royalty payments then due
Licensor shall be reduced by [*] until [*] of the upfront fee [*] has been
recouped by Licensee.


[*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -35-



If Licensee is required to pay any damages (i.e., something other than
prospective royalties and upfront or similar fees ) to the third party, Licensee
shall be responsible for the payment of any such damages to the third party and
shall be permitted to recoup one-half (1/2) of such payment from Licensor as
follows: If, for example, Licensee is required to pay damages of $1 Million to
the third party, Licensor's royalty payments otherwise due under this Agreement
shall be reduced by [*] until [*] of the damages [*] have been recouped by
Licensee.

Except as set forth below, any reduction of royalties due to Licensor as a
result of a recoupment of running royalties, upfront fees, and damages in the
aggregate arising out of a third party claim of infringement or violation of
intellectual property rights under this Section shall not reduce any single
royalty payment otherwise due Licensor hereunder by more than [*].

Licensor shall provide Licensee with a copy of any notice of default or breach
received by Licensor which relates in any way to the UKRF Rights within five (5)
business days of receipt of such notice. If Licensor fails to make any payment
before any applicable cure period has expired, Licensee may make such payment in
Licensor's name and on Licensor's behalf before such cure period expires, and
Licensee may fully recover any payment made by Licensee under this paragraph at
the applicable rate described in the next paragraph. Licensor's remedy for
recovering payments made by Licensee to any third party pursuant to this
paragraph shall be limited to recovery from such third party and not Licensee.

Except as set forth below, where Licensee seeks recoupment for payment(s) made
to UKRF as a result of Licensor's failure to make any payment to UKRF, Licensee
shall be permitted to recoup [*] of such payment to UKRF against [*] percent of
the royalty then due to Licensor as follows ("[*] Recoupment Rate"): Licensee
may reduce any royalty payment otherwise due to Licensor hereunder by [*] of
such royalty payment less any royalties payable by Licensor to UKRF ("Net
Royalty Amount"). [*]. The [*] Recoupment Rate shall not apply where Licensee
seeks recoupment for payment(s) made to UKRF where Licensor's decision not to
make any payment to UKRF (i) was made on the basis of a written opinion of
reputable outside patent counsel; (ii) the opinion and any other relevant
information was fully disclosed to Licensee within a reasonable time prior to
Licensor's decision not to pay; and (iii) where, following such disclosure,
Licensee failed to require Licensor to make the payment in accordance with the
provisions of the previous paragraph on the basis of the written opinion of
counsel as provided therein. In such case Licensee shall be permitted to recoup
[*] of Licensee's payment to UKRF by reducing any royalty payment otherwise due
to Licensor hereunder by [*].


[*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -36-


ARTICLE 20. FORCE MAJEURE:

Neither Party shall be liable for any failure to perform arising out of causes
beyond the control and without the fault or negligence of such Party. Such
causes include, but are not limited to, acts of God; acts of the public enemy;
acts of terrorism, natural disasters such as fire or flood or unusually severe
weather; quarantine restrictions; strikes; and freight embargoes.

ARTICLE 21. CHOICE OF LAW/FORUM:

Any legal or other action hereunder shall be brought in the State and federal
courts nearest the principal place of business of the defendant in any such
action, and this Agreement shall be construed and interpreted and its
performance shall be governed by the substantive laws of the State where such
courts are located, i.e., New York, if Licensee is the defendant, and
Massachusetts, if Licensor is the defendant, without regard to the state's
conflict of laws principles. The Parties consent to the exclusive personal
jurisdiction and venue of such courts in the event of such action. In construing
this Agreement, neither Party shall have been deemed to have drafted this
Agreement, and no court or arbitrator will construe or interpret this Agreement
in favor of a Party based on the presumption that it did not draft the term or
clause at issue, it being agreed that each Party has ably represented itself and
has been ably represented by counsel.

ARTICLE 22. DISPUTE RESOLUTION:

If there is any dispute arising out of or relating to this Agreement or a
Party's performance or failure to perform hereunder, such dispute shall, at the
written request of either Party be submitted to the top executive officer of
each Party, or another executive officer of a Party designated by the top
executive officer as his or her representative for such purpose. The initial
Representatives are the General Manager, North American Pharmaceuticals, for
Licensee, and the President of Licensor. The Representatives shall meet as soon
as reasonably practicable to consider the matter and each shall each use
reasonable commercial efforts to effect a resolution. If the Representatives are
able to resolve the dispute, the resolution shall be set forth in a written
instrument signed by each of them.

If the Representatives are not able to resolve the dispute within thirty (30)
days of their first meeting or within such extended period they agree upon, they
shall proceed to non-binding arbitration by a skilled mediator familiar with the
commercial and manufacturing processes of the pharmaceutical industry and
pursuant to the rules of an organization specializing in alternatives to
disputes, such as the CPR Institute for Dispute Resolution, End Dispute, or the
AAA. If the Parties cannot agree upon a single mediator within the next 30 days,
they shall each select a mediator and the two selected shall select the sole
mediator. If a Party does not select a mediator, the mediator selected by the
other Party shall be the sole mediator. The selected mediator shall use his best
efforts to make a nonbinding decision on the merits of the case within sixty
(60) days, and the Parties shall use their best reasonable commercial efforts to
cooperate with the mediator. The mediator need not give reasons for his
decision.

If the Parties are not able to resolve their dispute through mediation, such
dispute may, if they agree, be submitted to binding arbitration pursuant to the
expedited procedures and in accordance

                                      -37-


with the Patent Licensing Rules of the AAA. The arbitrator shall be mutually
selected by the Parties or, if they cannot agree, each Party shall designate one
arbitrator to represent it in the selection process and the two arbitrators
shall appoint a third arbitrator who shall arbitrate such dispute or difference.
Such selection process shall be completed within sixty (60) days from the end of
the period during which they attempted to resolve the dispute through the
mediation process. The disputed matter shall be arbitrated at such location as
the Parties shall mutually designate or, if they are not able to agree on such
location, at a location selected by the arbitrator. The selected arbitrator
shall, if reasonably possible, be one who is familiar with the commercial and
manufacturing practices of the pharmaceutical industry.

The arbitrator's award shall be final and binding on the Parties and enforceable
by either Party in any court of competent jurisdiction. The fees and expenses of
the arbitrator shall be shared equally by the Parties.

ARTICLE 23. NOTICES:

Any notice, request, instruction or other communication required or permitted to
be given under this Agreement shall be in writing and shall be given by sending
such notice properly addressed to the other Party's address shown below (or any
other address as either Party may indicate by notice in writing to the other
from time to time as required by this Article): (i) by hand or by prepaid
registered or certified mail, return receipt requested, (ii) by a nationally
recognized overnight courier service, or (iii) via facsimile (provided such
facsimile is sent by a machine which acknowledges receipt of the transmission)
at the following addresses:

If to Licensor:

                  Control Delivery Systems
                  400 Pleasant Street
                  Watertown, MA 02472
                  Attn: Paul Ashton, Ph.D., President
                  Facsimile Number:  617-926-2313

With a copy to:

                  Control Delivery Systems
                  400 Pleasant Street
                  Watertown, MA  02472
                  Attn: Lori Freedman, General Counsel
                  Facsimile Number: (617) 926-5050


                                      -38-


and to:

                  Ropes & Gray
                  One International Place
                  Boston, MA  02110
                  Attn: Mary E. Weber
                  Facsimile Number: (617) 951-7050

If to Licensee:

                  Bausch & Lomb Incorporated
                  1400 N. Goodman Street
                  Rochester, NY 14609
                  Attn: Gary Phillips, M.D.
                        Corporate Vice President, Global Pharmaceutical and
                        Vitreoretinal
                  Facsimile Number: (585) 338-0811

With a copy to:

                  Bausch & Lomb Pharmaceuticals, Inc.
                  One Bausch & Lomb Place
                  Rochester, NY 14604
                  Attn: Robert B. Stiles
                        Senior Vice President and General Counsel
                  Facsimile Number: (585) 338-8706

Any notice, if mailed properly addressed, postage prepaid, shall be deemed made
(i) three (3) days after the date of mailing as indicated on the certified or
registered mail receipt, (ii) on the next business day if sent by overnight
courier service, or (iii) on the date of delivery if hand delivered or the date
of transmission if sent by facsimile transmission.

ARTICLE 24. MERGER CLAUSE:

This Agreement contains the entire understanding between the Parties and
supersedes all proposals, oral and written, all negotiations, conversations or
discussions between or among the Parties relating to the subject matter of this
Agreement and restates the 1999 Agreement and the Vitrasert Agreement, both as
amended, in their entirety.

ARTICLE 25. INTEGRATION CLAUSE:

No amendment or modification to this Agreement shall be valid or binding upon
the Parties unless made in writing and executed by authorized representatives of
both Parties.

ARTICLE 26. SEVERABILITY CLAUSE:

Any terms or provision of this Agreement which is found to be invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity of enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.

                                      -39-


ARTICLE 27. NO WAIVER:

The failure of either Party to terminate, seek redress for a breach of, or to
insist on strict performance of any term, covenant, condition, or provision
contained in this Agreement shall not act as a waiver of rights or of the right
to require future compliance and the term, covenant or provision in question
shall remain in full force and effect.

ARTICLE 28. TRANSFERABILITY OF RIGHTS AND OBLIGATIONS:

This License and Agreement shall inure to the benefit of and be binding upon the
successors, assigns, or other legal representatives of the Parties.
Notwithstanding the foregoing, neither Party may assign, delegate, or
subcontract its right and obligations hereunder without the prior written
consent of the other Party, which shall not be unreasonably withheld, except
that (i) no consent to assignment shall be necessary in the case of any transfer
by Licensee of substantially all of the assets or stock of Licensee's
proprietary (branded and/or generic) ophthalmic pharmaceutical business, (ii) no
consent shall be necessary in the case of any Sublicense pursuant to Section
2.1.1, and (iii) no consent to assignment shall be necessary in the case of any
transfer by Licensor of substantially all of the assets or stock of Licensor's
ophthalmics business. In addition, if Licensor directly or indirectly delegates
or transfers any rights or obligations under this Agreement, it shall be a
condition of such delegation or transfer that its obligations under Sections 2.3
and 2.4 are expressly assumed by, and become binding upon, such delegatee or
transferee.

ARTICLE 29. PATENT MARKING:

Licensee shall mark all Licensed Products sold or otherwise disposed of by it in
the United States under the license granted in this Agreement with the word
"Patent" and the number of the Licensed Patent. All License Products shipped of
sold in other countries shall be marked in such a manner as to conform with the
patent laws and practice of the country to which such products are shipped or in
which such products are sold.

ARTICLE 30. INTENTIONALLY OMITTED

ARTICLE 31. INDEPENDENT CONTRACTORS:

Licensor and Licensee are not partners, joint venturers or agents of one another
and shall at all times act as independent contractors without the right or
authority to bind each other with respect to any agreement, representation, or
warranty made with or to any third party. Except as otherwise stated herein,
Licensor and Licensee each shall be responsible for all costs, expenses, and
taxes, arising from the conduct of its own business.

ARTICLE 32. CONFIDENTIALITY:

   32.1 Confidentiality. Notwithstanding any other provision herein, during
   the term of this Agreement and for a period of ten (10) years from
   termination of this Agreement, each Party ("Receiver") will hold in
   confidence, will not disclose to others (except those Affiliates,
   attorneys, accountants, stockholders, investment bankers, advisers or
   other consultants who are bound by an obligation of confidentiality), and
   will not use for any purpose not contemplated

                                      -40-


   by this Agreement, any technical or business information (including the
   terms and conditions of this Agreement) Receiver obtains from the other
   Party ("Discloser") in connection with this Agreement (collectively, the
   "Confidential Information") provided that the Receiver may disclose
   Confidential Information: (a) as otherwise expressly provided in this
   Agreement, (b) as required by applicable law or any listing agreement
   with, or the rules and regulations of, any applicable securities exchange
   or the National Association of Securities Dealers, (c) necessary to secure
   any required consents under this Agreement as to which the other Party has
   been advised, (d) consented to in writing by the furnishing Party, (e) in
   confidence, to accountants, banks, and financing sources and their
   advisers, or (f) in confidence, to the other party (and their Affiliates,
   attorneys, accountants, stockholders, investment bankers, advisers or
   other consultants who are bound by an obligation of confidentiality) in a
   merger, acquisition or license or proposed merger, acquisition or license,
   or the like, and further provided that with respect to disclosures of the
   terms and conditions of this Agreement made pursuant to the filing of this
   Agreement as an exhibit to a document filed with the SEC, the filing Party
   shall use commercially reasonable efforts to obtain confidential treatment
   under the Securities Act of 1933 or the Securities Exchange Act of 1934 of
   those portions of this Agreement identified to the filing Party in writing
   by the other Party in advance of the filing (the filing party shall
   provide the other Party with reasonable advance notice of the filing to
   permit the other Party to make the confidentiality request described
   above). Except as otherwise set forth above, Receiver shall make
   Discloser's Confidential Information available to persons within
   Receiver's organization only on a "need to know" basis, and Receiver shall
   inform all persons to whom such Confidential Information is made available
   of the confidential nature of the Confidential Information and the
   restrictions comprised hereunder and shall require such persons to keep
   the Confidential Information confidential as provided in this Section.
   However, this confidentiality obligation shall not extend to any portion
   of the Confidential Information which: (i) is known to Receiver as
   documented by its written records at the time of disclosure; or (ii) is or
   becomes public or generally available to the public through publication or
   otherwise but through no fault of Receiver; or (iii) corresponds in
   substance to information furnished to Receiver on a nonconfidential basis
   by a third party having a bona fide right to do so and not having any
   confidential obligation, direct or indirect, to Discloser with respect to
   the same; or (iv) corresponds to information furnished by Discloser to any
   third party on a nonconfidential basis except in limited consumer testing;
   or (v) Receiver can demonstrate was developed by Receiver independently of
   the disclosure of the Confidential Information by Discloser; or (vi) is
   disclosed by Receiver pursuant to a legal requirement, provided Receiver
   has complied with the provisions set forth in Section 32.2 below.

   32.2 External Disclosure. If Receiver becomes legally required to disclose
   any of Discloser's Confidential Information, Receiver shall notify
   Discloser promptly of such requirement so that Discloser may seek a
   protective order or other appropriate remedy concerning such disclosure.
   Receiver will consult with Discloser, if requested to do so, regarding the
   nature and extent of the required disclosure and will cooperate to limit
   such disclosure to the extent practical. Unless specifically requested
   otherwise by Control Delivery Systems Inc., Bausch & Lomb Incorporated
   will direct all communications it receives from potential or existing
   investors in Control Delivery Systems, Inc. to Steve McCluski (Senior Vice
   President and Chief Financial Officer), Robert Bailey (Vice President,
   Assistant General Counsel and Assistant Secretary), or Gary Phillips
   (Corporate Vice President, Global Pharmaceutical and Vitreoretinal) (or
   their respective successors).

                                   -41-


ARTICLE 33. RELINQUISHMENT:

   33.1 UKRF Letter Agreement. The Licensee hereby relinquishes, agrees to
   relinquish and shall not exercise, any and all rights or causes of actions
   Licensee has, now, in the past, or in the future, pursuant to the Letter
   Agreement dated June 9, 1999, as between UKRF, Licensor and Licensee (the
   "UKRF Letter Agreement"). Licensee hereby agrees that the relinquishment
   of its rights under the UKRF Letter Agreement shall be fully evidenced by
   this Amendment without the need for further documentation of such
   relinquishment, and supercedes any prior negotiations, understandings,
   agreements, instruments and representations with respect to the UKRF
   Letter Agreement.

   33.2 Covenant Not to Compete. The Licensee hereby relinquishes, agrees to
   relinquish and shall not exercise, any and all rights or causes of actions
   Licensee has, now, in the past, or in the future, pursuant to the Covenant
   Not to Compete dated June 9, 1999, as between Licensee and Paul Ashton,
   Ph.D. (the "Covenant Not to Compete"). Licensee hereby agrees that waiver
   of its rights under the Covenant Not to Compete shall be fully evidenced
   by this Amendment, and supersedes any prior negotiations, understandings,
   agreements, instruments and representations with respect to the Covenant
   Not to Compete.

ARTICLE 34. NO LIMIT TO REMEDIES:

Subject to the terms of this Agreement, the existence or choice of any one
remedy available to a Party shall not limit or otherwise restrict a Party from
choosing any remedy available, it being understood that a Party's remedies are
cumulative.

ARTICLE 35. COUNTERPARTS:

This Agreement may be executed in counterparts, each of which shall be
enforceable against the Party actually executing such counterpart, and which
together shall constitute one instrument.

ARTICLE 36. TRANSITION OBLIGATIONS:

   36.1 Clinical/Trial Agreements. The Parties wish to reflect the transfer
   to Licensee of pre-clinical, clinical, manufacturing and regulatory
   activities which were being performed by Licensor and/or Licensee with
   respect to current clinical trials relating to DME, Uveitis and ARMD (the
   "Clinical Activities"). As agreed upon by the Parties, prior to Licensor's
   withdrawal of its IND covering such Clinical Activities, Licensee has
   provided: (a) notice of assignment and assumption to third parties under
   the third party contracts related to the Clinical Activities listed on
   Exhibit 36.1A (the "Clinical Agreements"); and (b) a notice of termination
   (as executed by Licensor) to third parties under third party clinical
   trial agreements listed on Exhibit 36.1B ("Trial Agreements").
   Consequently, Licensor hereby transfers and assigns to Licensee, and
   Licensee hereby assumes, (i) all Clinical Agreements; (ii) all outstanding
   bills for Clinical Activities provided by Licensor to Licensee as of June
   18, 2003; (iii) all payment obligations arising on or after June 18, 2003
   under the Clinical Agreements; and (iv) all payments obligations for
   services required under the Trial Agreements through the date of
   termination of such Trial Agreements. However, notwithstanding any
   payments by Licensee with respect to any Clinical or Trial Agreement,
   Licensor shall be responsible for any material breach or failure by
   Licensor in the performance of any such agreement prior to the

                                      -42-


   assumption by Licensee, or the termination, of such agreement, except for
   (x) the payment obligations assumed by Licensee pursuant to this Section
   36.1; or (y) breaches of a Clinical or Trial Agreement resulting from a
   delay by Licensee in providing notice of termination or assignment and
   assumption to third parties pursuant to subsections (a) or (b) above.

   36.2 Clinical Activities Data. Up through December 31, 2003 ("Transition
   Period"), Licensor shall cooperate with Licensee and provide reasonable
   access to, answer questions regarding, and transfer to Licensee, all
   relevant information possessed by Licensor regarding the Clinical
   Activities.

   36.3 Transition Space. Licensor shall have the right to control its
   premises, but Licensor shall provide space at its premises during the
   Transition Period through November 30, 2003, to permit Licensee and its
   consultants and representatives ("Licensee Transition Personnel") to
   transition the Clinical Activities to Licensee. Licensor hereby grants to
   Licensee a license to permit Licensee Transition Personnel to use and
   occupy such portions of Licensor's premises as are reasonably designated
   by Licensor to the extent needed to perform such transition activities on
   behalf of Licensee. The Licensee Transition Personnel shall have access to
   all applicable records and information reasonably necessary to complete
   the transition of the Clinical Activities to Licensee as contemplated in
   this Article 36. Licensee shall require all Licensee Transition Personnel
   to (i) observe Licensor's codes of conduct and attire; (ii) observe all
   building security rules and procedures at Licensor's premises; (iii)
   return all building passes, security cards or other access materials
   immediately upon completion and delivery of the transition activities
   contemplated under this Agreement; (iv) work during Licensor's ordinary
   business hours, unless otherwise agreed, and follow Licensor's reasonable
   instructions as to where to work; and (v) adhere to Licensor's reasonable
   restrictions regarding confidential information they may be exposed to at
   Licensor's premises. As soon as possible after receipt of Licensor's
   reasonable request that Licensee remove from Licensor's premises any
   Licensee Transition Personnel failing to adhere to such restrictions,
   Licensee will cause such individual to be removed.

   36.4 Insurance. In connection with the assumption of the payment
   obligations pursuant to Section 36.1, Licensor shall promptly provide
   Licensee with a copy of all insurance policies maintained as of the date
   hereof in connection with Clinical Activities, including without
   limitation the Clinical and Trial Agreements. Such insurance shall be in
   form, substance, and amount reasonably satisfactory to Licensee. Licensor
   shall maintain such insurance in force for as long as any obligation under
   any Clinical or Trial Agreement. Licensee shall be named as an additional
   insured on all such policies, none of which may be cancelled or materially
   amended without prior notice to, and the written consent of, Licensee,
   which consent will not be unreasonably withheld. If there is any default
   under any such policy, Licensee shall have the right, but not the
   obligation, to cure such default, including paying any premiums
   thereunder. If Licensee pays any premium or other amount due from Licensor
   under any such policy or otherwise incurs any out-of-pocket cost in curing
   any such default, such amount(s) will be deemed part of and added to the
   Unpaid Advanced Amount under Article 3.

                                      -43-


IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
in duplicate originals by its duly authorized officer or representative.

BAUSCH & LOMB INCORPORATED                      CONTROL DELIVERY SYSTEMS, INC.

By:  /s/Gary Phillips                           By:  /s/ Michael J. Soja
   ------------------------------                 ----------------------------
Printed Name: Gary Phillips                     Printed Name: Michael J. Soja
             --------------------                            -----------------
Title: Corporate Vice President                 Title: V. Ex President and CFO
      ---------------------------                     ------------------------


                                  EXHIBIT 1.14
       FIRST GENERATION EXCLUSIVE LICENSED PRODUCT SPECIFICATIONS/DRAWINGS

                                    FIGURE 1
                                      [*]

                                    FIGURE 2
                                      [*]

[*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -45-



                                 EXHIBIT 1.23(a)
                 LICENSED PATENTS, PATENT APPLICATIONS AND IDFs

I.    ISSUED PATENTS AND PENDING PATENT APPLICATIONS

[*]


[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -46-

                                 EXHIBIT 1.23(b)
                 EXCLUDED PATENTS, PATENT APPLICATIONS AND IDFs


[*]



[*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -52-

                                  EXHIBIT 1.33
                         NON-EXCLUSIVE LICENSED PRODUCT

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -58-



                                  EXHIBIT 1.47
                                 UKRF LICENSES

1.     License Agreement By and Between University of Kentucky Research
Foundation and Controlled Delivery Systems, Inc., dated October 20, 1991, as
amended August 10, 1993

       -Patent Rights:  US Patent No. 5,378,475 "Sustained Release Drug
Delivery Devices"

2.     License Agreement By and Between University of Kentucky Research
Foundation and Controlled Delivery Systems, Inc. dated October 31, 1995

       -Patent Rights:  USSN 08/187,462 "Co-drugs as a Method of Controlled
Delivery" (abandoned)

3.     License Agreement By and Between University of Kentucky Research
Foundation and Controlled Delivery Systems, Inc. dated September 9, 1997

       -Patent Rights:  US Patent No. 5,836,935 "Implantable Refillable
Controlled release Device to Delivery Drugs Directly into an Internal Portion
of the Body"

4.     License Agreement By and Between University of Kentucky Research
Foundation and Controlled Delivery Systems, Inc. dated September 9, 1997

       -Patent Rights:  US Patent No. 5,773,019 "Implantable Controlled
Release Device to Delivery Drugs to an Internal Portion of the Body"

5.     License Agreement By and Between University of Kentucky Research
Foundation and Controlled Delivery Systems, Inc. dated September 9, 1997

       -Patent Rights:  US Patent No. 5,681,964 "Permeable Non-Irritating
Prodrugs of non-steroidal, anti-inflammatory agents"

                                      -61-


                                  EXHIBIT 2.3
          PATENTS, PATENT APPLICATIONS, AND INVENTION DISCLOSURE FORMS
                             NOT SUBJECT TO NON-SUIT

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                     -62-



                                   EXHIBIT 2.8
                                CO-OWNED PATENTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -63-


                                  EXHIBIT 2.9
                               LICENSEE NON-SUIT

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -64-

                                  EXHIBIT 2.10
                       LICENSEE COVENANT NOT TO FILE: IDFS


                                      -65-
[*]
[*]- Indicates material that has been omitted and for which confidential
treatment has been requested. All such information has been filed with the
Commission pursuant to Rule 24b-2 promulgated under the Securities and Exchange
Act of 1934, as amended.


                                  EXHIBIT 3.7.3
                                 FORM OF OPTION

                               OPTION CERTIFICATE

No. [___]                                                                [DATE]

      BAUSCH & LOMB INCORPORATED, a New York corporation ( "B&L"), for value
received and pursuant to Section 3.7.3 of an Amended and Restated License
Agreement (the "License Agreement"), dated as of December 9th, 2003, by and
between B&L and Control Delivery Systems, Inc., a Delaware corporation ("CDS"),
hereby certifies that CDS, or its registered assigns (the "Option Holder"), is
entitled to purchase from B&L, in whole or in part, 600,000 shares (the "Option
Shares") of CDS common stock, par value $0.01 per share ("Common Stock"), at the
purchase price of $5.00 per share (the "Exercise Price"), at any time or from
time to time prior to 5:00 P.M., New York, New York time, on JUNE 30, 2004 (the
"Expiration Time"), all subject to the terms, conditions and adjustments set
forth below in this Option Certificate.

1.    Exercise.

      a.    Notice of Exercise. The Option Holder may exercise this option, from
            time to time, in whole or in part, by delivering a notice of
            exercise to B&L in substantially the attached form at any time prior
            to the Expiration Time.

      b.    Closing of Exercise. The closing of any exercise of this option must
            occur at the offices of B&L.

            i.    B&L Deliveries. At the closing, B&L shall deliver to the
                  Option Holder:

                  A.    certificates representing the Option Shares being
                        purchased endorsed for transfer or accompanied by
                        executed stock powers,

                  B.    customary representations regarding ownership of the
                        Option Shares, and

                  C.    an agreement to indemnify the Option Holder for any
                        breach of the representations regarding ownership of the
                        Option Shares

            ii.   Option Holder Deliveries. At the closing, the Option Holder
                  shall deliver to B&L the aggregate exercise price for the
                  Option Shares being purchased by wire transfer or check drawn
                  on immediately available funds.

2. Transferability of Option. This option is transferable by the Option Holder
in whole or in part. B&L shall maintain a register of the names and addresses of
Option Holders and the transferees of this option. Upon the surrender of this
Option Certificate and a completed assignment form in substantially the attached
form, B&L shall at its expense execute and deliver

                                                                              66


to the Option Holder, its transferees, or both a new Option Certificate or
Certificates covering the total number of Option Shares covered by the
surrendered Option Certificate or Certificates.

3.    Representations, Warranties and Covenants.

      a.    Representations. B&L represents and warrants to the Option Holder as
            follows as of the date of this Option Certificate:

            i.    B&L has the full power and authority to grant this option.

            ii.   B&L is the registered holder and beneficial owner of the
                  Option Shares.

            iii.  The Option Shares are unencumbered except for encumbrances
                  imposed by the Stockholders' Agreement (the "Stockholders
                  Agreement"), dated as of August 8, 2000, by and among CDS and
                  the stockholders party thereto, and the Standstill Agreement
                  (the "Standstill Agreement"), entered into in connection with
                  the License Agreement by CDS and B&L.

      b.    No Disposition of Option Shares. Until the Expiration Time, B&L
            shall not and shall not agree to dispose of any interest in the
            Option Shares or create or allow to be created any encumbrance on
            the Option Shares.

      c.    Cooperation. B&L shall cooperate with the Option Holder to
            effectuate any amendments or waivers to the Stockholders Agreement,
            the Standstill Agreement or any other similar agreement, or any
            amendment to CDS' Certificate of Incorporation, to enable the
            closing of any purchase of Option Shares to occur, provided that B&L
            shall not be required to incur any costs or expenses other than out
            of pocket expenses or costs to its own advisors in connection
            therewith.

4.    Adjustment to Option Shares.

      a.    Recapitalization. If the outstanding shares of Common Stock are
            changed into or exchanged for a different number or kind of shares
            or other CDS securities by reason of any recapitalization,
            reclassification, stock split, stock dividend, combination,
            subdivision or similar transaction, the number and kind of Option
            Shares and the Exercise Price shall be appropriately and
            proportionally adjusted.

      b.    Sale of CDS. If CDS consolidates or merges with any other entity and
            the Common Stock is converted into or exchanged for stock or other
            securities of another entity or for cash or other property (any of
            the foregoing, "Merger Consideration"), B&L shall retain the Merger
            Consideration, and the Option Holder shall receive upon exercise the
            Merger Consideration attributable to the shares of Common Stock
            being purchased.

5.    Miscellaneous.

      a.    Remedies/No Waivers. B&L stipulates that in the event of any default
            or threatened default by B&L in the performance of this Option
            Certificate, the Option Holder's remedies at law will be inadequate.
            A court may specifically enforce the terms of this

                                                                              67


            Option Certificate or enjoin any violation or impending violation of
            the terms of this Option Certificate. Any delay or failure to
            enforce this Option Certificate does not impair the right to
            enforcement and is not a waiver of any breach or any future breach.
            All remedies of the Option Holder shall be cumulative and not
            alternative.

      b.    Choice of Law/Forum. Any legal or other action pertaining to the
            terms of this Certificate must be brought in the state and federal
            courts nearest the principal place of business of the defendant in
            the action. This Option Certificate shall be construed and
            interpreted in accordance with, and its performance shall be
            governed by, the substantive laws of the state where such courts are
            located, without regard to the state's conflict of laws principles.
            B&L and the Option Holder consent to the exclusive personal
            jurisdiction and venue of such courts in the event of such action.

      c.    Notices.

            i.    Delivery. Any notice, request, instruction or other
                  communication required or permitted to be given pursuant to
                  this Option Certificate shall be in writing and shall be given
                  as follows to the address indicated in Section 5(c)(iii):

                  A.    by hand,

                  B.    by prepaid registered or certified mail, return receipt
                        requested,

                  C.    by a nationally recognized overnight courier service, or

                  D.    via facsimile.

            ii.   Timing of Effectiveness. Any notice shall be deemed made as of
                  the time set forth in this Section 5(c)(ii).

                  A.    If delivered by hand, upon delivery.

                  B.    If sent by mail, 3 days after the date of mailing
                        indicated on the certified or registered mail receipt.

                  C.    If sent by overnight courier service, on the next
                        business day.

                  D.    If sent by facsimile, on the date of confirmed
                        receipt.

            iii.  Addresses for Notice. The addresses for notice are as
                  follows:

                  A.    If to the original Option Holder

                        Control Delivery Systems
                        400 Pleasant Street
                        Watertown, MA 02472
                        Attn:  Paul Ashton, Ph.D., President
                        Facsimile Number:  617-926-2313

                                                                              68


                        with a copy to:

                        Control Delivery Systems
                        400 Pleasant Street
                        Watertown, MA  02472
                        Attn:  Lori Freedman, General Counsel
                        Facsimile Number:  (617) 926-5050

                        and to:

                        Ropes & Gray
                        One International Place
                        Boston, MA  02110
                        Attn:  Mary E. Weber
                        Facsimile Number:  (617) 951-7050.

                  B.    If to a subsequent Option Holder, to the address showing
                        on the transfer register maintained by B&L for such
                        Option Holder.

                  C.    If to B&L:

                        Bausch & Lomb Incorporated
                        1400 N. Goodman Street
                        Rochester, NY  14609
                        Attn:  Gary Phillips, M.D.
                               Corporate Vice President, Global Pharmaceutical
                               and Vitreoretinal
                        Facsimile Number:  (585) 338-0811

                        with a copy to:

                        Bausch & Lomb Pharmaceuticals, Inc.
                        One Bausch & Lomb Place
                        Rochester, NY 14604
                        Attn:  Robert B. Stiles
                                 Senior Vice President and General Counsel
                        Facsimile Number: (585) 338-8706

      d.    Amendments and Waivers. This Option Certificate may be amended only
            by a written instrument signed by B&L and the Option Holder. B&L
            shall record any amendments of this Option Certificate in the
            register maintained to record transfers. Any term of this Option
            Certificate may be waived only by a written instrument signed by the
            waiving party.

      e.    Severability. Any terms or provision of this Option Certificate
            which are invalid or unenforceable in any jurisdiction are
            ineffective only to the extent of such invalidity or
            unenforceability and only in such jurisdiction. The invalidity of
            any term of this Option Certificate in one jurisdiction does not
            impair the enforceability of the

                                                                              69


            remaining terms or affect the validity of the term in any other
            jurisdiction.

      f.    Construction. The headings contained in this Option Certificate are
            for convenience only and are not a part of this Option Certificate.

                                                                              70




      IN WITNESS WHEREOF, this Option Certificate has been duly executed by B&L
and as of the date first written above.

                                             BAUSCH & LOMB INCORPORATED

                                             By:_____________________________
                                             Name:
                                             Title:

                   [SIGNATURE PAGE TO B&L OPTION CERTIFICATE]



                           FORM OF NOTICE OF EXERCISE

           [To be executed and delivered only upon exercise of option]

To:Bausch & Lomb Incorporated

      The undersigned registered holder of an option to purchase Control
Delivery Systems, Inc. common stock, par value $.01 per share, from Bausch &
Lomb Incorporated hereby exercises such Option for [_______________] shares. The
closing of this exercise shall occur on [_______________].(1) At the closing,
the undersigned requests that B&L transfer the shares being purchased to
[______________], whose address is [________________].

Dated: [_____________]

                                               _________________________________
                                               Signature(2)

- ----------
(1) This date must be a business day on or before the 30th day following the
        date of the notice of exercise.

(2) The signature must conform to the name of the holder as specified on
        the face of the Option Certificate or to a registered assign on the
        transfer register maintained by B&L. Otherwise, the person or entity
        must provide B&L with evidence of valid assignment.

                 [FORM OF EXERCISE FOR B&L OPTION CERTIFICATE]




                               FORM OF ASSIGNMENT

 [To be executed and delivered to Bausch & Lomb only upon assignment of option,
                              in whole or in part]

      For value received, the undersigned registered holder of an option to
purchase Control Delivery Systems, Inc. common stock, par value $.01 per share,
from Bausch & Lomb Incorporated hereby sells, assigns and transfers unto
[________________], whose address is [____________], the rights represented by
such option to purchase [______________](3) shares of Control Delivery Systems,
Inc. common stock and appoints [____________] attorney to make such transfer on
the transfer register maintained by Bausch & Lomb Incorporated for such
purposes, with full power of substitution in the premises.

Dated: [________________]

                                        _____________________________
                                              Signature(4)

- ----------
(3) Insert the number of shares assigned. In the case of a partial assignment,
      Bausch & Lomb Incorporated will execute and deliver a new Option
      Certificate representing the unassigned portion of the option to the
      assigning holder.

(4) The signature must conform to the name of the holder as specified on
      the face of the Option Certificate or to a registered assign on the
      transfer register maintained by B&L. Otherwise, the person or entity must
      provide B&L with evidence of valid assignment.




                                  EXHIBIT 3.7.4
                             FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR SUCH LAWS COVERING THE TRANSFER OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.

                                 PROMISSORY NOTE

$6,794,719.00                                                 December 9th, 2003

      FOR VALUE RECEIVED, the undersigned Control Delivery Systems, Inc. (the
"Borrower") promises to pay to Bausch & Lomb Incorporated (the "Lender") on the
Maturity Date (as hereinafter defined), the principal sum of Six Million Seven
Hundred Ninety-Four Thousand Seven Hundred and Nineteen Dollars ($6,794,719), or
such lesser principal amount as may be outstanding hereunder. Payments hereunder
shall be made to the Lender at 1400 N. Goodman Street, Rochester, New York or at
such other address as the Lender may specify.

      1.   MATURITY DATE. The term "Maturity Date" means July 1, 2007. If the
Borrower has not repaid the entire principal amount due to the Lender under this
Note by the Maturity Date (whether by prepayment or by offset as described
below), the Borrower will be liable for and shall pay a late charge at an annual
rate of one and one-half (1.5) times the prime rate in effect as announced by
the JPMorgan Chase Bank, N.A. from time to time, on any outstanding balance of
the principal amount remaining after the Maturity Date. This late charge will
compound annually and will accrue commencing on the day following the Maturity
Date until the entire remaining principal amount of this Note has been repaid.

                                       -74-


      2.   OFFSET. The Borrower agrees that the Lender will have the right to
offset and apply certain amounts owing by the Lender to the Borrower under the
Amended and Restated License Agreement dated as of December 9th, 2003 between
the Borrower and the Lender (the "License Agreement") against the amount of
principal due under this Note. Such amounts that may be offset include (a) any
Milestone Payments (as defined in the License Agreement) owing from Lender to
Borrower, and (b) any royalty payments otherwise due Borrower under Article 3 of
the License Agreement, in each case until the entire remaining principal amount
of this Note has been fully repaid. If the Lender elects to apply any amounts
described in the preceding sentence against principal due hereunder, the Lender
shall provide an executed Certificate of Offset of Principal in the form of
Exhibit A to the Borrower promptly after each such application; provided,
however, that if such application is with respect to royalty payments owed by
the Lender to the Borrower, Lender shall furnish the Certificate of Offset of
Principal to the Borrower in conjunction with the Royalty Report referenced in
Section 7.1 of the License Agreement. The remaining principal amount owed under
this Note shall be reduced to the amount indicated on such Certificate.
Notwithstanding the foregoing, neither the existence of this Note nor the
provision of one or more Certificates of Offset of Principal by the Lender shall
affect any of the Borrower's rights under the License Agreement, including
without limitation the Borrower's right to audit and dispute the amounts of any
royalty payments pursuant to Sections 7.1 and 7.2 of the License Agreement.

      3.   PREPAYMENTS. This Note may be prepaid in whole or from time to time
in part without premium or penalty, including without limitation by means of any
payment made by the Borrower under Section 3.7.3 of the License Agreement.

      4.    UNSECURED. The indebtedness represented by this Note is unsecured.

      5.    DEFAULT.

            5.1   Each of the following shall constitute an "Event of Default"
for purposes of this Note:

                                       -75-


            5.1.1 the Borrower fails to pay any amount
      on this Note when it is due and payable;

            5.1.2 there occurs any material event of default by the Borrower
      under the License Agreement, and any applicable grace period shall have
      expired;

            5.1.3 if the Borrower files a petition in bankruptcy
      or is adjudicated bankrupt, or if a petition in bankruptcy is filed
      against the Borrower and such petition is not discharged or dismissed
      within sixty (60) days thereafter, or if the Borrower makes any assignment
      for the benefit of its creditors or any arrangement pursuant to any
      bankruptcy law, or if a trustee, custodian or receiver is appointed for
      the Borrower or any of its assets or property;

            5.1.4 there occurs any material event of default by
      Borrower under any agreement relating to its Material Financing Debt.
      "Material Financing Debt" means any financing debt (other than under this
      Note) outstanding in an aggregate amount of principal (whether or not due)
      and accrued interest exceeding $5,000,000; or

            5.1.5 the dissolution or liquidation of Borrower.

      5.2   If there shall occur an Event of Default under subparagraphs 5.1.1,
5.1.2 or 5.1.4 above, Lender shall be entitled by notice to Borrower to declare
this Note and any interest accrued hereon and all liabilities of Borrower
hereunder to be forthwith due and payable; and if there shall occur an Event of
Default under subparagraphs 5.1.3 or 5.1.5 above, then this Note and any
interest accrued hereon and all liabilities of Borrower hereunder to Lender
shall automatically become forthwith due and payable; and in each case the same
shall thereupon become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived.

      5.3   Borrower agrees to pay all reasonable costs and expenses incurred by
Lender (including reasonable attorney's fees), if any, in connection with the
enforcement or collection of this Note arising after the occurrence of any Event
of Default or any event which with notice or lapse of time or both would
constitute an Event of Default, unless such occurrence is cured by Borrower
within any applicable grace period or such reimbursement is not required

                                      -76-


by the terms of any waiver granted by Lender in respect of such occurrence. The
obligations of Borrower under this paragraph shall survive the payment of this
Note.

      6.    WAIVERS. The Borrower waives to the extent not prohibited by
applicable law (a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by the provisions hereof),
protests, notices of protest and notices of dishonor, (b) any requirement of
diligence or promptness on the part of the Lender in the enforcement of its
rights under this Note, (c) all notices of every kind which may be required to
be given by any statute or rule of law, (d) any valuation, stay, appraisement or
redemption laws and (e) any defense of any kind (other than payment) which the
Borrower may now or hereafter have with respect to its liability under this
Note. No failure or delay on the part of Lender in the exercise of any power or
right in this Note shall operate as a waiver thereof, and no exercise or waiver
of any single power or right, or the partial exercise thereof, shall affect the
Lender's rights with respect to any and all other rights and powers.

      7.    ASSIGNABILITY. This Note shall bind and inure to the benefit of the
Borrower and the Lender and their permitted successors and assigns.
Notwithstanding the foregoing, neither party may assign, delegate, or
subcontract its rights and obligations hereunder without the prior written
consent of the other party, which shall not be unreasonably withheld or delayed,
except that (i) no consent to assignment shall be necessary in the case of any
transfer by the Lender of substantially all of the assets or stock of Lender's
proprietary (branded and/or generic) ophthalmic pharmaceutical business, and
(ii) no consent to assignment shall be necessary in the case of any transfer by
the Borrower of substantially all of the assets or stock of the Borrower's
opthalmics business, and provided that such assignee, delegatee or transferee
shall be at least as creditworthy as the Borrower (where creditworthiness of the
assignee, delegatee or transferee shall take into account the fair value of the
opthalmics business being transferred to such assignee, delegatee or
transferee)

                                       -77-


      8.    LOSS OR MUTILATION OF NOTE. Upon receipt by the Borrower of evidence
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
this Note, together with indemnity reasonably satisfactory to the Borrower, in
the case of loss, theft or destruction, or the surrender and cancellation of the
Note, in the case of mutilation, the Borrower shall execute and deliver to
Lender a new Note of like tenor as this Note.

      9.    NOTICES. Any notice, request, instruction or other communication
required or permitted to be given under this Note shall be in writing and shall
be given by sending such notice properly addressed to the other party's address
shown below (or any other address as either party may indicate by notice in
writing to the other from time to time as required by this paragraph): (i) by
hand or by prepaid registered or certified mail, return receipt requested, (ii)
by a nationally recognized overnight courier service, or (iii) via facsimile
(provided such facsimile is sent by a machine which acknowledges receipt of the
transmission) at the following addresses:

      If to the Borrower:

            Control Delivery Systems
            400 Pleasant Street
            Watertown, MA 02472
            Attn: Chief Executive Officer
            Facsimile Number:  617-926-2313

      With a copy to:

            Control Delivery Systems
            400 Pleasant Street
            Watertown, MA  02472
            Attn: Lori Freedman, General Counsel
            Facsimile Number: (617) 926-5050

                                       -78-


       and to:

            Ropes & Gray
            One International Place
            Boston, MA  02110
            Attn: Mary E. Weber
            Facsimile Number: (617) 951-7050

       If to the Lender:

            Bausch & Lomb Incorporated
            1400 N. Goodman Street
            Rochester, NY 14609
            Attn: Gary Phillips, M.D.
                  Corporate Vice President, Global Pharmaceutical and
            Vitreoretinal
            Facsimile Number: (585) 338-0811

       With a copy to:

            Bausch & Lomb Pharmaceuticals, Inc.
            One Bausch & Lomb Place
            Rochester, NY 14604
            Attn: Robert B. Stiles
                  Senior Vice President and General Counsel
            Facsimile Number: (585) 338-8706

Any notice, if mailed properly addressed, postage prepaid, shall be deemed made
(i) three (3) days after the date of mailing as indicated on the certified or
registered mail receipt, (ii) on the next business day if sent by overnight
courier service, or (iii) on the date of delivery if hand delivered or the date
of transmission if sent by facsimile transmission.

      10.   GOVERNING LAW; CONSENT TO JURISDICTION. This Note shall be governed
by and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
including all matters of construction, validity and performance (including
Section 5-1401 and 5-1402 of the New York General Obligations Law but excluding
all other choice of law and conflicts of law rules). Any legal or other action
hereunder shall be brought in the State and federal courts nearest the

                                      -79-


principal place of business of the defendant in any such action, and the parties
consent to the exclusive personal jurisdiction and venue of such courts in the
event of such action.

      11.   CONSTRUCTION. In construing this Note, neither party shall have been
deemed to have drafted this Note, and no court or arbitrator will construe or
interpret this Note in favor of a party based on the presumption that it did not
draft the term or clause at issue, it being agreed that each party has ably
represented itself and has been ably represented by counsel.

      12.   WAIVER AND AMENDMENT. Any term of this Note may only be amended,
waived or modified with the written consent of the Borrower and the Lender of
this Note.

            [The remainder of this page is intentionally left blank.]

                                      -80-


      IN WITNESS WHEREOF, the undersigned has caused this Note to be executed as
of the date first above written.

BORROWER                                    CONTROL DELIVERY SYSTEMS, INC.

                                            By:_________________________________

                                            Name:_______________________________

                                            Title:______________________________

LENDER                                      BAUSCH & LOMB INCORPORATED

                                            By:_________________________________

                                            Name:_______________________________

                                            Title:______________________________

                                      -81-



                              PAYMENTS OF PRINCIPAL



                            Amount of                     Unpaid
                            Principal                    Principal             Notation
Date                      Repaid/Offset                   Balance               Made By
                                                                      

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------


                                      -82-



                                                                    Exhibit A to
                                                                 Promissory Note

                       CERTIFICATE OF OFFSET OF PRINCIPAL

      Reference is hereby made to the Promissory Note dated December 9th, 2003
by Control Delivery Systems, Inc. in favor of Bausch & Lomb Incorporated in the
original principal amount of $6,794,719 (the "Note"). Capitalized terms not
defined herein have the meanings given such terms in the Note.

      In accordance with paragraph 2 of the Note, the Lender hereby certifies to
the Borrower that the Lender has elected to offset against the remaining
principal amount of the Note the following funds owed by the Lender to the
Borrower under the License Agreement:



                    Description of                  Amount      Remaining Principal Balance
Date of Offset      Amounts Offset                  Offset         of Note (after Offset)
- --------------      --------------                  ------      ---------------------------
                                                       



      IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed as of the date first above written.

LENDER                                         BAUSCH & LOMB INCORPORATED

                                               By:______________________________

                                               Name:____________________________

                                               Title:___________________________

                                      -83-



                                   EXHIBIT 4.1
                               MILESTONE PAYMENTS

Licensee shall make the following one-time Milestone Payments to Licensor within
ten (10) business days after each of the following events:

(i)   [*] - the later of (a) June 1, 2000, or (b) the date Phase III
clinicals for uveitis have begun for the first Licensed Product;

(ii)  [*] - the later of (a) March 1, 2001, or (b) the date Phase III
clinicals for the first Licensed Product for DME or ARMD have begun;

(iii) [*] - the later of (a) September 1, 2002, or (b) the date an NDA
has been filed for the first Licensed Product for uveitis;

(iv)  [*] - the later of (a) March 1, 2003, or (b) the date an NDA has
been filed for the first First Generation Exclusive Licensed Product for either
DME or ARMD;

(v)   [*] - the later of (a) November 1, 2003, or (b) the date the FDA
has approved the NDA for the first First Generation Exclusive Licensed Product
for a uveitis related indication; and

(vi)  [*] - the later of (a) April 1, 2004, or (b) the date the FDA has
approved the NDA for the first First Generation Exclusive Licensed Product for
either a DME or ARMD related indication.

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -84-



                                   EXHIBIT 5.3

     LICENSEE'S SPECIFIC DILIGENCE OBLIGATIONS - FIRST GENERATION EXCLUSIVE
                   LICENSED PRODUCT (NON-UVEITIS INDICATIONS)

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -85-



                                   EXHIBIT 5.4

   LICENSEE'S SPECIFIC DILIGENCE OBLIGATIONS - NON-EXCLUSIVE LICENSED PRODUCTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -86-



                                EXHIBIT 16.1(vi)
              LITIGATION, PROCEEDINGS, GOVERNMENTAL INVESTIGATIONS

                                 Not Applicable

                                      -87-



                                EXHIBIT 16.2(iii)
                   EXCEPTIONS TO OWNERSHIP OF LICENSED PATENTS

1. US Patent No. 5,378,475 "Sustained Release Drug Delivery Devices"

Owned by University of Kentucky Research Foundation and licensed to Control
Delivery Systems, Inc. pursuant to the License Agreement By and Between
University of Kentucky Research Foundation and Control Delivery Systems, Inc.,
dated October 20, 1991, as amended August 10, 1993

2. USSN 08/187,462 "Co-drugs as a Method of Controlled Delivery" (abandoned)

Owned by University of Kentucky Research Foundation and licensed to Control
Delivery Systems, Inc. pursuant to the License Agreement By and Between
University of Kentucky Research Foundation and Control Delivery Systems, Inc.
dated October 31, 1995

3. US Patent No. 5,836,935 "Implantable Refillable Controlled release Device to
Delivery Drugs Directly into an Internal Portion of the Body"

Owned by University of Kentucky Research Foundation and licensed to Control
Delivery Systems, Inc. pursuant to the License Agreement By and Between
University of Kentucky Research Foundation and Control Delivery Systems, Inc.
dated September 9, 1997

4. US Patent No. 5,773,019 "Implantable Controlled Release Device to Delivery
Drugs to an Internal Portion of the Body"

Owned by University of Kentucky Research Foundation and licensed to Control
Delivery Systems, Inc. pursuant to the License Agreement By and Between
University of Kentucky Research Foundation and Control Delivery Systems, Inc.
dated September 9, 1997

5. US Patent No. 5,681,964 "Permeable Non-Irritating Prodrugs of non-steroidal,
anti-inflammatory agents"

Owned by University of Kentucky Research Foundation and licensed to Control
Delivery Systems, Inc. pursuant to the License Agreement By and Between
University of Kentucky Research Foundation and Controlled Delivery Systems, Inc.
dated September 9, 1997

                                      -88-



                                 EXHIBIT 16.2(v)
                               LICENSOR DISCLOSEES

I. ALL OFFICERS, EMPLOYEES, AND CONSULTANTS OF LICENSOR AS OF THE AMENDMENT DATE

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -89-



                                  EXHIBIT 36.1A
                               CLINICAL AGREEMENTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -92-




                                  EXHIBIT 36.1B
                                TRIAL AGREEMENTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -93-

                                                                    EXHIBIT 4.13

                                                               Execution Version

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                             COLLABORATION AGREEMENT

                                 BY AND BETWEEN

                         CONTROL DELIVERY SYSTEMS, INC.

                                       AND

                             ALIMERA SCIENCES, INC.

                          DATED AS OF FEBRUARY 11, 2005



                                TABLE OF CONTENTS



                                                                                                  Page
                                                                                               
ARTICLE  1  DEFINITIONS..................................................................           1

ARTICLE  2  JOINT DEVELOPMENT TEAM.......................................................          15
   2.1        Establishment of Joint Development Team....................................          15
   2.2        Responsibilities of the Joint Development Team.............................          16
   2.3        Meetings; Minutes..........................................................          16
   2.4        Decision-Making and Dispute Resolution.....................................          17
   2.5        Expenses...................................................................          17
   2.6        Dissolution of JDT.........................................................          17

ARTICLE  3  DEVELOPMENT ACTIVITIES.......................................................          17
   3.1        General....................................................................          18
   3.2        Development Plan...........................................................          18
   3.3        Performance................................................................          21
   3.4        Primary Contact Persons....................................................          22
   3.5        Availability of Employees..................................................          22
   3.6        Visit of Facilities........................................................          23
   3.7        Subcontracts...............................................................          23
   3.8        Information Sharing........................................................          23
   3.9        Records....................................................................          23
   3.10       Manufacturing for Clinical Supply Requirements.............................          23
   3.11       Technology Transfer by CDS.................................................          24

ARTICLE  4  COMMERCIALIZATION............................................................          24
   4.1        Commercialization of Product(s) in the Collaboration Field.................          24
   4.2        Commercialization Budget...................................................          24
   4.3        Diligence..................................................................          25
   4.4        Costs of Commercialization.................................................          27
   4.5        Manufacturing for Commercial Supply Requirements...........................          27
   4.6        Product Recalls............................................................          27

ARTICLE  5  GRANT OF RIGHTS..............................................................          28
   5.1        Grant of License by CDS....................................................          28
   5.2        Grant of License by Alimera................................................          29
   5.3        Sublicenses and Subcontracts...............................................          29
   5.4        Ownership of and Rights to Inventions......................................          29
   5.5        Limitation on Use..........................................................          30
   5.6        Reservation of Rights......................................................          30
   5.7        No Grant of Other Technology or Patent Rights..............................          31
   5.8        Options to Licenses in the Collaboration Field.............................          31
   5.9        Clinical IP................................................................          32
   5.10       Section 365(n) of the Bankruptcy Code......................................          32


                                      -i-



                                                                                                
ARTICLE  6  COSTS & REVENUES - PRE AND POST PROFITABILITY DATE...........................          33
   6.1        License Fee................................................................          33
   6.2        Milestone Payment..........................................................          33
   6.3        Direct Development Costs...................................................          33
   6.4        Revenues Prior to Profitability Date.......................................          35
   6.5        Costs and Revenues After the Profitability Date............................          35
   6.6        Revenues from Third Party Agreements.......................................          38
   6.7        Records; Audits............................................................          38

ARTICLE  7  INTELLECTUAL PROPERTY........................................................          39
   7.1        CDS-Prosecuted Patent Rights...............................................          39
   7.2        Abandonment................................................................          40
   7.3        Alimera-Prosecuted Patent Rights...........................................          40
   7.4        Information Disclosure; Cooperation........................................          41
   7.5        Employees and Sublicensees Assignment of Inventions........................          41
   7.6        Infringement...............................................................          41
   7.7        Marking....................................................................          44
   7.8        Trademarks.................................................................          44
   7.9        UKRF Licenses and B&L Agreement............................................          45

ARTICLE  8  CONFIDENTIALITY..............................................................          45
   8.1        Confidentiality............................................................          45
   8.2        Disclosure.................................................................          46

ARTICLE  9  REPRESENTATIONS AND WARRANTIES...............................................          46
   9.1        Representations and Warranties of CDS......................................          46
   9.2        Representations and Warranties of Alimera..................................          47
   9.3        Warranty Disclaimer........................................................          48
   9.4        Limited Liability..........................................................          48

ARTICLE  10  INDEMNITY...................................................................          48
   10.1       Cross Indemnity............................................................          48
   10.2       Limitation on Indemnity Obligations........................................          49
   10.3       Procedure..................................................................          49
   10.4       Insurance..................................................................          49
   10.5       Product Liability Claims...................................................          50

ARTICLE  11  TERM AND TERMINATION........................................................          50
   11.1       Term.......................................................................          50
   11.2       Termination for Default by Either Party....................................          50
   11.3       Termination for Non-Payment of Development Payment.........................          50
   11.4       Termination for Failure to Approve an Initial Development Plan.............          51
   11.5       Termination for Abandonment................................................          52
   11.6       Effect of Expiration or Termination of the Agreement.......................          54
   11.7       Survival of Provisions Upon Expiration or Termination......................          54


                                      -ii-



                                                                                                
ARTICLE  12  MISCELLANEOUS...............................................................          54
   12.1       Interpretation.............................................................          54
   12.2       Assignment.................................................................          55
   12.3       Severability...............................................................          55
   12.4       Notices....................................................................          55
   12.5       Governing Law and Venue....................................................          56
   12.6       Compliance with Applicable Laws............................................          56
   12.7       Dispute Resolution.........................................................          56
   12.8       Use of Name/Publicity......................................................          57
   12.9       Entire Agreement...........................................................          57
   12.10      Headings...................................................................          58
   12.11      Independent Contractors....................................................          58
   12.12      Waiver.....................................................................          58
   12.13      Counterparts...............................................................          58


SIGNATURE PAGE

EXHIBITS

      EXHIBIT 1.11A     CDS EXISTING PATENT RIGHTS

      EXHIBIT 1.11B     EXCLUDED CDS PATENT RIGHTS

      EXHIBIT 1.15      CDS PATENT COST-SHARING COUNTRIES

      EXHIBIT 1.42      EXCLUDED PRODUCT SPECIFICATIONS/DRAWINGS

      EXHIBIT 1.87      UKRF LICENSES

      EXHIBIT 3.2       INITIAL DEVELOPMENT PLAN

      EXHIBIT 5.8.3     TERMS FOR OPTION LICENSE AGREEMENT

      EXHIBIT 11.5.1    TERMS FOR THE [*] LICENSE AGREEMENT

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
      TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
      WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
      SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.

                                     -iii-


                             COLLABORATION AGREEMENT

THIS COLLABORATION AGREEMENT (the "Agreement") dated as of February 11, 2005
(the "Effective Date"), is made by and between CONTROL DELIVERY SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Delaware
having its offices at 400 Pleasant St., Watertown, Massachusetts 02472 ("CDS"),
and ALIMERA SCIENCES, INC., a corporation organized and existing under the laws
of the State of Delaware having its offices at 6120 Windward Parkway,
Alpharetta, GA 30005 ("Alimera"). CDS and Alimera are sometimes referred to
herein individually as a "Party" and collectively as the "Parties."

                                 R E C I T A L S

      WHEREAS, CDS designs and develops innovative ophthalmic drug delivery
products; and

      WHEREAS, Alimera develops and commercializes ophthalmic drug products; and

      WHEREAS, the Parties are interested in collaborating with one another and
jointly funding the development, and sharing Net Profits from the sale, of novel
products for treating eye diseases in humans, including a product for the
treatment of diabetic macular edema using a corticosteroid; and

      WHEREAS, CDS is willing to grant Alimera a license to certain of its
proprietary technology and know-how relating to developing products for treating
eye diseases and enter into such a collaboration upon the terms and conditions
set forth below;

      NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:

                             ARTICLE 1 DEFINITIONS

For purposes of this Agreement, the terms defined in this Article shall have the
meanings specified below, whether used in their singular or plural form:

      1.1 "Affiliate" shall mean any corporation or other entity that controls,
is controlled by, or is under common control with a Party to this Agreement. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it directly or indirectly owns or controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint more than fifty percent (50%)
of the members of the governing body of the corporation or other entity.

      1.2 "Alimera Improvements" shall mean any and all Improvements created,
conceived or reduced to practice by Alimera, or its Affiliates, agents,
subcontractors or sublicensees, alone or with others, or by Third Parties acting
on their behalf, that are (a) Improvements covered by or derived from practice
of the CDS Technology, and/or (b)

                                      -1-


Improvements covered by or derived from the practice of the Improvements set
forth in clause (a); provided, however, that Alimera Improvements shall not
include any Improvement that meets each of the following: (x) is related
specifically to an active ingredient provided by Alimera and used in the
Products, (y) can be practiced without infringing any CDS Existing Patent Rights
and any Patent Rights included within CDS Improvements, or without utilizing any
CDS Know-How, and (z) does not fall within the definition of the CDS Core
Technology.

      1.3 "Alimera Know-How" shall mean Know-How Controlled by Alimera.

      1.4 "Alimera Patent Costs" shall mean fees and costs associated with
filing, prosecution and maintenance of the Alimera-Prosecuted Patent Rights, as
defined in Section 7.3, in the Territory.

      1.5 "Approval" shall mean the approvals from applicable regulatory
authorities in any country or region required to lawfully market a Product in
such country or region, including, but not limited to, approval of an NDA. The
term "Approved" shall mean the receipt of Approval.

      1.6 "Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended from time to time.

      1.7 "B&L" shall mean Bausch & Lomb Incorporated.

      1.8 "B&L Agreement" shall mean the Amended and Restated License Agreement
between CDS and B&L dated as of December 9, 2003 as in existence and effect on
the Effective Date, a full and complete copy of which has been provided to
Alimera.

      1.9 "Business Day" shall mean each day of the week excluding Saturday,
Sunday and U.S. federal holidays.

      1.10 "CDS Core Technology" shall mean (a) any drug delivery device, or
component thereof, for ophthalmic use that includes a core containing one or
more drugs, and (b) any method or process for using a device described in clause
(a).

      1.11 "CDS Existing Patent Rights" shall mean (a) the United States and
foreign patents and patent applications listed in Exhibit 1.11A, (b) any Patent
Rights arising from those patents and patent applications during the Term, and
(c) any other patents or patent applications Controlled by CDS as of the
Effective Date, a Valid Claim of which, absent the licenses granted by CDS to
Alimera under Section 5.1, would be infringed by the making, having made, using,
selling, offering to sell or importing of a Product in the Collaboration Field
by Alimera or its subcontractors or sublicensees as permitted under this
Agreement; provided, however, that CDS Existing Patent Rights shall in no event
include the patents and patent applications listed in Exhibit 1.11B or any
Patent Rights arising from those patents or patent applications.

      1.12 "CDS Improvements" shall mean any and all Improvements created,
conceived or reduced to practice by CDS, or its Affiliates, agents, or
sublicensees, alone or with others or by Third Parties acting on their behalf,
during the course of activities conducted as set forth in the Development Plan,
that are (a) Improvements covered by or derived from practice of the CDS
Technology, and (b) Improvements covered by or derived from the practice of the
Improvements

                                      -2-


set forth in clause (a); provided, however, that CDS Improvements shall not
include any Improvement that is an Alimera Improvement.

      1.13 "CDS Know-How" shall mean Know-How Controlled by CDS that is required
for development and Commercialization of a Product.

      1.14 "CDS Net Income" or "CDS Net Losses" shall mean, for the first
calendar quarter after the CDS Profitability Date and for any calendar quarter
thereafter, Net Sales by CDS, and/or CDS Sublicense Revenue actually received by
CDS, for a Product in that calendar quarter minus the CDS Product Costs for such
Product in that calendar quarter; provided that in the event any portions of the
CDS Product Costs are already included in arriving at CDS Sublicense Revenue,
such portions of the CDS Product Costs shall be excluded from the above
calculation to determine the CDS Net Income or CDS Net Losses. To the extent Net
Sales and/or CDS Sublicense Revenue actually received by CDS exceed the CDS
Product Costs for the relevant calendar quarter, such amount of difference shall
be deemed "CDS Net Income," and to the extent CDS Product Costs exceed Net Sales
and/or CDS Sublicense Revenue actually received by CDS for the relevant calendar
quarter, the amount of such difference shall be deemed "CDS Net Losses." For
clarification, with respect to calculating CDS Net Income for any unit of
Product, the Manufacturing Cost incurred to manufacture such unit shall be
deemed to be incurred in that country and quarter in which such unit is sold.

      1.15 "CDS Patent Costs" shall mean fees and costs associated with filing,
prosecution and maintenance of the CDS-Prosecuted Patent Rights, as defined in
Section 7.1.2, in the countries listed on Exhibit 1.15.

      1.16 "CDS Patent Rights" shall mean CDS Existing Patent Rights and CDS'
interest in any Patent Rights included within Alimera Improvements and CDS
Improvements.

      1.17 "CDS Product Costs" shall mean, with respect to a Product, all costs
CDS incurred for developing and Commercializing such Product, including, without
limitation, the following costs: (a) all Direct Development Costs incurred by
CDS during the Term of this Agreement, (b) each of the following to the extent
paid by CDS to Alimera pursuant to this Agreement: all Development Payments,
Compounded Development Payments, Determined Disputed Costs and Compounded
Disputed Payments, (c) each of the following, if any, owed by Alimera to CDS to
the extent not already paid by Alimera: any Compounded Development Payments and
Compounded Disputed Payments, plus any interest on such unpaid amount that has
accrued in accordance with the terms of this Agreement after termination of
either this entire Agreement or this Agreement with respect to a Product, as
applicable, (d) each of the following to the extent not already included in
Direct Development Costs or reimbursed by Alimera: CDS Patent Costs, UKRF Costs
and insurance premiums paid by CDS to maintain insurance required by Section
10.4, as compounded, if applicable, pursuant to Section 4.4, and (e) any other
costs incurred by CDS for developing and Commercializing such Product.

      1.18 "CDS Profitability Date" shall mean, with respect to a Product, the
first day of the first calendar quarter in which the aggregate of Net Sales by
CDS, and CDS Sublicense Revenue actually received by CDS, of such Product for
all preceding calendar quarters and the

                                      -3-


current calendar quarter exceeds the CDS Product Costs during all preceding
calendar quarters and the current calendar quarter; provided that in the event
that any portions of the CDS Product Costs are already included in arriving at
the CDS Sublicense Revenue, such portions of the costs shall be excluded from
the above calculation to determine the CDS Profitability Date. For
clarification, all preceding calendar quarters include the Term of this
Agreement and for any applicable periods thereafter.

      1.19 "CDS Sublicense Revenue" shall mean any form of consideration
(excluding any amounts paid for equity securities of CDS other than amounts that
exceed the fair market value of such securities) in connection with a sublicense
agreement that CDS enters into with a Third Party to sell or otherwise transfer
some or all of CDS' rights to a Product, including, but not limited to,
marketing rights and/or distribution rights, provided that (1) the fair market
value of such securities shall be determined by mutual agreement of both
Parties, and (2) in the event that the Parties fail to reach such mutual
agreement, the matter shall be resolved by arbitration in accordance with
Section 12.7.2 herein.

      1.20 "CDS Technology" shall mean CDS Patent Rights, CDS Know-How and CDS'
interest in Alimera Improvements and CDS Improvements.

      1.21 "Change of Control" shall mean, with respect to a Party, (a) a merger
or consolidation of such Party with a Third Party which results in the voting
securities of such Party outstanding immediately prior thereto ceasing to
represent at least fifty percent (50%) of the combined voting power of the
surviving entity immediately after such merger or consolidation, or (b) except
in the case of a bona fide equity financing in which a Party issues new shares
of its capital stock, a transaction or series of related transactions in which a
Third Party, together with its Affiliates, becomes the beneficial owner of fifty
percent (50%) or more of the combined voting power of the outstanding securities
of such Party, or (c) the sale or other transfer to a Third Party of all or
substantially all of such Party's assets related to the Collaboration Field.

      1.22 "Clinical IP" shall mean (a) all preclinical and clinical protocols,
studies, data, results, study-related forms, materials and reports (e.g.,
investigator brochures, informed consent forms, data safety monitoring board
related documents, patient recruitment related materials, biocompatibility
studies, animal studies, safety studies, and chemistry, manufacturing and
control data) resulting from any preclinical or clinical study or trial of any
Product in the Collaboration Field that is conducted by or under the direction
of Alimera or CDS, or their Permitted Subcontractors or sublicensees, pursuant
to this Agreement, and any audit of any such preclinical or clinical study or
trial, and (b) all INDs, NDAs, any unfiled applications, components or materials
normally associated with an IND or NDA, regulatory filings or applications
comparable to INDs or NDAs in any foreign jurisdictions, and other regulatory
applications and Approvals regarding any Product in the Collaboration Field that
are prepared or submitted by or under the direction of Alimera or CDS, or their
Permitted Subcontractors or sublicensees, pursuant to this Agreement; provided,
however, that Clinical IP shall not include any Pre-Existing Clinical IP.

      1.23 "Clinical Supply Requirements" shall mean, with respect to each
Product, the quantities of such Product that are required for the conduct of
preclinical studies and clinical trials required to procure data necessary for
the acceptance of filing of an NDA for the Product,

                                      -4-


pursuant to the Development Plan. For the avoidance of doubt, supplies for
Non-NDA Trials are excluded from the definition of Clinical Supply Requirements.

      1.24 "CODRUG(TM)" shall mean a compound or a pharmaceutically acceptable
salt thereof comprising one constituent moiety covalently or ionically
associated with at least one other constituent moiety, wherein each moiety, in
its separate form (i.e., in the absence of the association), is a
therapeutically or pharmacologically active agent or a prodrug or
pharmaceutically acceptable salt of such an agent. The covalent association
between said moieties can be either direct or indirect through a linker.
Examples of covalent association include without limitation ester, amide,
carbamate, carbonate, cyclic ketal, thioester, thioamide, thiocarbamate,
thiocarbonate, xanthate, and phosphate ester bonds. Each constituent moiety of a
CODRUG(TM) compound can be the same as or different from the other constituent
moiety. Upon cleavage of the covalent or ionic association, the individual
constituent moieties are reconstituted as the therapeutically or
pharmacologically active forms of the same moieties prior to conjugation.

       1.25 "Collaboration Field" shall mean the treatment and prevention of eye
diseases in humans; provided, however, that the treatment and prevention of [*]
is excluded from the Collaboration Field.

      1.26 "Commercial Supply Requirements" shall mean, with respect to each
Product, quantities of such Product that are required to fulfill requirements
for commercial sales, Product sampling, and Non-NDA Trials, in the Collaboration
Field in the Territory.

      1.27 "Commercialize" or "Commercialization" shall mean any and all
activities directed to marketing, promoting, Detailing, distributing, importing,
offering for sale, having sold and/or selling a product, including, but not
limited to, sampling, and conducting Non-NDA Trials.

      1.28 "Commercialization Budget" shall have the meaning set forth in
Section 4.2 hereof.

      1.29 "Commercially Reasonable Efforts" shall mean efforts and resources
that parties in the pharmaceutical industry would consider normal to use for a
compound or product owned by a party in that industry or to which that party has
rights, which is of similar market potential at a similar stage in its
development or product life, taking into account the competitiveness of the
marketplace, the proprietary position of the compound or product, the regulatory
structure involved, the profitability of the applicable products, and other
relevant factors. In determining Commercially Reasonable Efforts with respect to
a particular Product, a Party may not consider any other product(s) owned or
licensed by it.

      1.30 "Compounded Development Payment" shall have the meaning set forth in
Section 6.3.2 hereof.

      1.31 "Confidential Information" shall have the meaning set forth in
Section 8.1 hereof.

      1.32 "Control" or "Controlled by" shall mean, in the context of a license
to or ownership of intellectual property, possession of the ability on the part
of a Party to grant access

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -5-


to or a license or sublicense as provided for herein without violating the terms
of any agreement or other arrangement with any Third Party existing at the time
such Party would be required hereunder to grant the other Party such access or
license or sublicense.

      1.33 "Detail" shall mean a face-to-face meeting (including a live video
presentation) with one or more healthcare professionals with prescribing
authority during which scientific and/or medical information about the Product
is discussed. Detailing does not include merely a reminder or a promotional
sample drop. When used as a verb, the term "Detailing" shall mean to engage in
the activity of a Detail.

      1.34 "Development Budget" shall mean the initial Development Budget and
thereafter each budget in the rolling three (3) year development plan agreed to
by the Parties as described in Section 3.2 hereof.

      1.35 "Development Plan" shall mean the initial Development Plan and
thereafter each rolling three (3) year development plan agreed to by the Parties
as described in Section 3.2 hereof. Each Development Plan (including the initial
Development Plan) (a) shall set forth a strategy and plan for development
(including, but not limited to, preclinical development and clinical trials),
manufacturing and regulatory approval for each Product, shall indicate which
Party shall have responsibility for the various development activities specified
therein consistent with the other terms of this Agreement, and shall specify the
expected timing of such activities, including the estimated dates of the
initiation and completion of such activities, and (b) shall include a
Development Budget as described in Section 3.2.

      1.36 "Direct Commercialization Costs" shall mean only the following costs
incurred, on a cash basis, by Alimera for Commercializing a Product in
accordance with this Agreement and pursuant to the Commercialization Budget:

            (a) Direct Costs of marketing activities for the Product, including
pre-launch, launch, advertising, packaging, activities necessary for seeking and
maintaining pricing and reimbursement approvals from Third Party payors,
literature, lectures, training (including wet labs for training healthcare
professionals) and sales promotion;

            (b) [*]

            (c) Direct Costs associated with maintaining Approvals for the
Product;

            (d) Direct Costs of package development and package maintenance for
the Product;

            (e) Selling Expenses for the Product;

            (f) Manufacturing Costs to satisfy Commercial Supply Requirements
for the Product;

            (g) Direct Costs of distribution of the Product other than the costs
specified in Section 1.60(d);

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -6-


            (h) Royalties, milestones and other fees paid by Alimera under Third
Party license(s) [*] that are at arms' length to the extent they relate to the
Product, to the extent such licenses are necessary for Alimera to make, have
made, use, offer to sell, sell, and import the Product without infringing
patents of such Third Parties, including without limitation as provided for in
Section 7.6.4;

            (i) Direct Costs of selection, filing, prosecution and maintenance
of trademarks used solely for the Product (or an appropriate allocation in the
case of any trademarks used for the Product and other products);

            (j) Direct Costs of Medical Advisory Services for the Product;

            (k) Recall expenses that are Direct Commercialization Costs as set
forth in Section 4.6;

            (l) Product Liability Losses that are Direct Commercialization Costs
as set forth in Section 10.5;

            (m) Insurance premiums paid by Alimera for the insurance required by
Section 10.4 to the extent such insurance relates to Commercialization of the
Product (i.e., if insurance covers risks other than risks related to
Commercialization of the Product, then only an appropriate portion of such
premiums shall be included); and

            (n) Taxes, duties, tariffs and other governmental charges (excluding
taxes on income) associated with manufacture and distribution of the Product, to
the extent not deducted from Net Sales pursuant to Section 1.60(c).

Notwithstanding any other provisions in this Agreement, Direct Commercialization
Costs shall include only the costs of labor for those individuals who spent
greater than fifty percent (50%) of their time on activities within the
Commercialization Budget during any calendar month (the "Majority Time
Individuals"), and such costs shall be determined according to the amount of the
Majority Time Individuals' time actually spent on such Commercialization
activities, provided that, if the Commercialization activity is Detailing, then
such costs for the Majority Time Individuals shall be determined in accordance
with Section 1.81. In the event there is more than one Product on the market at
any given time, Direct Commercialization Costs attributable to more than one
Product shall be allocated to each Product as appropriate; provided, however,
that in no event shall any Direct Commercialization Costs be accounted for more
than once. Notwithstanding the foregoing, in the event that a person devotes
time to activities under both the Commercialization Budget and the Development
Plan, the time spent shall be aggregated in determining whether such person
meets the fifty percent (50%) threshold set forth in this definition and in the
definition of Direct Development Costs, and the person's time shall be allocated
accordingly between development and Commercialization.

      1.37 "Direct Costs" shall mean, on a cash basis, the costs of labor
(including only salaries, wages and current period employee benefits (but
specifically excluding expenses associated with stock options or other
equity-based or deferred compensation)), raw materials, supplies, services,
fees, and other resources, directly and exclusively consumed or used in the
conduct of the applicable activity; provided, however, that the following costs
shall not be

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -7-


deemed Direct Costs: (i) corporate overhead expenses, including, but not limited
to, general administration, business development, travel, entertainment,
executive management, facilities, finance, information system and data
management services, investor relations, human resources, legal, payroll,
purchasing, and corporate supervisory services; (ii) amortization and
depreciation expenses, interest expenses, taxes, extraordinary or nonrecurring
losses customarily deducted by a Party in calculating and reporting consolidated
net income, capital expenditures (including, but not limited to, purchases of
facilities, property or equipment), and inventory write-offs (to the extent not
attributable to a Product); (iii) consulting (including legal) fees unless
specifically set forth in a mutually approved budget; and (iv) payments made to
any related party or Affiliates in excess of an arm's length charge for the
relevant product or service.

      1.38 "Direct Development Costs" shall mean the following costs incurred,
on a cash basis, by either Party for developing a Product, to the extent set
forth in the Development Budget approved by the Parties:

            (a) Direct Costs for development activities for the Product,
incurred, on a cash basis, by a Party or paid by a Party to Permitted
Subcontractors, conducted pursuant to the Development Plan, including, but not
limited to, research, formulation development and testing, clinical development
activities, data management, toxicology, and planning and execution of clinical
trials required to procure data necessary for the acceptance of filing of an
NDA;

            (b) Manufacturing Costs to satisfy Clinical Supply Requirements;

            (c) Direct Costs for regulatory filings pursuant to the Development
Plan (specifically excluding any filing related to Non-NDA Trials) for the
Product;

            (d) Insurance premiums paid by either Party for commercial insurance
to the extent such insurance relates to development activities conducted
pursuant to the Development Plan in accordance with Section 10.4 hereof (i.e.,
if insurance covers risks other than risks related to development of the
Product, then only an appropriate portion of such premiums shall be included);

            (e) CDS Patent Costs paid from the Effective Date up to the first
Product Profitability Date that are not otherwise reimbursed by a Third Party;
provided, however, that CDS Patent Costs in excess of [*] in any calendar
year shall not be included as Direct Development Costs;

            (f) Direct Costs of the activities conducted under Section 3.11,
including, but not limited to, technology transfer assistance from CDS to
Alimera to enable Alimera to manufacture the Product for Commercialization;

            (g) Direct Costs for capital expenditures to the extent attributable
to the Product as specifically approved in the Development Plan and set forth in
the Development Budget; and

            (h) Other Direct Costs as described in the Development Plan and set
forth in the Development Budget.

            [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN
FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.

                                      -8-


Notwithstanding any other provisions in this Agreement, Direct Development Costs
shall (1) with the exception of (e) and (f) above, include only Direct Costs
incurred, on a cash basis, in connection with activities conducted to procure
data necessary for the acceptance of filing of an NDA for the Product; and (2)
include only the costs of labor for those individuals who spent greater than
fifty percent (50%) of their time on activities under the Development Plan
during any calendar month, and such costs shall be determined according to the
percentage of the individuals' time actually spent on such development
activities; and (3) not include any Commercialization costs. Notwithstanding the
foregoing, in the event that a person devotes time to activities under both the
Commercialization Budget and the Development Plan, the time spent shall be
aggregated in determining whether such person meets the fifty percent (50%)
threshold set forth in this definition and in the definition of Direct
Commercialization Costs, and the person's time shall be allocated accordingly
between development and Commercialization.

      1.39 "DME" shall mean diabetic macular edema.

      1.40 "Effective Date" shall mean the date first set forth above.

      1.41 "Earnest Money Loan" shall mean the aggregate of the loan under the
Secured Promissory Notes from CDS to Alimera dated October 19, 2004, November
18, 2004 and December 22, 2004.

      1.42 "Excluded Product" shall mean a [*] that generally conforms to the
drawings and specifications (and any prior iterations thereof in whole or in
part) shown in Exhibit 1.42.

      1.43 "FDA" shall mean the United States Food and Drug Administration or
any successor agency with responsibilities comparable to those of the United
States Food and Drug Administration.

      1.44 "First Commercial Sale" shall mean, with respect to each Product, the
first sale for use or consumption by the general public of such Product in a
country after required Approval has been granted by the applicable regulatory
authority of such country.

      1.45 "First Product" shall have the meaning set forth in Section 1.77
hereof.

      1.46 "GAAP" shall mean the current United States generally accepted
accounting principles, consistently applied.

      1.47 "Gross Sales" shall mean, for any period, on a cash basis (a) for any
arm's length transaction in which Products are sold separately by Alimera or its
Affiliates to a Third Party, the gross invoice price for Products in such
transactions, and (b) for all other transactions (i.e., other than those
described in subsection (a)) in which Products are sold, used or otherwise
disposed of by Alimera or its Affiliates (including in barter or similar
transactions, or transactions that are not at arm's length to a Third Party, or
transactions in which Products are not sold separately, but not including the
provision of Products intended for use solely as samples), the total imputed
sales price for Products in such transactions, using as the imputed sales price
the weighted

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -9-


average gross invoice price for Products under subsection (a) during the
preceding calendar quarter or, if there have been no Gross Sales under
subsection (a) in the preceding quarter, using a reasonable imputed price to be
determined at the time by the parties. For purposes of this Section 1.47, "sold
separately" shall mean sold, solely for monetary consideration, on a stand-alone
basis (i.e., with a selling price independent of any other product) for not less
than arm's length value.

      1.48 "Improvements" shall mean any and all Inventions, enhancements,
derivatives, new uses, developments, techniques, materials, compounds, products,
designs, processes or other technology or intellectual property, whether or not
patentable and all Patent Rights and other intellectual property rights in any
of the foregoing.

      1.49 "IND" shall mean the Investigational New Drug Application filed with
FDA or a similar application filed with an applicable regulatory authority
outside of the United States.

      1.50 "Invention" shall mean ideas, information, Know-How, data research
results, writings, inventions, discoveries, modifications, improvements and
other technology (including, but not limited to, any proprietary biological or
other materials, compounds or reagents and computer software), whether or not
patentable or copyrightable.

      1.51 "Joint Development Team" or "JDT" shall mean the body organized and
acting pursuant to Article 2 hereof.

      1.52 "Know-How" shall mean unpatented information, whether or not
patentable, including, but not limited to, technical information, processes,
formulae, trade secrets, materials, designs, drawings and data.

      1.53 "Majority Time Individuals" shall have the meaning set forth in
Section 1.36.

      1.54 "Manufacturing Costs" shall mean:

      (A) with respect to Product manufactured by a Third Party, a Party's cost
of procuring such Product on an arms' length basis; or

      (B) with respect to Product manufactured by a Party or one of its
Affiliates, (1) Direct Costs incurred, on a cash basis, by such Party or one of
its Affiliates to manufacture such Product, including Direct Costs of
purchasing, inspection, quality assurance, quality control, storage, scrap and
training, and (2) a portion of depreciation, amortization, interest expense,
utilities, rent, maintenance and repairs, insurance and other manufacturing
overhead (the "Manufacturing Overhead") allocable to Product as determined by
the following formula: the Manufacturing Overhead multiplied by a fraction, the
numerator of which is the number of direct labor hours of individuals who spent
time on the production of Product at a plant at which Product is manufactured,
and the denominator of which is the number of direct labor hours devoted to the
production of all products at such plant when the plant is operating at full
capacity, provided that Manufacturing Costs shall exclude costs associated with
excess capacity, selling costs (including, without limitation, marketing,
advertising, salaries and commissions), corporate overhead, costs that are
otherwise attributed as Direct Development Costs or Direct Commercialization
Costs under this Agreement, royalties (earned or paid up) and other amounts

                                      -10-


payable to Third Parties under any license taken by a Party in connection with
the manufacture of the Product, and all amounts spent on research and
development;

provided, however, that any amount determined pursuant to clause (B) shall not
exceed the amount that a qualified Third Party manufacturer would charge for
supplying comparable quantities of the relevant Product in a timely manner on
reasonable and customary terms and conditions.

      1.55 "Medical Advisory Services" shall mean those health care
professionals employed or engaged by a Party with sufficient medical or other
pertinent health care experience to engage in in-depth dialogues with physicians
regarding medical issues associated with a Product.

      1.56 "Milestone Payment" shall have the meaning set forth in Section 6.2
hereof.

      1.57 "NDA" shall mean a new drug application or product license
application or its equivalent filed with and accepted by the FDA after
completion of human clinical trials to obtain marketing approval for a Product,
or any comparable application filed with and accepted by the regulatory
authorities of a country other than the United States, including, where
applicable, any applications for governmental pricing and marketing approval.

      1.58 "Net Profits" or "Net Losses" shall mean, for a particular calendar
quarter, the Net Sales for a Product in a country minus the Direct
Commercialization Costs for such Product in that country. For the avoidance of
doubt, Net Profits shall be calculated on a Product-by-Product and calendar
quarter-by-quarter basis. To the extent Net Sales exceed Direct
Commercialization Costs for the relevant calendar quarter, such amount of
difference shall be deemed "Net Profits," and to the extent Direct
Commercialization Costs exceed Net Sales for the relevant calendar quarter, such
amount of difference shall be deemed "Net Losses." For clarification, with
respect to calculating Net Profits or Net Losses for any unit of Product, the
Manufacturing Cost incurred to manufacture such unit shall be deemed to be
incurred in the country and quarter in which such unit is sold.

      1.59 "Net Profits Payment" shall have the meaning set forth in Section
6.5.1(b) hereof.

      1.60 "Net Sales" shall mean, with regard to a Product, on a cash basis,
for any period, Gross Sales less the following reasonable and customary
deductions:

            (a) normal and customary trade, cash and other discounts, allowances
and credits allowed and actually taken directly with respect to sales of the
Product;

            (b) credits or allowances actually granted for damaged goods or
returns or rejections of the Product;

            (c) taxes or other governmental charges imposed directly on the
sales of Products, including value added taxes or other similar governmental
charges, but not including any tax levied with respect to income;

            (d) freight, postage, shipping, and insurance charges; and

                                      -11-


            (e) charge back payments and government rebates allowed and taken.

      1.61 "Non-NDA Trial" shall mean any clinical trial, or part of a clinical
trial, of a Product that is not designed or required to procure data necessary
for the acceptance of filing of an NDA. Non-NDA Trials may be conducted before
or after the filing of an NDA, before Approval or at any time after Approval.
Non-NDA Trials shall specifically not include (that is, costs associated with
such trials may be deemed Direct Development Costs) any (i) clinical trials
designed to obtain favorable labeling at the time of initial Approval pursuant
to the Development Plan, (ii) post-Approval or post-marketing trials required by
the FDA or other regulatory authority in granting a conditional Approval, or
(iii) trials required to obtain Approval for pediatric use of a Product, whether
such trials are prior or subsequent to the filing of an NDA or Approval.

      1.62 "Non-Paying Party" shall have the meaning set forth in Section 6.3.2
hereof.

      1.63 "Option Compound" shall mean a compound, other than a compound that
is a corticosteroid, that (i) Alimera has a right to use and (ii) is selected by
Alimera under an Alimera Compound Option set forth in Section 5.8; provided,
however, that Option Compound shall not include any compound that is included in
a license or option by CDS to a Third Party, or is included in a term sheet with
a Third Party, as of the date on which Alimera notifies CDS under Section 5.8
that Alimera wishes to exercise an Alimera Compound Option with regard to such
compound. For the avoidance of doubt, a "compound," as used herein, shall be a
specific compound and shall not be a category or class of compounds.

      1.64 "Option Product" shall mean (i) a product that meets the definition
of "Product" in Section 1.77, except that the term "Option Compound" shall be
substituted in place of "corticosteroid," and (ii) clause (B)(2) and the third
sentence of Section 1.77 shall be omitted.

      1.65 "Option Term" shall mean the period commencing on the Effective Date
and expiring on the earliest of (i) [*] months after the Effective Date;
(ii) the date on which [*]; and (iii) Alimera's exercise of all [*] Alimera
Compound Options under Section 5.8.

      1.66 "Owed Party" shall have the meaning set forth in Section 6.3.2
hereof.

      1.67 "Party" shall mean CDS or Alimera.

      1.68 "Patent Rights" shall mean any United States or foreign patent or
patent applications, any patents issuing from such patent applications, and any
continuations, continuations-in-part to the extent specifically directed to
subject matter specifically described in such patent applications, divisionals,
renewals, reexaminations, reissues, extensions or provisional applications of
any of the foregoing and any corresponding patent, patent application, utility
model, inventor certificate, registration or the like in any country of the
world with respect to the foregoing.

      1.69 "Permitted Subcontractor" shall mean a Third Party or an Affiliate
that has been awarded a subcontract with one Party in accordance with Section
3.7 hereof.

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -12-


      1.70 "Phase I Clinical Trial" shall mean a clinical trial as defined in 21
C.F.R. 312.21(a), as may be amended from time to time, or any foreign equivalent
thereto.

      1.71 "Phase I/II Clinical Trial" shall mean a combined Phase I Clinical
Trial and Phase II Clinical Trial.

      1.72 "Phase II Clinical Trial" shall mean a clinical trial as defined in
21 C.F.R. 312.21(b), as may be amended from time to time, or any foreign
equivalent thereto.

      1.73 "Phase III Clinical Trial" shall mean a clinical trial as defined in
21 C.F.R. 312.21(c), as may be amended from time to time, or any foreign
equivalent thereto.

      1.74 "Pre-Existing Clinical IP" shall mean [*].

      1.75 "Primary Contact Person" shall have the meaning set forth in Section
3.4.

      1.76 "Prime" shall have the meaning set forth in Section 6.5.1(b).

      1.77 "Product" shall mean a drug delivery device that meets all of the
following criteria: (A) it has a core within a polymer layer that contains a
drug in a form other than a CODRUG(TM) and no other active ingredient, where the
core does not include a CODRUG(TM), (B) it is Approved or designed to be
Approved (1) to deliver a corticosteroid and no other active ingredient by
implantation, injection, or other direct delivery method to the posterior
portion of the eye, or (2) to treat DME by delivering a compound or formulation
by implantation, injection, or other direct delivery method other than through
an incision smaller than that required for a 25 gauge needle, (C) it does not
fall under the definition of Excluded Product, and (D) it is Approved or
designed to be Approved for a particular indication in a particular country. For
clarification, eye drops or other topical administration and tablets or other
oral administration shall not be deemed to be direct delivery to the posterior
portion of the eye. For example, "Product" shall specifically include a drug
delivery device that meets all of the following criteria (such product sometimes
referred to as the "First Product"): (1) consists of [*] (2) is Approved or
designed to be Approved to be administered [*]; (3) is Approved or designed to
be Approved [*] and (4) is Approved or designed to be Approved for a particular
indication in a particular country. For clarification, with regard to the same
drug delivery device described above, each indication in each country shall be a
separate Product. By way of non-limiting examples, with regard to a particular
drug delivery device X, (i) X for DME and X for age-related macular degeneration
shall be two different Products, and (ii) X for DME in the United States and X
for DME in Japan shall be two different Products.

      [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED. -13-


      1.78 "Profitability Date" shall mean, with respect to each Product, the
first day of the first calendar quarter in which Net Profits are realized for
such Product.

      1.79 "Recall" shall mean any recall of a product or any related actions
(e.g., market withdrawal and stock recovery). For avoidance of doubt, Recall
includes recall of product packaging.

      1.80 "Right of Access to Clinical IP" shall mean the right to reference,
cross-reference, review, have access to, incorporate and use Clinical IP in any
regulatory applications or filings, any patent filings, or for any research or
development purpose.

      1.81 "Selling Expenses" shall mean Direct Costs incurred, on a cash basis,
by Alimera for the sales force who are employees of Alimera or its Affiliates,
all only pursuant to the Commercialization Budget; provided, however, that if a
portion of time of Alimera Majority Time Individuals involved in Detailing
Products is devoted to Detailing products other than Products, then only the
following percentages of the Alimera Majority Time Individuals' time spent in
Detailing shall be Direct Commercialization Costs:

            (a) [*] if the Product is carried in the sole Detail position, in
which the Product is the only product presented during a Detail and the key
Product attributes are verbally presented in a presentation delivered during the
Detail by Alimera's or its Affiliates' sales representative;

            (b) [*] if the Product is carried in the primary Detail position, in
which key Product attributes are verbally presented in the first position during
a Detail, where the Product is given primary emphasis (i.e., an emphasis that is
more important than the emphasis given to any other product presented), and
where no more than three products are presented during such Detail;

            (c) [*] if the Product is carried in the secondary Detail position,
in which key Product attributes are presented in the second position during a
Detail, where the Product is given significant but not primary emphasis, and
where no more than three products are presented during such Detail;

            (d) [*] if the Product is carried in the tertiary Detail position,
in which key Product attributes are presented in the third position during a
Detail, where the Product is given some emphasis, and where three products are
presented during such Detail; provided that (1) if more than one Product is the
subject of a Detail, the foregoing percentages shall be cumulative, not to
exceed 100% (e.g., if one Product is carried in the primary Detail position and
another Product is carried in the secondary Detail position, then [*] of the
sales force time shall be a Direct Commercialization Cost with respect to the
first Product and [*] shall be a Direct Commercialization Cost with respect to
the second Product), and (2) if there are more than three products presented in
a Detail, the percentages specified in (b)-(d) above shall be multiplied by a
fraction, the numerator of which is three and the denominator of which is the
number of products presented in that Detail (e.g., if a Product is carried in
the secondary Detail position and there are four products presented during such
Detail, then [*] is multiplied by -3/4 and [*] of the sales force time shall be
a Direct Commercialization Cost with respect to that

            [*] - INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN
FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.

                                      -14-


Product). For clarification, the costs of Majority Time Individuals shall be
determined according to the amount of Majority Time Individuals' time actually
spent on Detailing multiplied by the applicable percentage as specified in this
Section 1.81 above. For example, if a Majority Time Individual spends
twenty-five (25) hours on Detailing, in which Products are carried in the
primary Detail positions, then Direct Commercialization Costs attributable to
such Detailing shall be the Direct Costs of 25 hours multiplied by [*] (as may
be further adjusted as specified above). For further clarification, Selling
Expenses relating to a Product may be incurred prior to First Commercial Sale of
such Product (e.g., for sales force training); in such event, the percentages
referred to in this Section 1.81 initially shall be based on the Detail position
for the relevant Product contemplated in the Commercialization Budget. For
example, if the Product is projected in the Commercialization Budget to be the
sole product Detailed by the sales force, then initially [*] of the Direct Costs
associated with the sales force shall be allocated as Selling Expenses. In the
event that the actual Detail position for a Product differs from that projected
in the Commercialization Budget, then the amount of the Direct Costs that are
included as Direct Commercialization Costs shall be adjusted subsequently to
reflect the actual Detail position.

      1.82 "Term" shall have the meaning set forth in Section 11.1.

      1.83 "Territory" shall mean all countries and territories worldwide.

      1.84 "Third Party" shall mean any person or entity other than CDS, Alimera
or their respective Affiliates.

      1.85 "UKRF" shall mean the University of Kentucky Research Foundation.

      1.86 "UKRF Costs" shall mean all royalties, milestones and other fees due
to UKRF related to a Product pursuant to the UKRF Licenses.

      1.87 "UKRF Licenses" shall mean the licenses set forth in Exhibit 1.87, as
may be amended from time to time consistent with Section 7.9, full and complete
copies of which agreements in effect as of the Effective Date have been provided
to Alimera.

      1.88 "Valid Claim" shall mean a claim of an issued and unexpired patent,
or a claim of a pending patent application, which has not been withdrawn,
cancelled, abandoned, disclaimed, or held permanently revoked, unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal.

                        ARTICLE 2 JOINT DEVELOPMENT TEAM

      2.1 Establishment of Joint Development Team. The Parties shall establish a
Joint Development Team ("JDT"), which shall consist of a total of four members,
with two members from each Party. Members of the JDT may be represented at any
meeting by a designee appointed by such member for such meeting, provided that
reasonable advance notice is provided to the other Party and such designee shall
be subject to an appropriate confidentiality agreement. Each Party shall be free
to change its members on prior written notice to the other Party. Each Party
may, in its discretion, upon reasonable notice to the other Party, invite
non-


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -15-


JDT employees and consultants of such Party to attend such meeting, provided
that such non-JDT employees and consultants shall be subject to appropriate
confidentiality agreements. The JDT shall remain in place until the expiration
or termination of its responsibilities set forth in this Agreement.

      2.2 Responsibilities of the Joint Development Team. In addition to the
responsibilities expressly described elsewhere in this Agreement, the JDT shall:

            (a) draft the Development Plan and present it to the Parties for
approval and monitor development activities and execution of the development
activities under the Development Plan;

            (b) develop updates or amendments to the Development Plan, and the
Development Budget, including, but not limited to, the annual updates pursuant
to Section 3.2, and make recommendations to the Parties for approval by the
Parties of such updates or amendments;

            (c) quarterly review and evaluate progress under the Development
Plan; provided, however, that the JDT shall not have authority to make any
determination that either Party is in breach of its obligations under the
Development Plan;

            (d) attempt to settle disputes or disagreements that are unresolved
by the Primary Contact Persons; provided, however, that the JDT shall not have
authority to make any determination that either Party is in breach of its
obligations under the Development Plan; and

            (e) perform any other activities related to the Development Plan as
jointly requested by both Parties from time to time.

      For the avoidance of doubt, the JDT shall have no authority to amend
either this Agreement or the Development Plan.

      2.3 Meetings; Minutes. During the course of implementing the Development
Plan, the JDT shall meet at least once each calendar quarter, and more
frequently as the Parties mutually agree is appropriate, on such dates, in such
places and at such times as the Parties shall agree. The meetings shall
alternate between the offices of the Parties unless the Parties otherwise agree.
Meetings may be by teleconference or videoconference; provided, however, that
the JDT shall meet in person at least twice every calendar year during the
course of implementing the Development Plan. In addition to these required
meetings, the JDT may also be polled or consulted from time to time by means of
telecommunications, video conferences or correspondence, as deemed necessary or
appropriate in order to fulfill its obligations under this Agreement. The JDT
will be chaired by CDS until June 30, 2005 and by Alimera during the second half
of 2005, and the chairmanship of the JDT shall alternate between the Parties
semi-annually thereafter. The role of the chairperson shall be to convene and
preside at meetings of the JDT, but the chairperson shall not be entitled to
prevent items from being discussed or to cast any tie-breaking vote. Not later
than thirty (30) days after the Effective Date, the JDT shall hold an
organizational meeting. Reasonably detailed written minutes will be kept of all
JDT meetings and will reflect without limitation material decisions made at such
meetings. The chairperson of the JDT shall have responsibility for keeping
minutes. Draft meeting minutes will be sent to each

                                      -16-


member of the JDT for review and approval within ten (10) Business Days after a
meeting. Minutes will be deemed approved unless a member of the JDT objects to
the accuracy or completeness of such minutes within thirty (30) calendar days of
receipt.

      2.4 Decision-Making and Dispute Resolution. From the Effective Date until
the termination of the Development Plan, neither Party shall undertake
development of a Product except in accordance with the Development Plan or as
otherwise permitted by Section 6.3.3. The representatives of each Party shall
have collectively one vote on behalf of such Party; provided, however, that no
such vote taken at a meeting shall be valid unless a representative of each
Party is present and participating in the vote. The JDT shall operate by
unanimous consent, provided that any deadlock shall be resolved as follows: in
the case of any matter which cannot be resolved by the JDT, including, but not
limited to, disputes referred to the JDT by the Primary Contact Persons pursuant
to Section 3.4 hereof, at the written request of either Party, the issue shall
be referred to senior management of the Parties in accordance with Section 12.7.
The JDT shall meet to consider any dispute referred to it pursuant to Section
3.4 within fifteen (15) days of such referral and at the conclusion of such
meeting shall either (1) have resolved the dispute and report such resolution in
writing to the Parties or (2) refer the matter for resolution as set forth in
the preceding sentence. If such executives cannot resolve such matter within the
relevant time period, the matter shall be resolved in accordance with the
following provisions:

            (a) If the deadlock relates to subject matter (other than subject
matter that would have an impact on the Development Budget, Direct Development
Costs and/or the reconciliation of Direct Development Costs) for which one Party
has the primary responsibility as set forth in Sections 3.2.3 and 3.2.4, that
Party shall have the right to resolve the deadlock in its reasonable
determination; and

            (b) If the deadlock relates to subject matter that would have an
impact on the Development Budget, Direct Development Costs and/or the
reconciliation of Direct Development Costs, or to subject matter for which
neither Party has the primary responsibility under Sections 3.2.3 and 3.2.4,
then the matter may be referred to arbitration in accordance with Section 12.7.2
hereof.

      2.5 Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its members, designees and non-JDT invitees to attend
meetings of, and otherwise participate on, the JDT, and such costs and expenses
shall not be Direct Development Costs or Direct Commercialization Costs but time
spent in connection with such meetings shall be treated as time devoted to
development in determining whether a person devotes at least 50% of his time to
development and/or Commercialization activities.

      2.6 Dissolution of JDT. Upon the mutual agreement of the Parties, the
activities and obligations of the JDT and its members may be suspended until
such time as (1) active development is being undertaken, or contemplated to be
undertaken, under the Development Plan, or (2) the JDT is dissolved.

                        ARTICLE 3 DEVELOPMENT ACTIVITIES

                                      -17-


      3.1 General. CDS and Alimera shall undertake development activities for
the Products in the Collaboration Field in accordance with the Development Plan.
During the course of implementing the Development Plan, CDS and Alimera shall
communicate regularly and shall assume certain rights and responsibilities for
the development of the Products in the Collaboration Field in accordance with
Section 3.2.3 and the Development Plan, all as described more specifically
herein.

      3.2 Development Plan.

            3.2.1. Initial Development Plan. No later than thirty (30) days
after the Effective Date, the Parties will approve an initial Development Plan
for the First Product. Such Development Plan will describe in reasonable detail
the activities to be undertaken by each of the Parties for the period commencing
on the Effective Date and ending on December 31, 2007, and shall be appended
hereto as Exhibit 3.2 and incorporated herein by reference. In the event that an
initial Development Plan is not approved within 30 days after the Effective
Date, either Party may terminate this Agreement in accordance with Section 11.4.

            3.2.2. Annual Updates. Not later than September 30 of each year
during the course of implementing the Development Plan and commencing on
September 30, 2005, the Parties shall agree to an update to the Development
Plan, describing in reasonable detail the activities to be undertaken during the
next three (3) calendar years and the expected timing of such activities,
including the estimated dates of the initiation and completion of such
activities (which may be adjusted by the Parties as necessary). For example, the
annual update taking place on or before September 30, 2005 will describe
development activities and the expected timing for such activities for calendar
years 2006, 2007 and 2008. The most recently updated Development Plan shall be
incorporated into Exhibit 3.2 and shall be deemed the Development Plan for the
applicable time period. The initial Development Plan and each updated
Development Plan shall (a) reflect Commercially Reasonable Efforts to be
undertaken by the Parties to develop Products, and (b) include a Development
Budget, which sets forth, for the time period covered by the applicable
Development Plan, on a calendar quarter-by-quarter and Product-by-Product basis,
the budget for development of each Product during the applicable time period.
The Development Budget shall also specifically allocate the Direct Development
Costs to be incurred by CDS and by Alimera for the period covered in the
Development Budget, broken down on a calendar quarter-by-quarter and
Product-by-Product basis. At any time during the course of development, upon
mutual written agreement, the Parties may amend the Development Plan, including,
but not limited to, the Development Budget. In the event the Parties fail to
agree to an updated Development Plan, the Parties shall refer the matter to
dispute resolution in accordance with Section 12.7 and shall proceed in
accordance with the then existing Development Plan until the matter is resolved;
provided, however, that if the dispute relates to costs proposed by a Party to
implement an agreed to Development Plan, then the Parties shall proceed in
accordance with Section 6.3.3.

      Each Development Budget shall be prepared on a cash basis, shall provide a
level of detail that is reasonably consistent with the initial Development
Budget, and shall provide a greater level of detail for the immediately
succeeding calendar year than for the remaining two (2) calendar years.

                                      -18-



            3.2.3. Allocation of Responsibility for Development Activities. The
Parties acknowledge and agree that each Development Plan shall allocate primary
responsibility for the various activities (and any related or ancillary
activities) listed below to be performed by the responsible Party as follows:



     Activity                                                                Responsible Party
     --------                                                                -----------------
                                                                       
A.   Preclinical research and development, including Product design,
     formulation, preclinical safety studies and in vivo pharmacology
     studies                                                                 CDS

B.   Technology transfer as described in Section 3.11                        CDS

C.   Phase I, Phase I/II, Phase II and Phase III Clinical Trials, as
     needed to procure data necessary for the acceptance of filing of an
     NDA                                                                     Alimera

D.   Preparation, filing and maintenance of regulatory filings
     including, but not limited to, NDA, but excluding the CDS IND
     (defined below in Section 3.2.4)                                        Alimera

E.   Filing and maintenance of the CDS IND (defined below in Section
     3.2.4)                                                                  CDS

F.   Manufacturing for Clinical Supply Requirements                          CDS

G.   Filing, prosecution and maintenance of CDS Patent Rights (subject
     to Alimera's rights in Article 7)                                       CDS


For clarification, commercial manufacturing is Commercialization for which
Alimera has primary responsibility as set forth in greater detail in Article 4.

            3.2.4. Regulatory Approvals.

            (a) Regulatory Filings.

                        (i) The CDS IND. Alimera and CDS shall be jointly
                  responsible for preparing, and CDS shall be responsible for
                  submitting (in the name of CDS), an IND in the United States
                  (the "CDS IND") for the first Product. CDS shall have primary
                  responsibility and final decision-making authority for all
                  regulatory matters related to the CDS IND, including
                  communicating with the FDA about such IND. CDS shall have
                  final decision-making authority for all clinical trials
                  conducted pursuant to such IND. Together with the CDS IND, CDS
                  shall submit to the FDA a letter in form and substance
                  satisfactory to both Parties authorizing a person designated
                  by Alimera and reasonably acceptable to CDS (initially, [*])
                  to communicate directly with the FDA regarding the CDS


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -19-


                  IND. In exercising its right to communicate directly with the
                  FDA related to the CDS IND, (1) Alimera shall not propose any
                  change, or accept any FDA proposals for any change, or make
                  any other decisions, with respect to the CDS IND, (2) if
                  Alimera wishes to initiate communications with the FDA,
                  Alimera shall afford a representative of CDS the opportunity
                  to participate in all such communications, provided that CDS
                  may decline such participation, and (3) if the FDA initiates
                  unsolicited communications with Alimera, Alimera shall use
                  Commercially Reasonable Efforts to afford a representative of
                  CDS the opportunity to participate in all such communications,
                  provided that CDS may decline such participation. In the event
                  that CDS does not participate in any such communication with
                  the FDA, Alimera shall, as soon as possible, but no later than
                  two (2) Business Day after such communication, report to CDS
                  the occurrence of such communication and provide CDS with a
                  reasonably detailed summary of the content of the
                  communication. In the event that the Parties have disagreement
                  prior to, during, or after such communications, CDS shall have
                  the final decision-making authority.

                        (ii) Other Regulatory Filings. When sufficient
                  preclinical data are available from preclinical studies for
                  the first Product conducted pursuant to the Development Plan,
                  Alimera shall have the right and responsibility for filing an
                  IND (in the name of Alimera) including such preclinical data
                  but not including any Pre-Existing Clinical IP. No later than
                  seven days after FDA issues a letter authorizing Alimera's
                  IND, CDS shall request approval from FDA for transferring (1)
                  its clinical protocol for the first Product, and (2)
                  responsibility for the patients in its clinical studies for
                  the first Product, to Alimera's IND. Promptly after receiving
                  such approval from the FDA, and in accordance with any other
                  legal requirements, CDS shall effect such transfer as approved
                  and CDS shall thereafter withdraw the CDS IND. Unless
                  otherwise agreed by the parties, Alimera shall be responsible
                  for all subsequent and non-U.S. regulatory matters, including
                  filing an NDA, provided that no regulatory filings by Alimera
                  shall include any Pre-Existing Clinical IP. Alimera shall be
                  responsible for obtaining Approvals and for subsequent
                  maintenance of Approvals. For regulatory filings made in the
                  name of Alimera, Alimera shall have the primary authority and
                  responsibility, with input from CDS, for submitting
                  supplements, communications, annual reports, adverse event
                  reports, manufacturing changes, supplier designations and
                  other related filings, and for communicating with FDA. The
                  Party responsible for submitting regulatory filings (the
                  "Regulatory Submission Party") shall provide the other Party
                  (the "Regulatory Non-Submission Party") with copies of all
                  substantive submissions to (which may be in draft form), and
                  all correspondences from, the FDA or other regulatory
                  authorities. The Regulatory Non-Submission Party may provide
                  comments regarding such submission prior to such planned
                  submission, and the Regulatory Submission Party shall consider
                  in good faith incorporating into the planned submission any
                  such comments. The Regulatory Non-

                                      -20-


                  Submission Party shall supply Know-How necessary to obtain
                  Approvals for each Product.

            (b) Manufacture-related Activities. Alimera shall be responsible for
preparing and submitting all documentation to regulatory authorities regarding
the manufacture of the Product for commercial sale necessary to obtain Approvals
for such Product. Alimera shall be responsible for all activities related to
pre-Approval inspections of Alimera's (or its subcontractor's) manufacturing
facility. Each Party shall have the right to inspect and audit the other Party's
manufacturing facility and related records and its operations, upon reasonable
notice. Any information obtained by a Party during such visits shall be treated
as Confidential Information in accordance with Article 8 of this Agreement.

            (c) Documentation. Each Party shall maintain all records, including,
but not limited to, batch records and supporting documentation required by the
FDA and other applicable regulatory authorities with respect to each Product for
the periods of time required by such authorities and shall provide a copy of all
such records to the other Party within ten (10) Business Days of reasonable
request by the other Party. Each Party shall provide the other Party with
reasonable access to documents and other materials Controlled by the other Party
that are useful in the regulatory filings and maintenance of Approvals in the
Territory.

            (d) Reporting. Each Party shall use Commercially Reasonable Efforts
to immediately provide notice to the other Party (and shall in any event provide
such notice within five (5) days) of: (a) discovery by such Party of any event
that triggers a filing requirement with FDA or other regulatory authorities; and
(b) any requirements that FDA may impose with respect to the Approval
(including, but not limited to, additional clinical trials) and all FDA
inquiries requiring a response.

            (e) Meetings. In connection with Section 3.2.4 (a)-(d) above, the
Regulatory Submission Party shall provide the Regulatory Non-Submission Party
with notice of all meetings, conferences, and discussions (including, but not
limited to, advisory committee meetings and any other meeting of experts
convened by FDA or other regulatory authorities concerning any topic relevant to
the Product) scheduled with FDA or such other regulatory authorities concerning
any regulatory matters relating to the Product within one (1) Business Day after
the Regulatory Submission Party receives notice of the scheduling of such
meetings, conferences, or discussions. The Parties shall jointly prepare for and
participate in such meetings, conferences or discussions. The Parties shall
confer in advance on the scheduling of, the objectives to be accomplished at,
and the agenda and strategy for, such meetings, conferences, and discussions
with FDA or other regulatory authorities. In the event that the Parties have
disagreement relating to such meetings, conferences and discussions, the
Regulatory Submission Party shall have the final decision-making authority.

      3.3 Performance.

            3.3.1. Commercially Reasonable Efforts. Each Party shall use
Commercially Reasonable Efforts to conduct all activities and responsibilities
assigned to it under the Development Plan and to cooperate with and provide
reasonable support to the other Party in such other Party's conduct of
activities under such plan.

                                      -21-


            3.3.2. Allocation of Responsibilities. The Development Plan shall
allocate responsibility between the Parties for each of the activities described
herein in accordance with Section 3.2.3. CDS and Alimera shall each expend
resources in the performance of the development activities in accordance with
the Development Plan. For the avoidance of doubt, neither Party shall have any
right or obligation to undertake any development activity for Products licensed
under this Agreement, other than those allocated to it in the Development Plan
and included in the Development Budget, except as set forth in Section 6.3.3. In
the event that a Party (a) fails to make any payment to a Third Party due to be
made by such Non-Performing Party in connection with development activities as
set forth in the Development Plan and Development Budget, or (b) fails to
perform development activities allocated to it in the Development Plan and
included in the Development Budget, that Party shall be called the
"Non-Performing Party." In the event that the Non-Performing Party fails to make
any payment to a Third Party due to be made by such Non-Performing Party in
connection with development activities as set forth in the Development Plan and
Development Budget, it shall notify the other Party in writing within ten (10)
Business Days after the missed payment due date. The other Party (the "March-In
Party") may, in its sole discretion, decide to make any such payment that the
Non-Performing Party fails to make. The associated costs paid by the March-In
Party shall be Direct Development Costs, and the Non-Performing Party's failure
to pay its share of such costs shall be treated as non-payment of Development
Payment pursuant to Section 6.3.2. In the event that the Non-Performing Party
fails to perform development activities allocated to it in the Development Plan
and included in the Development Budget, (1) it shall so notify the other Party,
and (2) the other Party may, in its sole discretion, after providing the
Non-Performing Party a reasonable opportunity to cure the failure, perform the
relevant activities, in which case the associated costs incurred by the other
Party shall be Direct Development Costs, and the Non-Performing Party's failure
to pay its share of costs shall be treated as non-payment of Development Payment
pursuant to Section 6.3.2.

      3.4 Primary Contact Persons. As of the Effective Date, CDS has designated
[*] as CDS' primary contact person and Alimera has designated [*] as Alimera's
primary contact person (each, a "Primary Contact Person"). The Primary Contact
Persons shall be responsible for the day-to-day interactions between the Parties
related to activities pursuant to the Development Plan and oversight of the
day-to-day operations of these activities. The Primary Contact Persons shall
attempt to resolve any disputes that arise during the course of implementing the
Development Plan. If the Primary Contact Persons cannot resolve any such dispute
within thirty (30) days (or such longer reasonable period of time as they may
agree) after their initial discussion of such issue, the dispute shall be
submitted to the JDT and resolved in accordance with Section 2.4. Each Party may
change its Primary Contact Person upon written notice to the other Party.

      3.5 Availability of Employees. Each Party agrees to make its employees
involved in the conduct of the development activities reasonably available upon
reasonable advance notice and during business hours at their respective places
of employment to consult with the other Party on issues, including, but not
limited to, regulatory, scientific, technical and clinical testing issues,
arising under the Development Plan and in connection with any request from any
regulatory agency.


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                      -22-


      3.6 Visit of Facilities. Subject to the provisions of Article 8, each
Party shall permit the other Party or the representatives of the other Party to
visit, upon reasonable notice and at reasonably acceptable times, their
respective facilities where the development activities are being conducted, and
to consult informally, during such visits and by telephone, facsimile and email,
with their respective personnel performing work on the development activities.
Any information obtained by a Party during such visits shall be treated as
Confidential Information in accordance with Article 8 of this Agreement. Each
Party shall use Commercially Reasonable Efforts to obtain comparable inspection
rights with respect to subcontractors.

      3.7 Subcontracts. Subject to the provisions of Article 8 and Section 7.3
hereof, each Party may subcontract portions of the development activities to be
performed by it to subcontractors so long as either (a) the JDT has authorized
the subcontract and subcontractor (which subcontract shall be consistent with an
approved Development Budget), or (b) such Party has obtained the prior written
consent of the other Party, which consent shall not be unreasonably delayed or
withheld (each such subcontractor, a "Permitted Subcontractor"). In addition to
obtaining prior written authorization or consent as required by the foregoing,
if the JDT adopts a standard form of subcontract, the Parties shall use
Commercially Reasonable Efforts to utilize such standard form of subcontract
agreement, as may be modified by the JDT from time to time. In any event, any
subcontract entered into pursuant to this Section 3.7, including any standard
form of subcontract, shall be consistent with the terms of this Agreement,
including providing for intellectual property ownership as set forth herein and
all confidentiality obligations of the Parties. With respect to any subcontract,
the subcontracting Party shall provide the JDT with a copy of the subcontract
within thirty (30) days of execution of such subcontract.

      3.8 Information Sharing. Each Party shall provide the other Party or the
JDT with such information related to the Development Plan as the other Party may
reasonably request.

      3.9 Records. The Parties will make available and disclose to one another
all results of the work conducted pursuant to the Development Plan and shall
keep such records as described in this Section 3.9 or elsewhere in this
Agreement; provided, however, that each Party shall maintain in confidence, and
shall limit its use of, such results and records in confidence in accordance
with Article 8 hereof and shall not use such results or records without written
consent of the other Party except to the extent provided in Section 5.9 or other
provisions of this Agreement. The Parties shall maintain records of the results
in sufficient detail and in good scientific manner appropriate for patent
purposes and FDA filings and as will properly reflect all work done and results
achieved in the performance of the development activities pursuant to the
Development Plan (including, but not limited to, all data in the form required
to be maintained under any applicable governmental regulations). Such records
shall include books, records, reports, research notes, charts, graphs, comments,
computations, analyses, recordings, photographs, computer programs and
documentation thereof, computer information storage means, samples of materials
and other graphic or written data generated in connection with the development
activities pursuant to Development Plan. Each Party hereby grants the other
Party the right to inspect and copy such records upon reasonable advance notice
by the other Party for purposes of this Agreement.

      3.10 Manufacturing for Clinical Supply Requirements. CDS and/or its
Permitted Subcontractors shall use Commercially Reasonable Efforts to provide an
adequate and timely

                                      -23-


supply to satisfy Clinical Supply Requirements, in such quantities and of such
type and specification as set forth in the Development Plan and all in
accordance with GMP and/or ISO standards, to the extent applicable for clinical
trials in the relevant country, and other applicable laws and regulations. The
Manufacturing Costs for such supply shall be Direct Development Costs.

      3.11 Technology Transfer by CDS. Upon the earlier of: (i) the
determination by the JDT and (ii) [*] prior to [*], CDS and/or its Permitted
Subcontractors shall be responsible for providing to Alimera all information,
support and materials reasonably necessary to enable Alimera and/or its
subcontractors to manufacture and perform quality testing on the Product to
satisfy Commercial Supply Requirements, all in accordance with the Development
Plan. CDS and/or its Permitted Subcontractors shall be responsible for the
following activities in accordance with the Development Plan: (a) oversee and
manage technology transfer to commercial manufacture site, (b) oversee and
manage manufacturing scale-up and validation activities, (c) transfer analytical
methods to commercial manufacture site for stability monitoring, and (d) procure
and oversee stability data necessary for IND and NDA filings. Alimera shall have
primary responsibility, with reasonable input and assistance from CDS, for the
preparation of the Chemistry, Manufacturing and Controls (the "CMC") section of
Alimera's IND and NDA filings. Technology transfer shall be effected in
accordance with GMP and ISO guidelines, to the extent applicable for
Commercialization in the relevant country.

                          ARTICLE 4 COMMERCIALIZATION

      4.1 Commercialization of Product(s) in the Collaboration Field. Alimera is
granted a license under this Agreement to market, distribute and/or sell any
Product in the Collaboration Field in the Territory, including, but not limited
to, the right to conduct marketing, reimbursement (e.g., seeking and maintaining
pricing and reimbursement approvals from Third Party payors), sales and
distribution activities. Alimera may subcontract with any Affiliate or Third
Party to perform any of the foregoing activities in accordance with Section 5.3.

      4.2 Commercialization Budget. Alimera shall have sole responsibility for
implementing Commercialization based on Alimera's commercially reasonable
expectations of the resources and expenses required to Commercialize each
Product in the Territory, taking into account industry standards and the
competitive environment in effect from time to time with regard to each Product.
Alimera shall prepare a budget ("Commercialization Budget") and consider in good
faith incorporating into the Commercialization Budget any comments made by CDS
prior to finalizing such budget. The Commercialization Budget shall set forth,
on a rolling two (2) year basis, the projected sales and the projected Direct
Commercialization Costs broken down on a calendar quarter-by-quarter and
Product-by-Product basis. Alimera shall prepare semi-annual updates to the
Commercialization Budget prior to June 30 and December 31 of each year in which
Alimera has a Commercialization Budget or engages in Commercialization of any
Products, and shall provide CDS with copies of such semi-annual updates. Prior
to finalizing the initial Commercialization Budget and prior to finalizing each
subsequent semi-annual updated Commercialization Budget, Alimera shall arrange
for the Parties to have an in-person meeting (or, at CDS' option, a meeting by
telephone, videoconference or other means), during which an executive from
Alimera shall present in reasonable detail its planned Commercialization


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -24-


activities and Commercialization Budget for the time period covered in the
subject Commercialization Budget and CDS shall have opportunities to ask
questions and to present its comments on the applicable Commercialization
Budget. It is understood and agreed that [*] shall have the right and ability to
[*]. Alimera shall provide an initial draft Commercialization Budget to CDS for
its review as soon as it is available, but in no event later than the earlier of
(a) [*] prior to [*] or (b) [*] prior to incurring Direct Commercialization
Costs estimated to be in excess of [*] in the aggregate.

      4.3 Diligence. Alimera shall use Commercially Reasonable Efforts to
Commercialize each Product in [*] (collectively, the "Major Markets") and in
all countries outside the Major Markets, except for any country outside the
Major Markets as to which Alimera has made an election pursuant to Section
4.3.9. For purposes of this Section 4.3 (including Subsections 4.3.1- 4.3.9),
the term "Alimera" shall include Alimera and any of its Affiliates, sublicensees
and subcontractors. Without limiting the foregoing, Alimera agrees to the
following specific obligations:

            4.3.1. Alimera shall effect a First Commercial Sale in the United
States of the first Product to receive Approval in the United States (the
"Alimera First Product") no later than [*] after obtaining such Approval.
Alimera's nonperformance of an obligation in this Section 4.3.1 shall be excused
to the extent directly attributable to a disruption in Commercial Supply
Requirements, but only to the extent that such disruption and the impact thereof
is outside the control of Alimera.

            4.3.2. With respect to Commercialization of the Alimera First
Product, Alimera shall expend not less than [*] in Direct Commercialization
Costs (excluding Manufacturing Costs) on or before [*], provided that if Alimera
is making Commercialization expenditures substantially in accordance with a
Commercialization Budget designed to provide for such level of expenditures and
the FDA provides Approval sooner than reasonably contemplated by the
Commercialization Budget, then the failure to spend at least [*] in Direct
Commercialization Costs (excluding Manufacturing Costs) on or before [*] shall
be excused.

            4.3.3. With respect to Commercialization of the Alimera First
Product, Alimera shall expend not less than [*] in Direct Commercialization
Costs (excluding Manufacturing Costs, but including expenditures referred to in
Section 4.3.2) on or before [*].

            4.3.4. With respect to Commercialization of the Alimera First
Product, Alimera shall expend not less than [*] in Direct Commercialization
Costs (excluding Manufacturing Costs) between [*] and [*].

            4.3.5. Alimera shall cause Gross Sales of Products in the United
States during the [*] period referred to in Section 4.3.4 to be at least [*]
more than Gross Sales of Products in the United States during the immediately
preceding [*] period. Alimera's


[*] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -25-


nonperformance of an obligation in this Section 4.3.5 shall be excused to the
extent directly attributable to (1) one or more of the following events, but
only to the extent that such event is outside the control of Alimera: a breach
of this Agreement by CDS, a disruption in Commercial Supply Requirements, or a
Product Recall, or (2) one or more of the following events, but only to the
extent that such event materially and adversely affects the market for the first
Product: FDA action or regulatory guidance affecting Product, a change in
reimbursement rates or policies relating to Product, or the introduction of one
or more competitive products or services that provide for superior dosing,
safety or efficacy.

            4.3.6. If Alimera fails to meet any spending obligation set forth in
Sections 4.3.2, 4.3.3 or 4.3.4 and such nonperformance is not excused, Alimera
may cure such failure by paying to CDS an amount equal to [*]. Alimera's right
to cure under this Section 4.3.6 shall terminate upon a Change of Control of
Alimera.

            4.3.7. If Alimera fails to achieve the Gross Sales obligation set
forth in Section 4.3.5, Alimera may cure such failure by paying to CDS an amount
equal to [*] (the "Extrapolated Net Profits"). For purposes of this Section
4.3.7, the Extrapolated Net Profits for the [*] period referred to in Section
4.3.4 shall be determined by the following formula: [*]. Alimera's right to cure
under this Section 4.3.7 shall terminate upon a Change of Control of Alimera.

            4.3.8. If Alimera fails to meet any of its obligations under
subsections 4.3.1 - 4.3.5 and does not cure such failure in accordance with this
Agreement within thirty (30) days of receiving a written notice from CDS
requesting Alimera to cure such failure, then CDS may choose one of the
following two options: (a) terminate this Agreement, or (b) terminate this
Agreement only with respect to the Alimera First Product. In the event of
termination pursuant to this Section 4.3.8, Alimera shall not, for a period of
[*] from the date of such termination, Develop or Commercialize, or license or
otherwise assist an Affiliate or a Third Party to Develop or Commercialize, any
product that is Approved or designed to be Approved (1) to [*] or (2) to deliver
a [*]. For purposes of this Section 4.3.8, the term "Develop" shall mean
performance of human clinical trials for a product. In the event of termination
of this Agreement with respect to the Alimera First Product, CDS shall no longer
be bound by Section 5.1.2(1), (2), (3) or (4) with respect to such Product.
After termination pursuant to this Section 4.3.8 and in the event that CDS (i)
makes a First Commercial Sale of the Alimera First Product in the United States
and (ii) reaches the CDS Profitability Date for the Alimera First Product, CDS
shall thereafter pay Alimera [*] of CDS Net Income realized by CDS in the United
States with respect to such Product until such time as the sum of all such
payments plus the revenues otherwise realized by Alimera with respect to such

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -26-

Product in the United States equal the amount of Direct Development Costs and
Direct Commercialization Costs previously incurred, on a cash basis, or
reimbursed by Alimera with respect to such Product in the United States;
provided, however, that in the event that there are CDS Net Losses in any
calendar quarter after the CDS Profitability Date, any payment to Alimera shall
be offset by such CDS Net Losses.

            4.3.9. For clarification, Alimera may elect not to engage in
Commercialization in any country outside the Major Markets. If Alimera
determines not to engage in Commercialization of any Product in any country
outside the Major Markets, Alimera shall so notify CDS. At any time after
receipt of such notice, CDS may by written notice to Alimera, effective upon the
giving of such notice, terminate Alimera's license(s), and rights to
Commercialize, in such country. Thereafter CDS may, in its sole discretion,
directly or through an Affiliate or Third Party, Commercialize the relevant
Product(s) in such country. In the event of such termination with respect to a
country, CDS shall no longer be bound by Section 5.1.2(1), (2), (3) or (4) with
respect to such country.

            4.4 Costs of Commercialization. Regardless of the Profitability Date
for a Product, Alimera shall have sole responsibility for paying all costs and
expenses incurred in connection with Commercializing such Product in the
Collaboration Field in the Territory, including, but not limited to, Direct
Commercialization Costs; with the exception that CDS shall be responsible for
paying: (a) the CDS Patent Costs paid after the first Product Profitability
Date, subject to Section 7.1.2, (b) all UKRF Costs and (c) insurance premiums
paid by CDS to maintain insurance required by Section 10.4 to the extent such
insurance relates to Product (i.e., if insurance covers risks other than risks
related to Commercialization of Products, then only an appropriate portion of
such premiums shall be reimbursed). Alimera shall reimburse CDS for [*] of the
amount described in clauses (a), (b) and (c) of the preceding sentence within
thirty (30) days after the date of invoice from CDS; provided, however, that the
amount of the [*] that Alimera reimburses CDS in any calendar year shall not
exceed [*]. The costs set forth in (a), (b) and (c) of this Section 4.4 for
which Alimera has a reimbursement responsibility shall be collectively referred
to herein as the "CDS Commercialization Costs". In the event that Alimera fails
to reimburse CDS within the time period specified above, any future payment to
CDS shall be increased by an amount that is calculated as follows: the amount of
the non-reimbursed CDS Commercialization Costs is multiplied by [*], and that
amount is compounded annually at the compounding rate of [*] per annum, for any
period in which any portion of such costs remains non-reimbursed. Alimera may
pay all or any portion of the unpaid CDS Commercialization Costs plus any
interest accrued and due at any time. Notwithstanding the foregoing, CDS may
exercise its rights pursuant to Section 11.2 of this Agreement.

      4.5 Manufacturing for Commercial Supply Requirements. Alimera shall use
Commercially Reasonable Efforts to provide an adequate and timely supply to
satisfy Commercial Supply Requirements. Subject to the terms of this Agreement,
Alimera shall have the right to manufacture, itself or through any Third Party,
any Product, under the licenses granted to Alimera pursuant to Article 5 and in
accordance with Section 5.3. Alimera shall be responsible for ensuring that all
such manufacturing is carried out in accordance with GMP and/or ISO standards to
the extent applicable for Commercialization in the relevant country.

      4.6 Product Recalls. Alimera shall have the sole right and responsibility
and authority to carry out any Product Recall, whether or not such Recall is
required or requested by a

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -27-


governmental authority. If any governmental authority having jurisdiction
requires or reasonably requests Alimera to Recall a Product due to a defect in
the manufacture, processing, packaging or labeling of the Product or for any
other reason whatsoever, Alimera shall immediately notify CDS. Alimera shall be
responsible for carrying out any Recall as expeditiously as possible and in such
a way designed to cause the least disruption to the sales of the Product and to
preserve the goodwill and reputation attached to the Product and to the names of
Alimera and CDS. Alimera agrees to maintain the appropriate records and
procedures to permit a Product Recall. All Direct Costs associated with any
Product Recall, to the extent such costs are not covered by insurance, shall be
Direct Commercialization Costs; provided, however, that in the event that the
Product Recall is required due to Alimera's negligence or misconduct (including
a manufacturing quality defect in the Product) or any other reason within
Alimera's control, all such expenses shall be borne solely by Alimera and, in
such event, shall not be Direct Commercialization Costs.

                           ARTICLE 5 GRANT OF RIGHTS

      5.1 Grant of License by CDS.

            5.1.1. License to First Product. Subject to the terms and conditions
of this Agreement, CDS hereby grants to Alimera an exclusive (even as to CDS)
right and license under CDS' interest (i.e. subject to the UKRF Licenses) in the
CDS Technology, solely to make, have made, use, offer to sell, sell, and import
First Product in the Collaboration Field in the Territory.

            5.1.2. License to Products Other Than First Product. Subject to the
terms and conditions of this Agreement and the B&L Agreement (wherein CDS
granted certain rights to the CDS Technology), CDS hereby grants to Alimera a
non-exclusive right and license under CDS' interest (i.e. subject to the UKRF
Licenses) in the CDS Technology, solely to make, have made, use, offer to sell,
sell, and import Products other than First Product in the Collaboration Field in
the Territory, provided that during the Term of this Agreement, and subject to
the terms and conditions of this Agreement and the B&L Agreement, (1) CDS shall
not grant a license to any Affiliate or Third Party under CDS' interest in the
CDS Technology to make, have made, use, offer to sell, sell, or import Products
in the Collaboration Field in the Territory, (2) CDS shall not itself use the
CDS Technology to make, have made, use, offer to sell, sell, or import Products
in the Collaboration Field in the Territory, (3) CDS shall not grant a license
to any Affiliate or Third Party under CDS' interest in the CDS Technology to
make, have made, use, offer to sell, sell, or import in the Collaboration Field
in the Territory any product that otherwise meets the definition of Product
under Section 1.77 except that such product is Approved or designed to be
Approved to deliver [*] and (4) CDS shall not itself use the CDS
Technology to make, have made, use, offer to sell, sell, or import in the
Collaboration Field in the Territory any product that otherwise meets the
definition of Product under Section 1.77 except that such product is Approved or
designed to be Approved to deliver [*]

            5.1.3 License to Exhibit 1.11B Patents. Subject to the terms and
conditions of this Agreement and only to the extent permitted by the B&L
Agreement, CDS hereby grants to

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -28-


Alimera a non-exclusive right and license under any interest CDS may have from
time to time in the United States and foreign patents and patent applications
listed in Exhibit 1.11B, solely to make, have made, use, offer to sell, sell,
and import Products in the Collaboration Field in the Territory, except for
products that would fall under the definition of Licensed Products in the B&L
Agreement.

      5.2 Grant of License by Alimera. Subject to the terms of this Agreement,
Alimera hereby grants to CDS a right and license under Alimera's interest in the
Alimera Know-How as necessary for CDS to perform its obligations under this
Agreement, including, but not limited to, its obligations under the Development
Plan.

      5.3 Sublicenses and Subcontracts. Subject to the terms and conditions of
this Agreement, Alimera may grant sublicenses and subcontracts to its Affiliates
or to Third Parties to perform Commercialization activities for Products under
the licenses granted pursuant to Sections 5.1.1 and 5.1.2 of this Agreement,
provided that for sublicenses and subcontracts under which (1) some or all of
Alimera's rights to a Product, including, but not limited to, marketing rights
and/or distributing rights, are sold, licensed or otherwise transferred and/or
(2) consideration owed by Alimera exceeds [*] Alimera shall obtain CDS'
prior written consent, which consent shall not be unreasonably withheld or
delayed. In the event of a proposed sublicense or subcontract that requires CDS'
prior written consent as described in the foregoing, Alimera shall present CDS
with a summary of the principal terms of the proposed transaction, including the
identity of the proposed subcontractor or sublicensee. CDS shall promptly
consent or provide justification for its objection and negotiate in good faith
with Alimera regarding terms that would be satisfactory. Each sublicense or
subcontract shall be consistent with the terms and conditions of this Agreement,
shall be at arm's length and shall include such terms as are necessary to permit
Alimera to fulfill its obligations hereunder. Alimera shall be responsible for
the operations of any sublicensee or subcontractor relative to this Agreement as
if such operations were carried out by Alimera itself, including, but not
limited to, any payment provided for hereunder, regardless of whether the terms
of any sublicense or subcontract provide for such payment to be paid by the
sublicensee or subcontractor directly to CDS. Alimera shall provide CDS with a
copy of each such sublicense or subcontract promptly after its execution;
provided, however, that Alimera may redact such copies in order to protect the
confidential information of the Third Party. The terms of any sublicense or
subcontract, or proposed sublicense or subcontract, shall be deemed to be
Confidential Information of Alimera. CDS acknowledges that Alimera intends to
grant a sublicense of rights to one or more Third Parties for the development
and Commercialization of Product in [*]. For avoidance of doubt, CDS'
acknowledgement in the preceding sentence shall not constitute CDS' consent,
which is required before Alimera enters into such a sublicense pursuant to this
Section 5.3. Each sublicensee or subcontractor and its employees, contractors,
consultants, clinical investigators and agents shall be required to assign all
Improvements to Alimera pursuant to Section 7.3.

      5.4 Ownership of and Rights to Inventions. Except as otherwise provided
under this Agreement, ownership of all Inventions made by either Party shall be
governed by applicable United States patent law. Alimera hereby assigns and
agrees to assign to CDS a co-ownership interest in Alimera's interest in any
Alimera Improvements, excluding any rights to any trademarks. Subject to Section
5.5, each Party shall have worldwide rights to use, practice and

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -29-


sublicense any such Alimera Improvements, without any accounting to, reporting
to, or other obligation to, or consent from, the other Party. If a Party
licenses or otherwise transfers to a Third Party any Alimera Improvements, the
other Party shall cooperate and give such consent to such Party to enter into
such license or transfer as may be required to permit such Party to license or
transfer the Alimera Improvements to the Third Party without a duty to account
to such other Party.

      5.5 Limitation on Use. Notwithstanding any other provisions of this
Agreement, neither Alimera nor any of its Affiliates, subcontractors or
sublicensees shall use Alimera Improvements for any product that falls within
the definition of CDS Core Technology, except for (1) Products (other than any
Product(s) for which Alimera's license(s) have been terminated pursuant to
Sections 4.3.8, 4.3.9 or 11.5 of this Agreement) during the Term of this
Agreement, (2) any Product(s) for which CDS has granted a license to Alimera
pursuant to Section 11.5.1, during the term of such license, and (3) Option
Products for which CDS has granted a license to Alimera pursuant to Section
5.8.2, during the term of such license. Alimera shall ensure that any agreement
it enters into with a licensee, sublicensee, acquirer, acquiree, transferee or
merger or consolidation partner of or with Alimera, or acquirer or transferee of
substantially all of the assets or stock of Alimera, or of the assets or
business relating to this Agreement or the Alimera Improvements, includes the
same limitation of use as set forth in this Section 5.5, and any such party
shall be bound by such limitation.

      5.6 Reservation of Rights.

            5.6.1. Reservation of Rights by CDS. All rights and interests not
expressly granted to Alimera are reserved by CDS (the "Reserved Interests") for
itself, its Affiliates and partners (other than Alimera) and other licensees and
sublicensees, including, but not limited to, the rights to use and grant
licenses under the CDS Technology or any other technology owned or controlled by
CDS to make, have made, use, offer to sell, sell, have sold and import products
(other than Products for so long as Alimera has a license to such Products under
this Agreement). It shall not be a breach of this Agreement for CDS, acting
directly or indirectly, to exploit its Reserved Interests in any manner anywhere
in the Territory, whether or not such activity is competitive with the
activities of Alimera, including, but not limited to, the research, development
and Commercialization or licensing of others to research, develop and
Commercialize products (other than Products for so long as Alimera has a license
to such Products under this Agreement). Except as otherwise expressly provided
in this Agreement, for the avoidance of doubt, CDS shall be free to enter into
an agreement with any Third Party or Third Parties under the CDS Technology or
any other technology owned or controlled by CDS or its Affiliate or a Third
Party, to research, develop and Commercialize any and all products (other than
Products for so long as Alimera has a license to such Products under this
Agreement), including, but not limited to, products that potentially compete in
the same indication or product market as a Product, and products that use or
include any or all compounds that are not, at the time of such agreement, the
subject of a license granted pursuant to Section 5.8.3.

            5.6.2. Reservation of Rights by Alimera. Except as otherwise
expressly provided in this Agreement, for the avoidance of doubt, Alimera shall
be free to enter into an agreement with any Third Party or Third Parties under
the Alimera Know-How, the Alimera-Prosecuted Patent Rights or any other
technology owned or controlled by Alimera or its Affiliate or a Third

                                      -30-


Party, to research, develop and Commercialize any and all products, including,
but not limited to, products that potentially compete in the same indication or
product market as a Product.

      5.7 No Grant of Other Technology or Patent Rights. Except as otherwise
expressly provided in this Agreement, under no circumstances shall a Party
hereto, as a result of this Agreement, obtain any ownership interest or license
in or other right to any technology, Know-How, patents, patent applications,
products, or biological materials of the other Party, including, but not limited
to, items owned, Controlled or developed by the other Party, at any time
pursuant to this Agreement. This Agreement does not create, and shall under no
circumstances be construed or interpreted as creating, an obligation on the part
of either Party to grant any license to the other Party other than as expressly
set forth herein. Any further contract or license agreement between the Parties
shall be in writing.

      5.8 Options to Licenses in the Collaboration Field.

            5.8.1. Options. Subject to the terms and conditions of this
Agreement and the B&L Agreement, CDS hereby grants to Alimera three (3) options
to obtain a non-exclusive right and license under CDS' interest (i.e. subject to
the UKRF Licenses) in the CDS Technology, solely to make, have made, use, offer
to sell, sell and import an Option Product in the Collaboration Field (each
option relating to a particular compound is referred to herein as an "Alimera
Compound Option," and the three (3) options are collectively referred to herein
as the "Alimera Compound Options"). Each license granted in connection with an
Alimera Compound Option will provide that during the term of such license, and
subject to the B&L Agreement, CDS shall not (a) grant a license to any Affiliate
or Third Party under CDS' interest in the CDS Technology to make, have made,
use, offer to sell, sell, or import such Option Product in the Collaboration
Field in the Territory, and (b) itself use the CDS Technology to make, have
made, use, offer to sell, sell, or import such Option Product in the
Collaboration Field in the Territory during the term of such license.

            5.8.2. Exercise of Options. Alimera may exercise, in accordance with
this Section 5.8, an Alimera Compound Option at any time during the Option Term,
by submitting a written request to CDS indicating its intent to exercise such
option and specifying the specific compound as to which it wishes to exercise
the option. CDS shall have [*] Business Days, after it receives such
notice, in which to notify Alimera in the event that CDS, acting in good faith,
has already entered into an agreement or term sheet with a Third Party that
includes the specific compound specified by Alimera. In that event, Alimera may
not exercise the Alimera Compound Option with respect to that specific compound;
provided, however, that if CDS and such Third Party fail to consummate a license
or other agreement relating to such compound or such agreement is terminated
during the Option Term, CDS shall promptly notify Alimera that such compound is
no longer subject to any Third Party rights and Alimera may exercise the Alimera
Compound Option with respect to such compound in accordance with this Section
5.8.2. If CDS has not notified Alimera within the time period set forth above,
then Alimera shall be permitted to exercise the Alimera Compound Option with
regard to that specific compound.

            5.8.3. Grant of License. Upon the exercise of any Alimera Compound
Option under Section 5.8.2, CDS may choose one of the following two options: (a)
the Parties will enter into a collaboration agreement (the "Option Collaboration
Agreement") to develop and

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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -31-

Commercialize the Option Product on the same terms as this Agreement (including,
but not limited to, the same economic terms, including license fee, milestone
payment and profit split) and Alimera shall reimburse CDS for [*] of all costs
and expenses CDS incurred (excluding any CDS Patent Costs related to Existing
CDS Patent Rights or costs that are Development Costs or otherwise reimbursed by
Alimera under this Agreement) with respect to the Option Compound and the Option
Product from the Effective Date of this Agreement until the effective date of
the Option Collaboration Agreement; or (b) CDS shall grant Alimera a license
under the CDS Technology, as then in effect, to make, have made, use, offer to
sell, sell and import the Option Product in the Collaboration Field in the
Territory, under the following terms: (A) CDS shall receive a royalty of [*] of
Net Sales of the Option Product in the Territory, and (B) Alimera shall
reimburse CDS [*] with respect to the Option Compound and the Option Product
from the Effective Date of this Agreement until the effective date of such
license, and (C) such other non-financial terms and conditions as set forth on
Exhibit 5.8.3 and other customary terms and conditions. If the Parties have not
entered into an agreement under (a) or (b), as CDS chooses, within [*] Business
Days after Alimera exercises an Alimera Compound Option, then the matter shall
be referred to dispute resolution in accordance with Section 12.7 hereof, and
the terms of such agreement shall be consistent with those specified above in
(a) or (b), as applicable.

            5.8.4. Reservation of Rights by CDS. The existence of the Alimera
Compound Options under Section 5.8.1 shall not limit the reservation of rights
by CDS pursuant to Section 5.6, and CDS shall have no obligation to refrain from
including any or all compounds in a license with a Third Party or Third Parties,
except to the extent of any license that is actually granted to Alimera pursuant
to Section 5.8.3 or to the extent restricted by Sections 5.1.1 and 5.1.2, from
and after the date of such license. In the event that CDS grants Alimera a
license to one or more Option Products pursuant to Section 5.8.3, the
reservation of rights by CDS will remain the same as set forth in Section 5.6.1,
except that the phrase "Products and Option Products for which CDS has granted a
license to Alimera" shall be substituted in place of "Products" wherever it is
used in Section 5.6.1 during the term of any such license.

      5.9 Clinical IP.

            5.9.1. Right of Access to Clinical IP. Alimera and CDS shall jointly
own all Clinical IP and shall provide each other with a Right of Access to
Clinical IP. Each Party may exercise this right of access for itself, its
Affiliates and any licensees, sublicensees or any other Third Party without the
consent of the other Party.

            5.9.2. Cooperation. Each Party shall use Commercially Reasonable
Efforts, and shall reasonably cooperate with the other Party, to provide the
other Party with such waivers, irrevocable cross reference letters, assignments,
and/or other reasonable documentation as may be necessary or useful for the
other Party's full exercise of any Right of Access to Clinical IP granted
pursuant to this Section 5.9.

      5.10 Section 365(n) of the Bankruptcy Code. All rights and licenses
granted under or pursuant to any section of this Agreement are rights to
"intellectual property" as defined in Section 101(35A) of the Bankruptcy Code.
CDS acknowledges and agrees that in connection

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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -32-


with such rights and licenses Alimera is hereby granted a right of access and a
right to obtain possession of and to benefit from (i) copies of research data,
(ii) laboratory samples, (iii) product samples and inventory, (iv) formulas, (v)
laboratory notes and notebooks, (vi) data and results related to clinical
trials, (vii) copies of regulatory filings and Approvals, (viii) rights of
reference in respect of regulatory filings and Approvals, (ix) preclinical
research data and results, and (x) marketing, advertising and promotional
materials, all of which constitute "embodiments" of intellectual property
pursuant to Section 365(n) of the Bankruptcy Code and (xi) all other embodiments
of such intellectual property, whether any of the foregoing are in CDS'
possession or control or in the possession and control of Alimera or Third
Parties. CDS agrees not to interfere with Alimera's exercise of rights and
licenses to intellectual property licensed hereunder and embodiments thereof in
accordance with this Agreement.

          ARTICLE 6 COSTS & REVENUES - PRE AND POST PROFITABILITY DATE

      6.1 License Fee. If this Agreement is not terminated pursuant to Section
11.4, then the [*] in principal plus all accrued interest due under the
Earnest Money Loan shall thereafter be treated as paid in full as the payment of
a license fee, and the security interest under the Security Agreement (the
"Security Agreement") made by CDS in favor of Alimera and effective as of
October 19, 2004, as amended on November 18, 2004, shall terminate, and Alimera
shall execute and deliver to CDS such documents as CDS may reasonably request to
evidence such termination pursuant to Section 4 of the Security Agreement. If
this Agreement is terminated pursuant to Section 11.4, then the Security
Agreement and the promissory notes issued in respect of the Earnest Money Loan
shall remain in full force and effect.

      6.2 Milestone Payment. Alimera shall make an additional payment of [*]
("Milestone Payment") to CDS upon [*]. For purposes of this Section 6.2, the
Parties agree that [*].

      6.3 Direct Development Costs. Each Party shall pay [*] of the total Direct
Development Costs of a Product incurred in accordance with the Development
Budget.

            6.3.1. Monthly Reporting, Sharing and Reconciling of Direct
Development Costs. During the course of implementing the Development Plan,
within fifteen (15) calendar days after the end of each calendar month, each
Party shall report in writing to the other Party a detailed itemization
(including copies of any third party invoices) of the actual Direct Development
Costs incurred, on a cash basis, by each Party in the preceding calendar month.
The Parties shall reconcile amounts owed for actual Direct Development Costs on
a monthly basis as follows: to the extent (i) a Party incurred, on a cash basis,
Direct Development Costs in a calendar month that are within (and do not exceed)
the costs allocated to be incurred by that Party in the Development Budget and
(ii) the amounts in (i) exceed the Direct Development Costs incurred, on a cash
basis, by the other Party in that calendar month that are within (and do not
exceed) the costs allocated to be incurred, on a cash basis, by the other Party
in the Development Budget, the Party that paid the greater amount of budgeted
Direct Development Costs shall issue an invoice to the other Party for [*] of
the excess and the other Party shall pay

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -33-


to the invoicing Party the amount of such invoice (the "Development Payment")
within thirty (30) calendar days after delivery of the invoice.

            6.3.2. Non-Payment. In the event that a Party (the "Non-Paying
Party") fails to make timely payment to the other Party (the "Owed Party") for
all or a portion of its Development Payment for a Product pursuant to Section
6.3, then any distribution of Net Profits and the Milestone Payment to CDS shall
be adjusted by an amount that is calculated as follows: the amount of the unpaid
Development Payment is multiplied by [*], and that amount is compounded annually
at the compounding rate of [*] per annum (the total amount is called the
"Compounded Development Payment"), for any period in which any portion of the
Compounded Development Payment remains outstanding. Specifically, if Alimera is
the Owed Party, then any Net Profits Payment and the Milestone Payment to CDS
shall be reduced by the Compounded Development Payment due from CDS to Alimera
until the amount of such Net Profits Payment and the Milestone Payment to CDS is
[*] and any remaining balance of the Compounded Development Payments that CDS
owes to Alimera shall be carried forward until the amount of such Compounded
Development Payments are paid off. If CDS is the Owed Party, then any Net
Profits Payment to CDS shall be increased by the Compounded Development Payment
due from Alimera to CDS up to [*] of Alimera's share of Net Profits and any
remaining balance of the Compounded Development Payments that Alimera owes to
CDS shall be carried forward and offset against Alimera's share of Net Profits
in subsequent periods until such Compounded Development Payments are paid off.
All or any portion of the unpaid Compounded Development Payment may be paid at
any time for such Product. Notwithstanding the foregoing, the Owed Party may
exercise its rights pursuant to Section 11.3 or 11.5 of this Agreement.

            6.3.3. Dispute over Direct Development Costs. Pursuant to the
process described in Section 3.2.2, in the event that the JDT and/or the Parties
cannot reach an agreement over direct development costs proposed by a Party to
implement the Development Plan, the issue shall be referred to the senior
management of the Parties in accordance with Section 12.7.1. In the event that
the senior management of the Parties cannot reach an agreement over such
proposed costs (the "Disputed Costs"), such dispute may be resolved through
arbitration in accordance with Section 12.7.2. In the meantime, while the matter
is in arbitration, the Party that proposed the Disputed Costs may, in its sole
discretion, incur such costs, in addition to those allocated to such Party in
the Development Budget, and the Parties otherwise would proceed in accordance
with the then existing Development Plan and Development Budget until the matter
is resolved.

            (a) If the Disputed Costs, or any portion thereof, are determined
through arbitration in accordance with Section 12.7.2 to be Direct Development
Costs that are reasonably necessary to develop the Product and the proposing
Party has paid such costs in accordance with the preceding sentence (the
"Determined Disputed Costs"), then the non-proposing Party shall pay to the
proposing Party an amount that is calculated as follows: an amount that
corresponds to [*] of the Determined Disputed Costs is multiplied by [*] and
that amount is compounded annually at the compounding rate of [*] per annum (the
total amount is called the "Compounded Disputed Costs"), for the period
commencing on the date the determination is made by the dispute resolution
procedure for so long as any portion of the Compounded Disputed Costs remain
outstanding. In the event that the non-proposing Party fails

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -34-

 to pay the Compounded Disputed Costs, any distribution of Net Profits and the
Milestone Payment for that Product to CDS shall be adjusted by the Compounded
Disputed Costs according to the following: (i) if CDS owes Compounded Disputed
Costs to Alimera, then any Net Profits Payment and Milestone Payment to CDS
shall be reduced by the Compounded Disputed Costs due from CDS to Alimera until
the amount of such Net Profits Payment to CDS is [*] and any remaining balance
of the Compounded Disputed Costs that CDS owes to Alimera shall be carried
forward until such Compounded Disputed Costs are paid off, or (ii) If Alimera
owes Compounded Disputed Costs to CDS, then any Net Profits Payment to CDS shall
be increased by the Compounded Disputed Costs due from Alimera to CDS up to [*]
of Alimera's share of Net Profits and any remaining balance of the Compounded
Disputed Costs that Alimera owes to CDS shall be carried forward and offset
against Alimera's share of Net Profits in subsequent periods until such
Compounded Disputed Costs are paid off. All or any portion of the unpaid
Compounded Disputed Costs may be paid at any time for such Product.
Notwithstanding the foregoing, the Owed Party may exercise its rights pursuant
to Section 11.3 or 11.5 of this Agreement.

            (b) If the Disputed Costs are determined pursuant to Section 2.4 or
through the dispute resolution procedure in accordance with Section 12.7 not to
be Direct Development Costs that are reasonably necessary to develop the
Product, and the proposing Party has paid such costs, then the proposing Party
shall bear the Disputed Costs and the non-proposing Party shall have no
obligation to pay.

      6.4 Revenues Prior to Profitability Date. Prior to the Profitability Date
for each Product, Alimera shall retain all Gross Sales generated from such
Product in the Collaboration Field in the Territory.

      6.5 Costs and Revenues After the Profitability Date.

            6.5.1. Net Profits. From and after the Profitability Date for each
Product and subject to (b) below, each Party shall be entitled to [*] of Net
Profits for that Product, calculated on a calendar quarter-by-quarter and
country-by-country basis. Such Net Profits Payment to CDS shall be deemed
royalty for licenses granted by CDS to Alimera under Article 5, provided that
Alimera has a right to recoup from such royalty to CDS any Compounded
Development Payment and Compounded Disputed Costs that CDS owes Alimera pursuant
to Sections 6.3.2 and 6.3.3 as pre-payments of such royalty.

            (a) Reporting; Reconciliation of Net Profits. After the incurrence
of Commercialization costs by Alimera, Alimera shall be responsible for issuing
a written report to CDS within [*] calendar days (or as the Parties
may otherwise agree) after the end of each calendar quarter, which such report
shall include the following calculations:

                        (i) Direct Commercialization Costs incurred, on a cash
                  basis, by Alimera for each Product in the preceding calendar
                  quarter and, in the event that there are Net Profits in such
                  preceding calendar quarter, Direct Commercialization Costs
                  incurred in prior quarters to the extent such costs are taken
                  into account in calculating Net Losses that are offset from
                  such Net Profits pursuant to Section 6.5.1 (b);

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -35-


                        (ii) the quantity of each Product sold in the preceding
                  calendar quarter;

                        (iii) for each calendar quarter with Net Losses, the
                  calculation of Gross Sales, Net Sales and Net Losses;

                        (iv) for each calendar quarter with Net Profits, the
                  calculation of Gross Sales, Net Sales, Net Profits; and in the
                  event that Net Profits are offset by Net Losses previously
                  realized pursuant to Section 6.5.1(b), such Net Losses; and

                        (v) the amount of Net Profits, if any, to which each
                  Party is entitled for such calendar quarter.

All of the reports and payments in this Section 6.5 shall be made in U.S.
dollars. If any currency conversion is required in connection with the
calculation of Gross Sales, Net Sales and Net Profits hereunder, such conversion
shall be made in accordance with GAAP.

            (b) Net Profits Payment. Alimera shall pay to CDS the amount of Net
Profits to which CDS is entitled for such calendar quarter within [*] calendar
days after the end of such calendar quarter (the "Net Profits Payment");
provided that Alimera may offset [*] of the Net Losses previously realized by
Alimera (plus interest as described below, if applicable) on a
Product-by-Product and country-by-country basis up to a maximum offset of [*] of
the amount of Net Profits Payment to which CDS is otherwise entitled for such
calendar quarter until [*] of such Net Losses previously realized by Alimera
(plus interest as described below if applicable) are offset. In the event that
Alimera incurs Net Losses, Alimera shall be entitled to recover under the
preceding offset an amount equal to [*] of the amount of the Net Losses
previously realized by Alimera plus interest, compounded annually at the
compounding rate of [*] per annum from the time that such Net Losses are
incurred until the time such Net Losses (plus interest), or portion thereof,
have been offset pursuant to this paragraph. [*] Notwithstanding the foregoing,
CDS may, at any time, elect to permit Alimera to retain [*] of Net Profits until
[*] of the Net Losses previously realized by Alimera have been offset. If CDS
makes such an election, then no interest charge shall accrue with respect to the
Net Losses between the time CDS makes such election and the time they are
recovered by Alimera by operation of the offset. In the event that, during any
calendar quarter, Alimera makes Commercial sales of two Products that are
otherwise identical except that they are Approved for two different indications
(the first Product for which Alimera has made Commercial sales shall be called
"Product 1" and the second Product for which Alimera has made Commercial sales
shall be called "Product 2"), so that it is not reasonably possible to allocate
Net Sales attributable to each such Product, then Net Profits and Net Losses for
such Products shall be determined as follows for periods in which there are
Commercial sales of both Product 1 and Product 2:

      The "Product 2 Profitability Date" shall be deemed to be the first day of
the first calendar quarter (i) that begins at least [*] after [*] and (ii) in

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -36-


which the aggregate of Net Sales of Product 1 and Product 2 exceed the aggregate
of Direct Commercialization Costs for Product 1 and Product 2. Before the
Product 2 Profitability Date, Net Profits for Product 1 shall be the aggregate
of Net Sales of Product 1 and Net Sales of Product 2 minus the Direct
Commercialization Costs of Product 1, and such Net Profits shall be distributed
as provided in the foregoing in this Section 6.5.1(b). After the Product 2
Profitability Date, Net Sales and Direct Commercialization Costs of Product 1
and Product 2 shall be aggregated for the purpose of determining Net Profits and
Net Losses for Product 1 and Product 2, such that (i) to the extent the
aggregate Net Sales for Product 1 and Product 2 exceeds the Direct
Commercialization Costs of Product 1 and Product 2, such amount of difference
shall be the aggregate Net Profits for Product 1 and Product 2, and (ii) to the
extent the Direct Commercialization Costs of Product 1 and Product 2 exceeds the
aggregate Net Sales for Product 1 and Product 2, such amount of difference shall
be the aggregate Net Losses for Product 1 and Product 2, provided that all
Direct Commercialization Costs incurred by Alimera for Product 2 prior to the
Product 2 Profitability Date (plus interest as described above, if applicable),
shall be treated as aggregate Net Losses for Product 1 and Product 2; further
provided that to the extent it is not possible to separately track Direct
Commercialization Costs for Product 1 and Product 2, such Direct
Commercialization Costs shall be reasonably allocated between Product 1 and
Product 2. The distribution of such aggregate Net Profits and offset of such
aggregate Net Losses shall be as provided in the foregoing in this Section
6.5.1(b). In the event that, during any calendar quarter, Alimera makes
Commercial sales of three or more Products that are otherwise identical except
that they are Approved for three or more different indications so that it is not
reasonably possible to allocate Net Sales attributable to each such Product, the
Parties agree to work together in good faith to extend the principles reflected
in the foregoing method of calculation to include such third or additional
Products.

            (c) Non-Payment. In the event that Alimera fails to make timely
payment to CDS for all or a portion of a Net Profits Payment pursuant to this
Section 6.5.1, CDS shall provide written notice to Alimera and Alimera shall
have fifteen (15) business days in which to cure the nonpayment. If after such
notice, Alimera fails to cure the nonpayment within such fifteen (15) business
day period, the portion of the unpaid Net Profits Payment shall increase any
future Net Profits Payments to CDS for any future period by an amount that is
calculated as follows: the amount of the unpaid Net Profits Payment is
multiplied by [*], and that amount is compounded annually at the rate of [*] per
annum (the total amount is called the "Compounded Net Profits Payment"), for the
period in which any portion of the Net Profits Payment remain outstanding.
Alimera shall have the right to pay all or any portion of the unpaid Compounded
Net Profits Payment plus any interest accrued and due at any time.
Notwithstanding the foregoing, CDS may exercise its rights pursuant to Section
11.2 of this Agreement.

            (d) Consideration for Net Profits Payments. In consideration of all
rights granted, and information provided by CDS to Alimera, and the amount of
Direct Development Costs paid by CDS under this Agreement with respect to
Product(s), the Parties agree that the amount of Net Profits Payments set forth
in Section 6.5 reflects the value of all such rights granted, information
provided and costs paid, and such Net Profits Payments shall be paid whether or
not such Product is covered by a Valid Claim in the CDS Patent Rights, and
whether or not such Net Profits Payments under this Section 6.5 extend beyond
the term of any CDS Patent Rights containing Valid Claims covering such Product.

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -37-

            6.5.2. Net Losses. In the event that there are Net Losses in a
calendar quarter, Alimera shall be solely responsible for bearing such Net
Losses, subject to Alimera's right to recover [*] of such Net Losses as provided
for in Section 6.5.1.

      6.6 Revenues from Third Party Agreements. In the event that Alimera enters
into a sublicense or other agreement, or otherwise agrees, with a Third Party,
before or after the Profitability Date for a Product, to sell or otherwise
transfer some or all of Alimera's rights to a Product, including, but not
limited to, marketing rights and/or distribution rights, and Alimera obtains any
form of consideration in connection therewith, CDS shall be entitled to receive
[*] of the excess of (i) such consideration (excluding any amounts paid for
equity securities of Alimera other than amounts that exceed the fair market
value of such securities) over (ii) Alimera's reasonable out-of-pocket costs
that are directly and solely incurred to secure such Third Party agreement,
promptly after any such consideration is received by Alimera, provided that (1)
the fair market value of such securities shall be determined by mutual agreement
of both Parties, and (2) in the event that the Parties fail to reach such mutual
agreement, the matter shall be resolved by arbitration in accordance with
Section 12.7.2 herein. The amount of payment that CDS is entitled to receive
from Alimera pursuant to the foregoing shall be deemed royalty for licenses
granted by CDS to Alimera under Article 5, provided that Alimera shall have the
right to recoup from all or any portion of such payment to CDS any Compounded
Development Payment, Compounded Disputed Costs or other amount then owed by CDS
to Alimera under this Agreement as pre-payments of royalty.

      6.7 Records; Audits.

            6.7.1. Each Party shall keep, and shall cause its Affiliates, agents
and sublicensees to keep, full and accurate records and books of account
containing all particulars that may be necessary for the purpose of calculating
Direct Development Costs, Direct Commercialization Costs, Gross Sales, Net
Sales, and Net Profits or Net Losses for Products to be received or borne by the
Parties pursuant to this Agreement, including, but not limited to, inventory,
purchase and invoice records, manufacturing records, sales analysis, general
ledgers, financial statements, and tax returns relating to Products. Such books
of account, with all necessary supporting data, shall be kept by each Party at
its place of business for the three (3) years next following the end of the
calendar year to which each shall pertain. Each Party (the "Audited Party")
shall permit an independent accounting firm selected by the other Party (the
"Auditing Party") and reasonably acceptable to the Audited Party, which
acceptance shall not be unreasonably withheld or delayed, to have access during
normal business hours to such records as may be reasonably necessary to verify
the accuracy of the Audited Party's reports of Direct Development Costs, Direct
Commercialization Costs, Gross Sales, Net Sales, and Net Profits or Net Losses
as provided herein. All such verifications shall be conducted at the expense of
the Auditing Party and not more than once in each calendar year. In the event
such audit concludes that adjustments should be made in the Auditing Party's
favor, then any appropriate payments (plus accrued interest at a rate announced
by the Bank of America as its prime rate in effect on the date that such payment
was first due plus three percent (3%) for the period starting from the date the
payment was first due ending on the date the payment was made) shall be paid by
the Audited Party within thirty (30) days of the date the Audited Party receives
the Auditing Party's accounting firm's written report so concluding, unless the
Audited Party shall have a good faith dispute as to the conclusions set forth in
such written report, in which case the audited Party shall

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -38-


provide written notice to the Auditing Party within such thirty (30) day period
of the nature of its disagreement with such written report. The Parties shall
thereafter, for a period of sixty (60) days, attempt in good faith to resolve
such dispute and if they are unable to do so then the matter will be submitted
to dispute resolution in accordance with Section 12.7 hereof. The fees charged
by such accounting firm shall be paid by the Auditing Party unless the audit
discloses that adjustments in favor of the Auditing Party for the period are
five percent (5%) or more of the aggregate amount paid or payable by the Audited
Party to the Auditing Party during the period, in which case the Audited Party
shall pay the reasonable fees and expenses charged by such accounting firm. The
Parties agree that all information subject to review under this Section 6.7 is
confidential and that it shall cause its accounting firm to retain all such
information subject to the confidentiality restrictions of Article 8 hereof.

            6.7.2. In addition to the foregoing, Alimera shall permit an
independent certified public accountant retained by UKRF to inspect the records
and books of account described in Section 6.7.1 during normal business hours and
upon reasonable notice to the extent required by the UKRF Licenses. Such right
of inspection shall last for two (2) years following the end of the calendar
quarter to which such records and books of account pertain, shall be limited
solely to those matters directly related to CDS royalty obligations under the
UKRF Licenses, and shall be allowed no more than once a year.

                        ARTICLE 7 INTELLECTUAL PROPERTY

      7.1 CDS-Prosecuted Patent Rights.

            7.1.1. Filing, Prosecution and Maintenance. CDS shall have primary
responsibility for and control over the preparation, filing, prosecution and
maintenance of (a) any of the CDS Existing Patent Rights, (b) any Patent Rights
included within the CDS Improvements, and (c) any Patent Rights included within
the Alimera Improvements that fall within the definition of or relate to the CDS
Core Technology (collectively, the "CDS-Prosecuted Patent Rights"). For
CDS-Prosecuted Patent Rights, CDS shall have the authority to select patent
counsel, and to determine the form and content of such prosecution documents and
to make all decisions regarding whether to file, prosecute and maintain patents
and patent applications, and in which countries to do so.

            7.1.2. CDS Patent Costs. Alimera shall be responsible for
reimbursement of CDS Patent Costs only in the jurisdictions identified in
Exhibit 1.15 as follows: the CDS Patent Costs in such jurisdictions paid up to
the first Product Profitability Date shall be Direct Development Costs, as
provided in Section 1.34, and shall be paid by CDS and split between CDS and
Alimera in accordance with Section 6.3. The CDS Patent Costs paid after the
first Product Profitability Date shall be paid by CDS and Alimera shall
reimburse CDS [*] for all such costs paid by CDS within thirty
(30) days after the date of invoice by CDS in accordance with Section 4.4. The
list of countries identified in Exhibit 1.15 may be amended (i.e., to add or to
drop one or more countries) only upon mutual agreement by the Parties. If, after
the Effective Date of this Agreement, CDS grants to any Third Party a license to
any of the CDS-Prosecuted Patent Rights for which Alimera has continuing
reimbursement obligations, thereafter Alimera's share of costs for those
particular CDS-Prosecuted Patent Rights shall be reduced on a per capita basis
during the term of such license (by way of example, if CDS grants

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                      -39-


a license to one Third Party to any of the CDS-Prosecuted Patent Rights,
Alimera's share of costs for those particular CDS-Prosecuted Patent Rights shall
be [*]).

            7.1.3. Communication. CDS shall provide Alimera with copies of all
official correspondence (including, but not limited to, applications, office
actions, responses, etc.) relating to prosecution and maintenance of
CDS-Prosecuted Patent Rights in countries identified in Exhibit 1.15. Alimera
may provide comments and CDS will give good faith consideration thereto. In
order to facilitate Alimera's rights to comment, CDS shall provide copies of all
such official correspondence and any proposed responses by CDS at least ten (10)
business days prior to any filing or response deadlines. In the event that the
Parties have a material disagreement relating to the prosecution or maintenance
of any of the CDS-Prosecuted Patent Rights (other than a determination by CDS to
abandon any CDS-Prosecuted Patent Rights as described below), CDS shall have the
right to decide on the course of action. Thereafter, Alimera may choose not to
pay any portion of the CDS Patent Costs associated with the applicable
CDS-Prosecuted Patent Rights. In the event that Alimera chooses not to pay for
one or more countries, then, with respect to such countries, (a) the license for
the applicable CDS-Prosecuted Patent Rights shall automatically terminate, and
(b) CDS shall no longer be bound by Section 5.1.2(1), (2), (3) or (4).

      7.2 Abandonment. CDS shall not abandon prosecution or maintenance of any
CDS-Prosecuted Patent Rights already pending in any country identified in
Exhibit 1.15 without notifying Alimera in a timely manner of CDS' intention and
reason therefore and providing Alimera with reasonable opportunity to comment
upon such abandonment and to assume responsibility for prosecution or
maintenance of such Patent Rights as set forth below. For avoidance of doubt,
for CDS-Prosecuted Patent Rights, CDS has the sole discretion to decide whether
or not to file in a country, and a decision not to file in a country shall not
be deemed as abandonment of CDS-Prosecuted Patent Rights in that country for
purpose of this Article 7. In the event that CDS abandons prosecution or
maintenance of CDS-Prosecuted Patent Rights in any country identified in Exhibit
1.15 at any time during the Term of this Agreement, Alimera may assume
prosecution responsibility therefor in the name of CDS, and such patent costs
shall be paid by Alimera and CDS may reimburse Alimera for [*] of such patent
costs within thirty (30) days after the date of invoice from Alimera (the "CDS
Reimbursement Amount"). In the event that CDS fails to reimburse Alimera within
the time period as specified above, any future payment to CDS shall be decreased
by an amount that is calculated as follows: the amount of the non-reimbursed CDS
Reimbursement Amount is multiplied by [*], and that amount is compounded
annually at the compounding rate of [*] per annum, for any period in which any
portion of such costs remains non-reimbursed. CDS may pay all or any portion of
the unpaid CDS Reimbursement Amount plus any interest accrued and due at any
time.

      7.3 Alimera-Prosecuted Patent Rights.

            7.3.1. Filing, Prosecution and Maintenance. Alimera shall have
primary responsibility for and control over the preparation, filing, prosecution
and maintenance of any Patent Rights included within Alimera Improvements that
are not CDS-Prosecuted Patent Rights ("Alimera-Prosecuted Patent Rights"). For
Alimera-Prosecuted Patent Rights, Alimera shall have the authority to select
patent counsel, and to determine the form and content of such

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -40-


prosecution documents and to make all decisions regarding whether to file,
prosecute and maintain patents and patent applications, and in which countries
to do so. Alimera shall be solely responsible for Alimera Patent Costs and such
costs shall be neither Direct Development Costs nor Direct Commercialization
Costs. Alimera shall provide CDS with copies of all official correspondence
(including, but not limited to, applications, office actions, responses, etc.)
relating to prosecution and maintenance of Alimera-Prosecuted Patent Rights.

            7.3.2. Abandonment. Alimera shall not abandon prosecution or
maintenance of any Alimera-Prosecuted Patent Rights in the Territory without
notifying CDS in a timely manner of Alimera's intention and reason therefore and
providing CDS with reasonable opportunity to comment upon such abandonment and
to assume responsibility for prosecution or maintenance of such
Alimera-Prosecuted Patent Rights. For avoidance of doubt, for Alimera-Prosecuted
Patent Rights, Alimera has the sole discretion to decide whether or not to file
in a country, and a decision not to file in a country shall not be deemed as
abandonment of Alimera-Prosecuted Patent Rights in that country for purpose of
this Article 7. In the event that Alimera abandons prosecution or maintenance of
Alimera-Prosecuted Patent Rights in any country in the Territory, CDS may assume
prosecution responsibility for such Patent Rights in that country, and
thereafter such Patent Rights will cease to being Alimera-Prosecuted Patent
Rights and will become CDS-Prosecuted Patent Rights. Notwithstanding the
foregoing, if Alimera, acting in good faith, grants a Third Party prosecution
rights with respect to any Alimera-Prosecuted Patent Rights, then CDS' rights
under this Section 7.2.2 shall be subject to the rights granted to such Third
Party.

      7.4 Information Disclosure; Cooperation. Each Party shall disclose and
make available to the other Party all material information controlled by such
Party that is reasonably necessary for the other Party to perform its
obligations and exercise its rights under this Article 7, including the
preparation, filing, prosecution and maintenance of patents and patent
applications pursuant to this Article 7. All such information shall be disclosed
to the other Party reasonably promptly after it is first developed or learned or
its significance is first appreciated. Without limiting the foregoing, each
Party agrees to disclose and make available to the other Party all Alimera
Improvements and CDS Improvements, as applicable. Neither Alimera or CDS shall
publicly disclose any Alimera Improvements before the Party responsible for
filing and prosecuting such Improvements has an opportunity to make appropriate
patent filings. Each Party agrees to cooperate with the other Party with respect
to the preparation, filing, prosecution and maintenance of patents and patent
applications pursuant to this Article 7.

      7.5 Employees and Sublicensees Assignment of Inventions. Each Party shall
cause all of its employees, Affiliates, contractors, sublicensees, consultants,
clinical investigators and agents, acting under authority from such Party or its
sublicensees, (i) to enter into written agreements pursuant to which each such
person or entity assigns to such Party all Improvements and other Inventions
that such individual or entity discovers, develops, creates, conceives or
reduces to practice in the course of their relationship with such Party or its
sublicensees; and (ii) to execute such other documents and take such other
actions as may be necessary to effectuate the foregoing assignments. Each Party
agrees to undertake to enforce the agreements referenced in this Section 7.3
(including, where appropriate, by legal action).

      7.6 Infringement

                                      -41-


            7.6.1. Notification. Each party shall promptly report in writing to
the other Party during the Term of this Agreement any known infringement or
suspected infringement of any of its Patent Rights that covers a Product and
shall provide the other Party with all available evidence supporting said
infringement or suspected infringement.

            7.6.2. Prosecution. CDS shall have the initial right, but not the
obligation, to initiate or prosecute an infringement or other appropriate suit
or action against any Third Party who at any time has infringed or is suspected
of infringing (an "Infringer"), any of the CDS Patent Rights covering a Product.
CDS shall give Alimera sufficient advance notice of its intent to file said suit
and the reasons therefore, and shall provide Alimera with an opportunity to make
suggestions and comments regarding such filing; provided, however, that Alimera
shall provide any such comments sufficiently in advance of any filing dates to
allow for consideration by CDS, and further provided that it shall be within
CDS' sole discretion whether to incorporate such suggestions or comments. CDS
shall keep Alimera reasonably informed of the status and progress of the
litigation. CDS shall have the sole and exclusive right to select counsel for
any such suit and action and shall pay [*] including, but not limited to,
attorneys' fees and court costs. If CDS has not taken legal action or been
successful in obtaining cessation of the infringement within (a) ninety (90)
days from the date of notice by Alimera under Section 7.4.1; (b) thirty (30)
days after Alimera notifies CDS that Alimera would like to move for injunctive
relief; or (c) ten (10) days before the expiration of a period of time set by
applicable law in which action must be taken with respect to the alleged
infringement (e.g., as may be required under the Hatch-Waxman Act and 35 USC
Section 271), then subject to any rights granted to B&L under the B&L Agreement,
to enforce or prosecute any Patent Rights owned or Controlled by CDS, Alimera
shall have the right to bring suit against an Infringer at Alimera's own
expense. This right of Alimera to bring suit, as well as to continue an existing
suit, is also conditioned on all of the following requirements:

                        (i) The allegedly infringing product, device or method
                  (collectively, the "Accused Device") falls within the
                  definition of Product;

                        (ii) If Alimera owns (or has licensed from a Third Party
                  and has the right to enforce) any patent(s) that reads on the
                  Accused Device practiced by the Infringer, Alimera will
                  include in the complaint one or more claims alleging
                  infringement of all such other patent(s);

                        (iii) Alimera has provided evidence to CDS that there is
                  a good faith basis to believe that the Accused Device is being
                  prepared for Commercialization or is already Commercialized;

                        (iv) Alimera shall keep CDS reasonably and timely
                  informed of the pre-litigation and litigation issues and
                  strategy (including, without limitation, furnishing copies of
                  communications, pleading, and other documents and keeping CDS
                  informed of settlement efforts and developments), and shall
                  obtain suggestions and strategy from CDS, including during
                  pre-trial motions and discovery;

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -42-


                        (v) In the instance of litigation issues and strategies
                  pertaining to defenses or setting strategy for the scope of
                  claims, Alimera shall incorporate all reasonable suggestions
                  and strategy from CDS as may be deemed appropriate in the
                  reasonable business judgment of CDS; and

                        (vi) Except for joining the legal actions described in
                  this Section 7.4.2 as a party at Alimera's request and matters
                  discussed in the following paragraph, CDS shall have no
                  obligation regarding such actions unless required to
                  participate by law or contract. However, CDS shall have the
                  right to participate in any such actions through its own
                  counsel and at its expense.

Upon request of the other Party, either Party shall join as a party to the suit,
at its own expense, and shall offer reasonable assistance to the other Party in
connection therewith at its own expense. Any damages, royalties, settlement fees
or other consideration for infringement resulting from such suit shall be
distributed as follows: (i) first, each Party shall be reimbursed for its
reasonable out-of-pocket costs paid in connection with the proceeding; and (ii)
thereafter, shall be [*]. Neither Party shall settle any such action or
otherwise consent to an adverse judgment in any such action that adversely
affects the rights or interests of the other Party under this Agreement,
including, without limitation, issues of validity of the CDS Patent Rights,
without the prior written consent of the other Party.

            7.6.3. Notification of Third Party Claim. Each Party shall promptly
report in writing to the other Party during the Term of this Agreement any claim
or allegation by any Third Party that the development or Commercialization of
any Product infringes the intellectual property rights of any Third Party and
shall provide the other Party with all available evidence supporting said
infringement or suspected infringement.

            7.6.4. Responsibility. Subject to any rights granted to B&L under
the B&L Agreement, Alimera shall have the initial right, but not the obligation,
to defend any suit or action initiated by any Third Party alleging solely that a
Product developed or Commercialized hereunder has infringed, or is suspected of
infringing any Third Party intellectual property rights. Upon Alimera's request,
CDS shall offer reasonable assistance to Alimera in connection therewith at
Alimera's expense. Alimera shall give CDS advance notice of its intent to defend
any said suit and shall provide CDS with an opportunity to make suggestions and
comments regarding such defense; provided, however, that CDS shall provide any
such comments sufficiently in advance of any filing dates to allow for
consideration by Alimera, and further provided that it shall be within Alimera's
sole discretion whether to incorporate such suggestions or comments. Alimera
shall keep CDS reasonably informed of the status and progress of the litigation.
Alimera shall have the sole and exclusive right to select counsel for any such
suit and action and shall pay all expenses of the suit, including, but not
limited to, attorneys' fees and court costs. Alimera shall have the right to
settle any such litigation and shall specifically have the right, whether or not
litigation commences, to negotiate a license or other rights from any Third
Party authorizing the use of Third Party intellectual property rights in
connection with Products; provided, however, that Alimera shall not settle any
such action, or otherwise consent to an adverse judgment in any such action, or
make any admission in any such license and negotiation that adversely affects
the rights or interests of CDS under this Agreement, including,

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -43-


without limitation, issues of validity of the CDS Patent Rights, without the
prior written consent of CDS. Any such license shall be at arm's length and
otherwise on terms and conditions as may be deemed appropriate in the reasonable
business judgment of Alimera. Alimera shall provide CDS with a copy of any such
license promptly after its execution. All reasonable costs incurred in
connection with such litigation and any amounts payable to the Third Party
relating to Products under such license shall constitute Direct
Commercialization Costs as follows: (i) any litigation, negotiation or
settlement-related costs and expenses or up-front payments shall be deemed to be
a Direct Commercialization Cost of Product or Products as reasonably allocated
by Alimera in good faith, subject to the dispute resolution procedures provided
for in Section 12.7; (ii) any royalties on net sales or similar payments
calculated by reference to sales shall be allocated to Products on a
Product-by-Product and country-by-country basis; (iii) any other amounts (e.g.,
milestone payments or patent reimbursement fees) shall be reasonably allocated
by Alimera to one or more Products in good faith, subject to the dispute
resolution procedures provided for in Section 12.7. If Alimera recovers any
damages or any other payments, by way of settlement or otherwise, in connection
with any counterclaim made by it in any such actions, such damages shall be
considered "Net Sales" for purposes of this Agreement.

      If Alimera does not defend a claim, suit or proceeding as set forth above
within ninety (90) days of the date Alimera was reasonably aware or notified of
the Third Party claim alleging infringement (or within such shorter period as
may be necessary for submitting or filing a response), then CDS may, in its sole
discretion, elect to defend such claim, suit or proceeding, using counsel of its
own choice and the provisions of Section 7.6.4 shall apply as if the term "CDS"
were changed to "Alimera" and the term "Alimera" were changed to "CDS."

      7.7 Marking. Alimera and any Affiliates or sublicensees shall mark all
Products with the numbers of all patents included in CDS Technology that cover
the Products. Without limiting the foregoing, all Products shall be marked in
such a manner as to conform with the patent laws of the country to which such
Products are shipped or in which such products are sold, including, but not
limited to, the requirements of 35 U.S.C. Section 287.

      7.8 Trademarks. Alimera shall be free to adopt, use and register in any
trademark offices any trademarks for use with a Product in its sole discretion.
Subject to Section 11.5.2, Alimera shall own all right, title and interest in
and to any such trademark in its own name during and after the Term of this
Agreement.

            7.8.1. The "Medidur" Mark. CDS hereby grants to Alimera a
royalty-free non-exclusive right and license, with right to sublicense, to use
the "MEDIDUR" mark Controlled by CDS on or in connection with any Products
marketed, distributed or sold pursuant to this Agreement. Alimera shall not use
the "MEDIDUR" mark in direct association with another mark such that the two
marks appear to be a single mark or in any other composite manner with any marks
of Alimera or any Third Party. Alimera shall cause to appear on all items
bearing the "MEDIDUR" mark such legends, markings and notices as may be required
by applicable law or reasonably requested by CDS to establish, perfect, defend
or exploit the proprietary character of the "MEDIDUR" mark. Alimera shall not
grant, attempt to grant, or record anywhere, a security interest in the
"MEDIDUR" mark. Alimera hereby assigns and will assign any goodwill associated
with its use of the "MEDIDUR" mark to CDS. CDS has the right to control the
quality of the Products Commercialized in connection with the commercial

                                      -44-


exploitation of the MEDIDUR Mark as follows: (1) CDS may, in its sole
discretion, request and carry out periodic inspections of the operation of
Alimera, its Affiliates, subcontractors and sublicensees, and (2) Alimera agrees
to reasonably cooperate, and to cause its Affiliates, subcontractors and
sublicensees to cooperate, with such periodic inspections of its operations upon
reasonable prior written notice by CDS. Alimera acknowledges and agrees that the
"MEDIDUR" mark shall remain the property of CDS. ALIMERA ACKNOWLEDGES AND AGREES
THAT THE "MEDIDUR" MARK IS PROVIDED ON AN "AS IS" BASIS AND THAT CDS MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR
STATUTORY, WITH RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF TITLE, VALIDITY, ENFORCEABILITY OR NON-INFRINGEMENT. CDS is not
obligated to (i) file any application for registration of the "MEDIDUR" mark, or
to secure any rights in the "MEDIDUR" mark, (ii) to maintain the "MEDIDUR" mark,
or (iii) to police or pursue (including for infringement) any Third Parties
using the "MEDIDUR" mark.

      7.9 UKRF Licenses and B&L Agreement. CDS shall not amend or modify any of
the UKRF Licenses or the B&L Agreement, or waive any right thereunder, in any
manner that would adversely affect Alimera's rights hereunder without the prior
written authorization of Alimera.

                           ARTICLE 8 CONFIDENTIALITY

      8.1 Confidentiality. Except as otherwise provided in this Article 8, each
Party shall maintain Confidential Information of the other Party in confidence
and shall not disclose Confidential Information of the other Party to any Third
Party and shall not use Confidential Information of the other Party except as
expressly authorized under this Agreement. "Confidential Information" shall mean
any and all information (whether in written, electronic, visual, verbal or other
form) received from the other Party or its representatives, including, but not
limited to, all information relating to any technology, product, method, process
or intellectual property of such disclosing Party (including, but not limited
to, Patent Rights, and other owned or licensed intellectual property rights,
data, Know-How, samples, technical and non-technical materials and
specifications), as well as any business plan, financial information, research
data or results, or other confidential commercial information of or about such
disclosing Party; provided, however, that Confidential Information shall not
include any information that: (a) is or becomes part of the public domain other
than by unauthorized acts or omissions of the Party obligated not to disclose
such Confidential Information or its employees, directors, officers, or agents
(collectively, the "Receiving Party"); (b) can be shown by written documents to
have been disclosed to the Receiving Party by a Third Party; provided, however,
that such Third Party had no obligation of confidentiality or non-use to the
disclosing party with respect to such Confidential Information; (c) can be shown
by written documents to have been in the possession of the Receiving Party prior
to disclosure by the disclosing Party; provided, however, that such Confidential
Information was not obtained directly or indirectly from the other Party to this
Agreement pursuant to a confidentiality agreement; or (d) is required to be
disclosed by the Receiving Party pursuant to interrogatories, requests for
information or documents, subpoena, civil investigative demand issued by a court
or governmental agency or as otherwise required by law; provided, however, that
in connection with this clause (d) the Receiving Party shall notify the other
Party immediately upon receipt thereof and give such other Party sufficient
advance

                                      -45-


notice to permit it to seek a protective order or other similar order with
respect to such Confidential Information; and provided, further, that the
Receiving Party furnishes only that portion of the Confidential Information that
it is advised by counsel is legally required whether or not a protective order
or other similar order is obtained by the other Party. Notwithstanding any other
provisions of this Article, (1) Alimera Know-How shall be Confidential
Information of Alimera and CDS Technology shall be Confidential Information of
CDS; and (2) each Party shall treat the terms and conditions of this Agreement
as Confidential Information of the other Party.

      8.2 Disclosure. To the extent that it is reasonably necessary, a Party may
disclose Confidential Information it is otherwise obligated under this Article 8
not to disclose to its employees on a need-to-know basis and on condition that
such employees agree in writing to non-use and non-disclosure obligations
essentially the same as those set forth herein and to keep the Confidential
Information confidential to the same extent as such Party is required to keep
the Confidential Information confidential. In addition, a Party may disclose
such Confidential Information: (a) to government or other regulatory authorities
to the extent that such disclosure is required by law, regulation or order (i)
in connection with the filing, prosecution or maintenance of patents for which
the Party disclosing the Confidential Information has responsibility or is
permitted under this Agreement to file, prosecute and maintain, or (ii) to
obtain authorizations to conduct clinical trials of, and to Commercialize,
Products pursuant to this Agreement; (b) to any applicable securities exchange
or the National Association of Securities Dealers ("NASD"), as required by
applicable law or any listing agreement with, or the rules and regulations of,
any applicable securities exchange or NASD, provided, that, the Party who makes
the filing will seek confidential treatment for such filing; (c) in confidence,
to lawyers, accountants and sources of funding of a Party and (d) to
sublicensees in connection with any sublicense of the technology or intellectual
property, or portion thereof, licensed hereunder as permitted under this
Agreement. In addition, a Party may disclose the terms of this Agreement to any
investors or potential investors, lenders, and other potential financing
sources, or to a Third Party in connection with a merger or acquisition or
proposed merger or acquisition or a license or proposed license of the
technology or intellectual property licensed hereunder, and to Affiliates,
attorneys, accountants, stockholders, investment bankers, advisers or other
consultants of the foregoing, in each case provided that the Person to which
such disclosure is made is obligated by written agreement to keep such
information confidential on essentially the same terms as set forth herein and
to use such Confidential Information solely to evaluate such investment,
financing, acquisition, merger or license.

                    ARTICLE 9 REPRESENTATIONS AND WARRANTIES

      9.1 Representations and Warranties of CDS. CDS represents and warrants as
of the Effective Date that:

            (a) CDS is a corporation duly organized, validly existing and in
corporate good standing under the laws of Delaware;

            (b) CDS has the legal right, authority and power to enter into this
Agreement, and to extend the rights and licenses granted to Alimera in this
Agreement;

                                      -46-


            (c) CDS has taken all necessary action to authorize the execution,
delivery and performance of this Agreement;

            (d) upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of CDS enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);

            (e) the performance of its obligations under this Agreement will not
conflict with its charter documents or result in a breach of any agreements,
contracts or other arrangements to which it is a party;

            (f) CDS is the sole and exclusive owner or the licensee of CDS
Existing Patent Rights;

            (g) to the best of CDS' knowledge, no claim has been threatened or
asserted that the practice of any patent or patent application listed in Exhibit
1.11A infringes patent rights of any Third Party;

            (h) CDS has not received any complaint, demand or notice from a
Third Party in writing challenging the validity or enforceability of any patent
listed in Exhibit 1.11A;

            (i) CDS has no present intention [*] any patent listed in Exhibit
1.11A and has not instructed its patent counsel or taken any other actions [*]
any patent listed in Exhibit 1.11A;

            (j) CDS is in compliance in all material respects with the UKRF
Licenses and the B&L Agreement; to CDS' knowledge, there is no noncompliance by
UKRF or B&L under the UKRF Licenses and the B&L Agreement, respectively, other
than noncompliance that would not adversely affect Alimera's rights hereunder;
and

            (k) neither CDS nor any of its Affiliates has initiated for CDS a
filing for protection under the bankruptcy laws, an assignment for the benefit
of creditors, appointment of a receiver or trustee over its property or any
similar undertaking.

      9.2 Representations and Warranties of Alimera. Alimera represents and
warrants as of the Effective Date that:

            (a) Alimera is a corporation duly organized, validly existing and in
corporate good standing under the laws of Delaware.

            (b) Alimera has the legal right, authority and power to enter into
this Agreement, and to extend the rights and licenses granted to CDS in this
Agreement;

            (c) Alimera has taken all necessary action to authorize the
execution, delivery and performance of this Agreement;

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                     -47-



            (d) upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of Alimera enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws,
affecting creditors' and contracting parties' rights generally and except as
enforceability maybe subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);

            (e) the performance of its obligations under this Agreement will not
conflict with Alimera's charter documents or result in a breach of any
agreements, contracts or other arrangements to which it is a party; and

            (f) to the knowledge of Alimera, Alimera is the sole and exclusive
owner of the Alimera Know-How.

      9.3 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY CDS TECHNOLOGY,
CDS KNOW-HOW, ALIMERA IMPROVEMENTS, ALIMERA KNOW-HOW, GOODS, SERVICES OR OTHER
SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY, SCOPE AND
NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

      9.4 Limited Liability. EXCEPT FOR THEIR RESPECTIVE OBLIGATIONS UNDER
ARTICLE 8 or ARTICLE 10, NEITHER CDS NOR ALIMERA WILL BE LIABLE WITH RESPECT TO
ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY PUNITIVE, EXEMPLARY,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOST PROFITS.

                              ARTICLE 10 INDEMNITY

      10.1 Cross Indemnity. Each Party (the "Indemnifying Party") agrees to
defend, indemnify and hold the other party (the "Indemnified Party"), its
Affiliates and their respective directors, officers, employees and agents and
their respective heirs and assigns harmless from all Third Party claims,
actions, losses, damages, liabilities or expenses (including, but not limited
to, reasonable attorneys' fees) (each, a "Loss") arising as a result of (a) a
breach by the Indemnifying Party of any of its representations, warranties or
obligations under this Agreement, (b) actual or asserted violations of any
applicable law or regulation by the Indemnifying Party or any of its employees,
Affiliates, sublicensees, consultants, or other agents in connection with the
research, development, manufacture, distribution, marketing, promotion, sale, or
use of Products, or the reporting requirements for Products, including, but not
limited to, any allegation or determination that a Product has been adulterated,
misbranded, mislabeled or otherwise is not in compliance with any applicable law
or regulation, or (c) except as provided in Section 7.4.4 or 10.5, bodily
injury, death, property damage or other harm or damage attributable to the
research, development, manufacture, distribution, marketing, promotion, sale or
use of any Products by the Indemnifying Party or its employees, Affiliates,
sublicensees, consultants, or other agents.

                                     -48-



      10.2 Limitation on Indemnity Obligations. A Party, its Affiliates and
their respective directors, officers, employees and agents shall not be entitled
to the indemnities set forth in Sections 10.1 to the extent the Loss for which
indemnification is sought was caused by the negligence, or by the reckless or
intentional misconduct or omission, of such Party or its directors, officers,
employees or agents.

      10.3 Procedure. If an Indemnified Party intends to claim indemnification
under Article 10, the Indemnified Party shall notify the Indemnifying Party of
any Loss in respect of which the Indemnified Party intends to claim such
indemnification, and the Indemnifying Party shall assume the defense thereof
with counsel mutually satisfactory to the Parties. The failure to deliver notice
to the Indemnifying Party within a reasonable time after the commencement of any
such action, shall relieve such Indemnifying Party of liability to the
Indemnified Party under Article 10 only to the extent that the delay adversely
affects Indemnifying Party's rights or ability to defend such claim or action,
but the failure so to deliver notice to the Indemnifying Party will not relieve
the Indemnifying Party of any liability that it may have to any Indemnified
Party otherwise than under Article 10. The Indemnified Party under Article 10
shall provide reasonable assistance to the Indemnifying Party and its legal
representatives, at the Indemnifying Party's expense, in the investigation of
any action, claim or liability covered by this indemnification. The Indemnifying
Party shall additionally be liable to pay the reasonable legal costs and
attorneys' fees incurred by the Indemnified Party in establishing its claim for
indemnity. Except as provided in the last sentence of this Section 10.3, the
indemnity agreement in this Article 10 shall not apply to amounts paid in
settlement of any Loss if such settlement is effected without the consent of the
Indemnifying Party, which consent shall not be withheld unreasonably or delayed.
Indemnifying Party shall not, without the written consent of Indemnified Party,
settle or compromise any Loss or consent to the entry of any judgment with
respect to any Loss (a) that does not release Indemnified Party from all
liability with respect to such Loss or (b) which may materially adversely affect
Indemnified Party or under which Indemnified Party would incur any obligation or
liability, other than one as to which Indemnifying Party has an indemnity
obligation hereunder. If Indemnifying Party, within ten (10) days of receiving
notice of a Loss or such shorter period as may be necessary for submitting or
filing a response, fails to assume the defense of such Loss or fails to notify
Indemnified Party that is assuming such defense, Indemnified Party shall have
the right to assume the defense, compromise or settlement of such Loss at the
risk and expense of Indemnifying Party.

      10.4 Insurance. Each Party shall maintain, and shall cause its Affiliates
and each sublicensee conducting activities under this Agreement to maintain, at
such Party's, an Affiliate's, or sublicensee's sole expense, appropriate product
liability insurance coverage in amounts reasonably determined by the Party from
time to time but at least sufficient to insure against claims which may arise
from the performance of obligations or exercise of rights granted under this
Agreement or from indemnification obligations under this Article 10, but in no
event shall a Party's insurance coverage be in an amount less than $5,000,000
per occurrence and $10,000,000 annual aggregate. The policy of insurance shall
contain a provision of non-cancellation except upon the provision of thirty (30)
days notice to the other Party. The policy of insurance with respect to any
Product that would, absent the licenses herein, infringe a Valid Claim under a
patent licensed under one or more of the UKRF Licenses shall contain an
endorsement naming UKRF, and the University of Kentucky (and its Board of
Trustees, agents, officers, and employees) as additional insureds. Each Party
shall maintain such insurance

                                     -49-



commencing on the Effective Date and for so long as it continues to research,
produce, develop, manufacture, distribute, sell or use the Products, and
thereafter for so long as each Party maintains insurance for itself covering
such manufacture or sales.

      10.5 Product Liability Claims. If either Party incurs any losses, costs,
damages (including amounts paid in settlement of claims), fees (including
reasonable attorneys' fees) or expenses arising out of any Third Party claim
relating to injuries or death resulting from the use of any Product developed or
Commercialized pursuant to this Agreement, then such losses, costs, damages,
fees or expenses that are not attributable to the gross negligence and/or
willful misconduct of a Party and are not covered by an insurance policy
("Product Liability Losses") shall be Direct Commercialization Costs. If CDS
incurs Product Liability Losses, Alimera shall reimburse CDS for [*] of the
Product Liability Losses within forty-five (45) days of receipt of a request for
reimbursement for such Product Liability Losses. If either Party incurs any
losses, costs, damages (including amounts paid in settlement of claims), fees
(including reasonable attorneys' fees) or expenses arising out of any Third
Party claim relating to injuries or death resulting from the use of any Product
developed or Commercialized pursuant to this Agreement, then to the extent such
losses, costs, damages, fees or expenses are attributable to the gross
negligence and/or willful misconduct of a Party, such Party shall bear [*] of
such losses, damages, fees or expenses.

                        ARTICLE 11 TERM AND TERMINATION

      11.1 Term. If not earlier terminated as provided in this Article 11, the
term of this Agreement (the "Term") shall commence on the Effective Date and
expire upon the later of (i) ten (10) years after the Effective Date, or (ii)
the expiration or abandonment of the last Valid Claim included in the CDS Patent
Rights, or (iii) as long as Alimera, any Affiliate of Alimera or any sublicensee
is selling a Product in any part of the Territory.

      11.2 Termination for Default by Either Party. Either Party may terminate
this Agreement (i) upon the occurrence of a breach of a material term of this
Agreement (other than a material breach described in clause (ii) below or in
Section 11.3, 11.4 or 11.5) if the breaching Party fails to remedy such breach
within thirty (30) days after notice thereof by the non-breaching Party or, with
respect to a breach (other than a failure to make a payment) that cannot be
cured within such period, then such longer period (up to 90 days) as may be
reasonably necessary, using Commercially Reasonable Efforts, to cure the breach,
or (ii) if the other Party files for protection under the bankruptcy laws, makes
an assignment for the benefit of creditors, appoints or suffers appointment of a
receiver or trustee over its property, files a petition under any bankruptcy or
insolvency act or has any such petition filed against it and such proceeding
remains undismissed or unstayed for a period of more than sixty days. Upon
termination, the non-breaching Party shall, subject to the dispute resolution
procedures set forth in Section 12.7, have the right, in its sole discretion, to
seek any other rights or remedies available to it at law or in equity.

      11.3 Termination for Non-Payment of Development Payment. Either Party (the
"Terminating Party") may terminate this Agreement upon the other Party's failure
to make a timely payment of all or a portion of any of its Development Payments,
or if the other Party has outstanding Compounded Development Payments and/or
Compounded Disputed Costs under

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                     -50-


 Section 6.3 (the "Non-Terminating Party"); provided, however, that the
Terminating Party gives notice of termination to the Non-Terminating Party, and
the Non-Terminating Party fails to pay all such payments under this Agreement
within thirty (30) days of receiving such notice (provided that each Party has a
one-time right to use sixty (60) days to cure hereunder). The Terminating
Party's sole and exclusive remedy for the Non-Terminating Party's failure to
make any of its Development Payments, Compounded Development Payments and/or
Compounded Disputed Costs, shall be the following: (i) the Terminating Party may
terminate this Agreement under this Section 11.3, (ii) the amounts of Compounded
Development Payments plus Compounded Disputed Costs owed by each Party shall be
determined, as of the date of termination (provided that solely for purposes of
this Section 11.3, the amounts of Compounded Development Payments and Compounded
Disputed Costs shall be calculated as set forth in Sections 6.3.2 and 6.3.3
except that the words [*] shall be substituted in place of [*] in Sections 6.3.2
and 6.3.3) and the Party with the larger total amount of such costs shall pay
the other Party the difference between the paying Party's total amount of such
costs and the other Party's total amount of such costs (the "Termination
Amount"), provided that, from and after the date of termination, interest on any
unpaid Termination Amount shall accrue at [*] compounded annually, until the
full Termination Amount plus accrued interest has been paid; further provided
that the accrual of such interest or payment shall not preclude the Terminating
Party from seeking full payment of amounts owed under this Section 11.3, and
(iii) if (A) CDS is the Terminating Party, (B) Alimera has paid more than [*]
pursuant to Sections 6.1-6.3, and (C) CDS terminates this Agreement pursuant to
this Section 11.3 and thereafter directly or through an Affiliate or a Third
Party Commercializes any Product that was under development pursuant to the
Development Plan at the time of termination, then (x) CDS shall, after the CDS
Profitability Date, on a quarterly basis, pay Alimera [*] of CDS Net Income
realized by CDS that is attributable to such Product, until the aggregate amount
of such payments equals [*] of the total amount of Development Payments and
Determined Disputed Costs paid by Alimera pursuant to Sections 6.1-6.3
(provided, however, that such total amount of Development Payments and
Determined Disputed Costs paid by Alimera shall exclude (1) any amount Alimera
paid to CDS upon termination pursuant to this Section 11.3, and (2) any amount
Alimera paid to CDS solely due to the [*] multiplier and the [*] annual
compounding pursuant to Sections 6.3.2 and 6.3.3); further provided that in the
event that there are CDS Net Losses in any calendar quarter after the CDS
Profitability Date, any payment to Alimera shall be offset by such CDS Net
Losses, and (y) Alimera shall not, for as long as CDS makes, or is obligated to
make, payment to Alimera pursuant to the foregoing, Develop or Commercialize, or
license or otherwise assist an Affiliate or a Third Party to Develop or
Commercialize, any product that is Approved or designed to be Approved (1) to
treat DME or (2) to deliver a corticosteroid by injection, implantation or other
direct delivery method to the posterior portion of the eye. Solely for purposes
of the preceding sentence, the term "Develop" shall mean performance of human
clinical trials for a product.

      11.4 Termination for Failure to Approve an Initial Development Plan.
Either Party may terminate this Agreement in the event that an initial
Development Plan is not approved within 30 days after the Effective Date. If
either Party chooses to terminate this Agreement under this Section 11.4, such
termination shall be the sole and exclusive remedy for each Party for failure to
approve an initial Development Plan, provided that CDS shall repay to Alimera
[*] in accordance with the terms of the Secured Promissory Notes from CDS to
Alimera dated October 19, 2004, November 18, 2004 and December 22, 2004.

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                     -51-



      11.5 Termination for Abandonment. For purposes of this Section 11.5,
"Abandonment" by a Party or to "Abandon" shall mean either (i) delivery of a
written election by a Party to abandon this Agreement with respect to a Product
or (ii) the event in which the aggregate amount of a Party's overdue Development
Payments and/or overdue Determined Disputed Costs exceeds [*] with respect to
such Product in the Territory, and the Non-Paying Party fails to pay all
Compounded Development Payments and Compounded Disputed Costs then owing related
to such Product in the Territory under this Agreement within thirty (30) days of
receiving written request of payment of such outstanding Compounded Development
Payments and Compounded Disputed Costs from the other Party. If a Party Abandons
a Product pursuant to this Section 11.5, then the other Party's sole remedy
shall be termination with respect to such Product pursuant to this Section 11.5.
Solely for purposes of this Section 11.5 (including 11.5.1 and 11.5.2), the term
"Product" shall have the meaning set forth in Section 1.77 except that in (E)
and (4) the words "in a particular country" shall be omitted, in the next to
last sentence the words "in each country" shall be omitted, and in the last
sentence example (ii) shall be omitted.

      11.5.1. Effect of Abandonment by CDS. In the event that CDS Abandons a
Product, Alimera shall terminate this Agreement with respect to that Product in
the Territory for Abandonment of that Product by CDS under this Section 11.5.
Upon such termination, Alimera shall choose one of the following two options:
(1) the Parties will enter into a license agreement under which CDS grants
Alimera an exclusive license under the CDS Technology to make, have made, use,
offer to sell, sell, and import such Product in the Collaboration Field, and, in
consideration of the grant of such license, CDS shall receive a royalty of [*]
of Net Sales of such Product in the Territory (after recovery by Alimera of all
Development Payments and Determined Disputed Costs owed by CDS to Alimera
pursuant to Sections 6.3.2 and 6.3.3 as pre-payments of royalty, without giving
effect to the [*] multiplier or the [*] annual compounding otherwise provided
for in Sections 6.3.2 and 6.3.3) and the license shall include those other terms
and conditions set forth on Exhibit 11.5.1, or (2) CDS shall pay to Alimera any
Compounded Development Payments or Compounded Disputed Costs that CDS owes
Alimera as of the date of termination, after deducting the amounts of any
outstanding Compounded Development and/or Compounded Disputed Costs that Alimera
owes CDS as of that date (the "CDS Abandonment Amount") (provided that solely
for purposes of this Section 11.5.1 and Section 11.5.2, the amounts of
Compounded Development Payments and Compounded Disputed Costs shall be
calculated as set forth in Sections 6.3.2 and 6.3.3 except that the words [*]
shall be substituted in place of [*] in Sections 6.3.2 and 6.3.3) further
provided that, from and after the date of termination, interest on any unpaid
CDS Abandonment Amount shall accrue at [*] (rather than at [*]), compounded
annually, until such costs have been paid. In the event that the Parties enter
into a license agreement pursuant to this Section 11.5.1(a), upon execution of
such license agreement and at Alimera's request: (a) any and all Confidential
Information and materials solely related to such Product provided by Alimera
pursuant to this Agreement shall be promptly returned by CDS to Alimera, (b) CDS
shall promptly deliver to Alimera copies of all Clinical IP owned or Controlled
by CDS and necessary or useful to the development or Commercialization of such
Product and CDS shall not use any such Clinical IP thereafter for any regulatory
applications or filings for such Product, provided that the foregoing shall not
prevent CDS from using such Clinical IP for other Products or from performing
preclinical and clinical studies or other research of any nature, including
research that reproduces data contained in the Clinical IP, or from using the
results of

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.
                                     -52-



such research in regulatory applications or filings or for any other purpose,
(c) any regulatory filings for such Product which have been submitted in CDS'
name which have not been transferred to Alimera, subject to FDA approval, will
be transferred to Alimera's name, and (d) CDS will assign to Alimera all of its
right, title and interest in any trademark under which CDS shall solely have
marketed such Product or registered for use solely with such Product together
with the goodwill associated therewith. Termination of this Agreement with
respect to such Product and the options described this Section 11.5.1 with
respect to such Product shall be Alimera's sole and exclusive remedy for
Abandonment of such Product by CDS. In the event that, (x) Alimera chooses
option (2) upon termination with respect to a Product and CDS pays to Alimera
the amounts described therein, and (y) at the time of such termination, no
Product designed for treating DME is being developed pursuant to a Development
Plan or being Commercialized pursuant to the Commercialization Budget, then CDS
shall no longer be bound by Section 5.1.2(1), (2), (3) or (4) with respect to
that Product.

      11.5.2. Effect of Abandonment by Alimera. In the event that CDS terminates
this Agreement with respect to a Product in the Territory for Abandonment of
that Product by Alimera under this Section 11.5, the rights and licenses granted
to Alimera pursuant to Article 5 shall terminate with respect to that Product in
the Territory and the Parties shall negotiate in good faith a license agreement
under which Alimera shall grant to CDS a non-exclusive license to any Alimera
Know-How related to such Product. After termination with respect to such Product
as set forth in this Section 11.5 and at CDS' request: (a) any and all
Confidential Information and materials solely related to such Product provided
by CDS pursuant to this Agreement shall be promptly returned by Alimera to CDS,
(b) Alimera shall promptly deliver to CDS copies of all Clinical IP owned or
Controlled by Alimera and necessary or useful to the development or
Commercialization of such Product and Alimera shall not use any such Clinical IP
thereafter for any regulatory applications or filings for such Product, provided
that the foregoing shall not prevent Alimera from using such Clinical IP for
other Products or from performing preclinical and clinical studies or other
research of any nature, including research that reproduces data contained in the
Clinical IP, or from using the results of such research in regulatory
applications or filings or for any other purpose, (c) if Alimera has applied for
or obtained any Approvals in any country for the Product, then Alimera shall, to
the extent legally permissible, take all additional action reasonably necessary
to assign all of its right, title and interest in and transfer possession and
control to CDS of such applications or Approvals, (d) any regulatory filings for
the Product which have been submitted in Alimera's name, subject to FDA
approval, will be transferred to CDS' name, (e) Alimera will assign to CDS all
of its right, title and interest in any trademark under which Alimera shall
solely have marketed the Product or registered for use solely with such Product
together with the goodwill associated therewith, and (f) CDS shall no longer be
bound by Section 5.1.2(1), (2), (3) or (4) with respect to the Product Abandoned
by Alimera. Termination of this Agreement with respect to the Product shall be
CDS' sole and exclusive remedy for Abandonment of that product by Alimera,
except that Alimera shall promptly pay to CDS all Compounded Development
Payments and/or Compounded Disputed Costs that Alimera owes CDS as of the date
of termination, after deducting the amounts of any outstanding Compounded
Development and/or Compounded Disputed Costs that CDS owes Alimera as of that
date (the "Alimera Abandonment Amount"), provided that, from and after the date
of termination, interest on any unpaid Alimera Abandonment Amount shall accrue
at [*] (rather than at [*]), compounded annually, until such costs
have been paid; further

                                     -53-

[*]- Indicates material that has been omitted and for which confidential
treatment has been requested. All such information has been filed with the
Commission pursuant to Rule 24b-2 promulgated under the Securities and Exchange
Act of 1934, as amended.



provided that the accrual of such interest or payment shall not preclude CDS
from seeking full payment of amounts owed under this Section 11.5.2.

            11.6 Effect of Expiration or Termination of the Agreement. Except as
expressly provided herein, the expiration or termination of this Agreement shall
not relieve the Parties of any obligation accruing prior to such expiration or
termination and all rights and licenses granted under this Agreement shall be
terminated. In the event of termination of this Agreement pursuant to Section
11.2, (a) any and all Confidential Information and materials provided by the
non-breaching Party to the breaching Party pursuant to this Agreement shall be
promptly returned by the breaching Party to the non-breaching Party, and (b) the
breaching Party shall not use any Clinical IP arising from the activities
conducted under this Agreement at any time thereafter; provided that the
foregoing shall not prevent the breaching Party from performing preclinical and
clinical studies or other research of any nature, including research that
reproduces data contained in the Clinical IP, or from using the results of such
research in regulatory applications or filings or for any other purpose.

            11.7 Survival of Provisions Upon Expiration or Termination. The
provisions of Articles 8, 10 and 11, and Sections 5.2 (in the event of
termination of this Agreement by CDS under Section 11.5.2), 5.4, 5.5, 5.6, 5.9,
9.3, 9.4, 11.5.1 (in the event of termination of this Agreement by Alimera under
Section 11.5), 11.5.2 (in the event of termination of this Agreement by CDS
under Section 11.5), 11.6, 12.5, 12.6 and 12.7 shall survive the expiration or
termination of this Agreement for any reason.

                            ARTICLE 12 MISCELLANEOUS

      12.1 Interpretation.

            (a) If an ambiguity or a question of intent or interpretation arises
with respect to this Agreement, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any provisions
of this Agreement.

            (b) Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "but not
limited to." The word "will" shall be construed to have the same meaning and
effect as the word "shall." Unless the context requires otherwise, (A) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or therein), (B) any reference to any laws herein shall be construed as
referring to such laws as from time to time enacted, repealed or amended, (C)
any reference herein to any Person shall be construed to include the Person's
permitted successors and assigns, (D) the words "herein", "hereof and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof unless
specifically stated, (E) any reference herein to the words "mutually agree" or
"mutual written agreement" shall not impose any obligation on either Party to
agree to any terms relating thereto or to engage in discussions relating to such
terms except as

                                     -54-



such Party may determine in such Party's sole discretion and
unless otherwise stated; and (F) all references herein to Articles, Sections or
Schedules shall be construed to refer to Articles, Sections and Schedules of
this Agreement unless otherwise noted.

      12.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either Party without the consent of the other Party; provided,
however, that either Party may, without such consent, assign its rights and
obligations under this Agreement in connection with a Change of Control of such
Party; provided, however, that such Party's rights and obligations under this
Agreement shall be assumed by its successor in interest in any such transaction.
Any purported assignment in violation of the preceding sentence shall be void.
Any permitted assignee shall assume all obligations of its assignor under this
Agreement.

      12.3 Severability. Each Party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the Parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement
without the invalid provisions.

      12.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid (where
applicable), addressed to such other Party at its address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor and shall be effective upon receipt by the addressee.

            If to CDS:           Control Delivery Systems, Inc.
                                 400 Pleasant Street
                                 Watertown, MA 02472
                                 Attention:  President
                                 Fax:  (617)-926-5050

            With a copy to:      Control Delivery Systems, Inc.
                                 400 Pleasant Street
                                 Watertown, MA 02472
                                 Attention:  General Counsel
                                 Fax: (617) 926-5050

            With a copy to:      Ropes & Gray LLP
                                 One International Place
                                 Boston, MA  02110
                                 Attention: Susan Galli, Esq.

                                     -55-



                                 Fax: (617) 951-7050

            If to Alimera:       Alimera Sciences, Inc.
                                 6120 Windward Parkway, Suite 290
                                 Alpharetta, GA 30005
                                 Attention: President
                                 Fax: (678) 990-5744

            With a copy to:      Hutchison & Mason PLLC
                                 3110 Edwards Mill Road, Suite 100
                                 Raleigh, NC 26712
                                 Attention:  William N. Wofford
                                 Fax: (919) 829-9696

      12.5 Governing Law and Venue. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York,
without regard to any choice of law principle that would dictate the application
of the laws of another jurisdiction. Any suit brought by Alimera arising under
or relating to this Agreement shall be brought in a court of competent
jurisdiction in the Commonwealth of Massachusetts, and Alimera hereby consents
to the jurisdiction of the state and federal courts sitting in the Commonwealth
of Massachusetts. Any suit brought by CDS arising under or relating to this
Agreement shall be brought in a court of competent jurisdiction in the state of
Georgia, and CDS hereby consents to the jurisdiction of the state and federal
courts sitting in the state of Georgia. Each Party agrees not to raise any
objection at any time to the laying or maintaining of the venue of any such
action, suit or proceeding in any of the specified courts, irrevocably waives
any claim that such action, suit or other proceeding has been brought in any
inconvenient forum and further irrevocably waives the right to object, with
respect to such action, suit or other proceeding, that such court does not have
any jurisdiction over such Party.

      12.6 Compliance with Applicable Laws. The Parties shall use their best
efforts to comply with all provisions of any applicable laws, regulations, rules
and orders relating to the license granted and to the testing, production,
transportation, export, packaging, labeling, sale or use of Products. The
Parties shall use their best efforts to obtain written assurances regarding
export and re-export of technical data (including Products made by use of
technical data) as may be required by the Office of Export Administration
Regulations. Notwithstanding any other provision of this Agreement, each Party
(and each Affiliate and agent of the Party) may disclose the tax treatment and
tax structure of the transaction and all materials of any kind (including, but
not limited to, opinions and other tax analyses) that are provided to the Party
relating to such tax treatment and tax structure as contemplated by section
1.6011-4(b)(3)(iii) of the Code of Federal Regulations.

      12.7 Dispute Resolution. Any disputes, other than disputes regarding the
construction, validity or enforcement of patents (which disputes shall be
resolved by Section 12.5), arising between the Parties relating to, arising out
of or in any way connected with this Agreement or any term or condition hereof,
or the performance by either Party of its obligations hereunder, whether before
or after termination of this Agreement, shall be resolved as follows:

                                     -56-



            12.7.1. Senior Management. If the dispute cannot be resolved by the
Primary Contact Persons in accordance with Section 3.4 hereof or then in
accordance with Section 2.4, the Primary Contact Persons shall promptly notify
the chief executive officer of each Party (or their designee), who shall meet in
person at a mutually acceptable time and location or by means of telephone or
video conference within sixty (60) days of such notice and attempt to negotiate
a settlement.

            12.7.2. Arbitration. If the chief executive officers are not able to
resolve the dispute within thirty (30) days of their first meeting or within
such extended period as they agree upon, either Party may submit the matter to
binding arbitration in accordance with this Section 12.7.2. Except as specified
below, the arbitration shall be conducted in accordance with the rules of, and
under the auspices of, the American Arbitration Association (the "AAA"). The
arbitration will be conducted by a single arbitrator with relevant technical
expertise who is jointly selected by the Parties or, if the Parties cannot
mutually agree, is selected by the AAA administrator and is not employed by and
does not have a material financial relationship with, a Party or any of its
Affiliates. If Alimera is the claimant, the location of the arbitration shall be
in the Boston, Massachusetts and if CDS is the claimant, the location of the
arbitration shall be in Atlanta, Georgia. This Agreement shall remain in effect
pending completion of the proceedings brought under this Section 12.7.2. Within
ten (10) Business Days after the arbitrator is selected, each Party shall submit
to the arbitrator that Party's proposed resolution of the dispute and
justification therefor. All arbitration proceedings must be completed within 30
days after the arbitration is convened. The Parties hereby agree that the
arbitrator has authority to issue rulings and orders regarding all procedural
and evidentiary matters that the arbitrator deems reasonable and necessary with
or without petition therefor by the Parties as well as the final ruling and
judgment. Rulings shall be issued by written order summarizing the arbitration
proceedings. Any judgment or award by the arbitrator in any dispute shall have
the same force and effect as the final judgment of a court of competent
jurisdiction. Nothing in this arbitration clause shall prevent either Party from
seeking a pre-award attachment of assets or preliminary relief to enforce its
rights in intellectual property or confidentiality obligations under this
Agreement, or to enjoin any event that might cause irreparable injury, in a
court of competent jurisdiction prior to an award on the merits by the
arbitrator.

      12.8 Use of Name/Publicity. Except as otherwise expressly permitted under
this Agreement, neither Party shall (i) use the name of the other in any press
releases, public announcements or other publicity or advertising materials, or
(ii) disclose the existence or terms of this Agreement, in each case, without
written approval of the other Party. The Parties agree that a public
announcement of the execution of this Agreement shall be made in the form of a
mutually acceptable press release within ten Business Days after the Effective
Date. Thereafter, each Party, with the prior written consent from the other
Party, shall have the right to publicly announce the achievement of any event
relating to Product deemed newsworthy by such Party and to publish results of
clinical trials and other publications relating to the Products, provided that
no such publications by one Party shall include Confidential Information of the
other Party.

      12.9 Entire Agreement. This Agreement, together with the Exhibits hereto,
contains the entire understanding of the Parties with respect to the subject
matter hereof. All express or implied agreements and understandings, either oral
or written, heretofore made are expressly merged in and made a part of this
Agreement. In the event of any conflict or inconsistency

                                     -57-



between any provision of any Exhibits hereto and any provision of this
Agreement, the provisions of this Agreement shall prevail. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both Parties hereto. The Confidentiality Agreement between Alimera and CDS
with an effective date of August 17, 2004 remains effective until the Effective
Date of this Agreement, whereupon the provisions of such agreement shall survive
to the extent set forth in that agreement.

      12.10 Headings. The captions to the several Articles and Sections hereof
and Exhibits hereto are not a part of this Agreement, but are merely guides or
labels to assist in locating and reading the several Articles and Sections
hereof.

      12.11 Independent Contractors. It is expressly agreed that CDS and Alimera
shall be independent contractors and that the relationship between the two
Parties shall not constitute a partnership, joint venture or agency. Neither CDS
nor Alimera shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the other Party to do so.

      12.12 Waiver. The waiver by either Party hereto of any right hereunder or
the failure to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.

      12.13 Counterparts. This Agreement may be executed by facsimile and/or in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

[signature page to follow]

                                     -58-



IN WITNESS WHEREOF, the Parties have executed this Collaboration Agreement as of
the date first set forth above.

CONTROL DELIVERY SYSTEMS, INC.            ALIMERA SCIENCE, INC.

By:    /s/ Paul Ashton                    By:    /s/ Dan Myers
       ------------------------------            -------------------------------

Name:  Paul Ashton                        Name:  Dan Myers
       ------------------------------            -------------------------------

Title: CEO                                Title: President, CEO
       ------------------------------            -------------------------------


                                     -59-


                                    EXHIBITS

                 
EXHIBIT 1.11A:      CDS EXISTING PATENT RIGHTS

EXHIBIT 1.11B:      EXCLUDED CDS PATENTS AND PATENT APPLICATIONS

EXHIBIT 1.15:       CDS PATENT COST-SHARING COUNTRIES

EXHIBIT 1.42:       EXCLUDED PRODUCT SPECIFICATIONS/DRAWINGS

EXHIBIT 1.87:       UKRF LICENSES

EXHIBIT 3.2:        INITIAL DEVELOPMENT PLAN

EXHIBIT 5.8.3:      TERMS FOR OPTION LICENSE AGREEMENT

EXHIBIT 11.5.1      TERMS FOR THE [*] LICENSE AGREEMENT


[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -60-


                                  EXHIBIT 1.11A

                           CDS EXISTING PATENT RIGHTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -61-

                                 EXHIBIT 1.11B
                           EXCLUDED CDS PATENT RIGHTS

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                      -69-


                                  EXHIBIT 1.42


                    EXCLUDED PRODUCT SPECIFICATIONS/DRAWINGS

                                    FIGURE 1

                                      [*]


                                    FIGURE 2

                                      [*]



[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                                  EXHIBIT 1.87

                                  UKRF LICENSES


   
A.    License Agreement dated October 20, 1991, as amended August 10, 1993,
      relating to U.S. Patent No. 5,378,475 (Application No. 07/658,695)

B.    License Agreement dated September 9, 1997 relating to U.S. Patent Nos.
      5,773,109 and 6,001,386 (Application No. 08/534,854)




                                   EXHIBIT 3.2

                            INITIAL DEVELOPMENT PLAN

[*]

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.



                                  EXHIBIT 5.8.3

                       TERMS FOR OPTION LICENSE AGREEMENT


                   
                      Any terms not defined herein shall have those definitions set forth in the
                      Collaboration Agreement

LICENSE               Alimera shall have a non-exclusive license under the CDS Technology (as in
                      existence on the Option License Effective Date (as defined below), with the right
                      to sublicense, to make, have made, use, import, sell, and offer for sale the Option
                      Product in the Collaboration Field in the Territory.  During the term of this
                      option license, CDS shall not (a) grant a license to any Affiliate or Third Party
                      under CDS' interest in the CDS Technology to make, have made, use, offer to sell,
                      sell, or import such Option Product in the Collaboration Field in the Territory,
                      and (b) itself use the CDS Technology to make, have made, use, offer to sell, sell,
                      or import such Option Product in the Collaboration Field in the Territory.

                      Alimera shall have an exclusive royalty-free license to use the "MEDIDUR"
                      mark Controlled by CDS on or in connection with the Option Product marketed,
                      distributed or sold pursuant to this license.

ROYALTIES             During the option license term, Alimera shall pay to CDS on a quarterly basis
                      a royalty of [*] of Net Sales by Alimera or its Affiliates.

DILIGENCE             As provided in Section 4.3 of the Collaboration Agreement.

SUBLICENSES           Alimera shall have full rights to sublicense without
                      consent, provided that such sublicense shall be consistent
                      with the term of the option license. [*]

OWNERSHIP OF AND      As provided in Section 5.4 of the Collaboration Agreement.
RIGHTS TO
INVENTIONS

LIMITATION ON USE,    As provided in Section 5.5, 5.6 and 5.7 of the Collaboration Agreement.
RESERVATION OF
RIGHTS BY CDS, AND
NO GRANT OF OTHER
TECHNOLOGY OR
PATENT RIGHTS



[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.



                   
PATENT                As provided for in Article 7 of the Collaboration Agreement. Neither Party is
MAINTENANCE AND       obligated to pay for patent costs or enforcement costs under this license as
ENFORCEMENT           long as either the Collaboration Agreement or the [*] license pursuant to Section
                      11.5.1 of the Collaboration Agreement is in effect. If neither the Collaboration
                      Agreement nor the [*] license pursuant to Section 11.5.1 of the Collaboration
                      Agreement is in effect, then CDS shall have the primary control in filing, prosecution,
                      maintenance and enforcement of CDS Patent Rights. The Parties [*] patent
                      costs. Any amounts recovered as a result of any infringement action taken by the
                      Parties hereunder shall be first applied, on a pro-rata basis, to reimburse each
                      Party for its out-of-pocket expenses incurred in connection with such action and
                      the remainder, if any, shall be divided appropriately [*].

REGULATORY            All regulatory filings and/or Approvals related to the Option Product that are
                      subject of this license will be immediately transferred to Alimera and Alimera shall
                      own all such filings and Approvals.

PATENT MARKING        As provided in Section 7.7 of the Collaboration Agreement.

INDEMNITY             As provided for in Article 10, except that CDS shall not be responsible for product
                      liability claims as described in Section 10.5 arising based on acts or omissions
                      after the Option License Effective Date except to the extent the claims are
                      attributable to CDS' gross negligence or willful misconduct.

REPORTS               Alimera will provide to CDS a quarterly written account of the Net Sales of Option
                      Products together with any relevant sublicense revenues and royalty payments.

TERM; TERMINATION     Commences upon Alimera's exercise of its rights pursuant to Section
                      5.8.3 under the Collaboration Agreement (the "Option License Effective Date") and
                      expires upon the expiration or abandonment of the last Valid Claim included in the
                      relevant CDS Patent Rights.

                      Alimera may terminate the license at any time by giving CDS ninety (90) days written
                      notice. CDS may terminate the license if Alimera: (a) fails to make any payment due
                      under the license, unless Alimera makes such payments within sixty (60) days after
                      receipt of written notice from CDS, or (b) commits a material breach of any other
                      provision of the license, and such breach is not cured within ninety (90) days after
                      receipt of written notice from CDS.


[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                   
REPRESENTATIONS       As provided in Article 9 of the Collaboration Agreement.
AND WARRANTIES

CONFIDENTIALITY       As provided in Article 8 and Sections 12.1-12.8 and 12.10-12.13 of
AND MISCELLANEOUS     the Collaboration Agreement.




                                 EXHIBIT 11.5.1

                       TERMS FOR THE [*] LICENSE AGREEMENT


                   
                      Any terms not defined herein shall have those definitions set forth in the
                      Collaboration Agreement

LICENSE               Alimera shall have a non-exclusive license under the CDS Technology (as in
                      existence on the License Effective Date (as defined below), with the right to
                      sublicense, to make, have made, use, import, sell, and offer for sale the Product
                      that CDS has abandoned pursuant to Section 11.5.1 of the Collaboration Agreement in
                      the Collaboration Field in the Territory.  During the term of the license, CDS
                      shall not (a) grant a license to any Affiliate or Third Party under CDS' interest
                      in the CDS Technology to make, have made, use, offer to sell, sell, or import such
                      Product in the Collaboration Field in the Territory, and (b) itself use the CDS
                      Technology to make, have made, use, offer to sell, sell, or import such Product in
                      the Collaboration Field in the Territory.

                      Alimera shall have an exclusive royalty-free license to use the "MEDIDUR"
                      mark Controlled by CDS on or in connection with any Products marketed, distributed or
                      sold pursuant to this license.

ROYALTIES             During the license term, Alimera shall pay to CDS on a quarterly basis a royalty of
                      [*] of Net Sales by Alimera or its Affiliates.

DILIGENCE             As provided in Section 4.3 of the Collaboration Agreement.

SUBLICENSES           and subcontracts Alimera shall have full rights to sublicense without consent,
                      provided that such sublicense shall be consistent with the term of this license.
                      [*]

CLINICAL IP/KNOW-     CDS shall have transferred, or shall transfer, to Alimera copies of all
HOW                   pre-clinical and clinical data that (1) relate to the Product that is the subject
                      of this license, and (2) are owned or Controlled by CDS as of the License Effective
                      Date.  Alimera shall have the exclusive right to use such preclinical and clinical
                      data to make, have made, use, import, sell, and offer for sale such Product in the
                      Field in the Territory.

OWNERSHIP OF AND      As provided in Section 5.4 of the Collaboration Agreement.
RIGHTS TO
INVENTIONS

PATENT                As provided for in Article 7 of the Collaboration Agreement.  Neither Party is
MAINTENANCE AND       obligated to pay for patent costs or enforcement costs under



[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


                   
ENFORCEMENT           this license as long as the Collaboration Agreement is in effect.  Thereafter, CDS shall have the
                      primary control in filing, prosecution, maintenance and enforcement of CDS Patent
                      Rights.  The Parties shall [*] patent costs.  Any amounts recovered as a
                      result of any infringement action taken by the Parties hereunder shall be first
                      applied, on a pro-rata basis, to reimburse each Party for its out-of-pocket
                      expenses incurred in connection with such action and the remainder, if any, shall
                      be divided appropriately between the Parties [*].

PATENT MARKING        As provided in Section 7.7 of the Collaboration Agreement.

REGULATORY            Subject to applicable legal and regulatory requirements, all regulatory filings and/or
                      Approvals related to the Product that is the subject of this license will be
                      promptly transferred to Alimera and Alimera shall own all such filings and Approvals.

INDEMNITY             As provided for in Article 10, except that CDS shall not be responsible for product
                      liability claims as described in Section 10.5 arising based on acts or omissions
                      after the License Effective Date except to the extent the claims are attributable to
                      CDS' gross negligence or willful misconduct.

REPORTS               Alimera will provide to CDS a quarterly written account of the Net Sales of the
                      Products, together with any relevant sublicense revenues and royalty payments.

TERM; TERMINATION     Commences upon Alimera's exercise of its rights pursuant to Section
                      11.5.1 under the Collaboration Agreement (the "License Effective Date") and expires
                      upon the expiration or abandonment of the last Valid Claim included in the relevant
                      CDS Patent Rights.

                      Alimera may terminate the license at any time by giving CDS ninety (90) days written
                      notice. CDS may terminate the license if Alimera: (a) fails to make any payment due
                      under the license, unless Alimera makes such payments within sixty (60) days after
                      receipt of written notice from CDS, or (b) commits a material breach of any other
                      provision of the license, and such breach is not cured within ninety (90) days after
                      receipt of written notice from CDS.

REPRESENTATIONS       As provided in Article 9 of the Collaboration Agreement.
AND WARRANTIES

CONFIDENTIALITY       As provided in Article 8 and Sections 12.1-12.8 and 12.10-12.13 of
AND                   the Collaboration Agreement.
MISCELLANEOUS


[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.



                               AMENDMENT NO. 1 TO

                             COLLABORATION AGREEMENT

                                 BY AND BETWEEN

                         CONTROL DELIVERY SYSTEMS, INC.

                                       AND

                             ALIMERA SCIENCES, INC.

This Amendment No. 1 to the Collaboration Agreement by and between Control
Delivery Systems, Inc. and Alimera Sciences, Inc. dated as of February 11, 2005
(the "Agreement") is made as of February 23, 2005, and modifies certain terms of
the Agreement.

The undersigned Parties hereby agree as follows:

      1.    The fourth sentence of Section 3.2.4 (a) (i) of the Agreement is
            amended to read as follows:

                  As soon as practicable, CDS shall submit to the FDA a letter
                  in form and substance satisfactory to both Parties authorizing
                  a person designated by Alimera and reasonably acceptable to
                  CDS (initially [*]) to communicate directly with
                  the FDA regarding the CDS IND.

      2.    Section 6.2 of the Agreement is amended to read as follows:

       6.2 Milestone Payments. Alimera shall make an additional payment of
$750,000 to CDS ("Milestone Payment"), which shall be  disbursed as follows:

            (a)   [*] upon [*]

            (b)   [*] upon [*]

            (c)   [*] when [*]

            (d)   [*] upon [*] and

            (e)   [*] and any unpaid amounts from (a) through (d) above
                  upon the [*]

      3.    Except as otherwise set forth in this Amendment No. 1, the terms of
the Agreement shall remain in full force and effect.

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.


IN WITNESS WHEREOF, the parties have caused this instrument to be executed by
their duly authorized representatives.

CONTROL DELIVERY SYSTEMS, INC.              ALIMERA SCIENCES, INC.

By: /s/ Paul Ashton                         By: /s/ Dan Myers
   ----------------------------                -----------------------------
Name: Paul Ashton                           Name: Dan Myers
     --------------------------                  ---------------------------
Title: Chief Executive Officer              Title: President, CEO
      -------------------------                   --------------------------




                               AMENDMENT NO. 2 TO

                             COLLABORATION AGREEMENT

                                 BY AND BETWEEN

                         CONTROL DELIVERY SYSTEMS, INC.

                                       AND

                             ALIMERA SCIENCES, INC.

This Amendment No. 2 to the Collaboration Agreement by and between Control
Delivery Systems, Inc. and Alimera Sciences, Inc. dated as of February 11, 2005
and amended on February 23, 2005 (the "Agreement") is made as of May 11, 2005,
and modifies certain terms of the Agreement.

The undersigned Parties hereby agree as follows:

      1. Section 3.2.3 of the Agreement is hereby deleted in its entirety and
the following is substituted in place thereof:

            3.2.3. Allocation of Responsibility for Development Activities. The
Parties acknowledge and agree that each Development Plan shall allocate primary
responsibility for the various activities (and any related or ancillary
activities) listed below to be performed by the responsible Party as follows:



                  Activity                                                             Responsible Party
- ------------------------------------------------------------------------               -----------------
                                                                                    
A.      Preclinical research and development, including Product
        design,formulation, preclinical safety studies and in                          CDS
        vivo pharmacology studies

B.      Technology transfer as described in Section 3.11                               CDS

C.      Phase I, Phase I/II, Phase II and Phase III Clinical Trials, as
        needed to procure data necessary for the acceptance of filing of
        an NDA                                                                         Alimera

D.      Preparation, filing and maintenance of regulatory filings                      Alimera

E.      Manufacturing for Clinical Supply Requirements                                 CDS

F.      Filing, prosecution and maintenance of CDS Patent Rights
        (subject to Alimera's rights in Article 7)                                     CDS


For clarification, commercial manufacturing is Commercialization for which
Alimera has primary responsibility as set forth in greater detail in Article 4.



      2. Section 3.2.4 (a) of the Agreement is hereby deleted in its entirety
and the following is substituted in place thereof:

            3.2.4 Regulatory Approvals.

            (a) Regulatory Filings. Unless otherwise agreed by the Parties,
Alimera shall be responsible for all U.S. and non-U.S. regulatory matters,
including filing an IND and NDA for the first Product, provided that no
regulatory filings by Alimera shall include any Pre-Existing Clinical IP.
Alimera shall be responsible for obtaining Approvals and for subsequent
maintenance of Approvals. For all regulatory filings made in the name of
Alimera, Alimera shall have the primary authority and responsibility, with input
from CDS, for submitting supplements, communications, annual reports, adverse
event reports, manufacturing changes, supplier designations and other related
filings, and for communicating with FDA. The Party responsible for submitting
regulatory filings (the "Regulatory Submission Party") shall provide the other
Party (the "Regulatory Non-Submission Party") with copies of all substantive
submissions to (which may be in draft form), and all correspondences from, the
FDA or other regulatory authorities. The Regulatory Non-Submission Party may
provide comments regarding such submission prior to such planned submission, and
the Regulatory Submission Party shall consider in good faith incorporating into
the planned submission any such comments. The Regulatory Non-Submission Party
shall supply Know-How necessary to obtain Approvals for each Product.

      3. Section 6.2 of the Agreement is hereby deleted in its entirety and the
following is substituted in place thereof:

      6.2 Milestone Payments. Alimera shall make an additional payment of
[*] to CDS ("Milestone Payment"), which shall be disbursed as follows:

            (a)   [*] upon [*]

            (b)   [*] upon execution of this Amendment No. 2; and

            (c)   [*] when a [*]

      4. Except as otherwise set forth in this Amendment No. 2, the terms of the
Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have caused this instrument to be executed by
their duly authorized representatives.

CONTROL DELIVERY SYSTEMS, INC.              ALIMERA SCIENCES, INC.

    /s/ Michael J. Soja                         /s/ Daniel H. White
By:____________________________             By:_____________________________

      Michael J. Soja                             Daniel H. White
Name:__________________________             Name:___________________________

                                                   VP Finance and Corporate
       VP Finance                                  Development
Title:_________________________             Title:__________________________

[*]-INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.

                                                                    EXHIBIT 4.19

                               COMMERCIAL SUBLEASE

      THIS COMMERCIAL SUBLEASE (the "Sublease") is made this 6th day of April,
2005 (the "Commencement Date"), by and between Exergen Corporation, a
Massachusetts corporation having an address at 400 Pleasant Street, Watertown,
Massachusetts (the "Landlord"), and Control Delivery Systems, Inc., a Delaware
corporation, having its principal place of business at 400 Pleasant Street,
Watertown, Massachusetts (the "Subtenant").

                                   WITNESSETH:

      WHEREAS, by Commercial Building Lease dated as of the date hereof between
FHP, LLC, a Massachusetts limited liability company, as lessor (the
"Overlandlord"), and Landlord as lessee thereunder (the "Original Sublease"),
Overlandlord leased to Landlord the premises, together with the right to use all
sidewalks, parking areas, easements, rights of way and other means of access to
and from public ways and adjoining properties, being the entire premises now
known and numbered as 396-400 Pleasant Street, Watertown, Massachusetts (the
"Property"); and

      WHEREAS, Subtenant desires to sublease from Landlord and Landlord desires
to sublease to Subtenant, a portion of the Premises as shown on Exhibit A
attached hereto and described below on the terms and conditions set forth
herein.

      NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:

                                    ARTICLE I

                                     DEMISE

      Section 1. Landlord hereby leases the space shown on Exhibit A attached
hereto consisting of 13,411 square feet exclusive use space (the "Subleased
Premises"), together with the right to use in common with others entitled
thereto the approximately 1,038 square feet of common area space shown on
Exhibit A (the "Common Area") and other common walkways, hallways, driveways and
similar areas necessary for access to the Subleased Premises, situated in or
about the building (the "Building") located at the Property to Subtenant and
Subtenant hereby leases and takes the Subleased Premises from Landlord upon the
terms, provisions and conditions in this Sublease contained, and subject to any
easements, restrictions and conditions of record and all laws and ordinances
applicable to the Subleased Premises.

      Section 2. Subtenant acknowledges that Subtenant owned and occupied the
Building prior to the sale of the Building to Landlord by Subtenant on the date
hereof. As a result, Subtenant is thoroughly familiar with the condition of the
Building and agrees that it is leasing the Subleased Premises "as is" with no
representations or warranties by Landlord, including,

                                        1



without limitation, any representations or warranties as to habitability or
fitness for a particular purpose.

                                   ARTICLE II

                                      TERM

      Section 1. The term of this Sublease shall commence on the Commencement
Date and shall continue for a period of eighteen (18) months, unless sooner
terminated or extended as herein provided (the "Term").

      Section 2. Landlord and Subtenant each shall have an option to extend the
Term for eighteen (18) months (the "Extension Period"), provided that the party
seeking to exercise such option shall not be in default under any of the
material terms of this Sublease at the time of the exercise. If either Landlord
or Subtenant elects to exercise this option, it shall do so by giving written
notice of such election to the other no later than six (6) months prior to the
end of the original Term. The Extension Period shall be upon the same terms and
conditions of this Sublease, except that during the Extension Period, Subtenant
shall pay Annual Base Rent equal to $23.00 per square foot for the Subleased
Premises and for Subtenant's Proportionate Share (as defined in Article III,
Section 3 below) of the Common Area.

                                   ARTICLE III

                                      RENT

      Section 1. Subtenant shall pay without demand, setoff or deduction as rent
at such place as Landlord from time to time may direct, annual base rent (the
"Annual Base Rent") equal to $22.00 per square foot for the Subleased Premises
and for Subtenant's Proportionate Share (as defined in Article III, Section 3
below) of the Common Area. As of the Commencement Date, the Subleased Premises
constitute 13,411 square feet and Subtenant's Proportionate Share of the Common
Area constitutes 386 square feet. Therefore, Subtenant shall pay as Annual Base
Rent the amount of Three Hundred Three Thousand Five Hundred Thirty Four Dollars
($303,534) in equal monthly installments of Twenty Five Thousand Two Hundred
Ninety Four Dollars ($25,294) on the first day of each calendar month; provided,
however, that the first calendar month's rent shall be paid on the Commencement
Date. If the Commencement Date falls on other than the first day of a calendar
month or if the Term ends on other than the last day of a calendar month, the
Annual Base Rent shall be prorated for the month in which the Term commences or
ends, as the case may be.

      Section 2. During the Term, in addition to Annual Base Rent, Subtenant
agrees to pay to Landlord, as additional rent (the "Additional Rent"),
Subtenant's Proportionate Share (as defined in Article III, Section 3 below) of
all Taxes (as defined in Article III, Section 4 below) and Operating Expenses
(as defined in Article III, Section 5 below) that accrue during the Term and
Subtenant's portion of Shared Utilities (as described in Article V, Sections 2
and 3 below) that accrue during the Term. On the Commencement Date and thirty
(30) days prior to the beginning


                                       2


of each calendar year during the Term (including, if applicable, the Extension
Period), Landlord shall submit an estimate of the Additional Rent for the
ensuing calendar year and Subtenant shall pay Landlord such estimated amount of
Additional Rent in monthly installments on the first day of each calendar month
during the Term. At the end of each calendar year during the Term (including, if
applicable, the Extension Period) and at the termination of the Sublease, as
soon as Landlord can determine the actual amount of Additional Rent owed by
Subtenant for the preceding year (or, if applicable, portion thereof), Landlord
shall give Subtenant written notice of such amount (the "Additional Rent
Statement"). The Additional Rent Statement shall include an itemized statement
showing in reasonable detail the actual Taxes, Operating Expenses, and Shared
Utilities for the relevant period broken down by component expenses. Upon
request by Subtenant, Landlord also shall provide appropriate supporting
documentation.

If the actual amount of Additional Rent owed by Subtenant exceeds the estimated
amount paid by Subtenant, Subtenant shall pay such excess to Landlord within ten
(10) days of receipt by Subtenant of the Additional Rent Statement or the end of
the Dispute Period (as defined below). If the estimated amount of Additional
Rent paid by Subtenant exceeded the actual amount owed by Subtenant, Landlord
shall pay such excess to Subtenant within ten (10) days of receipt by Subtenant
of the Additional Rent Statement.

If Subtenant disputes the accuracy of the Additional Rent Statement, Subtenant
shall have thirty (30) days after receiving the Additional Rent Statement, or
such longer time as may be necessary, to audit Landlord's books and records
concerning the Additional Rent Statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accord with generally
accepted accounting principles consistently applied. If the parties cannot
resolve the dispute within thirty (30) days after completion of the audit (the
"Dispute Period"), Subtenant shall still pay the amount shown owing within ten
(10) days of the end of the Dispute Period and Subtenant, in its sole
discretion, may commence alternative dispute resolution procedures or submit the
matter to a court of competent jurisdiction. Any such audit shall be conducted
at Subtenant's sole cost and expense. If a court, arbitrator or mediator
determines that the Additional Rent Statement overstated the Additional Rent by
three percent (3%) or more, Subtenant may recover the amount it spent on the
audit, the amount it paid in excess of the correct Additional Rent, and its
reasonable attorneys' fees and costs associated with the dispute. If a court,
arbitrator or mediator determines that the Additional Rent Statement overstated
the Additional Rent, but by an amount less than three percent (3%), then
Subtenant may recover only the amount it paid in excess of the correct
Additional Rent. If Subtenant does not commence alternative dispute resolution
procedures or submit the matter to a court of competent jurisdiction within
sixty (60) days after the end of the Dispute Period, then the Additional Rent
Statement shall be conclusive and final.

The provisions of this Article III, Section 2 shall survive expiration or
termination of the Sublease.


                                       3


      Section 3. For all purposes of this Sublease, "Subtenant's Proportionate
Share" of the Building on and as of the Commencement Date shall be 37.19%.
Subtenant's Proportionate Share is calculated as follows:

                          sq. ft. of Subleased Premises

                           --------------------------

                 (sq. ft. of Building - sq. ft. of Common Area)

In the event that the square footage of any pertinent area changes for any
reason, Subtenant's Proportionate Share shall be automatically recalculated in
accordance with the above equation and using the same measurement techniques and
standards originally employed.

      Section 4. "Taxes" shall mean any and all governmental impositions and
taxes imposed upon the Building and/or the Property, including any fire service
or other charges for municipal services, and all betterment assessments, as well
as all ad valorem, license or other taxes imposed upon the Building and/or the
Property and/or imposed upon Landlord by reason of its ownership thereof or this
Sublease; provided, however, that "Taxes" shall not include (i) federal, state,
or local income taxes, (ii) franchise, gift, transfer, excise, capital stock,
estate, succession, or inheritance taxes, (iii) penalties or interest for late
payment of Taxes, or (iv) the portion of Taxes that is allocable to any capital
improvements made after the Commencement Date expect to the extent the
improvements benefit all tenants or at least benefit Subtenant. If at any time
during the Term the methods of taxation of real estate prevailing on the
Commencement Date shall be altered so that in lieu of, in addition to, or as a
substitute for, the whole or any part of the Taxes, there shall be levied,
assessed or imposed (x) a tax, assessment, levy, imposition or charge, wholly or
partially as capital levy or otherwise, on the rents received therefrom, (y) a
tax, assessment, levy, imposition or charge measured by or based in whole or in
part upon the Subleased Premises and imposed upon Landlord, or (z) a tax license
fee or the like measured by the rents payable from Subtenant to Landlord, then
all such taxes, assessments, levies, impositions, or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
"Taxes" for the purposes hereof. In the event of a betterment assessment,
Landlord shall pay in accordance with the longest payment option offered

      Section 5. "Operating Expenses" shall mean any expenses, costs and
disbursements invoiced to Landlord by an unaffiliated entity (except as agreed
to by Subtenant) in connection with the maintenance, operation and repair of all
or any part of the Building, including the Common Area and the parking and other
common areas outside the Building on the Property (in connection with which
Operating Expenses shall include snow removal and landscaping). Landlord agrees
to maintain, operate and repair the Building and Property to a standard
consistent with Subtenant's former ownership thereof. "Operating Expenses" shall
not include (i) costs incurred due to maintenance, operation and repair of the
Building and/or Property to a standard in excess of Subtenant's former ownership
thereof, (ii) expenses, costs, and disbursements incurred in connection with
Shared Utilities (as defined in Article V, Section 2 below), (iii) Taxes (as
defined in Article III, Section 4 above), (iv) leasing commissions, costs,


                                       4


disbursements, and other expenses incurred for leasing, renovating, or improving
space for Landlord or other tenants, (v) costs incurred by Landlord in
discharging its obligations under Article XXV, (vi) costs (including permit,
license, and inspection fees) incurred in renovating, improving, decorating,
painting, or redecorating vacant space or space for Landlord or other tenants,
(vii) costs incurred by Landlord for alterations that are considered capital
improvements and replacements under generally accepted accounting principles
consistently applied, (viii) depreciation and amortization on the Building
except as expressly permitted elsewhere in the Sublease, (ix) costs of a capital
nature including capital improvements, capital repairs, capital equipment, and
capital tools, as determined under generally accepted accounting principles
consistently applied, (x) costs incurred because Landlord or another tenant
violated the terms of any lease, (xi) interest on debt or amortization payments
on mortgages or deeds of trust or any other debt for borrowed money, (xii)
rentals and other related expenses incurred in leasing air conditioning systems
or other equipment ordinarily considered to be of a capital nature, but normal
maintenance shall be included, (xiii) items and services for which Subtenant
reimburses Landlord or pays third parties or that Landlord provides selectively
to one or more tenants of the Building other than Subtenant without
reimbursement, (xiv) advertising and promotional expenditures, (xv) repairs or
other work needed because of fire, windstorm, or other casualty or cause insured
against by Landlord or to the extent Landlord's insurance required under this
Sublease would have provided insurance, whichever is the greater coverage, (xvi)
nonrecurring costs incurred to remedy structural defects in original
construction materials or installations, (xvii) any costs, fines, or penalties
incurred because Landlord violated any governmental rule or authority, (xviii)
costs incurred to test, survey, cleanup, contain, abate, remove, or otherwise
remedy Hazardous Material (as defined in Article X, Section 2 below) in, on, or
under the Property unless and to the extent that the Hazardous Material was in,
on, or under the Property as a result of Subtenant's negligence or wrongful
acts, (xix) costs incurred to comply with the Americans with Disabilities Act
except to the extent compliance is required because of amendment(s) to such law,
which amendment(s) became effective after the Commencement Date, (xx) costs for
sculpture, paintings, or other art, and (xxi) other expenses that under
generally accepted accounting principles consistently applied would not be
considered normal maintenance, operation or repair expenses.

      Section 6. Subtenant agrees to make monthly Annual Base Rent installments,
Additional Rent payments, Security Payments (as described in Article XXIII,
Section 1 below) and, if applicable, Swap Payment repayments (as described in
Article XXVI, Section 1 below) to Landlord by automatic electronic transfer. If
Subtenant does not pay the Annual Base Rent, Additional Rent or any other
charges due hereunder within five (5) days of when due, Subtenant shall pay
Landlord a late charge equal to five percent (5%) of such payment; and, if such
payment shall be made more than ten (10) days after such five (5) day grace
period, Subtenant shall in addition pay Landlord interest on such payment at the
rate of one percent (1%) per month from the date due until the date paid.

                                   ARTICLE IV

                          USE OF THE SUBLEASED PREMISES


                                       5


      Section 1. Subtenant shall use the Subleased Premises solely and
exclusively pursuant to the terms of this Sublease for office, research and
development, storage, or other activities incidental to and accessory to
Subtenant's business, and for no other purposes whatsoever without the written
consent of the Landlord.

      Section 2. Subtenant shall comply with all present and future laws, rules,
regulations, ordinances, requirements, and orders of public authorities relating
to Subtenant's use and occupancy of the Subleased Premises, including, without
limitation, building and zoning laws, requirements of Board of Health and
requirements of any other federal, state or local agencies having jurisdiction
of the Subleased Premises and the Building, including, without limitation, any
structural change required to be performed by Subtenant by any of the same.
Subtenant shall furthermore comply with all reasonable requirements of
Landlord's insurance carrier, and any Board of Fire Underwriters, or similar
bodies.

      Section 3. Subtenant shall be entitled to use Subtenant's Proportionate
Share of the parking areas on the Property as designated by Landlord.

                                    ARTICLE V

                                    UTILITIES

      Section 1. Subtenant shall pay all charges for utilities used exclusively
in the Subleased Premises (i.e., those utilities used in the Subleased Premises
that are not "Shared Utilities," as defined in Article V, Section 2 below)
whether such charges shall be made by a quasi-public or private utility company
or by a governmental authority or subdivision or department thereof. Subtenant
shall cause each such utility service to be separately metered to itself in its
name and shall be fully responsible for all costs in connection therewith. If
Landlord shall pay any of such charges on behalf of Subtenant, Subtenant shall
reimburse Landlord upon demand. Landlord shall not be responsible to Subtenant
for the failure or interruption of any such utilities unless such failure or
interruption is caused by the gross negligence or willful misconduct of Landlord
or his agents.

      Section 2. "Shared Utilities" shall mean utilities serving the Building as
a whole (e.g., gas, electricity and water) and the maintenance and repair of
related common mechanical systems and equipment (e.g., HVAC and electrical
systems). Landlord and Subtenant shall share responsibility for the expenses,
costs, and disbursements to third parties incurred in connection with Shared
Utilities. All Shared Utilities shall remain in Landlord's name and Landlord
shall pay the utility suppliers. Subtenant shall reimburse Landlord for its
portion of such expenses, costs, and disbursements as set forth in Article V,
Section 3. Landlord shall not be responsible to Subtenant for the failure or
interruption of any Shared Utilities unless such failure or interruption is
caused by the gross negligence or willful misconduct of Landlord or his agents.
Beginning promptly after the Commencement Date, and sooner if feasible, Landlord
shall retain and pay an energy consultant to develop a cost reduction strategy
for Shared Utilities and a contractor to


                                       6


implement the energy consultant's recommended improvements. The parties estimate
that the total cost of such work will be approximately $40,000 ("Program
Costs"). In no event shall Program Costs exceed $50,000.

      Section 3. Subtenant's portion of expenses, costs, and disbursements to
third parties incurred in connection with Shared Utilities shall be determined
as set forth below. If at any time during the Term or the Extension Period, if
any, the cost of electricity or gas changes from the cost of such utilities
during the Reference Year (as defined below), Landlord and Subtenant agree to
make mutually acceptable appropriate changes to Exhibit B to preserve the
intended economics of this Article V, Section 3.

      (a)   First Six Months of Term.

            (1)   During the first six months of the Term, Subtenant shall make
                  monthly estimated payments to Landlord for Shared Utilities
                  ("Estimated Payments"). Each Estimated Payment shall be equal
                  to Subtenant's costs in the same calendar month as set forth
                  in Exhibit B. Exhibit B shows the amounts incurred by
                  Subtenant and Landlord respectively at their former properties
                  for the period December 1, 2003 through November 30, 2004 (the
                  "Reference Year"). By way of clarification, Subtenant's
                  Estimated Payment for May during the first six months of the
                  Term would be $18,295, which is the corresponding amount for
                  May in the Reference Year.

            (2)   Within fifteen (15) days of the end of the first six months of
                  the Term, Landlord shall determine the actual amount spent for
                  Shared Utilities (the "Actual Amount"). The Actual Amount then
                  shall be compared to the total Estimated Payments made by
                  Subtenant during the first six months of the Term plus
                  Landlord's total costs at his former property during the
                  corresponding six calendar months in the Reference Year as
                  shown in Exhibit B (together, the "Reference Amount"). By way
                  of clarification, if the first six months of the Term are May
                  2005 through October 2005, then the Reference Amount shall be
                  $165,903 (total costs incurred by both Landlord and Subtenant
                  during the months May 2004 through October 2004 at their
                  former properties).

                  (i)   If the Actual Amount is less than the Reference Amount,
                        the difference shall be deemed "Savings." Savings shall
                        first be applied to reimburse Landlord for the Program
                        Costs. If a balance remains after such reimbursement,
                        Landlord shall pay Subtenant fifty percent (50%) of such
                        balance.

                  (ii)  If the Actual Amount is greater than the Reference
                        Amount, the difference shall be deemed "Excess." In the
                        event of an Excess, Subtenant shall pay Landlord fifty
                        percent (50%) of the Excess.


                                       7


      (b)   Second Six Months of Term.

            (1)   During the second six months of the Term, Subtenant shall make
                  monthly Estimated Payments to Landlord that are adjusted to
                  reflect the percentage of Savings realized by Subtenant in the
                  first six months of the Term ("Adjusted Estimate Payments").
                  Each Adjusted Estimated Payment shall be equal to Subtenant's
                  costs in the same calendar month as set forth in Exhibit B
                  reduced by a fraction the numerator of which is the Savings
                  from the first six months of the Term divided by two, and the
                  denominator of which is the total Estimated Payments made by
                  Subtenant during the first six months of the Term.

            (2)   Within fifteen (15) days of the end of the second six months
                  of the Term, Landlord shall determine the Actual Amount for
                  such period and compare it to the Reference Amount for such
                  period.

                  (i)   If the Actual Amount is less than the Reference Amount,
                        there shall be Savings for the second six months of the
                        Term. Landlord shall be entitled to fifty percent (50%)
                        of such Savings. Landlord shall subtract the following
                        from the other fifty percent (50%) and, if a balance
                        remains, shall pay such balance to Subtenant: (x) any
                        unpaid Program Costs; and (y) the difference between
                        Subtenant's Estimated Payments for the second six months
                        of the Term and the Adjusted Estimated Payments for the
                        same period.

                  (ii)  If the Actual Amount is greater than the Reference
                        Amount such that there is an Excess for the second six
                        months of the Term, Subtenant shall pay Landlord fifty
                        percent (50%) of such Excess.

      (c)   Third Six Months of Term.

            Determined using the methodology for the second six months of the
            Term.

      (d)   Extension Period.

            (1)   If there is an Extension Period, Subtenant shall make monthly
                  Estimated Payments to Landlord.

            (2)   Within fifteen (15) days of the end of each six months of the
                  Extension Period, Landlord shall determine the actual amount
                  spent for Shared Utilities during the applicable six month
                  period and deduct Landlord's total costs at his former
                  property during the corresponding six calendar months in the
                  Reference Year as shown in Exhibit B (the "Extension Actual
                  Amount"). The Extension Actual Amount then shall be compared
                  to the total Estimated


                                       8


                  Payments made by Subtenant during the applicable six month
                  period (the "Extension Reference Amount").

                  (i)   If the Extension Actual Amount is less than the
                        Extension Reference Amount such that there are Savings
                        for the applicable six month period, Landlord pay
                        Subtenant one hundred percent (100%) of such Savings.

                  (ii)  If the Extension Actual Amount is greater than the
                        Extension Reference Amount such that there is an Excess
                        for the applicable six month period, Subtenant shall pay
                        Landlord one hundred percent (100%) of such Excess.

                                   ARTICLE VI

                                     REPAIRS

      Section l. Subject to the other terms of this Sublease, including Article
V, Section 2 and those terms relating to fire or other casualty, Landlord at its
expense shall keep the roof, structure, and mechanical systems in or on the
Building in good order and repair; provided, however, that Subtenant shall
reimburse Landlord for the reasonable cost of such repairs to the extent the
repairs are caused by the negligence or misconduct of Subtenant, its employees,
contractors, agents and guests, and to the extent that the cost of the repairs
are not covered by insurance that Landlord is required to maintain under this
Sublease. Notwithstanding anything to the contrary contained in this Sublease,
Subtenant shall be responsible, at its sole expense, for keeping any mechanical
systems that exclusively serve the Subleased Premises in good order and repair.

      Section 2. Throughout the Term, Subtenant agrees to maintain the Subleased
Premises and all additions and improvements made upon them in good order and
repair, reasonable wear and tear and damage by fire or other casualty excepted.

                                   ARTICLE VII

                          RULES, REGULATIONS AND SIGNS

      Section 1. Subtenant shall comply with all reasonable rules and
regulations from time to time promulgated in writing by Landlord, provided that
the same are applicable to all Subtenants and occupants of the Building and do
not conflict with any right expressly granted to Subtenant in this Sublease.
Without consent from Landlord, Subtenant shall not: (a) keep or permit any
outside display or sales, nor place, maintain or permit any signs, placards,
lettering, awnings, aerials, flagpoles, decorations or the like or other
installations upon the exterior or roof of the Building, except for (i) a sign
on or near the front entrance of the Building indicating the location


                                       9


of the entrance to the Subleased Premises and (ii) a sign on or near the
entrance to the Subleased Premises indicating the same; or (b) make any holes in
or outside the Building, except as may be necessary for installation or removal
of any approved signs or approved alterations or trade fixtures and equipment
(Subtenant hereby agreeing that upon vacating the Subleased Premises it shall
repair any and all damage caused by any such installation or removals).

                                  ARTICLE VIII

                            ALTERATIONS BY SUBTENANT

      Section 1. Subtenant shall not make any alterations costing in excess of
$50,000 in the Subleased Premises without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Prior to the
commencement of any construction within the Subleased Premises, Subtenant shall
submit plans and specifications to Landlord for its approval. All work performed
by Subtenant shall be done in a good and workmanlike manner and in full
compliance with all laws and ordinances, and using materials of quality at least
equal to those employed in the rest of the Building. Upon completion of the
work, Subtenant shall deliver to Landlord sworn statements and lien waivers
evidencing that such work has been fully paid for. Subtenant shall indemnify and
hold Landlord harmless from all claims, liabilities and expenses (including
reasonable attorneys' fees) in connection with such work, including any mechanic
liens, and shall cause all such mechanic liens to be discharged, bonded or
insured over in a manner satisfactory to Landlord.

                                   ARTICLE IX

                       COVENANTS OF SUBTENANT AND LANDLORD

      Section 1. Subtenant shall throughout the Term hereof maintain the
Subleased Premises in safe condition and repair, reasonable wear and tear and
damage by fire or other casualty excepted, free from rubbish, dirt, refuse, or
garbage; store all trash and garbage in approved receptacles within the
Subleased Premises; handle all delivery and receiving of merchandise, supplies
and other materials to and from the Subleased Premises through service areas
provided for such use, if any; use the Common Area and other common areas in a
proper manner and with due regard to the rights of others; notify Landlord
promptly after the same shall come to the attention of Subtenant of the need for
any repairs or replacements to the Building.

      Section 2. Subtenant shall not during the Term hereof injure, overload or
deface the Subleased Premises or the Building, nor permit nor suffer any use of
the Subleased Premises, nor make any use of the Building or of the Subleased
Premises, that will be improper, offensive, or contrary to law, or liable to
invalidate any insurance, whether against risks of loss to persons or property,
or otherwise, or which will be injurious to any person or property or which will
constitute any waste or nuisance; and Subtenant shall pay any increase or extra
premium payable for such insurance resulting from any act done by Subtenant, or
any other increase in insurance premiums resulting from non-compliance of its
obligations under this Sublease. The statement of the insurer shall be
conclusive, as to the cause of such increased or extra premium, unless


                                       10


Subtenant shall establish to Landlord's reasonable satisfaction that Subtenant
is not responsible for such increased or extra premium.

      Section 3. To a standard consistent with Subtenant's former ownership and
occupancy of the Property, Landlord shall during the Term ensure the provision
of gas, electricity, water, HVAC service, and other such utilities, and
landscaping, plowing, maintenance of the Common Area and other common areas, and
similar services to and for the benefit of the Subleased Premises.

                                    ARTICLE X

                              ENVIRONMENTAL MATTERS

      Section 1. Subtenant shall not violate and shall promptly remedy or
correct any violations by it of any federal, state or local laws, rules and
regulations now or hereafter in effect with respect to Hazardous Material, as
defined below, introduced to the Subleased Premises. Subtenant shall not use all
or any portion of the Subleased Premises for the generation, storage, treatment,
use or disposal of any Hazardous Material except in compliance with all
applicable laws. Without limitation, express or implied, upon any other
requirements of this Sublease, Subtenant shall pay all such sums and take all
such actions as may be required to avoid or discharge the imposition of any lien
on the Subleased Premises resulting from Subtenant's violation of Massachusetts
General Laws, Chapter 21E, Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. Section 9601 et seq., or any other federal, state,
local or other statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability or standards of conduct concerning
any Hazardous Material, and Subtenant shall indemnify and save harmless Landlord
and Landlord's mortgagee from any and all reasonable losses, claims, liabilities
and expenses, including, without limitation, reasonable attorneys' fees incurred
or suffered by Landlord by virtue of Subtenant's violation of the provisions
thereof as applied to the Subleased Premises. The provisions of this Article X,
Section 1 shall survive the termination of this Sublease.

      Section 2. For purposes of this Sublease, "Hazardous Material" means and
includes any hazardous substance or any pollutant or contaminant defined as such
in (or for purposes of) the federal, state, or local statute, law, ordinance,
code, rule, regulation, order, or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as may now or at any time in the future be in
effect, or any other hazardous, toxic or dangerous waste, substance, or
material.

                                   ARTICLE XI

                                LANDLORD'S ENTRY

      Section 1. Landlord shall have the right to enter upon the Subleased
Premises at all reasonable business hours upon reasonable notice (and at any
time in case of an emergency) for the purpose of inspecting or exhibiting the
same, or for the purpose of making repairs to the


                                       11


Subleased Premises, or for any other purpose or purposes contemplated in this
Sublease; provided, however, that none of the same shall be construed to impose
upon Landlord any obligation or liability whatsoever for the care, supervision
or repair of the Subleased Premises other than as expressly provided in this
Sublease; and provided further, that, Landlord must be accompanied by an
employee of Subtenant during each such entry (except in the case of an emergency
as discussed below), shall abide by all safety and other rules and regulations
of Subtenant, and agrees to hold in confidence and not use for any purpose any
confidential or proprietary information of Subtenant received or observed during
such entry. Landlord shall not, by reason of any inspection, be deemed to have
received notice of any condition with respect to which Landlord is obligated to
take any action under this Sublease. If Subtenant or its employees shall not be
present to permit entry into said Subleased Premises and if at any time, due to
emergency, an entry therein shall be necessary, Landlord or its agents may enter
the Subleased Premises, forcibly, if necessary, to prevent injury to persons or
damage to property without in any way rendering Landlord or its agents liable
therefor or without affecting Subtenant's obligations contained in this
Sublease. Landlord shall use all reasonable efforts to minimize any material
inconvenience to Subtenant in exercising its rights hereunder.

                                   ARTICLE XII

                                 INDEMNIFICATION

      Section 1. To the fullest extent permitted by law, Subtenant agrees to
indemnify and save Landlord harmless against any and all bodily and personal
injury, loss, claim or damage to any person or property while on the Subleased
Premises, and from and against all bodily and personal injury, loss, claim or
damage to any person or property anywhere in the Building or on the Property
caused by any wrongful act or omission or the negligence of Subtenant or of
Subtenant's employees, agents, licensees, invitees or any other person for whom
Subtenant is responsible, or caused by a default in the proper performance of
Subtenant's obligation under the terms of this Sublease; provided, however, that
Subtenant shall have no such indemnification obligations to the extent that any
such injury, loss, claim or damage is caused by the wrongful act or omission or
the negligence of Landlord, or of Landlord's employees, agents, licensees,
invitees or any other person for whom Landlord is responsible, or caused by a
default in the proper performance of Landlord's obligation under the terms of
this Sublease.

      Section 2. To the fullest extent permitted by law, Landlord agrees to
indemnify and save Subtenant harmless against any and all bodily and personal
injury, loss, claim or damage to any person or property while on the Subleased
Premises, and from and against all bodily and personal injury, loss, claim or
damage to any person or property anywhere in the Building or on the Property
caused by any wrongful act or omission or the negligence of Landlord or of
Landlord's employees, agents, licensees, invitees or any other person for whom
Landlord is responsible, or caused by a default in the proper performance of
Landlord's obligation under the terms of this Sublease; provided, however, that
Landlord shall have no such indemnification obligation to the extent that any
such injury, loss, claim or damage is caused by the wrongful act or omission or
the negligence of Subtenant, or of Subtenant's employees, agents, licensees,
invitees or any other person for whom Subtenant is responsible, or caused by a
default in the proper performance of Subtenant's obligation


                                       12


under the terms of this Sublease.

                                  ARTICLE XIII

                                    SURRENDER

      Section 1. At the expiration or prior termination of the Sublease,
Subtenant shall surrender the Subleased Premises in good condition, reasonable
wear and tear and damage by fire or other casualty excepted.

      Section 2. All personal property and trade fixtures owned by Subtenant
that can be removed without substantial physical injury to the Subleased
Premises shall remain the property of Subtenant and shall be removed by
Subtenant no later than the expiration or termination of the Sublease; provided,
however, that if Subtenant is in default under this Article XIII, Section 2 or
if any such property shall not be removed by the expiration or termination of
this Sublease, such property shall, at the express written election of Landlord,
be deemed to have become Landlord's property. Furthermore, in such event,
Landlord may dispose of any of Subtenant's property not so removed at
Subtenant's risk and expense. Subtenant shall repair any and all damage caused
by the removal of Subtenant's personal property and trade fixtures.

                                   ARTICLE XIV

                                    INSURANCE

      Section 1. During the Term, Subtenant shall maintain in full force and
effect the following insurance, written by one or more insurance companies
licensed to do business in the Commonwealth of Massachusetts having a Best
rating of A or better, class VIII or better:

      A. Workmen's compensation insurance covering all employees, and if
Subtenant shall contract with any independent contractor for the furnishing of
labor, materials or services to Subtenant, Subtenant shall require such
independent contractor to maintain workmen's compensation insurance covering all
its employees and all the employees of any subcontractors. Subtenant shall also
maintain employers liability insurance having limits of not less than
$1,000,000.

      B. Property insurance with standard extended coverage in an amount of not
less than one hundred percent (100%) of the full sound insurable value of all of
Subtenant's property and, if the Subleased Premises shall be sprinkled,
sprinkler insurance in an amount of not less than one hundred percent (100%) of
the full sound insurable value thereof. Said coverage shall include explosion
and boiler insurance if appropriate.

      C. Commercial general liability insurance with limits of $2,000,000 as
provided in the comprehensive general liability forms with contractual liability
endorsements attached, in companies qualified to do business in the Commonwealth
of Massachusetts, insuring against injury to persons and damage to property as
herein provided, naming Landlord and Landlord's


                                       13


Mortgagee as additional insureds thereunder. Such insurance may be carried by
Subtenant under a blanket or umbrella coverage.

      D. Comprehensive automobile liability insurance covering all owned,
non-owned and hired vehicles, with limits of not less than $1,000,000 combined
single limit for personal injury and property damage.

      Section 2. During the Term, Landlord shall maintain in full force and
effect the following insurance, written by one or more insurance companies
licensed to do business in the Commonwealth of Massachusetts having a Best
rating of A or better, class VIII or better:

      A. Landlord shall, throughout the term of this Sublease, keep the Building
and all other improvements on the Property insured pursuant to one or more
policies of property insurance written on an "all risk" of physical loss or
damage basis in such amounts as would be equal to one hundred percent (100%)
replacement cost of the Building and all other improvements on the Property, as
is necessary to avoid co-insurance.

      B. Commercial general liability insurance with coverage for
premises/operations, personal injury, and contractual liability with combined
single limits of liability of not less than $2,000,000 for bodily injury and
property damage per occurrence. This limit can be made through a combination of
a primary commercial general liability policy and an umbrella policy or other
multi-property "blanket" coverage.

      Section 3. Each policy of insurance placed by Subtenant under this
Sublease shall provide that such policy may not be canceled without at least
thirty (30) days prior written notice to Landlord and Landlord's Mortgagee. Each
policy of insurance placed by Landlord under this Sublease shall provide that
such policy may not be canceled without at least thirty (30) days prior written
notice to Subtenant. Each party shall furnish such policy or a certificate by
the insurer as to the existence thereof to the other party at least thirty (30)
days prior to the Commencement Date and thereafter at least fifteen (15) days
prior to the expiration thereof or of any modification or renewal of such
policy. Each of said policies shall be written on an annual basis with premiums
to be prepaid yearly, and evidence of such payment shall be given to the other
party not less than fifteen (15) days prior to the expiration of such policy.

      Section 4. Each of Landlord and Subtenant hereby reSubleases the other
(and each person and legal entity claiming through each of them) from any and
all liability or responsibility to the other (and each person and legal entity
claiming through the other) by way of subrogation or otherwise for any loss or
damage to property caused by fire or any of the extended coverage casualties, or
by sprinkler leakage, even if such fire or other casualty or such leakage shall
have been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible. This mutual waiver precludes the assignment
of any such claim by subrogation to an insurance company (or any other person),
and Landlord and Subtenant each agree to give written notice of this waiver to
each insurance company that has issued or shall issue any property insurance
policy to it, and to have the policy properly endorsed with provisions that
either designate the other party as one of the insureds or deny to the insurer
acquisition by


                                       14


subrogation of rights of recovery against the other party to the extent such
rights have been waived by the insured party, as set forth herein, insofar as,
and to the extent that such provisions may be effective without making it
impossible to obtain insurance coverage from responsible companies qualified to
do business in the Commonwealth of Massachusetts (even though extra premium may
result therefrom). Each party shall be entitled to have certificates of
insurance with respect to such policies containing such provisions. In addition,
and without limiting the foregoing, each of Landlord and Subtenant waives any
and every such claim against the other that would have been covered had the
insurance policies required to be maintained by such person by this Sublease
been in force, to the extent that such loss or damage would have been
recoverable under such policies, whether or not the same have been maintained.


                                   ARTICLE XV

                    DAMAGE OR DESTRUCTION BY FIRE OR CASUALTY

      Section 1. If so much of the Building shall be damaged or destroyed so
that the remainder of the Building becomes uneconomic for Landlord's use in the
good faith judgment of Landlord or if the time to repair the Building would
exceed one hundred eighty (180) days, Landlord may terminate this Sublease by
giving notice to Subtenant within thirty (30) days of such event.

      Section 2. If this Sublease shall not be so terminated, Landlord, within a
reasonable time, having in mind delays resulting from the settlement of any
insurance loss, preparation of plans and obtaining permits, shall commence to
restore the Subleased Premises. Landlord shall proceed reasonably diligently
with such restoration. Landlord shall not be obligated to expend more than
Landlord shall receive as insurance proceeds or otherwise on account of such
damage or destruction, before taking into account deductions for deductibles or
co-insurance. If Landlord fails to proceed with reasonable diligence or fails to
complete restoration within ninety (90) days of its estimated completion date,
Subtenant may, as its sole and exclusive remedy, terminate this Sublease by
written notice to Landlord.

      Section 3. If the Subleased Premises shall be damaged and if this Sublease
shall not be terminated as herein provided, then the Annual Base Rent and
Subtenant's Proportionate Share for all purposes shall be reduced for the
portion of the Subleased Premises that cannot be used as a result of such damage
until the Subleased Premises shall have been restored to its former condition.

                                   ARTICLE XVI

                                 EMINENT DOMAIN

      Section 1. If after the Commencement Date the whole or substantially all
of the Subleased Premises shall be taken under the power of eminent domain or by
purchase in lieu thereof by any public, quasi-public or private authority, or
condemned as unlawful, or suffer any


                                       15


damage that shall entitle Landlord to make a claim for injury to the Building
arising to the level of a taking, direct or consequential, all herein referred
to as "Taking," then this Sublease shall, at the election of Landlord by written
notice to Subtenant, be terminated.

      Section 2. If after the Commencement Date:

      (i)   the aggregate of all reductions of the floor area of the Subleased
            Premises shall equal or exceed twenty (20%) or more of the original
            floor area of the Subleased Premises; or

      (ii)  the Building shall be permanently deprived of access by motor
            vehicle to and from a public street or private way,

then, in either such case, Subtenant shall have the right at its election to
terminate this Sublease by giving Landlord notice of its election within thirty
(30) days after such event; provided, however, in the case of (ii) that if
Landlord shall have undertaken to provide substitute access and Landlord shall
have completed the same within thirty (30) days, Subtenant's notice of
termination shall be void.

      Section 3. All damages awarded for any Taking, whether for the whole or a
part of the Subleased Premises, or the Building or otherwise, shall belong to
and be the sole property of the Landlord whether such damages shall be awarded
as compensation for diminishing the value of the Subleasehold, fee or otherwise,
and Subtenant does hereby assign to Landlord all of its right, title, and
interest thereto; provided, however, that Subtenant shall be entitled to receive
and retain any amounts which may be specifically awarded to it by reason of the
loss of its furniture or trade fixtures or for moving expenses. Subtenant agrees
to execute and deliver any document necessary or desirable to confirm Landlord's
rights under this Article XVI, Section 3.

      Section 4. If this Sublease shall not be terminated as provided in Article
XVI, Section 1, Landlord shall, within a reasonable period of time after such
damage, commence to restore the damage or destruction to the Subleased Premises.
Landlord shall proceed with reasonable diligence to the completion of such
restoration so that they shall have been restored as nearly as possible to the
condition they were in prior to such damage. If Landlord fails to proceed with
reasonable diligence or fails to complete restoration within ninety (90) days of
its estimated completion date, Subtenant may, as its sole and exclusive remedy,
terminate this Sublease by written notice to Landlord. If the net award after
all costs and expenses incurred by Landlord in the collection thereof shall not
be sufficient to restore the Building, Landlord may terminate this Sublease by
written notice to that effect to the Subtenant.

      Section 5. During the period of restoration, the Annual Base Rent reserved
hereunder shall be suspended or abated according to the proportion of the floor
area of the Subleased Premises rendered unusable and Subtenant's Proportionate
Share for all purposes shall be adjusted in accordance with Article III, Section
3. There shall be no abatement or suspension of Rent hereunder if there shall be
no actual physical damage to the Subleased Premises, nor, in any case shall
there be an abatement of Subtenant's obligation to pay other charges due under
this


                                       16



Sublease. If Subtenant shall be permanently deprived of any portion of the floor
area of the Subleased Premises, the Annual Base Rent shall be proportionally
abated for the balance of the Term (including the Extension Period, if
applicable) to reflect the then size of the Subleased Premises and the Building
and Subtenant's Proportionate Share for all purposes shall be adjusted in
accordance with Article III, Section 3.

                                  ARTICLE XVII

                                SUBTENANT DEFAULT

      Section 1. Subtenant shall be deemed in default hereunder if, after
receipt from Landlord of the required notice and the expiration of the
applicable cure period (each as described more fully below), (a) Subtenant shall
neglect or fail to make any payment of Annual Base Rent, Additional Rent or
other payments to be made by it hereunder or shall neglect or fail to perform or
observe any of the other material covenants and agreements contained in this
Sublease and on its part to be performed or observed, (b) the estate created
hereby shall be taken upon execution, attachment, or any other process of law
and such process shall not be rendered inoperative within twenty (20) days
thereafter, (c) Subtenant shall be adjudged a bankrupt or insolvent, or if any
receiver or trustee of all or any part of the business or property of Subtenant,
wherever located, shall be appointed and shall not be discharged within ninety
(90) days after appointment, (d) Subtenant shall make any general assignment of
its property for the benefit of creditors, or if Subtenant shall file a
voluntary petition in bankruptcy or insolvency or shall apply for reorganization
or arrangement with its creditors under the bankruptcy or insolvency laws now in
force or hereinafter enacted, federal, state or otherwise, or if any such
petition shall be filed against Subtenant and shall not be discharged within
ninety (90) days after the filing, provided that the rent and all other monetary
obligations of Subtenant shall be paid, or (e) Subtenant shall seek a
composition with its creditors by trust mortgage or otherwise. Anything herein
contained to the contrary notwithstanding, Subtenant shall not be in default
until it receives written notice from Landlord of one or more of (a) through (e)
above, as applicable, and is given the opportunity to cure the same, as follows.
If such potential default shall relate to the payment of money, Subtenant shall
have five (5) days to make payment. If such potential default shall be other
than the payment of money, Subtenant shall have thirty (30) days to cure,
provided that if the potential default complained of is of such character that
it reasonably requires more than thirty (30) days to cure the same, Subtenant
shall have a reasonable period of time, not to exceed sixty (60) days,
subsequent to such thirty (30) day period, provided that Subtenant shall
commence to cure such potential default within such thirty (30) day period and
proceed diligently until completion of such cure. Landlord shall not exercise
any remedy hereunder if Subtenant shall complete the cure of any potential
default within the time periods allowed above.

      Section 2. If Subtenant shall be in default under this Sublease as
specified in Article XVII, Section 1 above, then in any such case Landlord may
terminate this Sublease upon notice to Subtenant, and this Sublease shall come
to an end on the date of such notice (or such other date specified for
termination therein) as fully and completely as if such date were the date
herein originally fixed for the expiration of the Term, and Subtenant will then
quit and surrender the Subleased Premises to Landlord, but Subtenant shall
remain liable as hereinafter provided. If


                                       17


Subtenant is in default hereunder, Landlord also shall have the right when it
delivers notice of termination or at any time thereafter, to enter upon the
Subleased Premises or any part thereof in the name of the whole and repossess
the same as of its former estate and expel Subtenant and those claiming by,
through or under it, and remove their goods and effects without being deemed
guilty of any manner of trespass and without prejudice to any remedies which
might otherwise be used for arrears of rent or other payments or preceding
breach of covenant.

      Section 3. In the event of termination under Article XVII, Section 2,
Subtenant shall pay to Landlord, as liquidated current damages, the Annual Base
Rent, Additional Rent and other sums that would be payable hereunder for the
remainder of the Term, or the Extension Period if the option under Article II,
Section 2 was already exercised, if such termination had not occurred, less the
net proceeds, if any, of any reletting of the Subleased Premises, after
deducting all reasonable expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, and advertising for such reletting. Subtenant shall
pay the liquidated current damages to Landlord monthly on the days when the
Annual Base Rent would have been payable hereunder if this Sublease had not been
terminated. Landlord shall apply the Security Payments provided for in Article
XVII, Section 2 to the liquidated current damages.

      Section 4. If Subtenant shall be in default hereunder, Landlord may, at
its option, without waiving any claim for breach of agreement, at any time
thereafter cure such default for the account of Subtenant, and Subtenant shall
reimburse Landlord for any amount paid and any expense or contractual liability
so incurred, including reasonable attorneys' fees. Landlord may cure the default
of Subtenant prior to the expiration of the cure period, but only after notice,
which notice need not be in writing if confirmed forthwith by notice in writing
to the Subtenant if it is necessary to protect the real estate or the interest
of Landlord therein or to prevent injury or damage to persons or property. Any
amount payable by Subtenant to Landlord pursuant to the provisions of this
Article XVII, Section 4 shall be paid as part of and at the time for payment of
the next installment of Annual Base Rent thereafter coming due.

                                  ARTICLE XVIII

                               LANDLORD'S DEFAULT

Section 1. Landlord's failure to perform or observe any of its Sublease
obligations after a period of thirty (30) business days or the additional time,
if any, that is reasonably necessary to promptly and diligently cure the failure
after receiving notice from Subtenant, or such lesser time as expressly provided
elsewhere in this Sublease, is a default. The notice shall give in reasonable
detail the nature and extent of the failure and identify the Sublease
provision(s) containing the obligation(s). If Landlord commits a default,
Subtenant may pursue any remedies given in this Sublease or under the law,
provided, however, that in no event (unless otherwise specified herein) shall
Subtenant have a right to offset Annual Base Rent or Additional Rent as a result
of an alleged default hereunder.


                                       18


                                   ARTICLE XIX

                            ASSIGNMENT AND SUBLETTING

      Section 1. Except as herein expressly set forth, Subtenant shall not
assign this Sublease nor any estate of interest therein, nor sublet or license
the whole or any part of the Subleased Premises, all of which are herein
referred to as a "Transfer," without the prior written consent of Landlord, not
to be unreasonably withheld or delayed. Subtenant may Transfer its interest to
any parent corporation or wholly-owned subsidiary corporation or wholly-owned
subsidiary of any parent corporation without such consent, provided that in each
case Subtenant shall give notice of such Transfer to Landlord. Each such
assignee shall assume the obligations of the Subtenant hereunder. Subtenant
shall remain liable to Landlord during the Term (including the Extension Period,
if applicable) for the payment of rent and the performance of all obligations of
Subtenant hereunder. Consent by Landlord to one or more Transfers shall not
operate to exhaust Landlord's right to refuse consent to any future Transfer.
Subtenant shall notify Landlord promptly of any proposed Transfer.

                                   ARTICLE XX

                            OVERSUBLEASES, MORTGAGES

      Section 1. At the election of Landlord, or any future mortgagee, or any
person who is or shall become the owner of the fee of the Building and who has
or shall Sublease the same to Landlord, herein "Overlessor," which election may
be changed from time to time, this Sublease and the Subtenant's rights hereunder
shall be subject and subordinate to such mortgage or OverSublease; provided that
such mortgagee or Overlessor shall first enter into a written instrument in
recordable form and otherwise in form reasonably satisfactory to Subtenant,
which provides that so long as no default, after the giving of any required
notice and expiration of all grace or cure periods, is continuing hereunder: (i)
this Sublease will not be affected and will continue as a direct Sublease
between Subtenant and any such mortgagee or Overlessor and their assignees,
nominees or successors (including, but not limited to, purchasers at a
foreclosure sale) taking title to the Building or the Property or otherwise
succeeding to the interest of Landlord hereunder, (ii) such mortgagee or
Overlessor shall be prospectively bound to Subtenant under the terms of this
Sublease (including Subtenant's right to extend the Term hereof), (iii)
Subtenant's possession hereunder will not be disturbed by any default in,
termination, foreclosure of, exercise of any remedy under such mortgage or
OverSublease and/or any conveyance in lieu of the exercise thereof, as the case
may be and (iv) Subtenant shall attorn to such mortgagee or Overlessor hereunder
upon such mortgagee or Overlessor or their assignees, nominees or successors
(including, but not limited to, purchasers at a foreclosure sale) taking title
to the Building or the Property or otherwise succeeding to the interest of
Landlord hereunder. Subtenant shall, upon request of Landlord, such mortgagee,
or Overlessor, execute any documents which may be necessary to evidence or
confirm such subordination.


                                       19


      Section 2. Subtenant shall, upon receipt of written notice from any such
mortgagee, Overlessor, or other person to whom Landlord may from time to time
assign the rents or other payments due hereunder, make payment of such rents or
other payment to such person and shall be fully protected in making such
payment. Landlord shall advise Subtenant in writing if Landlord shall hereafter
grant a mortgage or OverSublease or otherwise assign the rents hereunder.

                                   ARTICLE XXI

                                     BROKER

      Section 1. Landlord and Subtenant warrant and represent to each other that
neither has dealt with any broker or agent in connection with this Sublease
except Meredith & Grew Incorporated and Richards Barry Joyce & Partners, and
that no other broker or agent has been instrumental in this transaction. Both
parties agree to indemnify the other against any claim, loss, damage, cost or
liability for any brokerage commission or fee which may be asserted against
either party in connection with this Sublease by any other broker with whom
either party has dealt.

                                  ARTICLE XXII

                                     NOTICES

      Section 1. Except as specifically otherwise provided in this Sublease, all
notices and other communications authorized or required hereunder shall be in
writing and shall be given by mailing the same by certified or registered mail,
return receipt requested, postage prepaid, or by expedited overnight courier
utilizing receipt, or by facsimile confirmed in one of the foregoing methods,
and any such notice shall be deemed to have been given when so mailed. If
intended for Landlord, the same shall be mailed to Landlord at:

                        Dr. Frank Pompei
                        C/o Exergen Corporation
                        51 Water Street Watertown.
                        MA 02472

with a copy contemporaneously sent to:

                        Walter H. McLaughlin, Jr., Esq.
                        Gilman, McLaughlin & Hanrahan LLP
                        101 Merrimac Street
                        P.O. Box 9601
                        Boston, Massachusetts 02114-9601


                                       20


with copies to such other parties as Landlord shall designate, and if intended
for Subtenant, the same shall be mailed to Subtenant at:

                        Control Delivery Systems, Inc.
                        400 Pleasant Street
                        Watertown, Massachusetts 02472
                        Attention: Cristin L. Rothfuss, Corporate Counsel

with a copy contemporaneously sent to:

                        Mary Weber, Esq.
                        Ropes & Gray, LLP
                        One International Place
                        Boston, MA 02110-2624

      All notices shall be effective upon receipt or the third business day
after deposit with the United States Post Office, postage paid.

                                  ARTICLE XXIII

                                SECURITY DEPOSIT

      Section 1. As security for its full and faithful performance of this
Sublease during the original Term, Subtenant shall make the following payments
(each a "Security Payment"): for each of the first six (6) months of the Term,
Subtenant shall make an $18,000 Security Payment to Landlord and commencing on
the seventh month of the Term and continuing until the total Annual Base Rent
for the original Term is paid in full, Subtenant shall make a $20,000 Security
Payment to Landlord each month. Each Security Payment shall be paid in
conjunction with and be in addition to Subtenant's monthly installment of Annual
Base Rent and Additional Rent. The first such Security Payment shall be applied
against the monthly installment of Annual Base Rent due for the eighteenth
(18th) month of the Term. The second such Security Payment shall be applied
against the balance for the monthly installment of Annual Base Rent due for the
eighteenth (18th) month of the Term, and the remainder shall be applied against
the monthly installment of Annual Base Rent due for the seventeenth (17th) month
of the Term. Other Security Payments shall be applied in the same manner (i.e.,
against the latest unpaid Annual Base Rent installment). Subtenant shall
continue to make such payments and such payments shall continue to be applied in
this manner until the total Annual Base Rent for the original Term is paid in
full.

      Section 2. In the event that this Sublease is terminated prior to the end
of the original Term, and so long as Subtenant is not in default under any of
the terms, provisions or conditions of this Sublease on the termination date,
Landlord shall refund to Subtenant any amounts paid by Subtenant in excess of
the Annual Base Rent due for the actual term length by virtue of the Security
Payment mechanism described in Article XXIII, Section 1.


                                       21


                                  ARTICLE XXIV

                                  MISCELLANEOUS

      Section 1. In any case where either party hereto is required to do any
act, other than the making of any payment of rent or other monetary sum due
Landlord hereunder, the time for performance thereof shall be extended for a
period equal to any delay caused by or resulting from any act of God, war, civil
commotion, fire casualty, labor difficulties, shortages of labor, materials or
equipment, governmental regulations or other causes beyond such party's
reasonable control, whether such time be designated by a fixed date, a fixed
time, or a "reasonable time." In no event shall the parties inability to pay a
monetary sum be affected by this clause.

      Section 2. Failure of either party to complain of any act or omission on
the part of the other party, no matter how long the same may continue, shall not
be deemed to be a waiver by said party of any of its rights hereunder. No waiver
by either party at any time shall be effective unless in writing and signed by
the party adversely affected by the breach with respect to which waiver is
asserted to have been made. No waiver of any breach of any provision of this
Sublease shall be deemed a waiver of a breach of any other provision of this
Sublease or a consent to any subsequent breach of the same or any other
provision. If any action by either party shall require the consent or approval
of the other party, the other party's consent to or approval of such action on
any one occasion shall not be deemed a consent to or approval of said action on
any subsequent occasion or a consent or approval of any other action on the same
or any subsequent occasion. Each and every right and remedy which either party
may have under this Sublease or by operation of law, either at law or in equity,
with respect to any breach, shall be distinct and separate from every other such
right and remedy; all such rights and remedies shall be cumulative, and none of
them shall be deemed inconsistent with any other, no such right or remedy
whether or not exercised, shall be deemed to be in exclusion of any other, and
any two or more or all of such rights and remedies may be exercised at the same
time or successively, except where in this Sublease otherwise expressly
provided.

      Section 3. If any term or provision of this Sublease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such term
or provisions to Persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Sublease shall be valid and be enforced to the fullest extent
permitted by law.

      Section 4. Except as herein otherwise provided, the terms and provisions
of this Sublease shall be binding upon and inure to the benefit of the heirs,
legal representatives, successors, and assigns respectively of Landlord and
Subtenant. This Article XXIV, Section 4 shall not be deemed to be any consent by
Landlord to an assignment hereof by Subtenant.

      Section 5. The headings used for the various Articles of this Sublease are
used only as a matter of convenience for reference, and are not to be construed
as part of this Sublease or to be


                                       22


used in determining the intent of the parties to this Sublease.

      Section 6. This instrument constitutes the entire and only agreement
between the parties and no oral statements or representations or prior written
matters not contained in this Sublease shall have any force and effect. Except
as expressly provided in this Sublease, none of the exhibits herein referred to
or attached hereto shall in any way constitute any representation or warranty in
respect to the Building, the Subleased Premises, location of construction and
location of Buildings and improvements, occupancy by other Subtenants,
continuation of occupancy by other Subtenants, use by other Subtenants, nor
limitation on the construction of additional Buildings or additions to Building
by Landlord whether on the roof, if any, of the Subleased Premises, or
elsewhere. No subsequent amendments, changes, or additions to this Sublease
shall be binding upon Landlord or Subtenant unless reduced to writing and duly
executed by Landlord and Subtenant. Any pronoun shall be read in the singular or
plural in such gender as the context may require or permit.

      Section 7. Subtenant shall from time to time, upon request of Landlord,
furnish to Landlord or to any designee of Landlord, certifications as to the
status of this Sublease, the existence or non-existence of default on the part
of Landlord, or any state of fact or facts requested to be certified to by
Subtenant with reference to this Sublease.

      Section 8. Except as otherwise expressly set forth herein, this Sublease
is a net Sublease, and shall be interpreted to the end that the Annual Base Rent
and Additional Rent shall be payable to Landlord without offset or deduction in
any and all events, except as herein expressly set forth. Landlord shall have no
obligation hereunder except as expressly set forth in this Sublease.

      Section 9. So long as Subtenant shall not be in default, Subtenant may
peaceably and quietly occupy and enjoy the Subleased Premises and the use
thereof, without molestation of any person or any claims by, through or under
Landlord.

      Section 10. This Sublease may be executed in counterparts, each of which
shall be deemed an original and all of which, taken together, shall be deemed to
be one and the same instrument.

      Section 11. The liability of Landlord hereunder shall be limited solely to
the equity of Landlord in the Building and any sales or insurance proceeds
realized therefrom, and in no case shall Landlord or any partner or agent of
Landlord ever be personally liable beyond the extent of his or their equity in
the Building or such proceeds for the obligations of Landlord, except that any
of the same may be named in order to obtain jurisdiction of Landlord in any
litigation. Each Landlord hereunder shall be liable for the obligations of
Landlord only during such time as such person shall be Landlord and with respect
only to items occurring during such period of ownership.

      Section 12. The terms of this Sublease shall be not be disclosed by either
party to any


                                       23


third party; provided, however, that each party may disclose such terms to its
financial advisors and potential investors or in connection with a potential
merger or acquisition, in each case under the auspices of a confidentiality
agreement.

                                   ARTICLE XXV

                                   WORK LETTER

      Section 1. Subtenant enters into this Sublease subject to Landlord's
agreement to complete certain demising work and improvements no later than sixty
(60) days after the Closing Date. In particular, Landlord agrees to complete all
work specified in Exhibit C. Landlord shall be responsible for all costs
associated with upgrading the bathrooms, as specified in Exhibit B. In addition,
Landlord shall be responsible for the first $25,000 of completing all other work
specified in Exhibit B and any Additional Work, as defined below. Landlord and
Subtenant shall each be responsible for fifty percent (50%) of the balance for
completing all other work specified in Exhibit B and any Additional Work.

      Section 2. Until the work associated with upgrading the bathrooms is
completed, Subtenant's employees and guests shall be entitled to use the
bathrooms in Landlord's portion of the Building. Landlord shall use all
reasonable efforts to minimize disruption to Subtenant's business during
performance of the work.

      Section 3. If, no later than six (6) months after the Commencement Date, a
local, state or federal governmental body having appropriate authority orders
Landlord to perform demising work beyond that specified in Exhibit B
("Additional Work"), Landlord shall complete the same. Landlord and Subtenant
shall be responsible for the cost of the Additional Work as set forth above. In
the event that Subtenant is responsible for any part of the cost of the
Additional Work, Landlord agrees to pay Subtenant's fifty percent (50%) share
and Subtenant agrees to increase each monthly payment of Annual Base Rent during
the remainder of the Term by an amount equal to such fifty percent (50%) share
divided by the remaining number of Annual Base Rent payments.

      EXECUTED as a Sealed Instrument on the day, month and year first above
written.


SUBTENANT:                              LANDLORD:

CONTROL DELIVERY SYSTEMS, INC.          EXERGEN CORPORATION


By: /s/ Michael J. Soja                 By: /s/ Francesco Pompei
   ----------------------------------      -------------------------------------
   Name:   Michael J. Soja                 Francesco Pompei, President
   Office: VP and CFO                      Hereunto duly authorized
   Hereunto duly authorized


                                       24


Overlandlord hereby consents to this Sublease.

FHP, LLC

By: /s/ Francesco Pompei
   ------------------------------------
   Francesco Pompei, Manager


                                       25


                                    EXHIBIT A

                                   FLOOR PLAN



                                       26


                                    EXHIBIT B

                                 REFERENCE YEAR

AMOUNTS INCURRED BY LANDLORD AT HIS FORMER PROPERTY



           Water/sewer    Maint. Contracts   Electric       Gas         TOTAL
           ---------------------------------------------------------------------
                                                       
Dec-03     $     --                          $  3,275    $     962    $   4,237
Jan-04           --                             3,622        1,345        4,968
Feb-04           --                             2,655        1,102        3,756
Mar-04           --                             3,513        1,054        4,566
Apr-04           --                             3,513          418        3,931
May-04           --                             3,776           94        3,870
Jun-04           --                             6,796           93        6,889
Jul-04           --                             5,737           99        5,836
Aug-04           --                             6,924           94        7,018
Sep-04           --                             6,394           90        6,484
Oct-04           --                             6,394          366        6,761
Nov-04           --                             4,342          366        4,708
           ---------------------------------------------------------------------
Total      $     --          $      --       $ 56,941    $   6,084    $  63,025
           ---------------------------------------------------------------------


AMOUNTS INCURRED BY SUBTENANT AT ITS FORMER PROPERTY



           Water/sewer  Maint. Contracts    Electric         Gas          TOTAL
           ---------------------------------------------------------------------
                                                         
Dec-03      $    175        $  1,333        $ 11,139      $  6,931      $ 19,578
Jan-04           175           1,333          11,239         6,562        19,309
Feb-04           175           1,334          10,233         7,367        19,110
Mar-04           175           1,333           9,922         7,402        18,832
Apr-04           175           1,333          10,322         5,820        17,650
May-04           175           1,334          11,182         5,604        18,295
Jun-04           175           1,333          15,149         4,683        21,340
Jul-04           175           1,333          17,082         4,730        23,321
Aug-04           175           1,334          17,053         4,220        22,782
Sep-04           175           1,333          13,376         4,747        19,631
Oct-04           175           1,333          17,623         4,545        23,676
Nov-04           175           1,334           9,264         5,107        15,880
           ---------------------------------------------------------------------
Total       $  2,100        $ 16,000        $153,585      $ 67,717      $239,402
           ---------------------------------------------------------------------



                                       27



                                    EXHIBIT C

                                    WORK PLAN


                                                                
1.
       Bottom of Ramp in entrance front of building, straighten
       approx. 20' of wall 10'h removing existing double swing
       door and reinstall in another location. Wall single
       thickness 5/8" sheet rock T.J.P.                               $   4,000

2.
       Back section of building straighten wall approx. 17'L x
       10'H. Removing existing doors and not reinstall with
       single 5/8 sheet rock T.J.P.                                   $   2,800

3.
       Building divider wall 34-6" x 10'h with two framed doors
       and hardware, to form a corridor to bath rooms. Includes
       drop ceiling, lighting, VT flooring. T.J.P with base cover.
       (Does not include sprinkler system)                            $   8,200

4.
       In same area cut open in existing wall to gain access to
       area, and baths. Includes, framing 36"x84" opening for
       frame and door with all hardware.                              $   1,400
5.
       Build diagonal wall at bottom of ramp with frame 36" crash
       bar door to match existing doors wall approx. 9'Lx10'H
       single 5/8 sheet rock both sides T.J.P.                        $   3,200
7.
       Install drop ceiling in space 34.5'x16' + 12"x16" adjacent
       to divider wall to baths includes; installing track for
       drop ceiling 2"x4" all ceiling tile and six 2'x4' light
       panels and switching.  Excluding flooring.                     $   4,200

8.     Frame and install sheet rock T.J.P. 6'x8' opening to divide
       office space in front of building                              $   1,000

9.     Ramp outside extend to 18'L. Build with pressure treated
       lumber and pipe rail.                                          $   2,800
                                                                      ---------
                                SUBTOTAL                              $  27,600

                   Contractor mark-up20%                              $   5,520
                                                                      ---------
                                TOTAL                                 $  33,120
                                                                      ---------



                                       28

                                                                    Exhibit 4.20

                              AMENDED AND RESTATED
                         CONTROL DELIVERY SYSTEMS, INC.
                           CHANGE OF CONTROL AGREEMENT

     AGREEMENT made this 17th day of August, 2004, by and between Paul Ashton
("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many corporations, the possibility of a Change of
Control (as defined in Exhibit A) may exist and that such possibility, and the
uncertainty and questions which it may raise among management personnel, may
result in the departure or distraction of management personnel to the detriment
of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including Executive, to their duties, to assisting the
Board in assessing proposals with respect to a Change of Control and to advising
the Board as to the best interests of the Company and its shareholders with
respect to such potential Change of Control, without distraction and conflict
arising from the possibility of a Change of Control; and

     Whereas, the Board wishes to induce Executive and other members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate in specified
circumstances following a Change of Control of the Company;

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
terms and conditions contained herein, the parties hereto agree as follows:

     1. Severance Benefits Following a Change of Control

          (a) Entitlement to Severance Benefits. If during that period starting
     on the date of a Change of Control and ending on the second anniversary of
     the Change of Control, the Company terminates Executive's employment
     without Cause, or if Executive terminates his employment for Good Reason,
     the Company will, subject to Section 2 below, provide severance benefits to
     Executive as set forth below in this Section 1.

          "Good Reason" means (i) failure by the Company to maintain Executive
     in the position of Chief Executive Officer and President including holding
     the title of and serving as Chief Executive Officer and President of the
     Company and having responsibility for performing all duties typically
     undertaken by such offices or assignment to Executive of duties materially
     inconsistent with such positions, (ii) the diminution in any material
     respect of Executive's positions or authority, excluding for this purpose
     an isolated, insubstantial and inadvertent action not taken in bad faith
     and which is remedied by the Company promptly after receipt of notice
     thereof given by Executive, (iii) failure by the Company to provide
     Executive with Base Salary as well as



     with the compensation (including without limitation bonus and other
     incentive compensation) Executive was receiving immediately prior to the
     Change of Control and with Benefits, or (iv) relocation of Executive's
     principal place of work to a location more than 30 miles from its current
     location without Executive's consent. For purposes of this definition of
     Good Reason, "Company" means Control Delivery Systems and any successor of
     Control Delivery Systems, provided if any such successor has a parent, then
     Company shall mean the ultimate parent corporation.

          "Cause" means only (a) willful malfeasance or gross negligence in the
     performance by Executive of his or her duties, resulting in material harm
     to the Company, (b) fraud or dishonesty by Executive with respect to the
     Company, or (c) Executive's conviction of any felony involving deception,
     fraud or moral turpitude. The Company may treat a termination of
     Executive's employment as termination for Cause only after (i) giving
     Executive written notice of the intention to terminate for Cause and of his
     or her right to a hearing by the Board, (ii) at least 30 days after giving
     the notice, conducting a hearing by the Board at which Executive may be
     represented by counsel, and (iii) giving Executive 30 days' written notice
     of the results of the hearing, which shall require a vote of a majority of
     the Directors then in office other than Executive. For purposes of this
     definition of Cause, no act or omission shall be considered to have been
     "willful" unless it was not in good faith and Executive had knowledge at
     the time that the act or omission was not in the best interest of the
     Company. Any act or failure to act based on authority given pursuant to a
     resolution duly adopted by the Board or based on the advice of counsel of
     the Company shall be conclusively presumed to be done, or omitted to be
     done, by Executive in good faith and in the best interest of the Company.
     Cause shall not include willful failure due to incapacity resulting from
     physical or mental illness or any actual or anticipated failure after
     Notice of Termination for Good Reason.

          "Base Salary" means $250,000, provided that in the event the Board in
     its sole discretion increases Executive's Base Salary above $250,000, the
     Base Salary as so increased will be referred to as "Base Salary."

          "Benefits" means the following plans, policies and arrangements (or in
     any successor or supplemental plans, policies or arrangements), if and to
     the extent maintained by the Company, in each case at a level appropriate
     to Executive's position as determined by the Board and in each case in
     accordance with the terms of the pertinent plan, policy or arrangement:

          (i) the Company's 2001 Incentive Plan;

          (ii) the Company's group medical plan;

          (iii) life insurance arrangements or disability plan arrangements
     provided to executive-level employees of the Company;


                                       -2-



          (iv) all the Company's equity plans in which executives of the Company
     participate;

          (v) the Company's normal expense reimbursement policies; and

          (vi) ordinary vacation arrangements provided to executive-level
     employees of the Company, including at least four weeks paid vacation in
     addition to Company holidays per year.

          (b) Severance Benefits Following a Change of Control. The Company will
     provide severance benefits to Executive as follows:

          (i) The Company will pay to Executive within 30 days of the
     termination a lump-sum cash amount equal to 200% of the sum of (x) Base
     Salary, plus (y) the greater of (1) 100 percent of his bonus for the
     completed year immediately preceding the Change of Control, and (2) 100
     percent of his bonus for the immediately preceding employment year.

          (ii) The Company will also pay to Executive within 30 days of the
     termination a pro-rata portion of his maximum bonus for the year of
     termination.

               (A) For purposes of this Section 1(b), the maximum bonus payable
          in such year will be calculated assuming all bonus targets or formulas
          for determining the bonus in such year had been met if Executive and
          Board had, prior to the termination of Executive's employment, agreed
          on such targets or formulas.

               (B) If no such targets or formulas have been set as of such
          termination date, then the maximum bonus shall be deemed to be the
          greater of (x) 100 percent of his bonus for the completed year
          immediately preceding the Change of Control, and (y) 100 percent of
          his bonus for the immediately preceding employment year.

          (iii) The Company will continue for a period of two years from the
     date of termination to provide Executive with medical benefits under the
     Company's group medical plan and life insurance arrangements and disability
     arrangements provided to executive level employees of the Company. To the
     extent the Company is unable to provide such benefits to Executive under
     its existing plans and arrangements, it will either arrange to provide
     Executive with substantially similar benefits upon comparable terms or pay
     Executive cash amounts equal to Executive's cost of obtaining such
     benefits.

          (iv) All options to purchase Company stock held by Executive will
     automatically and immediately vest and become exercisable upon such
     termination and remain exercisable for a period of one year following such
     termination, and all restricted stock held by Executive under restricted
     stock plans and arrangements of the Company shall automatically and
     immediately vest and no longer be subject to forfeiture upon such


                                       -3-



     termination. The Company agrees that it will not exercise any right that
     the Company has to purchase, repurchase or reacquire all or any part of
     such vested stock.

     2. Taxes on Severance Benefits.

     2.1 Withholding. All payments required to be made by the Company hereunder
to Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.

     2.2 Section 4999 Excise Taxes. In the event that it is determined that any
payment or benefit provided by the Company to or for the benefit of Executive,
either under this Agreement or otherwise, will be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code or any successor
provision(s) ("Section 4999"), the Company will, prior to the date on which any
amount of the excise tax must be paid or withheld, make an additional lump-sum
payment (the "Gross-up Payment") to Executive in an amount sufficient, after
giving effect to all federal, state and other taxes and charges (including
interest and penalties, if any) with respect to the gross-up payment, to make
Executive whole for all taxes (including withholding taxes) and any associated
interest and penalties, imposed under or as a result of Section 4999.

     2.3 Selection of Accounting Firm. Determinations under this Section 2 will
be made by PricewaterhouseCoopers, LLP or if PricewaterhouseCoopers, LLP is
unable or unwilling to serve or if the Company and Executive otherwise
determine, by another firm mutually agreed to by the Company and Executive (the
"Firm"). The determinations of the Firm will be binding upon the Company and
Executive except as the determinations are established in resolution (including
by settlement) of a controversy with the Internal Revenue Service to have been
incorrect. All fees and expenses of the Firm will be paid by the Company.

     2.4 IRS Claims. If the Internal Revenue Service asserts a claim that, if
successful, would require the Company to make a Gross-up Payment or an
additional Gross-up Payment, the Company and Executive will cooperate fully in
resolving the controversy with the Internal Revenue Service. The Company will
make or advance such Gross-up Payments as are necessary to prevent Executive
from having to bear the cost of payments made to the Internal Revenue Service in
the course of, or as a result of, the controversy. The Firm will determine the
amount of such Gross-up Payments or advances and will determine after final
resolution of the controversy whether any advances must be returned by Executive
to the Company. The Company will bear all expenses of the controversy and will
gross Executive up for any additional taxes that may be imposed upon Executive
as a result of its payment of such expenses.

     3. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.

     4. Fees and Expenses. In the event of Executive's termination of employment
during that period starting on the date of a Change of Control and ending on the
second anniversary of


                                       -4-



the Change of Control, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement.

     5. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.

     6. Confidentiality. Executive agrees to maintain the confidentiality of the
Company's (and its related entities and projects) books, records, financial
information, technical information, business plans and/or strategies, and other
confidential matters unless required to make disclosure in the performance of
his duties for the Company or as a result of a legal proceeding or other legally
mandated cause. Executive further agrees to abide by all of the terms of the
Confidentiality and Inventions Agreement dated as of __________.

     The parties recognize and agree that should the Company be required to
pursue a claim against Executive under this Section 6, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 8, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 6.

     7. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Incorporation and
By-laws, any separate indemnification agreements between the Company and
Executive, and any insurance policies that may be maintained by the Company.

     8. Arbitration. Except as otherwise provided in Section 6, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Either party may request that the arbitrator(s) submit written findings
of fact and


                                       -5-



conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 8.

     9. Rights of Survivors If Executive dies after becoming entitled to
benefits under Section 1 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that has been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 1 will be exercisable by the beneficiary, or if none, the estate.

     10. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the Company is not the surviving corporation), lease or
otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by
the Company or the Executive.

     11. Amendment or Modification; Waiver. This Agreement may not be amended
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement will be deemed a waiver of a subsequent
breach.

     12. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.

     13. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law, other than its choice of law principles.

     14. Entire Agreement. This Agreement (including without limitation the
Exhibits hereto) constitutes the entire agreement and supersedes conflicting
terms in all prior agreements and undertakings, both written and oral, between
Executive and the Company with respect to the subject matter hereof. Except as
otherwise set forth herein, the terms and conditions of all other agreements
with Executive, including without limitation all Restricted Stock Award
Agreements and a Confidentiality and Inventions Agreement, shall continue in
full force and effect.

     15. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:

If to the Company:

     Control Delivery Systems, Inc.
     400 Pleasant Street
     Watertown, MA 02472


                                       -6-



If to Executive:

     Paul Ashton
     19 Brimmer Street
     Boston, MA 02108

Either party may change its address for receiving notices by giving notice to
the other party.

     16. Release. Notwithstanding anything to the contrary contained in this
Agreement, in order for Executive to be eligible for the severance benefits to
be provided in accordance with this Agreement, Executive must sign (and not
revoke within seven days of signing) a release of claims in the form attached
hereto and marked Exhibit B.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -7-



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Lori H. Freedman
                                            ------------------------------------
                                        Name: Lori H. Freedman
                                        Title: Vice President, Corporate Affairs
                                               and General Counsel


                                       -8-



                                    Exhibit A

     "Change of Control" means the occurrence of any of the following events:

          (a) The acquisition by any Person or group of the ultimate beneficial
     ownership (within the meaning of Rule 13d-3 promulgated under the
     Securities Exchange Act of 1934, as amended (the "Exchange Act")) of more
     than 50% of the then outstanding securities of the Company entitled to vote
     generally in the election of directors; excluding, however, the following:
     (i) any acquisition directly from the Company (other than any acquisition
     by virtue of the exercise of an exercise, conversion or exchange privilege
     unless the security being so exercised, converted or exchanged was itself
     acquired directly from the Company); (ii) any acquisition by the Company;
     (iii) any acquisition by an employee benefit plan (or related trust)
     sponsored or maintained by the Company or by any corporation controlled by
     the Company; (iv) any acquisition by the Executive, by an Executive Related
     Party (as defined in Exhibit A) or by a group of which the Executive is a
     member; or (v) any acquisition by any corporation pursuant to a transaction
     which complies with clauses (i), (ii) and (iii) of subsection (c) of this
     Exhibit A; or

          (b) Individuals who, as of the date hereof, constitute the Board (the
     "Incumbent Board") cease for any reason to constitute at least a majority
     of the Board; provided, however, that any individual becoming a director
     subsequent to the date hereof whose election, or nomination for election,
     by the Company's shareholders, was approved by a vote of at least a
     majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest with respect to the election or removal of directors or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

          (v) A reorganization, recapitalization, merger or consolidation (a
     "Corporate Transaction") of the Company, unless (i) securities representing
     more than 50% of the then outstanding securities entitled to vote generally
     in the election of directors of the Company or the corporation resulting
     from or surviving such Corporate Transaction (or the ultimate parent of the
     Company or such corporation after such Corporate Transaction) are
     beneficially owned subsequent to such Corporate Transaction by the Person
     or Persons who were the beneficial owners of the outstanding securities of
     the Company entitled to vote generally in the election of directors
     immediately prior to such Corporate Transaction, in substantially the same
     proportions as their ownership immediately prior to such Corporate
     Transaction; (ii) no Person (excluding any corporation resulting from such
     Corporate Transaction or any employee benefit plan (or related trust) of
     the Company or such corporation resulting from such Corporate Transaction)
     ultimately beneficially owns, directly or indirectly, more than 50% of the
     then outstanding securities entitled to vote generally in the election of
     directors of the Company or the corporation resulting from or surviving
     such Corporate Transaction (or the ultimate parent of the



     Company or such corporation after such Corporate Transaction) except to the
     extent that such ownership existed prior to the Corporate Transaction; and
     (iii) at least a majority of the members of the board of directors of the
     corporation resulting from such Corporate Transaction were members of the
     Incumbent Board at the time of the execution of the initial agreement, or
     of the action of the Board, providing for such Corporate Transaction; or

          (c) The sale, transfer or other disposition of all or substantially
     all of the assets of the Company; or

          (vi) Approval by the shareholders of the Company of a complete
     liquidation or dissolution of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.

     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly owned subsidiary.

     An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.


                                      -ii-



                                    EXHIBIT B

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Amended and Restated
Change of Control Agreement between me and Control Delivery Systems, Inc. (the
"Company") dated as of August 17, 2004 (the "Agreement"), which benefits are
subject to my signing of this Release of Claims and to which I am not otherwise
entitled, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, I, on my own behalf and on behalf
of my heirs, executives, administrators, beneficiaries, representatives and
assigns, and all others connected with me, hereby release and forever discharge
the Company, its subsidiaries and other affiliates and all of their respective
past, present and future officers, directors, trustees, shareholders, employees,
agents, general and limited partners, members, managers, joint venturers,
representatives, successors and assigns, and all others connected with any of
them, both individually and in their official capacities, from any and all
causes of action, rights and claims of any type or description, known or
unknown, which I have had in the past, now have, or might now have, through the
date of my signing of this Release of Claims, in any way resulting from, arising
out of or connected with my employment by the Company or any of its subsidiaries
or other affiliates or the termination of that employment or pursuant to any
federal, state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the Company and that this


                                      -iii-



Release of Claims will take effect only upon the expiration of such seven-day
revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           -----------------------------
Name (please print):
                     -------------------
Date Signed:
             ---------------------------


                                      -iv-

                                                                    Exhibit 4.21

                              AMENDED AND RESTATED
                         CONTROL DELIVERY SYSTEMS, INC.
                           CHANGE OF CONTROL AGREEMENT

     AGREEMENT made this 17th day of August, 2004, by and between Michael J.
Soja ("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many corporations, the possibility of a Change of
Control (as defined in Exhibit A) may exist and that such possibility, and the
uncertainty and questions which it may raise among management personnel, may
result in the departure or distraction of management personnel to the detriment
of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including Executive, to their duties, to assisting the
Board in assessing proposals with respect to a Change of Control and to advising
the Board as to the best interests of the Company and its shareholders with
respect to such potential Change of Control, without distraction and conflict
arising from the possibility of a Change of Control; and

     Whereas, the Board wishes to induce Executive and other members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate in specified
circumstances following a Change of Control of the Company;

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
terms and conditions contained herein, the parties hereto agree as follows:

     1. Severance Benefits Following a Change of Control

          (a) Entitlement to Severance Benefits. If during that period starting
     on the date of a Change of Control and ending on the second anniversary of
     the Change of Control, the Company terminates Executive's employment
     without Cause, or if Executive terminates his employment for Good Reason,
     the Company will, subject to Section 2 below, provide severance benefits to
     Executive as set forth below in this Section 1.

          "Good Reason" means (i) failure by the Company to maintain Executive
     in the position of Vice President, Chief Financial Officer including
     holding the title of and serving as Vice President, Chief Financial Officer
     of the Company and having responsibility for performing all duties
     typically undertaken by such offices or assignment to Executive of duties
     materially inconsistent with such positions, (ii) the diminution in any
     material respect of Executive's positions or authority, excluding for this
     purpose an isolated, insubstantial and inadvertent action not taken in bad
     faith and which is remedied by the Company promptly after receipt of notice
     thereof given by Executive, (iii) failure by the Company to provide
     Executive with Base Salary as well as



     with the compensation (including without limitation bonus and other
     incentive compensation) Executive was receiving immediately prior to the
     Change of Control and with Benefits, or (iv) relocation of Executive's
     principal place of work to a location more than 30 miles from its current
     location without Executive's consent. For purposes of this definition of
     Good Reason, "Company" means Control Delivery Systems and any successor of
     Control Delivery Systems, provided if any such successor has a parent, then
     Company shall mean the ultimate parent corporation.

          "Cause" means only (a) willful malfeasance or gross negligence in the
     performance by Executive of his or her duties, resulting in material harm
     to the Company, (b) fraud or dishonesty by Executive with respect to the
     Company, or (c) Executive's conviction of any felony involving deception,
     fraud or moral turpitude. The Company may treat a termination of
     Executive's employment as termination for Cause only after (i) giving
     Executive written notice of the intention to terminate for Cause and of his
     or her right to a hearing by the Board, (ii) at least 30 days after giving
     the notice, conducting a hearing by the Board at which Executive may be
     represented by counsel, and (iii) giving Executive 30 days' written notice
     of the results of the hearing, which shall require a vote of a majority of
     the Directors then in office other than Executive. For purposes of this
     definition of Cause, no act or omission shall be considered to have been
     "willful" unless it was not in good faith and Executive had knowledge at
     the time that the act or omission was not in the best interest of the
     Company. Any act or failure to act based on authority given pursuant to a
     resolution duly adopted by the Board or based on the advice of counsel of
     the Company shall be conclusively presumed to be done, or omitted to be
     done, by Executive in good faith and in the best interest of the Company.
     Cause shall not include willful failure due to incapacity resulting from
     physical or mental illness or any actual or anticipated failure after
     Notice of Termination for Good Reason.

          "Base Salary" means $272,497, provided that in the event the Board in
     its sole discretion increases Executive's Base Salary above $272,497, the
     Base Salary as so increased will be referred to as "Base Salary."

          "Benefits" means the following plans, policies and arrangements (or in
     any successor or supplemental plans, policies or arrangements), if and to
     the extent maintained by the Company, in each case at a level appropriate
     to Executive's position as determined by the Board and in each case in
     accordance with the terms of the pertinent plan, policy or arrangement:

          (i) the Company's 2001 Incentive Plan;

          (ii) the Company's group medical plan;

          (iii) life insurance arrangements or disability plan arrangements
     provided to executive-level employees of the Company;


                                       -2-



          (iv) all the Company's equity plans in which executives of the Company
     participate;

          (v) the Company's normal expense reimbursement policies; and

          (vi) ordinary vacation arrangements provided to executive-level
     employees of the Company, including at least four weeks paid vacation in
     addition to Company holidays per year.

          (b) Severance Benefits Following a Change of Control. The Company will
     provide severance benefits to Executive as follows:

          (i) The Company will pay to Executive within 30 days of the
     termination a lump-sum cash amount equal to 200% of the sum of (x) Base
     Salary, plus (y) the greater of (1) 100 percent of his bonus for the
     completed year immediately preceding the Change of Control, and (2) 100
     percent of his bonus for the immediately preceding employment year.

          (ii) The Company will also pay to Executive within 30 days of the
     termination a pro-rata portion of his maximum bonus for the year of
     termination.

               (A) For purposes of this Section 1(b), the maximum bonus payable
          in such year will be calculated assuming all bonus targets or formulas
          for determining the bonus in such year had been met if Executive and
          Board had, prior to the termination of Executive's employment, agreed
          on such targets or formulas.

               (B) If no such targets or formulas have been set as of such
          termination date, then the maximum bonus shall be deemed to be the
          greater of (x) 100 percent of his bonus for the completed year
          immediately preceding the Change of Control, and (y) 100 percent of
          his bonus for the immediately preceding employment year.

          (iii) The Company will continue for a period of two years from the
     date of termination to provide Executive with medical benefits under the
     Company's group medical plan and life insurance arrangements and disability
     arrangements provided to executive level employees of the Company. To the
     extent the Company is unable to provide such benefits to Executive under
     its existing plans and arrangements, it will either arrange to provide
     Executive with substantially similar benefits upon comparable terms or pay
     Executive cash amounts equal to Executive's cost of obtaining such
     benefits.

          (iv) All options to purchase Company stock held by Executive will
     automatically and immediately vest and become exercisable upon such
     termination and remain exercisable for a period of one year following such
     termination, and all restricted stock held by Executive under restricted
     stock plans and arrangements of the Company shall automatically and
     immediately vest and no longer be subject to forfeiture upon such


                                       -3-



     termination. The Company agrees that it will not exercise any right that
     the Company has to purchase, repurchase or reacquire all or any part of
     such vested stock.

     2. Taxes on Severance Benefits.

     2.1 Withholding. All payments required to be made by the Company hereunder
to Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.

     2.2 Section 4999 Excise Taxes. In the event that it is determined that any
payment or benefit provided by the Company to or for the benefit of Executive,
either under this Agreement or otherwise, will be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code or any successor
provision(s) ("Section 4999"), the Company will, prior to the date on which any
amount of the excise tax must be paid or withheld, make an additional lump-sum
payment (the "Gross-up Payment") to Executive in an amount sufficient, after
giving effect to all federal, state and other taxes and charges (including
interest and penalties, if any) with respect to the gross-up payment, to make
Executive whole for all taxes (including withholding taxes) and any associated
interest and penalties, imposed under or as a result of Section 4999.

     2.3 Selection of Accounting Firm. Determinations under this Section 2 will
be made by PricewaterhouseCoopers, LLP or if PricewaterhouseCoopers, LLP is
unable or unwilling to serve or if the Company and Executive otherwise
determine, by another firm mutually agreed to by the Company and Executive (the
"Firm"). The determinations of the Firm will be binding upon the Company and
Executive except as the determinations are established in resolution (including
by settlement) of a controversy with the Internal Revenue Service to have been
incorrect. All fees and expenses of the Firm will be paid by the Company.

     2.4 IRS Claims. If the Internal Revenue Service asserts a claim that, if
successful, would require the Company to make a Gross-up Payment or an
additional Gross-up Payment, the Company and Executive will cooperate fully in
resolving the controversy with the Internal Revenue Service. The Company will
make or advance such Gross-up Payments as are necessary to prevent Executive
from having to bear the cost of payments made to the Internal Revenue Service in
the course of, or as a result of, the controversy. The Firm will determine the
amount of such Gross-up Payments or advances and will determine after final
resolution of the controversy whether any advances must be returned by Executive
to the Company. The Company will bear all expenses of the controversy and will
gross Executive up for any additional taxes that may be imposed upon Executive
as a result of its payment of such expenses.

     3. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.

     4. Fees and Expenses. In the event of Executive's termination of employment
during that period starting on the date of a Change of Control and ending on the
second anniversary of


                                       -4-



the Change of Control, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement.

     5. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.

     6. Confidentiality. Executive agrees to maintain the confidentiality of the
Company's (and its related entities and projects) books, records, financial
information, technical information, business plans and/or strategies, and other
confidential matters unless required to make disclosure in the performance of
his duties for the Company or as a result of a legal proceeding or other legally
mandated cause. Executive further agrees to abide by all of the terms of the
Confidentiality and Inventions Agreement dated as of __________.

     The parties recognize and agree that should the Company be required to
pursue a claim against Executive under this Section 6, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 8, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 6.

     7. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Incorporation and
By-laws, any separate indemnification agreements between the Company and
Executive, and any insurance policies that may be maintained by the Company.

     8. Arbitration. Except as otherwise provided in Section 6, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Either party may request that the arbitrator(s) submit written findings
of fact and


                                       -5-



conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 8.

     9. Rights of Survivors If Executive dies after becoming entitled to
benefits under Section 1 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that has been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 1 will be exercisable by the beneficiary, or if none, the estate.

     10. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the Company is not the surviving corporation), lease or
otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by
the Company or the Executive.

     11. Amendment or Modification; Waiver. This Agreement may not be amended
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement will be deemed a waiver of a subsequent
breach.

     12. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.

     13. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law, other than its choice of law principles.

     14. Entire Agreement. This Agreement (including without limitation the
Exhibits hereto) constitutes the entire agreement and supersedes conflicting
terms in all prior agreements and undertakings, both written and oral, between
Executive and the Company with respect to the subject matter hereof. Except as
otherwise set forth herein, the terms and conditions of all other agreements
with Executive, including without limitation all Restricted Stock Award
Agreements and a Confidentiality and Inventions Agreement, shall continue in
full force and effect.

     15. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:

If to the Company:

     Control Delivery Systems, Inc.
     400 Pleasant Street
     Watertown, MA 02472


                                       -6-



If to Executive:

     Michael J. Soja
     34 Musket Lane
     Sudbury, MA 01776

Either party may change its address for receiving notices by giving notice to
the other party.

     16. Release. Notwithstanding anything to the contrary contained in this
Agreement, in order for Executive to be eligible for the severance benefits to
be provided in accordance with this Agreement, Executive must sign (and not
revoke within seven days of signing) a release of claims in the form attached
hereto and marked Exhibit B.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -7-



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Michael J. Soja
                                            ------------------------------------
                                        Name: Michael J. Soja


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton
                                        Title: Chief Executive Officer &
                                               President


                                       -8-



                                    Exhibit A

     "Change of Control" means the occurrence of any of the following events:

          (a) The acquisition by any Person or group of the ultimate beneficial
     ownership (within the meaning of Rule 13d-3 promulgated under the
     Securities Exchange Act of 1934, as amended (the "Exchange Act")) of more
     than 50% of the then outstanding securities of the Company entitled to vote
     generally in the election of directors; excluding, however, the following:
     (i) any acquisition directly from the Company (other than any acquisition
     by virtue of the exercise of an exercise, conversion or exchange privilege
     unless the security being so exercised, converted or exchanged was itself
     acquired directly from the Company); (ii) any acquisition by the Company;
     (iii) any acquisition by an employee benefit plan (or related trust)
     sponsored or maintained by the Company or by any corporation controlled by
     the Company; (iv) any acquisition by the Executive, by an Executive Related
     Party (as defined in Exhibit A) or by a group of which the Executive is a
     member; or (v) any acquisition by any corporation pursuant to a transaction
     which complies with clauses (i), (ii) and (iii) of subsection (c) of this
     Exhibit A; or

          (b) Individuals who, as of the date hereof, constitute the Board (the
     "Incumbent Board") cease for any reason to constitute at least a majority
     of the Board; provided, however, that any individual becoming a director
     subsequent to the date hereof whose election, or nomination for election,
     by the Company's shareholders, was approved by a vote of at least a
     majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest with respect to the election or removal of directors or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

          (v) A reorganization, recapitalization, merger or consolidation (a
     "Corporate Transaction") of the Company, unless (i) securities representing
     more than 50% of the then outstanding securities entitled to vote generally
     in the election of directors of the Company or the corporation resulting
     from or surviving such Corporate Transaction (or the ultimate parent of the
     Company or such corporation after such Corporate Transaction) are
     beneficially owned subsequent to such Corporate Transaction by the Person
     or Persons who were the beneficial owners of the outstanding securities of
     the Company entitled to vote generally in the election of directors
     immediately prior to such Corporate Transaction, in substantially the same
     proportions as their ownership immediately prior to such Corporate
     Transaction; (ii) no Person (excluding any corporation resulting from such
     Corporate Transaction or any employee benefit plan (or related trust) of
     the Company or such corporation resulting from such Corporate Transaction)
     ultimately beneficially owns, directly or indirectly, more than 50% of the
     then outstanding securities entitled to vote generally in the election of
     directors of the Company or the corporation resulting from or surviving
     such Corporate Transaction (or the ultimate parent of the


     Company or such corporation after such Corporate Transaction) except to the
     extent that such ownership existed prior to the Corporate Transaction; and
     (iii) at least a majority of the members of the board of directors of the
     corporation resulting from such Corporate Transaction were members of the
     Incumbent Board at the time of the execution of the initial agreement, or
     of the action of the Board, providing for such Corporate Transaction; or

          (c) The sale, transfer or other disposition of all or substantially
     all of the assets of the Company; or

          (vi) Approval by the shareholders of the Company of a complete
     liquidation or dissolution of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.

     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly owned subsidiary.

     An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.


                                      -ii-



                                    EXHIBIT B

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Amended and Restated
Change of Control Agreement between me and Control Delivery Systems, Inc. (the
"Company") dated as of August 17, 2004 (the "Agreement"), which benefits are
subject to my signing of this Release of Claims and to which I am not otherwise
entitled, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, I, on my own behalf and on behalf
of my heirs, executives, administrators, beneficiaries, representatives and
assigns, and all others connected with me, hereby release and forever discharge
the Company, its subsidiaries and other affiliates and all of their respective
past, present and future officers, directors, trustees, shareholders, employees,
agents, general and limited partners, members, managers, joint venturers,
representatives, successors and assigns, and all others connected with any of
them, both individually and in their official capacities, from any and all
causes of action, rights and claims of any type or description, known or
unknown, which I have had in the past, now have, or might now have, through the
date of my signing of this Release of Claims, in any way resulting from, arising
out of or connected with my employment by the Company or any of its subsidiaries
or other affiliates or the termination of that employment or pursuant to any
federal, state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the Company and that this


                                      -iii-



Release of Claims will take effect only upon the expiration of such seven-day
revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           --------------------------
Name (please print):
                     ----------------
Date Signed:
             ------------------------


                                      -iv-

                                                                    Exhibit 4.22

                              AMENDED AND RESTATED
                         CONTROL DELIVERY SYSTEMS, INC.
                           CHANGE OF CONTROL AGREEMENT

     AGREEMENT made this 17th day of August, 2004, by and between Lori Freedman
("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many corporations, the possibility of a Change of
Control (as defined in Exhibit A) may exist and that such possibility, and the
uncertainty and questions which it may raise among management personnel, may
result in the departure or distraction of management personnel to the detriment
of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including Executive, to their duties, to assisting the
Board in assessing proposals with respect to a Change of Control and to advising
the Board as to the best interests of the Company and its shareholders with
respect to such potential Change of Control, without distraction and conflict
arising from the possibility of a Change of Control; and

     Whereas, the Board wishes to induce Executive and other members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate in specified
circumstances following a Change of Control of the Company;

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
terms and conditions contained herein, the parties hereto agree as follows:

     1. Severance Benefits Following a Change of Control

          (a) Entitlement to Severance Benefits. If during that period starting
     on the date of a Change of Control and ending on the second anniversary of
     the Change of Control, the Company terminates Executive's employment
     without Cause, or if Executive terminates his employment for Good Reason,
     the Company will, subject to Section 2 below, provide severance benefits to
     Executive as set forth below in this Section 1.

          "Good Reason" means (i) failure by the Company to maintain Executive
     in the positions of Vice President, Corporate Affairs, General Counsel and
     Secretary including holding the title of and serving as Vice President,
     Corporate Affairs, General Counsel and Secretary of the Company and having
     responsibility for performing all duties typically undertaken by such
     offices or assignment to Executive of duties materially inconsistent with
     such positions, (ii) the diminution in any material respect of Executive's
     positions or authority, excluding for this purpose an isolated,
     insubstantial and inadvertent action not taken in bad faith and which is
     remedied by the Company promptly after receipt of notice thereof given by
     Executive, (iii) failure by the Company to provide Executive with Base



     Salary as well as with the compensation (including without limitation,
     bonus and other incentive compensation) Executive was receiving immediately
     prior to the Change of Control and with Benefits, or (iv) relocation of
     Executive's principal place of work to a location more than 30 miles from
     its current location without Executive's consent. For purposes of this
     definition of Good Reason, "Company" means Control Delivery Systems and any
     successor of Control Delivery Systems, provided if any such successor has a
     parent, then Company shall mean the ultimate parent corporation.

          "Cause" means only (a) willful malfeasance or gross negligence in the
     performance by Executive of his or her duties, resulting in material harm
     to the Company, (b) fraud or dishonesty by Executive with respect to the
     Company, or (c) Executive's conviction of any felony involving deception,
     fraud or moral turpitude. The Company may treat a termination of
     Executive's employment as termination for Cause only after (i) giving
     Executive written notice of the intention to terminate for Cause and of his
     or her right to a hearing by the Board, (ii) at least 30 days after giving
     the notice, conducting a hearing by the Board at which Executive may be
     represented by counsel, and (iii) giving Executive 30 days' written notice
     of the results of the hearing, which shall require a vote of a majority of
     the Directors then in office other than Executive. For purposes of this
     definition of Cause, no act or omission shall be considered to have been
     "willful" unless it was not in good faith and Executive had knowledge at
     the time that the act or omission was not in the best interest of the
     Company. Any act or failure to act based on authority given pursuant to a
     resolution duly adopted by the Board or based on the advice of counsel of
     the Company shall be conclusively presumed to be done, or omitted to be
     done, by Executive in good faith and in the best interest of the Company.
     Cause shall not include willful failure due to incapacity resulting from
     physical or mental illness or any actual or anticipated failure after
     Notice of Termination for Good Reason.

          "Base Salary" means $272,497, provided that in the event the Board in
     its sole discretion increases Executive's Base Salary above $272,497, the
     Base Salary as so increased will be referred to as "Base Salary."

          "Benefits"means the following plans, policies and arrangements (or in
     any successor or supplemental plans, policies or arrangements), if and to
     the extent maintained by the Company, in each case at a level appropriate
     to Executive's position as determined by the Board and in each case in
     accordance with the terms of the pertinent plan, policy or arrangement:

          (i) the Company's 2001 Incentive Plan;

          (ii) the Company's group medical plan;

          (iii) life insurance arrangements or disability plan arrangements
     provided to executive-level employees of the Company;


                                       -2-



          (iv) all the Company's equity plans in which executives of the Company
     participate;

          (v) the Company's normal expense reimbursement policies; and

          (vi) ordinary vacation arrangements provided to executive-level
     employees of the Company, including at least four weeks paid vacation in
     addition to Company holidays per year.

          (b) Severance Benefits Following a Change of Control. The Company will
     provide severance benefits to Executive as follows:

          (i) The Company will pay to Executive within 30 days of the
     termination a lump-sum cash amount equal to 200% of the sum of (x) Base
     Salary, plus (y) the greater of (1) 100 percent of his bonus for the
     completed year immediately preceding the Change of Control, and (2) 100
     percent of his bonus for the immediately preceding employment year.

          (ii) The Company will also pay to Executive within 30 days of the
     termination a pro-rata portion of his maximum bonus for the year of
     termination.

               (A) For purposes of this Section 1(b), the maximum bonus payable
          in such year will be calculated assuming all bonus targets or formulas
          for determining the bonus in such year had been met if Executive and
          Board had, prior to the termination of Executive's employment, agreed
          on such targets or formulas.

               (B) If no such targets or formulas have been set as of such
          termination date, then the maximum bonus shall be deemed to be the
          greater of (x) 100 percent of his bonus for the completed year
          immediately preceding the Change of Control, and (y) 100 percent of
          his bonus for the immediately preceding employment year.

          (iii) The Company will continue for a period of two years from the
     date of termination to provide Executive with medical benefits under the
     Company's group medical plan and life insurance arrangements and disability
     arrangements provided to executive level employees of the Company. To the
     extent the Company is unable to provide such benefits to Executive under
     its existing plans and arrangements, it will either arrange to provide
     Executive with substantially similar benefits upon comparable terms or pay
     Executive cash amounts equal to Executive's cost of obtaining such
     benefits.

          (iv) All options to purchase Company stock held by Executive will
     automatically and immediately vest and become exercisable upon such
     termination and remain exercisable for a period of one year following such
     termination, and all restricted stock held by Executive under restricted
     stock plans and arrangements of the Company shall automatically and
     immediately vest and no longer be subject to forfeiture upon such


                                       -3-



     termination. The Company agrees that it will not exercise any right that
     the Company has to purchase, repurchase or reacquire all or any part of
     such vested stock.

     2. Taxes on Severance Benefits.

     2.1 Withholding. All payments required to be made by the Company hereunder
to Executive or his dependents, beneficiaries, or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll deductions as
may be required by law.

     2.2 Section 4999 Excise Taxes. In the event that it is determined that any
payment or benefit provided by the Company to or for the benefit of Executive,
either under this Agreement or otherwise, will be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code or any successor
provision(s) ("Section 4999"), the Company will, prior to the date on which any
amount of the excise tax must be paid or withheld, make an additional lump-sum
payment (the "Gross-up Payment") to Executive in an amount sufficient, after
giving effect to all federal, state and other taxes and charges (including
interest and penalties, if any) with respect to the gross-up payment, to make
Executive whole for all taxes (including withholding taxes) and any associated
interest and penalties, imposed under or as a result of Section 4999.

     2.3 Selection of Accounting Firm. Determinations under this Section 2 will
be made by PricewaterhouseCoopers, LLP or if PricewaterhouseCoopers, LLP is
unable or unwilling to serve or if the Company and Executive otherwise
determine, by another firm mutually agreed to by the Company and Executive (the
"Firm"). The determinations of the Firm will be binding upon the Company and
Executive except as the determinations are established in resolution (including
by settlement) of a controversy with the Internal Revenue Service to have been
incorrect. All fees and expenses of the Firm will be paid by the Company.

     2.4 IRS Claims. If the Internal Revenue Service asserts a claim that, if
successful, would require the Company to make a Gross-up Payment or an
additional Gross-up Payment, the Company and Executive will cooperate fully in
resolving the controversy with the Internal Revenue Service. The Company will
make or advance such Gross-up Payments as are necessary to prevent Executive
from having to bear the cost of payments made to the Internal Revenue Service in
the course of, or as a result of, the controversy. The Firm will determine the
amount of such Gross-up Payments or advances and will determine after final
resolution of the controversy whether any advances must be returned by Executive
to the Company. The Company will bear all expenses of the controversy and will
gross Executive up for any additional taxes that may be imposed upon Executive
as a result of its payment of such expenses.

     3. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.

     4. Fees and Expenses. In the event of Executive's termination of employment
during that period starting on the date of a Change of Control and ending on the
second anniversary of


                                       -4-



the Change of Control, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement.

     5. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.

     6. Confidentiality. Executive agrees to maintain the confidentiality of the
Company's (and its related entities and projects) books, records, financial
information, technical information, business plans and/or strategies, and other
confidential matters unless required to make disclosure in the performance of
his duties for the Company or as a result of a legal proceeding or other legally
mandated cause. Executive further agrees to abide by all of the terms of the
Confidentiality and Inventions Agreement dated as of ________.

     The parties recognize and agree that should the Company be required to
pursue a claim against Executive under this Section 6, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 8, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 6.

     7. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Incorporation and
By-laws, any separate indemnification agreements between the Company and
Executive, and any insurance policies that may be maintained by the Company.

     8. Arbitration. Except as otherwise provided in Section 6, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Either party may request that the arbitrator(s) submit written findings
of fact and


                                       -5-



conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 8.

     9. Rights of Survivors If Executive dies after becoming entitled to
benefits under Section 1 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that has been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 1 will be exercisable by the beneficiary, or if none, the estate.

     10. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the Company is not the surviving corporation), lease or
otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by
the Company or the Executive.

     11. Amendment or Modification; Waiver. This Agreement may not be amended
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement will be deemed a waiver of a subsequent
breach.

     12. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.

     13. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law, other than its choice of law principles.

     14. Entire Agreement. This Agreement (including without limitation the
Exhibits hereto) constitutes the entire agreement and supersedes conflicting
terms in all prior agreements and undertakings, both written and oral, between
Executive and the Company with respect to the subject matter hereof. Except as
otherwise set forth herein, the terms and conditions of all other agreements
with Executive, including without limitation all Restricted Stock Award
Agreements and a Confidentiality and Inventions Agreement, shall continue in
full force and effect.

     15. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:

If to the Company:

     Control Delivery Systems, Inc.
     400 Pleasant Street
     Watertown, MA 02472


                                       -6-



If to Executive:

     Lori Freedman
     21 Swan Road
     Winchester, MA 01890

Either party may change its address for receiving notices by giving notice to
the other party.

     16. Release. Notwithstanding anything to the contrary contained in this
Agreement, in order for Executive to be eligible for the severance benefits to
be provided in accordance with this Agreement, Executive must sign (and not
revoke within seven days of signing) a release of claims in the form attached
hereto and marked Exhibit B.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -7-



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Lori Freedman
                                            ------------------------------------
                                        Name: Lori Freedman


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Michael J. Soja
                                            ------------------------------------
                                        Name: Michael J. Soja
                                        Title: Vice President, Chief Financial
                                               Officer


                                       -8-



                                    Exhibit A

     "Change of Control" means the occurrence of any of the following events:

          (a) The acquisition by any Person or group of the ultimate beneficial
     ownership (within the meaning of Rule 13d-3 promulgated under the
     Securities Exchange Act of 1934, as amended (the "Exchange Act")) of more
     than 50% of the then outstanding securities of the Company entitled to vote
     generally in the election of directors; excluding, however, the following:
     (i) any acquisition directly from the Company (other than any acquisition
     by virtue of the exercise of an exercise, conversion or exchange privilege
     unless the security being so exercised, converted or exchanged was itself
     acquired directly from the Company); (ii) any acquisition by the Company;
     (iii) any acquisition by an employee benefit plan (or related trust)
     sponsored or maintained by the Company or by any corporation controlled by
     the Company; (iv) any acquisition by the Executive, by an Executive Related
     Party (as defined in Exhibit A) or by a group of which the Executive is a
     member; or (v) any acquisition by any corporation pursuant to a transaction
     which complies with clauses (i), (ii) and (iii) of subsection (c) of this
     Exhibit A; or

          (b) Individuals who, as of the date hereof, constitute the Board (the
     "Incumbent Board") cease for any reason to constitute at least a majority
     of the Board; provided, however, that any individual becoming a director
     subsequent to the date hereof whose election, or nomination for election,
     by the Company's shareholders, was approved by a vote of at least a
     majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest with respect to the election or removal of directors or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

          (v) A reorganization, recapitalization, merger or consolidation (a
     "Corporate Transaction") of the Company, unless (i) securities representing
     more than 50% of the then outstanding securities entitled to vote generally
     in the election of directors of the Company or the corporation resulting
     from or surviving such Corporate Transaction (or the ultimate parent of the
     Company or such corporation after such Corporate Transaction) are
     beneficially owned subsequent to such Corporate Transaction by the Person
     or Persons who were the beneficial owners of the outstanding securities of
     the Company entitled to vote generally in the election of directors
     immediately prior to such Corporate Transaction, in substantially the same
     proportions as their ownership immediately prior to such Corporate
     Transaction; (ii) no Person (excluding any corporation resulting from such
     Corporate Transaction or any employee benefit plan (or related trust) of
     the Company or such corporation resulting from such Corporate Transaction)
     ultimately beneficially owns, directly or indirectly, more than 50% of the
     then outstanding securities entitled to vote generally in the election of
     directors of the Company or the corporation resulting from or surviving
     such Corporate Transaction (or the ultimate parent of the



     Company or such corporation after such Corporate Transaction) except to the
     extent that such ownership existed prior to the Corporate Transaction; and
     (iii) at least a majority of the members of the board of directors of the
     corporation resulting from such Corporate Transaction were members of the
     Incumbent Board at the time of the execution of the initial agreement, or
     of the action of the Board, providing for such Corporate Transaction; or

          (c) The sale, transfer or other disposition of all or substantially
     all of the assets of the Company; or

          (vi) Approval by the shareholders of the Company of a complete
     liquidation or dissolution of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.

     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly owned subsidiary.

     An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.


                                      -ii-



                                    EXHIBIT B

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Amended and Restated
Change of Control Agreement between me and Control Delivery Systems, Inc. (the
"Company") dated as of August 17, 2004 (the "Agreement"), which benefits are
subject to my signing of this Release of Claims and to which I am not otherwise
entitled, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, I, on my own behalf and on behalf
of my heirs, executives, administrators, beneficiaries, representatives and
assigns, and all others connected with me, hereby release and forever discharge
the Company, its subsidiaries and other affiliates and all of their respective
past, present and future officers, directors, trustees, shareholders, employees,
agents, general and limited partners, members, managers, joint venturers,
representatives, successors and assigns, and all others connected with any of
them, both individually and in their official capacities, from any and all
causes of action, rights and claims of any type or description, known or
unknown, which I have had in the past, now have, or might now have, through the
date of my signing of this Release of Claims, in any way resulting from, arising
out of or connected with my employment by the Company or any of its subsidiaries
or other affiliates or the termination of that employment or pursuant to any
federal, state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the Company and that this


                                      -iii-



Release of Claims will take effect only upon the expiration of such seven-day
revocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           -----------------------------
Name (please print):
                     -------------------
Date Signed:
             ---------------------------


                                      -iv-

                                                                    Exhibit 4.23

                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     AGREEMENT made this 20th day of February, 2004, by and between Paul Ashton
("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that the possibility of additional layoffs and/or hibernation exists and that
such possibility, and the uncertainty and questions which it may raise among
certain key management personnel, may result in the departure or distraction of
such management personnel to the detriment of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of certain key
members of the Company's management, including Executive, to their duties, to
assist the Board and the Company in maximizing the value of the Company, without
distraction; and

     Whereas, the Board wishes to induce Executive and other key members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate on or before October 7,
2005;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Severance Benefits. If on or before October 7, 2005 the Company terminates
     Executive's employment without Cause, or if Executive terminates his or her
     employment for Good Reason, the Company will provide severance benefits to
     Executive as follows:

     a.   All of the shares of restricted stock granted to Executive will
          automatically and immediately vest upon such termination.

     b.   All options to purchase Company stock held by Executive will
          automatically and immediately vest and become exercisable upon such
          termination and remain exercisable for a period of six months
          following such termination (or three months in the case of incentive
          stock options).

     c.   The Company will pay to Executive within 30 days of the termination a
          lump-sum cash amount equal to the sum of (x) an amount equal to six
          months' Base Salary plus (y) a pro-rated portion of the maximum bonus
          that would otherwise be payable in the year of termination, if any.
          "Base Salary" means Executive's base salary on the date of this
          agreement. For purposes of this Agreement, the maximum bonus payable
          in any year will be calculated assuming all bonus targets or formulas
          for determining the bonus in such year had been met if Executive and
          Board had, prior to the termination of Executive's employment, agreed
          on such targets or formulas. If no such targets or formulas have been
          set as of such termination date, then the



          maximum bonus shall be deemed to be the actual bonus paid to Executive
          during the preceding fiscal year.

     d.   The Company will continue for a period of six months from the date of
          termination to provide Executive with the following benefits: (1) the
          Company's group medical plan, and (2) life insurance arrangements or
          disability plan arrangements provided to executive-level employees of
          the Company. To the extent that the Company is unable to provide such
          benefits to Executive under its existing plans and arrangements, it
          will pay Executive cash amounts equal to the cost the Company would
          have incurred to provide those benefits.

2.   Definitions.

     a.   "Cause" means only (a) willful malfeasance or gross negligence in the
          performance by Executive of his or her duties, resulting in material
          harm to the Company, (b) fraud or dishonesty by Executive with respect
          to the Company, or (c) Executive's conviction of any felony involving
          deception, fraud or moral turpitude. The Company may treat a
          termination of Executive's employment as termination for Cause only
          after (i) giving Executive written notice of the intention to
          terminate for Cause and of his or her right to a hearing by the Board,
          (ii) at least 30 days after giving the notice, conducting a hearing by
          the Board at which Executive may be represented by counsel, and (iii)
          giving Executive 30 days' written notice of the results of the
          hearing, which shall require a vote of a majority of the Directors
          then in office other than Executive. For purposes of this definition
          of Cause, no act or omission shall be considered to have been
          "willful" unless it was not in good faith and Executive had knowledge
          at the time that the act or omission was not in the best interest of
          the Company. Any act or failure to act based on authority given
          pursuant to a resolution duly adopted by the Board or based on the
          advice of counsel of the Company shall be conclusively presumed to be
          done, or omitted to be done, by Executive in good faith and in the
          best interest of the Company. Cause shall not include willful failure
          due to incapacity resulting from physical or mental illness or any
          actual or anticipated failure after Notice of Termination for Good
          Reason.

     b.   "Good Reason" means (i) failure by the Company to maintain Executive
          in the positions of Chief Executive Officer and President including
          holding the title of and serving as Chief Executive Officer and
          President of the Company and having responsibility for performing all
          duties typically undertaken by such offices or assignment to Executive
          of duties materially inconsistent with such positions, (ii) the
          diminution in any material respect of Executive's positions or
          authority, excluding for this purpose an isolated, insubstantial and
          inadvertent action not taken in bad faith and which is remedied by the
          Company promptly after receipt of notice thereof given by Executive,
          (iii) failure by the Company to provide Executive with Base Salary,
          benefits and other compensation (including without limitation bonus
          and other incentive compensation) Executive was receiving as of the
          date of this Agreement, or (iv) relocation of Executive's principal
          place of



          work to a location more than 30 miles from its current location
          without Executive's consent. For purposes of this definition of Good
          Reason, "Company" means Control Delivery Systems and any successor of
          Control Delivery Systems, provided if any such successor has a parent,
          then Company shall mean the ultimate parent corporation.

3.   Change of Control. Notwithstanding anything in this Agreement to the
     contrary (including without limitation Sections 1, 2 and 11 of this
     Agreement), if Executive is eligible for the benefits prescribed in the
     Change of Control Agreement between Executive and Company of even date
     herewith (the "Change of Control Agreement"), then Executive shall receive
     the benefits prescribed in the Change of Control Agreement and will not be
     eligible for benefits under this Agreement and the Company will have no
     obligation or liability to Executive under this Agreement.

4.   Terminability of Employment. This Agreement does not constitute a contract
     of employment for a specific term. Employment with the Company is at-will.
     The Company may at any time terminate Executive's employment with the
     Company with or without notice or Cause.

5.   Termination by the Company for Cause or by Executive Without Good Reason.
     If the Company terminates Executive's employment for Cause or if Executive
     terminates his employment other than for Good Reason, the Company will have
     no obligation or liability to Executive under this Agreement.

6.   Withholding. All payments required to be made by the Company to Executive
     under this Agreement will be subject to the withholding of such amounts, if
     any, relating to tax and other payroll deductions as may be required by
     law.

7.   Confidentiality, Non-Competition and Exclusivity. Executive further agrees
     to abide by all of the terms of the Confidentiality and Inventions
     Agreement dated as of July 27, 2001 ("Confidentiality and Inventions
     Agreement"). The parties recognize and agree that should the Company be
     required to pursue a claim against Executive under the Confidentiality and
     Inventions Agreement, the Company will likely be required to seek
     injunctive relief as well as damages at law. Accordingly, Section 8,
     Arbitration, will not apply to any action by the Company against Executive
     under the Confidentiality and Inventions Agreement.

8.   Arbitration. Except as otherwise provided in Section 7, any dispute or
     controversy between the parties involving the construction or application
     of this Agreement, or any claim arising out of or relating to this
     Agreement, or any claim arising out of or relating to Executive's
     employment by the Company that is not resolved within ten days by the
     parties will be settled by arbitration in Boston, Massachusetts, in
     accordance with the rules of the American Arbitration Association then in
     effect, and judgment upon the award rendered by the arbitrator(s) may be
     entered in any court having jurisdiction thereof. The Company and Executive
     agree that the arbitrator(s) will have no authority to award punitive or
     exemplary damages or so-called



     consequential or remote damages such as damages for emotional distress. Any
     decision of the arbitrator(s) will be final and binding upon the parties.
     Either party may request that the arbitrator(s) submit written findings of
     fact and conclusions of law. The parties agree and understand that they
     hereby waive their rights to a jury trial of any dispute or controversy
     relating to the matters specified above in this Section.

9.   Termination upon Death or Disability. If Executive ceases to be an employee
     of the Company as a result of death or disability, the Company will have no
     further obligation or liability to Executive under this Agreement. However,
     nothing in this Agreement is intended to interfere with the rights of
     Executive and his family or beneficiaries under other applicable plans,
     policies or arrangements of the Company applicable in the event of death or
     disability.

10.  Rights of Survivors If Executive dies after becoming entitled to benefits
     under Section 1 following termination of employment but before all such
     benefits have been provided, all unpaid cash amounts will be paid to the
     beneficiary that has been designated by Executive in writing (the
     "beneficiary"), or if none, to Executive's estate.

11.  Successors. This Agreement will inure to and be binding upon the Company's
     successors. The Company will require any successor to all or substantially
     all of the business and/or assets of the Company by sale, merger or
     consolidation (where the Company is not the surviving corporation), lease
     or otherwise, to assume this Agreement. This Agreement is not otherwise
     assignable by the Company or the Executive.

12.  Amendment or Modification; Waiver. This Agreement may not be amended unless
     agreed to in writing by Executive and an expressly authorized officer of
     the Company. No waiver by either party of any breach of this Agreement will
     be deemed a waiver of a subsequent breach.

13.  Controlling Law. This Agreement will be controlled and interpreted pursuant
     to Massachusetts law, other than its choice of law principles.

14.  Entire Agreement. This Agreement constitutes the entire agreement and
     supersedes conflicting terms in all prior agreements and undertakings, both
     written and oral, between Executive and the Company with respect to the
     subject matter hereof. Except as otherwise set forth herein, the terms and
     conditions of all other agreements with Executive, including without
     limitation all Restricted Stock Award Agreements, Stock Option Grant
     Agreements, the Change of Control Agreement and the Confidentiality and
     Inventions Agreement, shall continue in full force and effect.

15.  Notices. Any notices required or permitted to be sent under this Agreement
     shall be effective when delivered by hand or mailed by registered or
     certified mail, return receipt requested, and addressed as follows:



     If to the Company:

          Control Delivery Systems, Inc.
          400 Pleasant Street
          Watertown, MA 02472

     If to Executive:

          Paul Ashton
          19 Brimmer Street
          Boston, MA 02108

     Either party may change its address for receiving notices by giving notice
     to the other party.

16.  Release. Notwithstanding anything to the contrary contained in this
     Agreement, in order for Executive to be eligible for the severance benefits
     to be provided in accordance with this Agreement, Executive must sign (and
     not revoke within seven days of signing) a release of claims in the form
     attached hereto and marked Exhibit A.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Lori H. Freedman
                                            ------------------------------------
                                        Name: Lori H. Freedman
                                        Title: Vice President, Corporate Affairs
                                               & General Counsel



                                    EXHIBIT A

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Severance Agreement
between me and Control Delivery Systems, Inc. (the "Company") dated as of
February 20, 2004 (the "Agreement"), which benefits are subject to my signing of
this Release of Claims and to which I am not otherwise entitled, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, I, on my own behalf and on behalf of my heirs, executives,
administrators, beneficiaries, representatives and assigns, and all others
connected with me, hereby release and forever discharge the Company, its
subsidiaries and other affiliates and all of their respective past, present and
future officers, directors, trustees, shareholders, employees, agents, general
and limited partners, members, managers, joint venturers, representatives,
successors and assigns, and all others connected with any of them, both
individually and in their official capacities, from any and all causes of
action, rights and claims of any type or description, known or unknown, which I
have had in the past, now have, or might now have, through the date of my
signing of this Release of Claims, in any way resulting from, arising out of or
connected with my employment by the Company or any of its subsidiaries or other
affiliates or the termination of that employment or pursuant to any federal,
state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the



Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           -----------------------------
Name (please print):
                     -------------------
Date Signed:
             ---------------------------

                                                                    Exhibit 4.24

                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     AGREEMENT made this 20th day of February, 2004, by and between Michael J.
Soja ("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that the possibility of additional layoffs and/or hibernation exists and that
such possibility, and the uncertainty and questions which it may raise among
certain key management personnel, may result in the departure or distraction of
such management personnel to the detriment of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of certain key
members of the Company's management, including Executive, to their duties, to
assist the Board and the Company in maximizing the value of the Company, without
distraction; and

     Whereas, the Board wishes to induce Executive and other key members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate on or before October 7,
2005;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Severance Benefits. If on or before October 7, 2005 the Company terminates
     Executive's employment without Cause, or if Executive terminates his or her
     employment for Good Reason, the Company will provide severance benefits to
     Executive as follows:

     a.   All of the shares of restricted stock granted to Executive will
          automatically and immediately vest upon such termination, including
          without limitation the following shares: 14,040 shares of restricted
          stock granted on May 28, 2003; 30,046 shares of restricted stock
          granted on October 7, 2003; 5,954 shares of restricted stock granted
          on October 7, 2003; 10,000 shares of restricted stock granted on
          October 7, 2003.

     b.   All options to purchase Company stock held by Executive will
          automatically and immediately vest and become exercisable upon such
          termination and remain exercisable for a period of six months
          following such termination (or three months in the case of incentive
          stock options).

     c.   The Company will pay to Executive within 30 days of the termination a
          lump-sum cash amount equal to the sum of (x) an amount equal to six
          months' Base Salary plus (y) a pro-rated portion of the maximum bonus
          that would otherwise be payable in the year of termination, if any.
          "Base Salary" means Executive's base salary on the date of this
          agreement. For purposes of this Agreement, the maximum bonus payable
          in any year will be calculated



          assuming all bonus targets or formulas for determining the bonus in
          such year had been met if Executive and Board had, prior to the
          termination of Executive's employment, agreed on such targets or
          formulas. If no such targets or formulas have been set as of such
          termination date, then the maximum bonus shall be deemed to be the
          actual bonus paid to Executive during the preceding fiscal year.

     d.   The Company will continue for a period of six months from the date of
          termination to provide Executive with the following benefits: (1) the
          Company's group medical plan, and (2) life insurance arrangements or
          disability plan arrangements provided to executive-level employees of
          the Company. To the extent that the Company is unable to provide such
          benefits to Executive under its existing plans and arrangements, it
          will pay Executive cash amounts equal to the cost the Company would
          have incurred to provide those benefits.

2.   Definitions.

     a.   "Cause" means only (a) willful malfeasance or gross negligence in the
          performance by Executive of his or her duties, resulting in material
          harm to the Company, (b) fraud or dishonesty by Executive with respect
          to the Company, or (c) Executive's conviction of any felony involving
          deception, fraud or moral turpitude. The Company may treat a
          termination of Executive's employment as termination for Cause only
          after (i) giving Executive written notice of the intention to
          terminate for Cause and of his or her right to a hearing by the Board,
          (ii) at least 30 days after giving the notice, conducting a hearing by
          the Board at which Executive may be represented by counsel, and (iii)
          giving Executive 30 days' written notice of the results of the
          hearing, which shall require a vote of a majority of the Directors
          then in office other than Executive. For purposes of this definition
          of Cause, no act or omission shall be considered to have been
          "willful" unless it was not in good faith and Executive had knowledge
          at the time that the act or omission was not in the best interest of
          the Company. Any act or failure to act based on authority given
          pursuant to a resolution duly adopted by the Board or based on the
          advice of counsel of the Company shall be conclusively presumed to be
          done, or omitted to be done, by Executive in good faith and in the
          best interest of the Company. Cause shall not include willful failure
          due to incapacity resulting from physical or mental illness or any
          actual or anticipated failure after Notice of Termination for Good
          Reason.

     b.   "Good Reason" means (i) failure by the Company to maintain Executive
          in the position of Vice President, Chief Financial Officer including
          holding the title of and serving as Vice President, Chief Financial
          Officer of the Company and having responsibility for performing all
          duties typically undertaken by such offices or assignment to Executive
          of duties materially inconsistent with such positions, (ii) the
          diminution in any material respect of Executive's positions or
          authority, excluding for this purpose an isolated, insubstantial and
          inadvertent action not taken in bad faith and which is remedied by the
          Company promptly



          after receipt of notice thereof given by Executive, (iii) failure by
          the Company to provide Executive with Base Salary, benefits and other
          compensation (including without limitation bonus and other incentive
          compensation) Executive was receiving as of the date of this
          Agreement, or (iv) relocation of Executive's principal place of work
          to a location more than 30 miles from its current location without
          Executive's consent. For purposes of this definition of Good Reason,
          "Company" means Control Delivery Systems and any successor of Control
          Delivery Systems, provided if any such successor has a parent, then
          Company shall mean the ultimate parent corporation.

3.   Change of Control. Notwithstanding anything in this Agreement to the
     contrary (including without limitation Sections 1, 2 and 11 of this
     Agreement), if Executive is eligible for the benefits prescribed in the
     Change of Control Agreement between Executive and Company of even date
     herewith (the "Change of Control Agreement"), then Executive shall receive
     the benefits prescribed in the Change of Control Agreement and will not be
     eligible for benefits under this Agreement and the Company will have no
     obligation or liability to Executive under this Agreement.

4.   Terminability of Employment. This Agreement does not constitute a contract
     of employment for a specific term. Employment with the Company is at-will.
     The Company may at any time terminate Executive's employment with the
     Company with or without notice or Cause.

5.   Termination by the Company for Cause or by Executive Without Good Reason.
     If the Company terminates Executive's employment for Cause or if Executive
     terminates his employment other than for Good Reason, the Company will have
     no obligation or liability to Executive under this Agreement.

6.   Withholding. All payments required to be made by the Company to Executive
     under this Agreement will be subject to the withholding of such amounts, if
     any, relating to tax and other payroll deductions as may be required by
     law.

7.   Confidentiality, Non-Competition and Exclusivity. Executive further agrees
     to abide by all of the terms of the Employee Confidentiality, Proprietary
     Rights and Noncompetition Agreement dated as of February 26, 2001
     ("Confidentiality and Inventions Agreement"). The parties recognize and
     agree that should the Company be required to pursue a claim against
     Executive under the Confidentiality and Inventions Agreement, the Company
     will likely be required to seek injunctive relief as well as damages at
     law. Accordingly, Section 8, Arbitration, will not apply to any action by
     the Company against Executive under the Confidentiality and Inventions
     Agreement.

8.   Arbitration. Except as otherwise provided in Section 7, any dispute or
     controversy between the parties involving the construction or application
     of this Agreement, or any claim arising out of or relating to this
     Agreement, or any claim arising out of or relating to Executive's
     employment by the Company that is not resolved within ten



     days by the parties will be settled by arbitration in Boston,
     Massachusetts, in accordance with the rules of the American Arbitration
     Association then in effect, and judgment upon the award rendered by the
     arbitrator(s) may be entered in any court having jurisdiction thereof. The
     Company and Executive agree that the arbitrator(s) will have no authority
     to award punitive or exemplary damages or so-called consequential or remote
     damages such as damages for emotional distress. Any decision of the
     arbitrator(s) will be final and binding upon the parties. Either party may
     request that the arbitrator(s) submit written findings of fact and
     conclusions of law. The parties agree and understand that they hereby waive
     their rights to a jury trial of any dispute or controversy relating to the
     matters specified above in this Section.

9.   Termination upon Death or Disability. If Executive ceases to be an employee
     of the Company as a result of death or disability, the Company will have no
     further obligation or liability to Executive under this Agreement. However,
     nothing in this Agreement is intended to interfere with the rights of
     Executive and his family or beneficiaries under other applicable plans,
     policies or arrangements of the Company applicable in the event of death or
     disability.

10.  Rights of Survivors If Executive dies after becoming entitled to benefits
     under Section 1 following termination of employment but before all such
     benefits have been provided, all unpaid cash amounts will be paid to the
     beneficiary that has been designated by Executive in writing (the
     "beneficiary"), or if none, to Executive's estate.

11.  Successors. This Agreement will inure to and be binding upon the Company's
     successors. The Company will require any successor to all or substantially
     all of the business and/or assets of the Company by sale, merger or
     consolidation (where the Company is not the surviving corporation), lease
     or otherwise, to assume this Agreement. This Agreement is not otherwise
     assignable by the Company or the Executive.

12.  Amendment or Modification; Waiver. This Agreement may not be amended unless
     agreed to in writing by Executive and an expressly authorized officer of
     the Company. No waiver by either party of any breach of this Agreement will
     be deemed a waiver of a subsequent breach.

13.  Controlling Law. This Agreement will be controlled and interpreted pursuant
     to Massachusetts law, other than its choice of law principles.

14.  Entire Agreement. This Agreement constitutes the entire agreement and
     supersedes conflicting terms in all prior agreements and undertakings, both
     written and oral, between Executive and the Company with respect to the
     subject matter hereof. Except as otherwise set forth herein, the terms and
     conditions of all other agreements with Executive, including without
     limitation all Restricted Stock Award Agreements,



     Stock Option Grant Agreements, the Change of Control Agreement and the
     Confidentiality and Inventions Agreement, shall continue in full force and
     effect.

15.  Notices. Any notices required or permitted to be sent under this Agreement
     shall be effective when delivered by hand or mailed by registered or
     certified mail, return receipt requested, and addressed as follows:

     If to the Company:

          Control Delivery Systems, Inc.
          400 Pleasant Street
          Watertown, MA 02472

     If to Executive:

          Michael J. Soja
          34 Musket Lane
          Sudbury, MA 01776

Either party may change its address for receiving notices by giving notice to
the other party.

16.  Release. Notwithstanding anything to the contrary contained in this
     Agreement, in order for Executive to be eligible for the severance benefits
     to be provided in accordance with this Agreement, Executive must sign (and
     not revoke within seven days of signing) a release of claims in the form
     attached hereto and marked Exhibit A.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Michael J. Soja
                                            ------------------------------------
                                        Name: Michael J. Soja


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton
                                        Title: Chief Executive Officer &
                                               President



                                    EXHIBIT A

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Severance Agreement
between me and Control Delivery Systems, Inc. (the "Company") dated as of
February 20, 2004 (the "Agreement"), which benefits are subject to my signing of
this Release of Claims and to which I am not otherwise entitled, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, I, on my own behalf and on behalf of my heirs, executives,
administrators, beneficiaries, representatives and assigns, and all others
connected with me, hereby release and forever discharge the Company, its
subsidiaries and other affiliates and all of their respective past, present and
future officers, directors, trustees, shareholders, employees, agents, general
and limited partners, members, managers, joint venturers, representatives,
successors and assigns, and all others connected with any of them, both
individually and in their official capacities, from any and all causes of
action, rights and claims of any type or description, known or unknown, which I
have had in the past, now have, or might now have, through the date of my
signing of this Release of Claims, in any way resulting from, arising out of or
connected with my employment by the Company or any of its subsidiaries or other
affiliates or the termination of that employment or pursuant to any federal,
state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the



Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           --------------------------
Name (please print):
                     ----------------
Date Signed:
             ------------------------

                                                                    Exhibit 4.25

                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     AGREEMENT made this 20th day of February, 2004, by and between Lori
Freedman ("Executive") and Control Delivery Systems, Inc. (the "Company").

     Whereas, the Board of Directors of the Company (the "Board") recognizes
that the possibility of additional layoffs and/or hibernation exists and that
such possibility, and the uncertainty and questions which it may raise among
certain key management personnel, may result in the departure or distraction of
such management personnel to the detriment of the Company and its stockholders;

     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of certain key
members of the Company's management, including Executive, to their duties, to
assist the Board and the Company in maximizing the value of the Company, without
distraction; and

     Whereas, the Board wishes to induce Executive and other key members of
management to remain in the employ of the Company and to assure them of fair
severance should the employment of any of them terminate on or before October 7,
2005;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Severance Benefits. If on or before October 7, 2005 the Company terminates
     Executive's employment without Cause, or if Executive terminates his or her
     employment for Good Reason, the Company will provide severance benefits to
     Executive as follows:

     a.   All of the shares of restricted stock granted to Executive will
          automatically and immediately vest upon such termination, including
          without limitation the following shares: 11,700 shares of restricted
          stock granted on May 28, 2003; 24,046 shares of restricted stock
          granted on October 7, 2003; 5,954 shares of restricted stock granted
          on October 7, 2003; 10,000 shares of restricted stock granted on
          October 7, 2003.

     b.   All options to purchase Company stock held by Executive will
          automatically and immediately vest and become exercisable upon such
          termination and remain exercisable for a period of six months
          following such termination (or three months in the case of incentive
          stock options).

     c.   The Company will pay to Executive within 30 days of the termination a
          lump-sum cash amount equal to the sum of (x) an amount equal to six
          months' Base Salary plus (y) a pro-rated portion of the maximum bonus
          that would otherwise be payable in the year of termination, if any.
          "Base Salary" means Executive's base salary on the date of this
          agreement. For purposes of this Agreement, the maximum bonus payable
          in any year will be calculated



          assuming all bonus targets or formulas for determining the bonus in
          such year had been met if Executive and Board had, prior to the
          termination of Executive's employment, agreed on such targets or
          formulas. If no such targets or formulas have been set as of such
          termination date, then the maximum bonus shall be deemed to be the
          actual bonus paid to Executive during the preceding fiscal year.

     d.   The Company will continue for a period of six months from the date of
          termination to provide Executive with the following benefits: (1) the
          Company's group medical plan, and (2) life insurance arrangements or
          disability plan arrangements provided to executive-level employees of
          the Company. To the extent that the Company is unable to provide such
          benefits to Executive under its existing plans and arrangements, it
          will pay Executive cash amounts equal to the cost the Company would
          have incurred to provide those benefits.

2.   Definitions.

     a.   "Cause" means only (a) willful malfeasance or gross negligence in the
          performance by Executive of his or her duties, resulting in material
          harm to the Company, (b) fraud or dishonesty by Executive with respect
          to the Company, or (c) Executive's conviction of any felony involving
          deception, fraud or moral turpitude. The Company may treat a
          termination of Executive's employment as termination for Cause only
          after (i) giving Executive written notice of the intention to
          terminate for Cause and of his or her right to a hearing by the Board,
          (ii) at least 30 days after giving the notice, conducting a hearing by
          the Board at which Executive may be represented by counsel, and (iii)
          giving Executive 30 days' written notice of the results of the
          hearing, which shall require a vote of a majority of the Directors
          then in office other than Executive. For purposes of this definition
          of Cause, no act or omission shall be considered to have been
          "willful" unless it was not in good faith and Executive had knowledge
          at the time that the act or omission was not in the best interest of
          the Company. Any act or failure to act based on authority given
          pursuant to a resolution duly adopted by the Board or based on the
          advice of counsel of the Company shall be conclusively presumed to be
          done, or omitted to be done, by Executive in good faith and in the
          best interest of the Company. Cause shall not include willful failure
          due to incapacity resulting from physical or mental illness or any
          actual or anticipated failure after Notice of Termination for Good
          Reason.

     b.   "Good Reason" means (i) failure by the Company to maintain Executive
          in the positions of Vice President, Corporate Affairs, General Counsel
          and Secretary including holding the title of and serving as Vice
          President, Corporate Affairs, General Counsel and Secretary of the
          Company and having responsibility for performing all duties typically
          undertaken by such offices or assignment to Executive of duties
          materially inconsistent with such positions, (ii) the diminution in
          any material respect of Executive's positions or authority, excluding
          for this purpose an isolated, insubstantial and inadvertent action not
          taken in bad faith and



          which is remedied by the Company promptly after receipt of notice
          thereof given by Executive, (iii) failure by the Company to provide
          Executive with Base Salary, benefits and other compensation (including
          without limitation bonus and other incentive compensation) Executive
          was receiving as of the date of this Agreement, or (iv) relocation of
          Executive's principal place of work to a location more than 30 miles
          from its current location without Executive's consent. For purposes of
          this definition of Good Reason, "Company" means Control Delivery
          Systems and any successor of Control Delivery Systems, provided if any
          such successor has a parent, then Company shall mean the ultimate
          parent corporation.

3.   Change of Control. Notwithstanding anything in this Agreement to the
     contrary (including without limitation Sections 1, 2 and 11 of this
     Agreement), if Executive is eligible for the benefits prescribed in the
     Amended and Restated Change of Control Agreement between Executive and
     Company dated December 18, 2003 (the "Change of Control Agreement"), then
     Executive shall receive the benefits prescribed in the Change of Control
     Agreement and will not be eligible for benefits under this Agreement and
     the Company will have no obligation or liability to Executive under this
     Agreement.

4.   Terminability of Employment. This Agreement does not constitute a contract
     of employment for a specific term. Employment with the Company is at-will.
     The Company may at any time terminate Executive's employment with the
     Company with or without notice or Cause.

5.   Termination by the Company for Cause or by Executive Without Good Reason.
     If the Company terminates Executive's employment for Cause or if Executive
     terminates his employment other than for Good Reason, the Company will have
     no obligation or liability to Executive under this Agreement.

6.   Withholding. All payments required to be made by the Company to Executive
     under this Agreement will be subject to the withholding of such amounts, if
     any, relating to tax and other payroll deductions as may be required by
     law.

7.   Confidentiality, Non-Competition and Exclusivity. Executive further agrees
     to abide by all of the terms of the Employee Confidentiality, Proprietary
     Rights and Noncompetition Agreement dated as of October 1, 2001
     ("Confidentiality and Inventions Agreement"). The parties recognize and
     agree that should the Company be required to pursue a claim against
     Executive under the Confidentiality and Inventions Agreement, the Company
     will likely be required to seek injunctive relief as well as damages at
     law. Accordingly, Section 8, Arbitration, will not apply to any action by
     the Company against Executive under the Confidentiality and Inventions
     Agreement.

8.   Arbitration. Except as otherwise provided in Section 7, any dispute or
     controversy between the parties involving the construction or application
     of this Agreement, or any claim arising out of or relating to this
     Agreement, or any claim arising out of or



     relating to Executive's employment by the Company that is not resolved
     within ten days by the parties will be settled by arbitration in Boston,
     Massachusetts, in accordance with the rules of the American Arbitration
     Association then in effect, and judgment upon the award rendered by the
     arbitrator(s) may be entered in any court having jurisdiction thereof. The
     Company and Executive agree that the arbitrator(s) will have no authority
     to award punitive or exemplary damages or so-called consequential or remote
     damages such as damages for emotional distress. Any decision of the
     arbitrator(s) will be final and binding upon the parties. Either party may
     request that the arbitrator(s) submit written findings of fact and
     conclusions of law. The parties agree and understand that they hereby waive
     their rights to a jury trial of any dispute or controversy relating to the
     matters specified above in this Section.

9.   Termination upon Death or Disability. If Executive ceases to be an employee
     of the Company as a result of death or disability, the Company will have no
     further obligation or liability to Executive under this Agreement. However,
     nothing in this Agreement is intended to interfere with the rights of
     Executive and his family or beneficiaries under other applicable plans,
     policies or arrangements of the Company applicable in the event of death or
     disability.

10.  Rights of Survivors If Executive dies after becoming entitled to benefits
     under Section 1 following termination of employment but before all such
     benefits have been provided, all unpaid cash amounts will be paid to the
     beneficiary that has been designated by Executive in writing (the
     "beneficiary"), or if none, to Executive's estate.

11.  Successors. This Agreement will inure to and be binding upon the Company's
     successors. The Company will require any successor to all or substantially
     all of the business and/or assets of the Company by sale, merger or
     consolidation (where the Company is not the surviving corporation), lease
     or otherwise, to assume this Agreement. This Agreement is not otherwise
     assignable by the Company or the Executive.

12.  Amendment or Modification; Waiver. This Agreement may not be amended unless
     agreed to in writing by Executive and an expressly authorized officer of
     the Company. No waiver by either party of any breach of this Agreement will
     be deemed a waiver of a subsequent breach.

13.  Controlling Law. This Agreement will be controlled and interpreted pursuant
     to Massachusetts law, other than its choice of law principles.

14.  Entire Agreement. This Agreement constitutes the entire agreement and
     supersedes conflicting terms in all prior agreements and undertakings, both
     written and oral, between Executive and the Company with respect to the
     subject matter hereof. Except as otherwise set forth herein, the terms and
     conditions of all other agreements with Executive, including without
     limitation all Restricted Stock Award Agreements,



     Stock Option Grant Agreements, the Change of Control Agreement and the
     Confidentiality and Inventions Agreement, shall continue in full force and
     effect.

15.  Notices. Any notices required or permitted to be sent under this Agreement
     shall be effective when delivered by hand or mailed by registered or
     certified mail, return receipt requested, and addressed as follows:

     If to the Company:

          Control Delivery Systems, Inc.
          400 Pleasant Street
          Watertown, MA 02472

     If to Executive:

          Lori Freedman
          21 Swan Road
          Winchester, MA 01890

     Either party may change its address for receiving notices by giving notice
     to the other party.

16.  Release. Notwithstanding anything to the contrary contained in this
     Agreement, in order for Executive to be eligible for the severance benefits
     to be provided in accordance with this Agreement, Executive must sign (and
     not revoke within seven days of signing) a release of claims in the form
     attached hereto and marked Exhibit A.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Lori H. Freedman
                                            ------------------------------------
                                        Name: Lori H. Freedman


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton
                                        Title: Chief Executive Officer &
                                               President



                                    EXHIBIT A

                                RELEASE OF CLAIMS

     FOR AND IN CONSIDERATION OF the benefits to be provided me in connection
with the termination of my employment, as set forth in the Severance Agreement
between me and Control Delivery Systems, Inc. (the "Company") dated as of
February 20, 2004 (the "Agreement"), which benefits are subject to my signing of
this Release of Claims and to which I am not otherwise entitled, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, I, on my own behalf and on behalf of my heirs, executives,
administrators, beneficiaries, representatives and assigns, and all others
connected with me, hereby release and forever discharge the Company, its
subsidiaries and other affiliates and all of their respective past, present and
future officers, directors, trustees, shareholders, employees, agents, general
and limited partners, members, managers, joint venturers, representatives,
successors and assigns, and all others connected with any of them, both
individually and in their official capacities, from any and all causes of
action, rights and claims of any type or description, known or unknown, which I
have had in the past, now have, or might now have, through the date of my
signing of this Release of Claims, in any way resulting from, arising out of or
connected with my employment by the Company or any of its subsidiaries or other
affiliates or the termination of that employment or pursuant to any federal,
state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of the subsidiaries or other affiliates, each as amended from
time to time).

     Excluded from the scope of this Release of Claims is (i) any claim arising
under the terms of the Agreement and (ii) any right of indemnification or
contribution that I have pursuant to the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or other affiliates.

     In signing this Release of Claims, I acknowledge my understanding that I
may not sign it prior to the termination of my employment, but that I may
consider the terms of this Release of Claims for up to twenty-one (21) days (or
such longer period as the Company may specify) from the later of the date my
employment with the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its Affiliates
to seek the advice of an attorney prior to signing this Release of Claims; that
I have had sufficient time to consider this Release of Claims and to consult
with an attorney, if I wished to do so, or to consult with any other person of
my choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.

     I further acknowledge that, in signing this Release of Claims, I have not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement. I understand that I may revoke this Release of
Claims at any time within seven (7) days of the date of my signing by written
notice to the General Counsel of the



Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.

Intending to be legally bound, I have signed this Release of Claims under seal
as of the date written below.


Signature:
           -----------------------------
Name (please print):
                     -------------------
Date Signed:
             ---------------------------

                                                                    Exhibit 4.26

                                 FIRST AMENDMENT
                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     This First Amendment to Severance Agreement (this "Amendment") made this
17th day of August, 2004 (the "Amendment Effective Date"), by and between Paul
Ashton ("Executive") and Control Delivery Systems, Inc. (the "Company").

     Reference is made to (a) that certain Severance Agreement dated February
20, 2004, by and between Executive and the Company (the "Severance Agreement"),
and (b) that certain Control Delivery Systems, Inc. 2001 Incentive Plan
Restricted Stock Award Agreement dated August 16, 2004 between Executive and the
Company (the "August 2004 Restricted Stock Award Agreement").

     Whereas, the Board of Directors of the Company (the "Board") has determined
that Executive's salary should be reduced below Base Salary;

     Whereas, Executive has agreed to such reduction in salary under the terms
and conditions set forth in this Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Restricted Stock.

     a.   Section 11 of the August 2004 Restricted Stock Award Agreement is
          hereby deleted in its entirety and the following is substituted in
          place thereof: "Right of Repurchase of Vested Shares. Notwithstanding
          anything in this Agreement to the contrary, the Company agrees that it
          will not exercise any right that the Company has to purchase,
          repurchase or reacquire all or any part of Employee's Vested Shares."

2.   Bonus. Subject to the occurrence of the Bonus Date and provided that
     Executive is employed by the Company on the Bonus Date, Executive shall be
     eligible for a bonus equal to Bonus Amount.

     "Bonus Amount" means that amount equal to the product of (a) $301.37
     multiplied by (b) the number of calendar days that have elapsed during the
     period beginning on August 16, 2004 and ending on the Bonus Date.

     "Bonus Date" means the earliest date that the Board reasonably determines
     that the Company has the financial resources to pay Executive a bonus equal
     to the Bonus Amount.



     The parties acknowledge and agree that any obligation to pay a bonus is
     solely that of the Company and that none of the directors or officers of
     the Company shall have any personal liability with respect thereto.

3.   Amendment to Section 1 of Severance Agreement. Section 1 of the Severance
     Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.   "1. Severance Benefits.

          i.   Severance Benefits in the event of termination on or before
               December 31, 2006. If on or before December 31, 2006, the Company
               terminates Executive's employment without Cause, or Executive
               terminates his or her employment for Good Reason, the Company
               will provide severance benefits to Executive as follows:

               1.   Notwithstanding anything to the contrary in any agreement
                    between Executive and Company, including without limitation
                    Section 6 of the August 2004 Restricted Stock Award
                    Agreement, all unvested shares of restricted stock granted
                    to Executive will automatically and immediately vest on the
                    Separation Date and no longer be subject to forfeiture,
                    including without limitation the following shares: 20,000
                    shares of restricted stock granted on August 16, 2004.

               2.   All options to purchase Company stock held by Executive will
                    automatically and immediately vest and become exercisable on
                    the Separation Date and remain exercisable for a period of
                    six months following the Separation Date (or three months in
                    the case of incentive stock options).

               3.   The Company will pay to Executive a lump-sum cash amount
                    equal to the Severance Payment within 30 days following the
                    later of (a) the Separation Date, and (b) the date Executive
                    delivers to Company a release of claims in accordance with
                    Section 16 of this Agreement. Notwithstanding the foregoing,
                    in the event the Separation Date occurs after March 31,
                    2005, the Company shall have the right to defer payment of
                    the Severance Payment until the Deferment Date, provided
                    that the Severance Payment will accrue simple interest at
                    the rate of 3 % per year, payable on the Deferment Date. The
                    parties acknowledge and agree that the obligation to pay the
                    Severance Payment is solely that of the Company and that
                    none of the directors or officers of the Company shall have
                    any personal liability with respect thereto.



               4.   The Company will continue for a period of six months from
                    the Separation Date to provide Executive with the following
                    benefits: (1) the Company's group medical plan, and (2) life
                    insurance arrangements or disability plan arrangements
                    provided to executive-level employees of the Company. To the
                    extent that the Company is unable to provide such benefits
                    to Executive under its existing plans and arrangements, it
                    will pay Executive cash amounts equal to the cost the
                    Company would have incurred to provide those benefits.

4.   Amendment to Section 2 of the Severance Agreement. Section 2 of the
     Severance Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.   "2. Definitions.

          i.   "Applicable Base Salary" means: (a) for that period beginning
               August 16, 2004 and ending on that date which is 30 days
               following the Base Salary and Bonus Date, $140,000 and (b) for
               that period beginning on that date which is 31 days following the
               Base Salary and Bonus Date and ending on December 31, 2006, Base
               Salary.

          ii.  "Base Salary" means $250,000 provided that in the event the Board
               in its sole discretion increases Executive's Base Salary above
               $250,000, the Base Salary as so increased will be referred to as
               "Base Salary."

          iii. "Base Salary and Bonus Date" means the first date on which both
               of the following conditions are met (a) the sum of all royalty
               payments received by the Company from Bausch & Lomb after
               December 31, 2004 under that certain Amended and Restated License
               Agreement between the Company and Bausch & Lomb dated December 9,
               2003 equals five million dollars ($5,000,000), and (b) the sum of
               (i) cash, cash equivalents and short term investments, plus (ii)
               accounts receivable equals five million dollars ($5,000,000).

          iv.  "Bonus Amount" means that amount equal to the product of (a)
               $301.37 multiplied by (b) the number of calendar days that have
               elapsed during the period beginning on August 16, 2004 and ending
               on the Base Salary and Bonus Date.

          v.   "Cause" means only (a) willful malfeasance or gross negligence in
               the performance by Executive of his or her duties, resulting in
               material harm to the Company, (b) fraud or dishonesty by
               Executive with respect to the Company, or (c) Executive's
               conviction of any felony involving deception, fraud or moral
               turpitude. The Company may treat a termination of Executive's
               employment as termination for



               Cause only after (i) giving Executive written notice of the
               intention to terminate for Cause and of his or her right to a
               hearing by the Board, (ii) at least 30 days after giving the
               notice, conducting a hearing by the Board at which Executive may
               be represented by counsel, and (iii) giving Executive 30 days'
               written notice of the results of the hearing, which shall require
               a vote of a majority of the Directors then in office other than
               Executive. For purposes of this definition of Cause, no act or
               omission shall be considered to have been "willful" unless it was
               not in good faith and Executive had knowledge at the time that
               the act or omission was not in the best interest of the Company.
               Any act or failure to act based on authority given pursuant to a
               resolution duly adopted by the Board or based on the advice of
               counsel of the Company shall be conclusively presumed to be done,
               or omitted to be done, by Executive in good faith and in the best
               interest of the Company. Cause shall not include willful failure
               due to incapacity resulting from physical or mental illness or
               any actual or anticipated failure after Notice of Termination for
               Good Reason.

          vi.  "Deferment Date" means the earliest to occur of the date (a) the
               Company files for protection under the bankruptcy laws, makes an
               assignment for the benefit of creditors, appoints or suffers
               appointment of a receiver or trustee over its property, files a
               petition under any bankruptcy or insolvency act or has any such
               petition filed against it, (b) the sum of all amounts paid to the
               Company from any source (including without limitation from Bausch
               & Lomb, financing sources or under any new or existing license or
               other commercial arrangement) after March 31, 2005 equals two
               million dollars ($2,000,000) and (c) December 31, 2005.

          vii. "Good Reason" means (i) failure by the Company to maintain
               Executive in the positions of Chief Executive Officer and
               President including holding the title of and serving as Chief
               Executive Officer and President of the Company and having
               responsibility for performing all duties typically undertaken by
               such offices or assignment to Executive of duties materially
               inconsistent with such positions, (ii) the diminution in any
               material respect of Executive's positions or authority, excluding
               for this purpose an isolated, insubstantial and inadvertent
               action not taken in bad faith and which is remedied by the
               Company promptly after receipt of notice thereof given by
               Executive, (iii) failure by the Company to (a) provide Executive
               with the Applicable Base Salary, (b) pay Executive a bonus equal
               to Bonus Amount within thirty (30) days following the Base Salary
               and Bonus Date, or (c) provide Executive with the benefits and
               other compensation (including without limitation bonus and other
               incentive compensation) Executive was receiving as of the date of
               this Agreement, or (iv) relocation of Executive's principal place
               of work to



               a location more than 30 miles from its current location without
               Executive's consent. For purposes of this definition of Good
               Reason, "Company" means Control Delivery Systems and any
               successor of Control Delivery Systems, provided if any such
               successor has a parent, then Company shall mean the ultimate
               parent corporation.

          viii. "Maximum Bonus" means the maximum bonus payable in any year and
               is calculated assuming all bonus targets or formulas for
               determining the bonus in such year had been met if Executive and
               Board had, prior to the Separation Date, agreed on such targets
               or formulas. If no such targets or formulas have been set as of
               the Separation Date, then the maximum bonus shall be deemed to be
               the actual bonus paid to Executive during the preceding fiscal
               year. Notwithstanding anything herein to the contrary, Maximum
               Bonus shall not include the Bonus Amount.

          ix.  "Reduced Base Salary" means $140,000.

          x.   "Separation Date" means the date the Employee's employment with
               the Company ends.

          xi.  "Severance Payment" means the sum of (x) an amount equal to
               twelve months' Base Salary plus (y) a pro-rated portion of the
               Maximum Bonus that would otherwise be payable in the year that
               the Separation Date occurs, if any.

5.   Remainder of Severance Agreement Unaffected. In all other respects, the
     provisions of the Severance Agreement shall remain in full force and
     effect.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Lori Freedman
                                            ------------------------------------
                                        Name: Lori Freedman
                                              ----------------------------------
                                        Title: VP, Corporate Affairs & General
                                               Counsel
                                               ---------------------------------

                                                                    Exhibit 4.27

                                 FIRST AMENDMENT
                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     This First Amendment to Severance Agreement (this "Amendment") made this
17th day of August, 2004 (the "Amendment Effective Date"), by and between
Michael J. Soja ("Executive") and Control Delivery Systems, Inc. (the
"Company").

     Reference is made to (a) that certain Severance Agreement dated February
20, 2004, by and between Executive and the Company (the "Severance Agreement"),
(b) that certain Control Delivery Systems, Inc. 2001 Incentive Plan Restricted
Stock Award Agreement dated October 7, 2003 between Executive and the Company
and that certain Control Delivery Systems, Inc. 1997 Incentive Plan Restricted
Stock Award Agreement dated October 7, 2003 between Executive and the Company
(collectively, the "October 2003 Restricted Stock Award Agreements"), (c) that
certain Control Delivery Systems, Inc. 2001 Incentive Plan Restricted Stock
Award Agreement dated May 28, 2003 between Executive and the Company (the "May
2003 Restricted Stock Award Agreement"), and (d) that certain Control Delivery
Systems, Inc. 2001 Incentive Plan Restricted Stock Award Agreement dated August
16, 2004 between Executive and the Company (the "August 2004 Restricted Stock
Award Agreement").

     Whereas, the Board of Directors of the Company (the "Board") has determined
that Executive's salary should be reduced below Base Salary;

     Whereas, Executive has agreed to such reduction in salary under the terms
and conditions set forth in this Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Restricted Stock.

     a.   Notwithstanding anything to the contrary in the October 2003
          Restricted Stock Award Agreements, including without limitation
          Section 6 of such agreements, and notwithstanding anything to the
          contrary in the May 2003 Restricted Stock Award Agreement, including
          without limitation Section 7 of such agreement, all of the shares of
          restricted stock granted prior to August 16, 2004 shall automatically
          and immediately vest on the Amendment Effective Date and no longer be
          subject to forfeiture, including without limitation the following
          shares: 14,040 shares of restricted stock granted on May 28, 2003;
          30,046 shares of restricted stock granted on October 7, 2003; 5,954
          shares of restricted stock granted on October 7, 2003; 10,000 shares
          of restricted stock granted on October 7, 2003.

     b.   Section 11 of the October 2003 Restricted Stock Award Agreements,
          Section 11 of the August 2004 Restricted Stock Award Agreement and
          Section 12 of



          the May 2003 Restricted Stock Award Agreement are each hereby deleted
          in their entirety and the following is substituted in place thereof:
          "Right of Repurchase of Vested Shares. Notwithstanding anything in
          this Agreement to the contrary, the Company agrees that it will not
          exercise any right that the Company has to purchase, repurchase or
          reacquire all or any part of Employee's Vested Shares."

2.   Bonus. Subject to the occurrence of the Bonus Date and provided that
     Executive is employed by the Company on the Bonus Date, Executive shall be
     eligible for a bonus equal to Bonus Amount.

     "Bonus Amount" means that amount equal to the product of (a) $335.61
     multiplied by (b) the number of calendar days that have elapsed during the
     period beginning on August 16, 2004 and ending on the Bonus Date.

     "Bonus Date" means the earliest date that the Board reasonably determines
     that the Company has the financial resources to pay Executive a bonus equal
     to the Bonus Amount.

     The parties acknowledge and agree that any obligation to pay a bonus is
     solely that of the Company and that none of the directors or officers of
     the Company shall have any personal liability with respect thereto.

3.   Amendment to Section 1 of Severance Agreement. Section 1 of the Severance
     Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.  "1. Severance Benefits.

          i.   Severance Benefits in the event of termination on or before
               December 31, 2006. If on or before December 31, 2006, the Company
               terminates Executive's employment without Cause, or Executive
               terminates his or her employment for Good Reason, the Company
               will provide severance benefits to Executive as follows:

               1.   Notwithstanding anything to the contrary in any agreement
                    between Executive and Company, including without limitation
                    Section 6 of the August 2004 Restricted Stock Award
                    Agreement, all unvested shares of restricted stock granted
                    to Executive will automatically and immediately vest on the
                    Separation Date and no longer be subject to forfeiture,
                    including without limitation the following shares: 20,000
                    shares of restricted stock granted on August 16, 2004.

               2.   All options to purchase Company stock held by Executive will
                    automatically and immediately vest and become exercisable on
                    the Separation Date and remain exercisable for a period of
                    six



                    months following the Separation Date (or three months in the
                    case of incentive stock options).

               3.   The Company will pay to Executive a lump-sum cash amount
                    equal to the Severance Payment within 30 days following the
                    later of (a) the Separation Date, and (b) the date Executive
                    delivers to Company a release of claims in accordance with
                    Section 16 of this Agreement. Notwithstanding the foregoing,
                    in the event the Separation Date occurs after March 31,
                    2005, the Company shall have the right to defer payment of
                    the Severance Payment until the Deferment Date, provided
                    that the Severance Payment will accrue simple interest at
                    the rate of 3 % per year, payable on the Deferment Date. The
                    parties acknowledge and agree that the obligation to pay the
                    Severance Payment is solely that of the Company and that
                    none of the directors or officers of the Company shall have
                    any personal liability with respect thereto.

               4.   The Company will continue for a period of six months from
                    the Separation Date to provide Executive with the following
                    benefits: (1) the Company's group medical plan, and (2) life
                    insurance arrangements or disability plan arrangements
                    provided to executive-level employees of the Company. To the
                    extent that the Company is unable to provide such benefits
                    to Executive under its existing plans and arrangements, it
                    will pay Executive cash amounts equal to the cost the
                    Company would have incurred to provide those benefits.

4.   Amendment to Section 2 of the Severance Agreement. Section 2 of the
     Severance Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.  "2. Definitions.

          i.   "Applicable Base Salary" means: (a) for that period beginning
               August 16, 2004 and ending on that date which is 30 days
               following the Base Salary and Bonus Date, $150,000 and (b) for
               that period beginning on that date which is 31 days following the
               Base Salary and Bonus Date and ending on December 31, 2006, Base
               Salary.

          ii.  "Base Salary" means $272,497, provided that in the event the
               Board in its sole discretion increases Executive's Base Salary
               above $272,497, the Base Salary as so increased will be referred
               to as "Base Salary."

          iii. "Base Salary and Bonus Date" means the first date on which both
               of the following conditions are met (a) the sum of all royalty
               payments



               received by the Company from Bausch & Lomb after December 31,
               2004 under that certain Amended and Restated License Agreement
               between the Company and Bausch & Lomb dated December 9, 2003
               equals five million dollars ($5,000,000), and (b) the sum of (i)
               cash, cash equivalents and short term investments, plus (ii)
               accounts receivable equals five million dollars ($5,000,000).

          iv.  "Bonus Amount" means that amount equal to the product of (a)
               $335.61 multiplied by (b) the number of calendar days that have
               elapsed during the period beginning on August 16, 2004 and ending
               on the Base Salary and Bonus Date.

          v.   "Cause" means only (a) willful malfeasance or gross negligence in
               the performance by Executive of his or her duties, resulting in
               material harm to the Company, (b) fraud or dishonesty by
               Executive with respect to the Company, or (c) Executive's
               conviction of any felony involving deception, fraud or moral
               turpitude. The Company may treat a termination of Executive's
               employment as termination for Cause only after (i) giving
               Executive written notice of the intention to terminate for Cause
               and of his or her right to a hearing by the Board, (ii) at least
               30 days after giving the notice, conducting a hearing by the
               Board at which Executive may be represented by counsel, and (iii)
               giving Executive 30 days' written notice of the results of the
               hearing, which shall require a vote of a majority of the
               Directors then in office other than Executive. For purposes of
               this definition of Cause, no act or omission shall be considered
               to have been "willful" unless it was not in good faith and
               Executive had knowledge at the time that the act or omission was
               not in the best interest of the Company. Any act or failure to
               act based on authority given pursuant to a resolution duly
               adopted by the Board or based on the advice of counsel of the
               Company shall be conclusively presumed to be done, or omitted to
               be done, by Executive in good faith and in the best interest of
               the Company. Cause shall not include willful failure due to
               incapacity resulting from physical or mental illness or any
               actual or anticipated failure after Notice of Termination for
               Good Reason.

          vi.  "Deferment Date" means the earliest to occur of the date (a) the
               Company files for protection under the bankruptcy laws, makes an
               assignment for the benefit of creditors, appoints or suffers
               appointment of a receiver or trustee over its property, files a
               petition under any bankruptcy or insolvency act or has any such
               petition filed against it, (b) the sum of all amounts paid to the
               Company from any source (including without limitation from Bausch
               & Lomb, financing sources or under any new or existing license or
               other commercial arrangement) after March 31, 2005 equals two
               million dollars ($2,000,000) and (c) December 31, 2005.



          vii. "Good Reason" means (i) failure by the Company to maintain
               Executive in the position of Vice President, Chief Financial
               Officer including holding the title of and serving as Vice
               President, Chief Financial Officer of the Company and having
               responsibility for performing all duties typically undertaken by
               such offices or assignment to Executive of duties materially
               inconsistent with such positions, (ii) the diminution in any
               material respect of Executive's positions or authority, excluding
               for this purpose an isolated, insubstantial and inadvertent
               action not taken in bad faith and which is remedied by the
               Company promptly after receipt of notice thereof given by
               Executive, (iii) failure by the Company to (a) provide Executive
               with the Applicable Base Salary, (b) pay Executive a bonus equal
               to Bonus Amount within thirty (30) days following the Base Salary
               and Bonus Date, or (c) provide Executive with the benefits and
               other compensation (including without limitation bonus and other
               incentive compensation) Executive was receiving as of the date of
               this Agreement, or (iv) relocation of Executive's principal place
               of work to a location more than 30 miles from its current
               location without Executive's consent. For purposes of this
               definition of Good Reason, "Company" means Control Delivery
               Systems and any successor of Control Delivery Systems, provided
               if any such successor has a parent, then Company shall mean the
               ultimate parent corporation.

          viii. "Maximum Bonus" means the maximum bonus payable in any year and
               is calculated assuming all bonus targets or formulas for
               determining the bonus in such year had been met if Executive and
               Board had, prior to the Separation Date, agreed on such targets
               or formulas. If no such targets or formulas have been set as of
               the Separation Date, then the maximum bonus shall be deemed to be
               the actual bonus paid to Executive during the preceding fiscal
               year. Notwithstanding anything herein to the contrary, Maximum
               Bonus shall not include the Bonus Amount.

          ix.  "Reduced Base Salary" means $150,000.

          x.   "Separation Date" means the date the Employee's employment with
               the Company ends.

          xi.  "Severance Payment" means the sum of (x) an amount equal to six
               months' Base Salary plus (y) a pro-rated portion of the Maximum
               Bonus that would otherwise be payable in the year that the
               Separation Date occurs, if any.

5.   Remainder of Severance Agreement Unaffected. In all other respects, the
     provisions of the Severance Agreement shall remain in full force and
     effect.



            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Michael J. Soja
                                            ------------------------------------
                                        Name: Michael J. Soja


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton
                                        Title: Chief Executive Officer &
                                               President

                                                                    Exhibit 4.28

                                 FIRST AMENDMENT
                         CONTROL DELIVERY SYSTEMS, INC.
                               SEVERANCE AGREEMENT

     This First Amendment to Severance Agreement (this "Amendment") made this
17th day of August, 2004 (the "Amendment Effective Date"), by and between Lori
H. Freedman ("Executive") and Control Delivery Systems, Inc. (the "Company").

     Reference is made to (a) that certain Severance Agreement dated February
20, 2004, by and between Executive and the Company (the "Severance Agreement"),
(b) that certain Control Delivery Systems, Inc. 2001 Incentive Plan Restricted
Stock Award Agreement dated October 7, 2003 between Executive and the Company
and that certain Control Delivery Systems, Inc. 1997 Incentive Plan Restricted
Stock Award Agreement dated October 7, 2003 between Executive and the Company
(collectively, the "October 2003 Restricted Stock Award Agreements"), (c) that
certain Control Delivery Systems, Inc. 2001 Incentive Plan Restricted Stock
Award Agreement dated May 28, 2003 between Executive and the Company (the "May
2003 Restricted Stock Award Agreement"), and (d) that certain Control Delivery
Systems, Inc. 2001 Incentive Plan Restricted Stock Award Agreement dated August
16, 2004 between Executive and the Company (the "August 2004 Restricted Stock
Award Agreement").

     Whereas, the Board of Directors of the Company (the "Board") has determined
that Executive's salary should be reduced below Base Salary;

     Whereas, Executive has agreed to such reduction in salary under the terms
and conditions set forth in this Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions contained herein, the parties hereto agree as follows:

1.   Restricted Stock.

     a.   Notwithstanding anything to the contrary in the October 2003
          Restricted Stock Award Agreements, including without limitation
          Section 6 of such agreements, and notwithstanding anything to the
          contrary in the May 2003 Restricted Stock Award Agreement, including
          without limitation Section 7 of such agreement, all of the shares of
          restricted stock granted prior to August 16, 2004 shall automatically
          and immediately vest on the Amendment Effective Date and no longer be
          subject to forfeiture, including without limitation the following
          shares: 11,700 shares of restricted stock granted on May 28, 2003;
          24,046 shares of restricted stock granted on October 7, 2003; 5,954
          shares of restricted stock granted on October 7, 2003; 10,000 shares
          of restricted stock granted on October 7, 2003.

     b.   Section 11 of the October 2003 Restricted Stock Award Agreements,
          Section 11 of the August 2004 Restricted Stock Award Agreement and
          Section 12 of



          the May 2003 Restricted Stock Award Agreement are each hereby deleted
          in their entirety and the following is substituted in place thereof:
          "Right of Repurchase of Vested Shares. Notwithstanding anything in
          this Agreement to the contrary, the Company agrees that it will not
          exercise any right that the Company has to purchase, repurchase or
          reacquire all or any part of Employee's Vested Shares."

2.   Bonus. Subject to the occurrence of the Bonus Date and provided that
     Executive is employed by the Company on the Bonus Date, Executive shall be
     eligible for a bonus equal to Bonus Amount.

     "Bonus Amount" means that amount equal to the product of (a) $124.28
     multiplied by (b) the number of calendar days that have elapsed during the
     period beginning on August 16, 2004 and ending on the Bonus Date.

     "Bonus Date" means the earliest date that the Board reasonably determines
     that the Company has the financial resources to pay Executive a bonus equal
     to the Bonus Amount.

     The parties acknowledge and agree that any obligation to pay a bonus is
     solely that of the Company and that none of the directors or officers of
     the Company shall have any personal liability with respect thereto.

3.   Amendment to Section 1 of Severance Agreement. Section 1 of the Severance
     Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.   "1. Severance Benefits.

          i.   Severance Benefits in the event of termination on or before
               December 31, 2006. If on or before December 31, 2006, the Company
               terminates Executive's employment without Cause, or Executive
               terminates his or her employment for Good Reason, the Company
               will provide severance benefits to Executive as follows:

               1.   Notwithstanding anything to the contrary in any agreement
                    between Executive and Company, including without limitation
                    Section 6 of the August 2004 Restricted Stock Award
                    Agreement, all unvested shares of restricted stock granted
                    to Executive will automatically and immediately vest on the
                    Separation Date and no longer be subject to forfeiture,
                    including without limitation the following shares: 20,000
                    shares of restricted stock granted on August 16, 2004.

               2.   All options to purchase Company stock held by Executive will
                    automatically and immediately vest and become exercisable on
                    the Separation Date and remain exercisable for a period of
                    six



                    months following the Separation Date (or three months in the
                    case of incentive stock options).

               3.   The Company will pay to Executive a lump-sum cash amount
                    equal to the Severance Payment within 30 days following the
                    later of (a) the Separation Date, and (b) the date Executive
                    delivers to Company a release of claims in accordance with
                    Section 16 of this Agreement. Notwithstanding the foregoing,
                    in the event the Separation Date occurs after March 31,
                    2005, the Company shall have the right to defer payment of
                    the Severance Payment until the Deferment Date, provided
                    that the Severance Payment will accrue simple interest at
                    the rate of 3 % per year, payable on the Deferment Date. The
                    parties acknowledge and agree that the obligation to pay the
                    Severance Payment is solely that of the Company and that
                    none of the directors or officers of the Company shall have
                    any personal liability with respect thereto.

               4.   The Company will continue for a period of six months from
                    the Separation Date to provide Executive with the following
                    benefits: (1) the Company's group medical plan, and (2) life
                    insurance arrangements or disability plan arrangements
                    provided to executive-level employees of the Company. To the
                    extent that the Company is unable to provide such benefits
                    to Executive under its existing plans and arrangements, it
                    will pay Executive cash amounts equal to the cost the
                    Company would have incurred to provide those benefits.

4.   Amendment to Section 2 of the Severance Agreement. Section 2 of the
     Severance Agreement is hereby deleted in its entirety and the following is
     substituted in place thereof:

     a.   "2. Definitions.

          i.   "Applicable Base Salary" means: (a) for that period beginning
               August 16, 2004 and ending on that date which is 30 days
               following the Base Salary and Bonus Date, $140,000 and (b) for
               that period beginning on that date which is 31 days following the
               Base Salary and Bonus Date and ending on December 31, 2006, Base
               Salary.

          ii.  "Base Salary" means $185,361 provided that in the event the Board
               in its sole discretion increases Executive's Base Salary above
               $185,361, the Base Salary as so increased will be referred to as
               "Base Salary."

          iii. "Base Salary and Bonus Date" means the first date on which both
               of the following conditions are met (a) the sum of all royalty
               payments



               received by the Company from Bausch & Lomb after December 31,
               2004 under that certain Amended and Restated License Agreement
               between the Company and Bausch & Lomb dated December 9, 2003
               equals five million dollars ($5,000,000), and (b) the sum of (i)
               cash, cash equivalents and short term investments, plus (ii)
               accounts receivable equals five million dollars ($5,000,000).

          iv.  "Bonus Amount" means that amount equal to the product of (a)
               $124.28 multiplied by (b) the number of calendar days that have
               elapsed during the period beginning on August 16, 2004 and ending
               on the Base Salary and Bonus Date.

          v.   "Cause" means only (a) willful malfeasance or gross negligence in
               the performance by Executive of his or her duties, resulting in
               material harm to the Company, (b) fraud or dishonesty by
               Executive with respect to the Company, or (c) Executive's
               conviction of any felony involving deception, fraud or moral
               turpitude. The Company may treat a termination of Executive's
               employment as termination for Cause only after (i) giving
               Executive written notice of the intention to terminate for Cause
               and of his or her right to a hearing by the Board, (ii) at least
               30 days after giving the notice, conducting a hearing by the
               Board at which Executive may be represented by counsel, and (iii)
               giving Executive 30 days' written notice of the results of the
               hearing, which shall require a vote of a majority of the
               Directors then in office other than Executive. For purposes of
               this definition of Cause, no act or omission shall be considered
               to have been "willful" unless it was not in good faith and
               Executive had knowledge at the time that the act or omission was
               not in the best interest of the Company. Any act or failure to
               act based on authority given pursuant to a resolution duly
               adopted by the Board or based on the advice of counsel of the
               Company shall be conclusively presumed to be done, or omitted to
               be done, by Executive in good faith and in the best interest of
               the Company. Cause shall not include willful failure due to
               incapacity resulting from physical or mental illness or any
               actual or anticipated failure after Notice of Termination for
               Good Reason.

          vi.  "Deferment Date" means the earliest to occur of the date (a) the
               Company files for protection under the bankruptcy laws, makes an
               assignment for the benefit of creditors, appoints or suffers
               appointment of a receiver or trustee over its property, files a
               petition under any bankruptcy or insolvency act or has any such
               petition filed against it, (b) the sum of all amounts paid to the
               Company from any source (including without limitation from Bausch
               & Lomb, financing sources or under any new or existing license or
               other commercial arrangement) after March 31, 2005 equals two
               million dollars ($2,000,000) and (c) December 31, 2005.



          vii. "Good Reason" means (i) failure by the Company to maintain
               Executive in the positions of Vice President, Corporate Affairs,
               General Counsel and Secretary including holding the title of and
               serving as Vice President, Corporate Affairs, General Counsel and
               Secretary of the Company and having responsibility for performing
               all duties typically undertaken by such offices or assignment to
               Executive of duties materially inconsistent with such positions,
               (ii) the diminution in any material respect of Executive's
               positions or authority, excluding for this purpose an isolated,
               insubstantial and inadvertent action not taken in bad faith and
               which is remedied by the Company promptly after receipt of notice
               thereof given by Executive, (iii) failure by the Company to (a)
               provide Executive with the Applicable Base Salary, (b) pay
               Executive a bonus equal to Bonus Amount within thirty (30) days
               following the Base Salary and Bonus Date, or (c) provide
               Executive with the benefits and other compensation (including
               without limitation bonus and other incentive compensation)
               Executive was receiving as of the date of this Agreement, or (iv)
               relocation of Executive's principal place of work to a location
               more than 30 miles from its current location without Executive's
               consent. For purposes of this definition of Good Reason,
               "Company" means Control Delivery Systems and any successor of
               Control Delivery Systems, provided if any such successor has a
               parent, then Company shall mean the ultimate parent corporation.

          viii. "Maximum Bonus" means the maximum bonus payable in any year and
               is calculated assuming all bonus targets or formulas for
               determining the bonus in such year had been met if Executive and
               Board had, prior to the Separation Date, agreed on such targets
               or formulas. If no such targets or formulas have been set as of
               the Separation Date, then the maximum bonus shall be deemed to be
               the actual bonus paid to Executive during the preceding fiscal
               year. Notwithstanding anything herein to the contrary, Maximum
               Bonus shall not include the Bonus Amount.

          ix.  "Reduced Base Salary" means $140,000.

          x.   "Separation Date" means the date the Employee's employment with
               the Company ends.

          xi.  "Severance Payment" means the sum of (x) an amount equal to six
               months' Base Salary plus (y) a pro-rated portion of the Maximum
               Bonus that would otherwise be payable in the year that the
               Separation Date occurs, if any.



5.   Remainder of Severance Agreement Unaffected. In all other respects, the
     provisions of the Severance Agreement shall remain in full force and
     effect.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]



     In witness whereof, the parties hereto have executed this Agreement as of
the date first set forth above.


                                        By: /s/ Lori H. Freedman
                                            ------------------------------------
                                        Name: Lori H. Freedman


                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Paul Ashton
                                            ------------------------------------
                                        Name: Paul Ashton
                                        Title: Chief Executive Officer &
                                               President

                                                                    Exhibit 4.29

                         CONTROL DELIVERY SYSTEMS, INC.
                               2001 INCENTIVE PLAN

                        Restricted Stock Award Agreement

     The undersigned employee ("Employee") has been granted an award (the
"Award") of restricted stock from Control Delivery Systems, Inc. (the "Company")
under the 2001 Incentive Plan (the "Plan"), subject to the terms set forth below
and in the Plan, a copy of which as currently in effect has been delivered to
Employee. In consideration of the grant of the Award, the Employee agrees with
the Company as follows:

1. Effective Date. This Agreement shall take effect as of the date of grant of
the Award, as indicated on the signature page hereof.

2. Shares Subject to Award. The Award consists of the number of shares set forth
on the signature page hereof (the "Shares") of common stock of the Company
("Stock"). Employee's rights to the Shares are subject to the restrictions
described in this Agreement and the Plan in addition to such other restrictions,
if any, as may be imposed by law.

3. Meaning of Certain Terms. Except as otherwise expressly provided, all terms
used herein shall have the same meaning as in the Plan. The term "vest" as used
herein with respect to any Share means the lapsing of the restrictions described
herein with respect to such Share.

4. Nontransferability of Shares. The Shares cannot be sold, transferred,
pledged, assigned or otherwise encumbered or disposed of until they have vested,
and then only as provided below and in the Plan.

5. Forfeiture Risk. If Employee ceases to be employed by the Company and its
subsidiaries for any reason, including death, any then outstanding and unvested
Shares shall be automatically and immediately forfeited. Employee hereby (i)
appoints the Company as the attorney-in-fact of Employee to take such actions as
may be necessary or appropriate to effectuate a transfer of the record ownership
of any such shares that are unvested and forfeited hereunder, (ii) agrees to
deliver to the Company, as a precondition to the issuance of any certificate or
certificates with respect to unvested Shares hereunder, one or more stock
powers, endorsed in blank, with respect to such Shares, and (iii) agrees to sign
such other powers and take such other actions as the Company may reasonably
request to accomplish the transfer or forfeiture of any unvested Shares that are
forfeited hereunder.

6. Vesting of Shares. The Shares shall vest in accordance with the provisions of
this Paragraph 6 and applicable provisions of the Plan (if not earlier in
accordance with the Plan, including Section 6 of the Plan), as follows:

     100% of the Shares will vest on the earlier to occur of:

          -    October 7, 2005; or

          -    a Liquidity Event Date (as defined below).


                                   PAGE 1 OF 9



     Notwithstanding the foregoing, in the event that a Liquidity Event Date
that relates to an initial public offering occurs on or before October 7, 2005,
100% of the Shares shall vest on that date which is the six-month anniversary of
the closing of the initial public offering.

     Any securities of the Company or any other entity, and any cash and other
consideration, into which the Shares are converted or for which they are
exchanged, by reason of a merger, consolidation, sale of assets, reorganization
or other transaction, shall vest (by their terms or through the use of an
escrow, a commitment to deliver in the future or such other device as is
determined by the administrator of the Plan) on the same terms as the Shares
from which they were converted or for which they were exchanged.

     A "Liquidity Event" means any public offering, merger, consolidation, sale
of assets, reorganization or other transaction in or as a result of which the
Stock of the Company (or the stock or other securities into or for which such
Stock is converted or exchanged) are or become registered under the Securities
Exchange Act of 1934 or are converted into or exchanged for cash. "Liquidity
Event Date" shall mean the date of the closing of a Liquidity Event.

     Notwithstanding the foregoing, no Shares shall vest on any vesting date
specified above unless Employee is then, and since the date of grant has
continuously been, employed by the Company or its subsidiaries.

7. Legend. Any certificates representing unvested Shares shall bear a legend
substantially in the following form:

     THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED
     HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF AN
     INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN
     THE REGISTERED OWNER AND CONTROL DELIVERY SYSTEMS, INC. COPIES OF SUCH PLAN
     AND AGREEMENT ARE ON FILE IN THE OFFICES OF CONTROL DELIVERY SYSTEMS, INC.

     As soon as practicable following the vesting of any such Shares, the
Company shall cause a certificate or certificates covering such Shares to be
issued and delivered to Employee, containing a legend substantially in the
following form:

     THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
     RESTRICTIONS UPON TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT.
     THE CORPORATION WILL FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER OF THIS
     CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE.

     If any Shares are held in book-entry form, the Company may take such steps
as it deems necessary or appropriate to record and manifest the restrictions
applicable to such Shares.

8. Dividends, etc. Employee shall be entitled to (i) receive regular cash
dividends, if any, paid with respect to those Shares of which Employee is the
record owner on the record date for


                                       -2-



such dividend, and (ii) vote any Shares of which Employee is the record owner on
the record date for such vote. Any dividends and distributions (other than any
regular cash dividends) distributed with respect to any Shares or any securities
of the Company or any other entity into which the Shares are converted or for
which they are exchanged (the "associated share"), including without limitation
a distribution of stock by reason of a stock dividend, stock split or otherwise
with respect to an associated share, or a distribution of other securities with
respect to an associated share, shall be subject to the restrictions of this
Agreement in the same manner and for so long as the associated share remains
subject to such restrictions, and shall be forfeited if and when the associated
share is so forfeited. The administrator of the Plan may require that any cash
distribution with respect to the Shares other than a regular cash dividend be
placed in escrow or otherwise made subject to such restrictions as the
administrator of the Plan deems appropriate. References in this Agreement to the
Shares shall refer, with the necessary changes having been made, to any such
restricted amounts.

9. Restriction on Transfer of Vested Shares.

     a. Employee shall not sell, assign, transfer, pledge, hypothecate, give or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares once they have vested ("Vested Shares"), or any
interest therein, unless such transfer shall be made in compliance with the
provisions of this Section 9 and the provisions of Sections 10 and 11 of this
Agreement.

     b. Notwithstanding Section 10 hereof, Employee shall not transfer any
Vested Shares unless either (i) a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the Vested Shares shall
have become, and continues to be, effective, or (ii) the Company receives an
opinion of counsel reasonably satisfactory to it that registration of such
Vested Shares is not required under the Act.

10. Right of First Refusal on Dispositions of Vested Shares.

     a. Receipt of Third-Party Offer. If at any time Employee desires to sell
for cash, cash equivalents or any other form of consideration (including a
promissory note) Vested Shares pursuant to an offer or proposed offer from a
third party (the "Proposed Transferee"), Employee shall submit a written offer
(the "Offer") to sell such Vested Shares (the "Offered Shares") to the Company
on terms and conditions, including price, not less favorable to the Company than
those on which Employee proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Vested
Shares owned by Employee, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state that the Company may acquire, in accordance with the
provisions of this Agreement, all or any portion of the Offered Shares for the
price and upon the other terms and conditions, including deferred payment (if
applicable), set forth therein.

     b. Company Notice of Intent to Purchase. If the Company desires to purchase
all or any portion of the Offered Shares, the Company shall give to Employee
written notice of the number of Offered Shares to be purchased by it within 30
days of the date of the Offer. Such communication shall, when taken in
conjunction with the Offer, be deemed to constitute a valid,


                                       -3-



legally binding and enforceable agreement for the sale and purchase of the
Offered Shares. Sale of the Offered Shares to the Company pursuant to this
Section 10 shall be made at the offices of the Company on the 45th day following
the date of the Offer (or, if such day is not a business day, then on the next
succeeding business day). Such sale shall be effected by Employee's delivery to
the Company of a certificate or certificates evidencing the Offered Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee of the purchase price therefor by the Company by a certified
or cashier's check.

     c. Sale to Third Party. If, within 30 days of its receipt of notice of the
Offer, the Company fails to deliver written notice to Employee of its intention
to purchase all of the Offered Shares (the Offered Shares which the Company does
not elect to purchase being referred to as the "Refused Shares"), the Refused
Shares not so purchased may be sold by Employee at any time within 90 days after
the date of the Offer, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. If the Refused Shares are not sold within such 90 day
period, they shall continue to be subject to the requirements of a prior offer
pursuant to this Section 10. If the Refused Shares are sold pursuant to this
Section 10 to any purchaser who is not a party to an agreement with the Company
containing restrictions on the transfer of the Vested Shares to the same extent
as those contained herein, the Company, may at its option, require the purchaser
to execute and deliver an agreement containing restrictions on the transfer of
Vested Shares the same as those set forth in this Agreement.

     d. Permitted Transfers. Employee shall have the right to make Permitted
Transfers (as defined below) of Employee's Vested Shares and the provisions of
subsections (a), (b) and (c) above shall not apply to any such Permitted
Transfer by Employee. For purposes of this Agreement, "Permitted Transfer" shall
mean any transfer by Employee during his or her lifetime of all or any portion
of the Vested Shares (i) to the Company; or (ii) to any parent, spouse, child,
grandchild, brother, sister or the spouse of a child, grandchild, brother or
sister (a "Member of the Immediate Family") of Employee, to a trust created for
the benefit of a Member of the Immediate Family of Employee or to a custodian of
a property of one or more such persons, or to a limited partnership or limited
liability company all partners or members of which are Members of the Immediate
Family of Employee, any of such transfers to include transfers by will or the
laws of descent and distribution; provided, however, that, it shall be a
condition of each such transfer, that (x) the transferee agrees to be bound by
the terms of this Agreement, including without limitation Sections 10, 11 and
13, as though no such transfer had taken place, and that (y) Employee has
complied with all applicable laws in connection with such transfer.


                                       -4-



11. Right of Repurchase of Vested Shares.

     a. Termination of Employment Relationship. If Employee's employment or
other service relationship with the Company terminates, voluntarily or
involuntarily, for any reason, the Company shall have the right to purchase, and
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement) shall, at the election of the Company, be
obligated to sell, all or any part of Employee's Vested Shares at the purchase
price and on the terms provided in this Section 11 (the "Repurchase Right").

     b. Exercise of Repurchase Right. The Company may exercise the Repurchase
Right by giving to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement), within 30 days of the date on
which Employee's employment or other service relationship with the Company
terminates (the "Termination Date"), written notice of (i) the number of Vested
Shares to be purchased by it, and (ii) the purchase price, as determined in a
manner provided below, to be paid for such Vested Shares. Such communication
shall be deemed to constitute a valid, legally binding and enforceable agreement
for the sale and purchase of the Vested Shares.

     The purchase price of Vested Shares purchased by the Company pursuant to
this Section 11 shall be the fair market value of such Vested Shares on the
Termination Date, as conclusively determined by the Board of Directors of the
Company after taking into consideration such factors as it deems appropriate.

     Sale of the Vested Shares to the Company pursuant to this Section 11 shall
be made at the offices of the Company on the 45th day following the Termination
Date (or, if such day is not a business day, then on the next succeeding
business day) or such earlier business day of which the Company shall notify
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement). Such sale shall be effected by the delivery to
the Company of a certificate or certificates evidencing the Vested Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement) of the purchase price therefor by
the Company by a certified or cashier's check.

12. Effect of Prohibited Transfer. The Company shall not be required (a) to
transfer on its books any Shares which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (b) to treat
as owner of such Shares or to pay dividends to any transferee to whom any such
Shares shall have been so sold or transferred.

13. Initial Public Offering. Upon the closing of the first underwritten public
offering by the Company under the Act of its Stock for its own account for cash:
(a) Sections 9(a), 10 and 11 of this Agreement shall terminate except as to
Offers accepted and Repurchase Rights exercised by the Company prior to such
date; (b) without the prior written approval of the Company, Employee agrees not
to, directly or indirectly, make or cause any offering, sale, short sale,
hypothecation, pledge or other disposition of any Vested Shares until the date
180 days after the effective date of the registration statement filed with the
Securities and Exchange Commission pursuant to the Act by the Company in
connection with such offering (the "Holdback Period"); and (c) Employee shall,
if so requested by the Company, sign an agreement with the


                                       -5-



underwriters of the offering containing such terms and provisions requested by
such underwriters substantially similar to those contained in this Section 13.
The Company may impose stop-transfer instructions with respect to the Shares or
other securities subject to the foregoing restrictions until the end of the
Holdback Period.

14. Termination of Restrictions on Transfer. The restrictions on the transfer of
Vested Shares contained in Sections 11 through 13 of this Agreement, and the
obligations of Employee and the Company set forth therein, except as to Offers
accepted and Repurchase Rights exercised by the Company prior to a Change in
Control, shall terminate upon a Change in Control, as defined below. The
transfer of the Shares pursuant to a Change in Control shall not be subject to
the provisions of Sections 9(a) and 10 of this Agreement.

     For purposes of this Section 14, Change in Control shall mean:

     (i) the acquisition by any Person or group of the ultimate beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of more than 50% of the
then outstanding securities of the Company entitled to vote generally in the
election of directors; excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition by virtue of the exercise
of an exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was itself acquired directly from the
Company), (B) any acquisition by the Company, or (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or by any corporation controlled by the Company; or

     (ii) a reorganization, recapitalization, merger or consolidation (a
"Corporate Transaction") of the Company, unless securities representing more
than 50% of the then outstanding securities entitled to vote generally in the
election of directors of the Company or the corporation resulting from or
surviving such Corporate Transaction (or the ultimate parent of the Company or
such corporation after such Corporate Transaction) are beneficially owned
subsequent to such Corporate Transaction by the Person or Persons who were the
beneficial owners of the outstanding securities of the Company entitled to vote
generally in the election of directors immediately prior to such Corporate
Transaction, in substantially the same proportions as their ownership
immediately prior to such Corporate Transaction; or

     (iii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company; or

     (iv) the dissolution or liquidation of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.


                                       -6-



     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include the Company or a wholly owned subsidiary of the
Company or an employee benefit plan (or related trust) of the Company or of a
wholly owned subsidiary.

15. Certain Tax Matters. Employee expressly acknowledges the following:

     a. Employee has been advised to confer promptly with a professional tax
advisor to consider whether Employee should make a so-called "83(b) election"
with respect to the Shares. Any such election, to be effective, must be made in
accordance with applicable regulations and within thirty (30) days following the
date of this Award. The Company has made no recommendation to Employee with
respect to the advisability of making such an election.

     b. The award or vesting of the Shares acquired hereunder, and the payment
of dividends with respect to such Shares, may give rise to "wages" subject to
withholding. Employee expressly acknowledges and agrees that Employee's rights
hereunder are subject to Employee's promptly paying to the Company in cash (or
by such other means as may be acceptable to the Company in its discretion,
including, if the administrator of the Plan so determines, by the delivery of
previously acquired Stock or shares of Stock acquired hereunder or by the
withholding of amounts from any payment hereunder) all taxes required to be
withheld in connection with such award, vesting or payment.

16. No Employment Rights. Nothing in the Plan, the Award or this Agreement
confers upon the Employee any right to continued employment or interferes with
the right of the Company to terminate Employee's employment at any time.

17. Severability; Governing Law. If any provisions of this Agreement shall be
determined to be illegal or unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
This Agreement shall be governed by, and construed in accordance with, the laws
of Delaware, excluding its choice of law provisions.

18. Injunctive Relief. It is acknowledged that it will be impossible to measure
the damages that would be suffered by the Company if Employee fails to comply
with the provisions of this Agreement and that, in the event of any such
failure, the Company will not have an adequate remedy at law. The Company shall,
therefore, be entitled to obtain specific performance of each of Employee's
obligations hereunder and to obtain immediate injunctive relief without the
requirement of posting a bond. Employee shall not urge, as a defense to any
proceeding for such specific performance or injunctive relief, that the Company
has an adequate remedy at law.

19. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.

20. Amendments. Except as provided below, the Board may at any time or times
amend the Plan or this Agreement for the purpose of satisfying the requirements
of any changes in applicable laws or regulations or for any other purpose which
at the time may be permitted by law. Sections 9 through 11 of this Agreement,
containing restrictions on the transfer of Shares, may be amended or modified
only by a written instrument executed by both the Company and Employee. No
termination or amendment of the Plan or amendment of this Agreement shall,


                                       -7-



without Employee's consent, adversely affect Employee's rights under the Plan or
this Agreement.

21. Notices. All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery, upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or upon
deposit with a recognized express overnight courier service, addressed, if to
the Company, to 400 Pleasant Street, Watertown, MA 02472, attention: Chief
Financial Officer, and if to Employee, to the address shown beneath his or her
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 21.

22. Merger Provision. This Agreement, including the Plan which is incorporated
herein by reference in its entirety, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, whether oral or
written, of the parties hereto concerning the subject matter hereof.

23. Waivers. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Company.

24. Definition. As used in this Agreement, the term "Company" shall include any
subsidiary or parent of the Company as defined in Sections 424(e) and (f) of the
Code.

25. Consistency with Plan. If there is any inconsistency between the provisions
of this Agreement and the provisions of the Plan, the Plan shall control.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -8-



Name of Employee: Paul Ashton

Number of Shares of Restricted Stock granted: 20,000

Date of Grant: August 16, 2004

The foregoing Restricted Stock Award is hereby accepted and in consideration of
the grant of such Award, the undersigned Employee hereby agrees with Control
Delivery Systems, Inc. that the undersigned will be bound by the foregoing
Restricted Stock Award Agreement:


/s/ Paul Ashton
- -------------------------------------
(Signature of Employee)

Dated: ___________, 2004

                                                                    Exhibit 4.30

                         CONTROL DELIVERY SYSTEMS, INC.
                               2001 INCENTIVE PLAN

                        Restricted Stock Award Agreement

     The undersigned employee ("Employee") has been granted an award (the
"Award") of restricted stock from Control Delivery Systems, Inc. (the "Company")
under the 2001 Incentive Plan (the "Plan"), subject to the terms set forth below
and in the Plan, a copy of which as currently in effect has been delivered to
Employee. In consideration of the grant of the Award, the Employee agrees with
the Company as follows:

1. Effective Date. This Agreement shall take effect as of the date of grant of
the Award, as indicated on the signature page hereof.

2. Shares Subject to Award. The Award consists of the number of shares set forth
on the signature page hereof (the "Shares") of common stock of the Company
("Stock"). Employee's rights to the Shares are subject to the restrictions
described in this Agreement and the Plan in addition to such other restrictions,
if any, as may be imposed by law.

3. Meaning of Certain Terms. Except as otherwise expressly provided, all terms
used herein shall have the same meaning as in the Plan. The term "vest" as used
herein with respect to any Share means the lapsing of the restrictions described
herein with respect to such Share.

4. Nontransferability of Shares. The Shares cannot be sold, transferred,
pledged, assigned or otherwise encumbered or disposed of until they have vested,
and then only as provided below and in the Plan.

5. Forfeiture Risk. If Employee ceases to be employed by the Company and its
subsidiaries for any reason, including death, any then outstanding and unvested
Shares shall be automatically and immediately forfeited. Employee hereby (i)
appoints the Company as the attorney-in-fact of Employee to take such actions as
may be necessary or appropriate to effectuate a transfer of the record ownership
of any such shares that are unvested and forfeited hereunder, (ii) agrees to
deliver to the Company, as a precondition to the issuance of any certificate or
certificates with respect to unvested Shares hereunder, one or more stock
powers, endorsed in blank, with respect to such Shares, and (iii) agrees to sign
such other powers and take such other actions as the Company may reasonably
request to accomplish the transfer or forfeiture of any unvested Shares that are
forfeited hereunder.

6. Vesting of Shares. The Shares shall vest in accordance with the provisions of
this Paragraph 6 and applicable provisions of the Plan (if not earlier in
accordance with the Plan, including Section 6 of the Plan), as follows:

     100% of the Shares will vest on the earlier to occur of:

          -    October 7, 2005; or

          -    a Liquidity Event Date (as defined below).


                                   PAGE 1 OF 9



     Notwithstanding the foregoing, in the event that a Liquidity Event Date
that relates to an initial public offering occurs on or before October 7, 2005,
100% of the Shares shall vest on that date which is the six-month anniversary of
the closing of the initial public offering.

     Any securities of the Company or any other entity, and any cash and other
consideration, into which the Shares are converted or for which they are
exchanged, by reason of a merger, consolidation, sale of assets, reorganization
or other transaction, shall vest (by their terms or through the use of an
escrow, a commitment to deliver in the future or such other device as is
determined by the administrator of the Plan) on the same terms as the Shares
from which they were converted or for which they were exchanged.

     A "Liquidity Event" means any public offering, merger, consolidation, sale
of assets, reorganization or other transaction in or as a result of which the
Stock of the Company (or the stock or other securities into or for which such
Stock is converted or exchanged) are or become registered under the Securities
Exchange Act of 1934 or are converted into or exchanged for cash. "Liquidity
Event Date" shall mean the date of the closing of a Liquidity Event.

     Notwithstanding the foregoing, no Shares shall vest on any vesting date
specified above unless Employee is then, and since the date of grant has
continuously been, employed by the Company or its subsidiaries.

7. Legend. Any certificates representing unvested Shares shall bear a legend
substantially in the following form:

     THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED
     HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF AN
     INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN
     THE REGISTERED OWNER AND CONTROL DELIVERY SYSTEMS, INC. COPIES OF SUCH PLAN
     AND AGREEMENT ARE ON FILE IN THE OFFICES OF CONTROL DELIVERY SYSTEMS, INC.

     As soon as practicable following the vesting of any such Shares, the
Company shall cause a certificate or certificates covering such Shares to be
issued and delivered to Employee, containing a legend substantially in the
following form:

     THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
     RESTRICTIONS UPON TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT.
     THE CORPORATION WILL FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER OF THIS
     CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE.

     If any Shares are held in book-entry form, the Company may take such steps
as it deems necessary or appropriate to record and manifest the restrictions
applicable to such Shares.

8. Dividends, etc. Employee shall be entitled to (i) receive regular cash
dividends, if any, paid with respect to those Shares of which Employee is the
record owner on the record date for


                                       -2-



such dividend, and (ii) vote any Shares of which Employee is the record owner on
the record date for such vote. Any dividends and distributions (other than any
regular cash dividends) distributed with respect to any Shares or any securities
of the Company or any other entity into which the Shares are converted or for
which they are exchanged (the "associated share"), including without limitation
a distribution of stock by reason of a stock dividend, stock split or otherwise
with respect to an associated share, or a distribution of other securities with
respect to an associated share, shall be subject to the restrictions of this
Agreement in the same manner and for so long as the associated share remains
subject to such restrictions, and shall be forfeited if and when the associated
share is so forfeited. The administrator of the Plan may require that any cash
distribution with respect to the Shares other than a regular cash dividend be
placed in escrow or otherwise made subject to such restrictions as the
administrator of the Plan deems appropriate. References in this Agreement to the
Shares shall refer, with the necessary changes having been made, to any such
restricted amounts.

9. Restriction on Transfer of Vested Shares.

     a. Employee shall not sell, assign, transfer, pledge, hypothecate, give or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares once they have vested ("Vested Shares"), or any
interest therein, unless such transfer shall be made in compliance with the
provisions of this Section 9 and the provisions of Sections 10 and 11 of this
Agreement.

     b. Notwithstanding Section 10 hereof, Employee shall not transfer any
Vested Shares unless either (i) a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the Vested Shares shall
have become, and continues to be, effective, or (ii) the Company receives an
opinion of counsel reasonably satisfactory to it that registration of such
Vested Shares is not required under the Act.

10. Right of First Refusal on Dispositions of Vested Shares.

     a. Receipt of Third-Party Offer. If at any time Employee desires to sell
for cash, cash equivalents or any other form of consideration (including a
promissory note) Vested Shares pursuant to an offer or proposed offer from a
third party (the "Proposed Transferee"), Employee shall submit a written offer
(the "Offer") to sell such Vested Shares (the "Offered Shares") to the Company
on terms and conditions, including price, not less favorable to the Company than
those on which Employee proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Vested
Shares owned by Employee, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state that the Company may acquire, in accordance with the
provisions of this Agreement, all or any portion of the Offered Shares for the
price and upon the other terms and conditions, including deferred payment (if
applicable), set forth therein.

     b. Company Notice of Intent to Purchase. If the Company desires to purchase
all or any portion of the Offered Shares, the Company shall give to Employee
written notice of the number of Offered Shares to be purchased by it within 30
days of the date of the Offer. Such communication shall, when taken in
conjunction with the Offer, be deemed to constitute a valid,


                                       -3-



legally binding and enforceable agreement for the sale and purchase of the
Offered Shares. Sale of the Offered Shares to the Company pursuant to this
Section 10 shall be made at the offices of the Company on the 45th day following
the date of the Offer (or, if such day is not a business day, then on the next
succeeding business day). Such sale shall be effected by Employee's delivery to
the Company of a certificate or certificates evidencing the Offered Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee of the purchase price therefor by the Company by a certified
or cashier's check.

     c. Sale to Third Party. If, within 30 days of its receipt of notice of the
Offer, the Company fails to deliver written notice to Employee of its intention
to purchase all of the Offered Shares (the Offered Shares which the Company does
not elect to purchase being referred to as the "Refused Shares"), the Refused
Shares not so purchased may be sold by Employee at any time within 90 days after
the date of the Offer, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. If the Refused Shares are not sold within such 90 day
period, they shall continue to be subject to the requirements of a prior offer
pursuant to this Section 10. If the Refused Shares are sold pursuant to this
Section 10 to any purchaser who is not a party to an agreement with the Company
containing restrictions on the transfer of the Vested Shares to the same extent
as those contained herein, the Company, may at its option, require the purchaser
to execute and deliver an agreement containing restrictions on the transfer of
Vested Shares the same as those set forth in this Agreement.

     d. Permitted Transfers. Employee shall have the right to make Permitted
Transfers (as defined below) of Employee's Vested Shares and the provisions of
subsections (a), (b) and (c) above shall not apply to any such Permitted
Transfer by Employee. For purposes of this Agreement, "Permitted Transfer" shall
mean any transfer by Employee during his or her lifetime of all or any portion
of the Vested Shares (i) to the Company; or (ii) to any parent, spouse, child,
grandchild, brother, sister or the spouse of a child, grandchild, brother or
sister (a "Member of the Immediate Family") of Employee, to a trust created for
the benefit of a Member of the Immediate Family of Employee or to a custodian of
a property of one or more such persons, or to a limited partnership or limited
liability company all partners or members of which are Members of the Immediate
Family of Employee, any of such transfers to include transfers by will or the
laws of descent and distribution; provided, however, that, it shall be a
condition of each such transfer, that (x) the transferee agrees to be bound by
the terms of this Agreement, including without limitation Sections 10, 11 and
13, as though no such transfer had taken place, and that (y) Employee has
complied with all applicable laws in connection with such transfer.


                                       -4-



11. Right of Repurchase of Vested Shares.

     a. Termination of Employment Relationship. If Employee's employment or
other service relationship with the Company terminates, voluntarily or
involuntarily, for any reason, the Company shall have the right to purchase, and
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement) shall, at the election of the Company, be
obligated to sell, all or any part of Employee's Vested Shares at the purchase
price and on the terms provided in this Section 11 (the "Repurchase Right").

     b. Exercise of Repurchase Right. The Company may exercise the Repurchase
Right by giving to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement), within 30 days of the date on
which Employee's employment or other service relationship with the Company
terminates (the "Termination Date"), written notice of (i) the number of Vested
Shares to be purchased by it, and (ii) the purchase price, as determined in a
manner provided below, to be paid for such Vested Shares. Such communication
shall be deemed to constitute a valid, legally binding and enforceable agreement
for the sale and purchase of the Vested Shares.

     The purchase price of Vested Shares purchased by the Company pursuant to
this Section 11 shall be the fair market value of such Vested Shares on the
Termination Date, as conclusively determined by the Board of Directors of the
Company after taking into consideration such factors as it deems appropriate.

     Sale of the Vested Shares to the Company pursuant to this Section 11 shall
be made at the offices of the Company on the 45th day following the Termination
Date (or, if such day is not a business day, then on the next succeeding
business day) or such earlier business day of which the Company shall notify
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement). Such sale shall be effected by the delivery to
the Company of a certificate or certificates evidencing the Vested Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement) of the purchase price therefor by
the Company by a certified or cashier's check.

12. Effect of Prohibited Transfer. The Company shall not be required (a) to
transfer on its books any Shares which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (b) to treat
as owner of such Shares or to pay dividends to any transferee to whom any such
Shares shall have been so sold or transferred.

13. Initial Public Offering. Upon the closing of the first underwritten public
offering by the Company under the Act of its Stock for its own account for cash:
(a) Sections 9(a), 10 and 11 of this Agreement shall terminate except as to
Offers accepted and Repurchase Rights exercised by the Company prior to such
date; (b) without the prior written approval of the Company, Employee agrees not
to, directly or indirectly, make or cause any offering, sale, short sale,
hypothecation, pledge or other disposition of any Vested Shares until the date
180 days after the effective date of the registration statement filed with the
Securities and Exchange Commission pursuant to the Act by the Company in
connection with such offering (the "Holdback Period"); and (c) Employee shall,
if so requested by the Company, sign an agreement with the


                                       -5-



underwriters of the offering containing such terms and provisions requested by
such underwriters substantially similar to those contained in this Section 13.
The Company may impose stop-transfer instructions with respect to the Shares or
other securities subject to the foregoing restrictions until the end of the
Holdback Period.

14. Termination of Restrictions on Transfer. The restrictions on the transfer of
Vested Shares contained in Sections 11 through 13 of this Agreement, and the
obligations of Employee and the Company set forth therein, except as to Offers
accepted and Repurchase Rights exercised by the Company prior to a Change in
Control, shall terminate upon a Change in Control, as defined below. The
transfer of the Shares pursuant to a Change in Control shall not be subject to
the provisions of Sections 9(a) and 10 of this Agreement.

     For purposes of this Section 14, Change in Control shall mean:

     (i) the acquisition by any Person or group of the ultimate beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of more than 50% of the
then outstanding securities of the Company entitled to vote generally in the
election of directors; excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition by virtue of the exercise
of an exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was itself acquired directly from the
Company), (B) any acquisition by the Company, or (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or by any corporation controlled by the Company; or

     (ii) a reorganization, recapitalization, merger or consolidation (a
"Corporate Transaction") of the Company, unless securities representing more
than 50% of the then outstanding securities entitled to vote generally in the
election of directors of the Company or the corporation resulting from or
surviving such Corporate Transaction (or the ultimate parent of the Company or
such corporation after such Corporate Transaction) are beneficially owned
subsequent to such Corporate Transaction by the Person or Persons who were the
beneficial owners of the outstanding securities of the Company entitled to vote
generally in the election of directors immediately prior to such Corporate
Transaction, in substantially the same proportions as their ownership
immediately prior to such Corporate Transaction; or

     (iii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company; or

     (iv) the dissolution or liquidation of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.


                                       -6-



     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include the Company or a wholly owned subsidiary of the
Company or an employee benefit plan (or related trust) of the Company or of a
wholly owned subsidiary.

15. Certain Tax Matters. Employee expressly acknowledges the following:

     a. Employee has been advised to confer promptly with a professional tax
advisor to consider whether Employee should make a so-called "83(b) election"
with respect to the Shares. Any such election, to be effective, must be made in
accordance with applicable regulations and within thirty (30) days following the
date of this Award. The Company has made no recommendation to Employee with
respect to the advisability of making such an election.

     b. The award or vesting of the Shares acquired hereunder, and the payment
of dividends with respect to such Shares, may give rise to "wages" subject to
withholding. Employee expressly acknowledges and agrees that Employee's rights
hereunder are subject to Employee's promptly paying to the Company in cash (or
by such other means as may be acceptable to the Company in its discretion,
including, if the administrator of the Plan so determines, by the delivery of
previously acquired Stock or shares of Stock acquired hereunder or by the
withholding of amounts from any payment hereunder) all taxes required to be
withheld in connection with such award, vesting or payment.

16. No Employment Rights. Nothing in the Plan, the Award or this Agreement
confers upon the Employee any right to continued employment or interferes with
the right of the Company to terminate Employee's employment at any time.

17. Severability; Governing Law. If any provisions of this Agreement shall be
determined to be illegal or unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
This Agreement shall be governed by, and construed in accordance with, the laws
of Delaware, excluding its choice of law provisions.

18. Injunctive Relief. It is acknowledged that it will be impossible to measure
the damages that would be suffered by the Company if Employee fails to comply
with the provisions of this Agreement and that, in the event of any such
failure, the Company will not have an adequate remedy at law. The Company shall,
therefore, be entitled to obtain specific performance of each of Employee's
obligations hereunder and to obtain immediate injunctive relief without the
requirement of posting a bond. Employee shall not urge, as a defense to any
proceeding for such specific performance or injunctive relief, that the Company
has an adequate remedy at law.

19. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.

20. Amendments. Except as provided below, the Board may at any time or times
amend the Plan or this Agreement for the purpose of satisfying the requirements
of any changes in applicable laws or regulations or for any other purpose which
at the time may be permitted by law. Sections 9 through 11 of this Agreement,
containing restrictions on the transfer of Shares, may be amended or modified
only by a written instrument executed by both the Company and Employee. No
termination or amendment of the Plan or amendment of this Agreement shall,


                                       -7-



without Employee's consent, adversely affect Employee's rights under the Plan or
this Agreement.

21. Notices. All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery, upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or upon
deposit with a recognized express overnight courier service, addressed, if to
the Company, to 400 Pleasant Street, Watertown, MA 02472, attention: Chief
Financial Officer, and if to Employee, to the address shown beneath his or her
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 21.

22. Merger Provision. This Agreement, including the Plan which is incorporated
herein by reference in its entirety, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, whether oral or
written, of the parties hereto concerning the subject matter hereof.

23. Waivers. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Company.

24. Definition. As used in this Agreement, the term "Company" shall include any
subsidiary or parent of the Company as defined in Sections 424(e) and (f) of the
Code.

25. Consistency with Plan. If there is any inconsistency between the provisions
of this Agreement and the provisions of the Plan, the Plan shall control.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -8-



Name of Employee: Michael J. Soja

Number of Shares of Restricted Stock granted: 20,000

Date of Grant: August 16, 2004

The foregoing Restricted Stock Award is hereby accepted and in consideration of
the grant of such Award, the undersigned Employee hereby agrees with Control
Delivery Systems, Inc. that the undersigned will be bound by the foregoing
Restricted Stock Award Agreement:


/s/ Michael J. Soja
- -------------------------------------
(Signature of Employee)

Dated: __________, 2004

                                                                    Exhibit 4.31

                         CONTROL DELIVERY SYSTEMS, INC.
                               2001 INCENTIVE PLAN

                        Restricted Stock Award Agreement

     The undersigned employee ("Employee") has been granted an award (the
"Award") of restricted stock from Control Delivery Systems, Inc. (the "Company")
under the 2001 Incentive Plan (the "Plan"), subject to the terms set forth below
and in the Plan, a copy of which as currently in effect has been delivered to
Employee. In consideration of the grant of the Award, the Employee agrees with
the Company as follows:

1. Effective Date. This Agreement shall take effect as of the date of grant of
the Award, as indicated on the signature page hereof.

2. Shares Subject to Award. The Award consists of the number of shares set forth
on the signature page hereof (the "Shares") of common stock of the Company
("Stock"). Employee's rights to the Shares are subject to the restrictions
described in this Agreement and the Plan in addition to such other restrictions,
if any, as may be imposed by law.

3. Meaning of Certain Terms. Except as otherwise expressly provided, all terms
used herein shall have the same meaning as in the Plan. The term "vest" as used
herein with respect to any Share means the lapsing of the restrictions described
herein with respect to such Share.

4. Nontransferability of Shares. The Shares cannot be sold, transferred,
pledged, assigned or otherwise encumbered or disposed of until they have vested,
and then only as provided below and in the Plan.

5. Forfeiture Risk. If Employee ceases to be employed by the Company and its
subsidiaries for any reason, including death, any then outstanding and unvested
Shares shall be automatically and immediately forfeited. Employee hereby (i)
appoints the Company as the attorney-in-fact of Employee to take such actions as
may be necessary or appropriate to effectuate a transfer of the record ownership
of any such shares that are unvested and forfeited hereunder, (ii) agrees to
deliver to the Company, as a precondition to the issuance of any certificate or
certificates with respect to unvested Shares hereunder, one or more stock
powers, endorsed in blank, with respect to such Shares, and (iii) agrees to sign
such other powers and take such other actions as the Company may reasonably
request to accomplish the transfer or forfeiture of any unvested Shares that are
forfeited hereunder.

6. Vesting of Shares. The Shares shall vest in accordance with the provisions of
this Paragraph 6 and applicable provisions of the Plan (if not earlier in
accordance with the Plan, including Section 6 of the Plan), as follows:

     100% of the Shares will vest on the earlier to occur of:

          -    October 7, 2005; or

          -    a Liquidity Event Date (as defined below).


                                   PAGE 1 OF 9



     Notwithstanding the foregoing, in the event that a Liquidity Event Date
that relates to an initial public offering occurs on or before October 7, 2005,
100% of the Shares shall vest on that date which is the six-month anniversary of
the closing of the initial public offering.

     Any securities of the Company or any other entity, and any cash and other
consideration, into which the Shares are converted or for which they are
exchanged, by reason of a merger, consolidation, sale of assets, reorganization
or other transaction, shall vest (by their terms or through the use of an
escrow, a commitment to deliver in the future or such other device as is
determined by the administrator of the Plan) on the same terms as the Shares
from which they were converted or for which they were exchanged.

     A "Liquidity Event" means any public offering, merger, consolidation, sale
of assets, reorganization or other transaction in or as a result of which the
Stock of the Company (or the stock or other securities into or for which such
Stock is converted or exchanged) are or become registered under the Securities
Exchange Act of 1934 or are converted into or exchanged for cash. "Liquidity
Event Date" shall mean the date of the closing of a Liquidity Event.

     Notwithstanding the foregoing, no Shares shall vest on any vesting date
specified above unless Employee is then, and since the date of grant has
continuously been, employed by the Company or its subsidiaries.

7. Legend. Any certificates representing unvested Shares shall bear a legend
substantially in the following form:

     THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED
     HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF AN
     INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN
     THE REGISTERED OWNER AND CONTROL DELIVERY SYSTEMS, INC. COPIES OF SUCH PLAN
     AND AGREEMENT ARE ON FILE IN THE OFFICES OF CONTROL DELIVERY SYSTEMS, INC.

     As soon as practicable following the vesting of any such Shares, the
Company shall cause a certificate or certificates covering such Shares to be
issued and delivered to Employee, containing a legend substantially in the
following form:

     THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
     RESTRICTIONS UPON TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT.
     THE CORPORATION WILL FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER OF THIS
     CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE.

     If any Shares are held in book-entry form, the Company may take such steps
as it deems necessary or appropriate to record and manifest the restrictions
applicable to such Shares.

8. Dividends, etc. Employee shall be entitled to (i) receive regular cash
dividends, if any, paid with respect to those Shares of which Employee is the
record owner on the record date for


                                       -2-



such dividend, and (ii) vote any Shares of which Employee is the record owner on
the record date for such vote. Any dividends and distributions (other than any
regular cash dividends) distributed with respect to any Shares or any securities
of the Company or any other entity into which the Shares are converted or for
which they are exchanged (the "associated share"), including without limitation
a distribution of stock by reason of a stock dividend, stock split or otherwise
with respect to an associated share, or a distribution of other securities with
respect to an associated share, shall be subject to the restrictions of this
Agreement in the same manner and for so long as the associated share remains
subject to such restrictions, and shall be forfeited if and when the associated
share is so forfeited. The administrator of the Plan may require that any cash
distribution with respect to the Shares other than a regular cash dividend be
placed in escrow or otherwise made subject to such restrictions as the
administrator of the Plan deems appropriate. References in this Agreement to the
Shares shall refer, with the necessary changes having been made, to any such
restricted amounts.

9. Restriction on Transfer of Vested Shares.

     a. Employee shall not sell, assign, transfer, pledge, hypothecate, give or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares once they have vested ("Vested Shares"), or any
interest therein, unless such transfer shall be made in compliance with the
provisions of this Section 9 and the provisions of Sections 10 and 11 of this
Agreement.

     b. Notwithstanding Section 10 hereof, Employee shall not transfer any
Vested Shares unless either (i) a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the Vested Shares shall
have become, and continues to be, effective, or (ii) the Company receives an
opinion of counsel reasonably satisfactory to it that registration of such
Vested Shares is not required under the Act.

10. Right of First Refusal on Dispositions of Vested Shares.

     a. Receipt of Third-Party Offer. If at any time Employee desires to sell
for cash, cash equivalents or any other form of consideration (including a
promissory note) Vested Shares pursuant to an offer or proposed offer from a
third party (the "Proposed Transferee"), Employee shall submit a written offer
(the "Offer") to sell such Vested Shares (the "Offered Shares") to the Company
on terms and conditions, including price, not less favorable to the Company than
those on which Employee proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Vested
Shares owned by Employee, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state that the Company may acquire, in accordance with the
provisions of this Agreement, all or any portion of the Offered Shares for the
price and upon the other terms and conditions, including deferred payment (if
applicable), set forth therein.

     b. Company Notice of Intent to Purchase. If the Company desires to purchase
all or any portion of the Offered Shares, the Company shall give to Employee
written notice of the number of Offered Shares to be purchased by it within 30
days of the date of the Offer. Such communication shall, when taken in
conjunction with the Offer, be deemed to constitute a valid,


                                       -3-



legally binding and enforceable agreement for the sale and purchase of the
Offered Shares. Sale of the Offered Shares to the Company pursuant to this
Section 10 shall be made at the offices of the Company on the 45th day following
the date of the Offer (or, if such day is not a business day, then on the next
succeeding business day). Such sale shall be effected by Employee's delivery to
the Company of a certificate or certificates evidencing the Offered Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee of the purchase price therefor by the Company by a certified
or cashier's check.

     c. Sale to Third Party. If, within 30 days of its receipt of notice of the
Offer, the Company fails to deliver written notice to Employee of its intention
to purchase all of the Offered Shares (the Offered Shares which the Company does
not elect to purchase being referred to as the "Refused Shares"), the Refused
Shares not so purchased may be sold by Employee at any time within 90 days after
the date of the Offer, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. If the Refused Shares are not sold within such 90 day
period, they shall continue to be subject to the requirements of a prior offer
pursuant to this Section 10. If the Refused Shares are sold pursuant to this
Section 10 to any purchaser who is not a party to an agreement with the Company
containing restrictions on the transfer of the Vested Shares to the same extent
as those contained herein, the Company, may at its option, require the purchaser
to execute and deliver an agreement containing restrictions on the transfer of
Vested Shares the same as those set forth in this Agreement.

     d. Permitted Transfers. Employee shall have the right to make Permitted
Transfers (as defined below) of Employee's Vested Shares and the provisions of
subsections (a), (b) and (c) above shall not apply to any such Permitted
Transfer by Employee. For purposes of this Agreement, "Permitted Transfer" shall
mean any transfer by Employee during his or her lifetime of all or any portion
of the Vested Shares (i) to the Company; or (ii) to any parent, spouse, child,
grandchild, brother, sister or the spouse of a child, grandchild, brother or
sister (a "Member of the Immediate Family") of Employee, to a trust created for
the benefit of a Member of the Immediate Family of Employee or to a custodian of
a property of one or more such persons, or to a limited partnership or limited
liability company all partners or members of which are Members of the Immediate
Family of Employee, any of such transfers to include transfers by will or the
laws of descent and distribution; provided, however, that, it shall be a
condition of each such transfer, that (x) the transferee agrees to be bound by
the terms of this Agreement, including without limitation Sections 10, 11 and
13, as though no such transfer had taken place, and that (y) Employee has
complied with all applicable laws in connection with such transfer.


                                       -4-



11. Right of Repurchase of Vested Shares.

     a. Termination of Employment Relationship. If Employee's employment or
other service relationship with the Company terminates, voluntarily or
involuntarily, for any reason, the Company shall have the right to purchase, and
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement) shall, at the election of the Company, be
obligated to sell, all or any part of Employee's Vested Shares at the purchase
price and on the terms provided in this Section 11 (the "Repurchase Right").

     b. Exercise of Repurchase Right. The Company may exercise the Repurchase
Right by giving to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement), within 30 days of the date on
which Employee's employment or other service relationship with the Company
terminates (the "Termination Date"), written notice of (i) the number of Vested
Shares to be purchased by it, and (ii) the purchase price, as determined in a
manner provided below, to be paid for such Vested Shares. Such communication
shall be deemed to constitute a valid, legally binding and enforceable agreement
for the sale and purchase of the Vested Shares.

     The purchase price of Vested Shares purchased by the Company pursuant to
this Section 11 shall be the fair market value of such Vested Shares on the
Termination Date, as conclusively determined by the Board of Directors of the
Company after taking into consideration such factors as it deems appropriate.

     Sale of the Vested Shares to the Company pursuant to this Section 11 shall
be made at the offices of the Company on the 45th day following the Termination
Date (or, if such day is not a business day, then on the next succeeding
business day) or such earlier business day of which the Company shall notify
Employee (or Employee's legal representative or transferee(s) pursuant to
Section 10(d) of this Agreement). Such sale shall be effected by the delivery to
the Company of a certificate or certificates evidencing the Vested Shares to be
purchased by the Company, duly endorsed for transfer to the Company, against
payment to Employee (or Employee's legal representative or transferee(s)
pursuant to Section 10(d) of this Agreement) of the purchase price therefor by
the Company by a certified or cashier's check.

12. Effect of Prohibited Transfer. The Company shall not be required (a) to
transfer on its books any Shares which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (b) to treat
as owner of such Shares or to pay dividends to any transferee to whom any such
Shares shall have been so sold or transferred.

13. Initial Public Offering. Upon the closing of the first underwritten public
offering by the Company under the Act of its Stock for its own account for cash:
(a) Sections 9(a), 10 and 11 of this Agreement shall terminate except as to
Offers accepted and Repurchase Rights exercised by the Company prior to such
date; (b) without the prior written approval of the Company, Employee agrees not
to, directly or indirectly, make or cause any offering, sale, short sale,
hypothecation, pledge or other disposition of any Vested Shares until the date
180 days after the effective date of the registration statement filed with the
Securities and Exchange Commission pursuant to the Act by the Company in
connection with such offering (the "Holdback Period"); and (c) Employee shall,
if so requested by the Company, sign an agreement with the


                                       -5-



underwriters of the offering containing such terms and provisions requested by
such underwriters substantially similar to those contained in this Section 13.
The Company may impose stop-transfer instructions with respect to the Shares or
other securities subject to the foregoing restrictions until the end of the
Holdback Period.

14. Termination of Restrictions on Transfer. The restrictions on the transfer of
Vested Shares contained in Sections 11 through 13 of this Agreement, and the
obligations of Employee and the Company set forth therein, except as to Offers
accepted and Repurchase Rights exercised by the Company prior to a Change in
Control, shall terminate upon a Change in Control, as defined below. The
transfer of the Shares pursuant to a Change in Control shall not be subject to
the provisions of Sections 9(a) and 10 of this Agreement.

     For purposes of this Section 14, Change in Control shall mean:

     (i) the acquisition by any Person or group of the ultimate beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of more than 50% of the
then outstanding securities of the Company entitled to vote generally in the
election of directors; excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition by virtue of the exercise
of an exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was itself acquired directly from the
Company), (B) any acquisition by the Company, or (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or by any corporation controlled by the Company; or

     (ii) a reorganization, recapitalization, merger or consolidation (a
"Corporate Transaction") of the Company, unless securities representing more
than 50% of the then outstanding securities entitled to vote generally in the
election of directors of the Company or the corporation resulting from or
surviving such Corporate Transaction (or the ultimate parent of the Company or
such corporation after such Corporate Transaction) are beneficially owned
subsequent to such Corporate Transaction by the Person or Persons who were the
beneficial owners of the outstanding securities of the Company entitled to vote
generally in the election of directors immediately prior to such Corporate
Transaction, in substantially the same proportions as their ownership
immediately prior to such Corporate Transaction; or

     (iii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company; or

     (iv) the dissolution or liquidation of the Company.

     For purposes of this definition, securities entitled to vote generally in
the election of directors that are issuable upon exercise of an exercise,
conversion or exchange privilege shall be deemed to be outstanding. In addition,
for purposes of this definition the following terms have the meanings set forth
below:

     A Person will be deemed to be the "owner" of any securities of which such
Person would be the "beneficial owner," as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.


                                       -6-



     "Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include the Company or a wholly owned subsidiary of the
Company or an employee benefit plan (or related trust) of the Company or of a
wholly owned subsidiary.

15. Certain Tax Matters. Employee expressly acknowledges the following:

     a. Employee has been advised to confer promptly with a professional tax
advisor to consider whether Employee should make a so-called "83(b) election"
with respect to the Shares. Any such election, to be effective, must be made in
accordance with applicable regulations and within thirty (30) days following the
date of this Award. The Company has made no recommendation to Employee with
respect to the advisability of making such an election.

     b. The award or vesting of the Shares acquired hereunder, and the payment
of dividends with respect to such Shares, may give rise to "wages" subject to
withholding. Employee expressly acknowledges and agrees that Employee's rights
hereunder are subject to Employee's promptly paying to the Company in cash (or
by such other means as may be acceptable to the Company in its discretion,
including, if the administrator of the Plan so determines, by the delivery of
previously acquired Stock or shares of Stock acquired hereunder or by the
withholding of amounts from any payment hereunder) all taxes required to be
withheld in connection with such award, vesting or payment.

16. No Employment Rights. Nothing in the Plan, the Award or this Agreement
confers upon the Employee any right to continued employment or interferes with
the right of the Company to terminate Employee's employment at any time.

17. Severability; Governing Law. If any provisions of this Agreement shall be
determined to be illegal or unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
This Agreement shall be governed by, and construed in accordance with, the laws
of Delaware, excluding its choice of law provisions.

18. Injunctive Relief. It is acknowledged that it will be impossible to measure
the damages that would be suffered by the Company if Employee fails to comply
with the provisions of this Agreement and that, in the event of any such
failure, the Company will not have an adequate remedy at law. The Company shall,
therefore, be entitled to obtain specific performance of each of Employee's
obligations hereunder and to obtain immediate injunctive relief without the
requirement of posting a bond. Employee shall not urge, as a defense to any
proceeding for such specific performance or injunctive relief, that the Company
has an adequate remedy at law.

19. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.

20. Amendments. Except as provided below, the Board may at any time or times
amend the Plan or this Agreement for the purpose of satisfying the requirements
of any changes in applicable laws or regulations or for any other purpose which
at the time may be permitted by law. Sections 9 through 11 of this Agreement,
containing restrictions on the transfer of Shares, may be amended or modified
only by a written instrument executed by both the Company and Employee. No
termination or amendment of the Plan or amendment of this Agreement shall,


                                       -7-



without Employee's consent, adversely affect Employee's rights under the Plan or
this Agreement.

21. Notices. All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery, upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or upon
deposit with a recognized express overnight courier service, addressed, if to
the Company, to 400 Pleasant Street, Watertown, MA 02472, attention: Chief
Financial Officer, and if to Employee, to the address shown beneath his or her
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 21.

22. Merger Provision. This Agreement, including the Plan which is incorporated
herein by reference in its entirety, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, whether oral or
written, of the parties hereto concerning the subject matter hereof.

23. Waivers. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Company.

24. Definition. As used in this Agreement, the term "Company" shall include any
subsidiary or parent of the Company as defined in Sections 424(e) and (f) of the
Code.

25. Consistency with Plan. If there is any inconsistency between the provisions
of this Agreement and the provisions of the Plan, the Plan shall control.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


                                       -8-



Name of Employee: Lori Freedman

Number of Shares of Restricted Stock granted: 20,000

Date of Grant: August 16, 2004

The foregoing Restricted Stock Award is hereby accepted and in consideration of
the grant of such Award, the undersigned Employee hereby agrees with Control
Delivery Systems, Inc. that the undersigned will be bound by the foregoing
Restricted Stock Award Agreement:


/s/ Lori Freedman
- -------------------------------------
(Signature of Employee)

Dated: _________, 2004

                                                                    Exhibit 4.32


September 29, 2005

PAUL ASHTON

DEAR DR. ASHTON:

     As you know, Control Delivery Systems, Inc. (the "Company") is
contemplating certain strategic transactions, including a possible sale or
merger involving the Company and pSvida Ltd. (the "Potential Acquiror"). There
is no assurance that the Company will enter into an agreement with respect to
any such transaction or consummate any such transaction even if such an
agreement is reached. However, the Company has been advised that the prospects
of a combination with the Potential Acquiror would be advanced if you and
certain other key personnel were to agree to certain undertakings designed to
assure the continuation of your services to the Company for at least a
transition period following any such combination. The Company believes that the
terms of this letter agreement (this "Retention Agreement") will be in the best
interests both of you and the shareholders of the Company by assisting in the
realization of the proposed combination.

     The terms of this Retention Agreement set forth herein are as follows:

     The Company and you are parties to a restricted stock award agreement or
agreements (the "Stock Agreements") pursuant to which you currently hold 20,000
shares of common stock of the Company that is subject to a substantial risk of
forfeiture (the "Restricted Stock"). Schedule A hereto lists the Restricted
Stock shares that you hold and the dates on which those shares were awarded to
you. Notwithstanding the provisions of the Stock Agreements or any other
agreement between you and the Company to the contrary, you hereby agree that the
following vesting and forfeiture rules shall apply:

          (a) Except as hereinafter provided, the Restricted Stock subject to
     the Stock Agreements, including your rights to any cash or property paid
     with respect thereto or exchanged therefor in connection with a Liquidity
     Event, or thereafter, (the Restricted Stock and such other securities,
     cash, property or other rights, if any, being herein referred to as the
     "Restricted Property") shall vest on the date that is six (6) months after
     the Liquidity Event Date if you are then employed by the Company or its
     successor (or a parent or subsidiary thereof) (the "Employer"); provided,
     that if there has been no Liquidity Event Date by December 31, 2005, the
     Restricted Property shall vest on June 30, 2006 if you are then still
     employed by the Employer. The applicable vesting date described in the
     preceding sentence is hereinafter referred to as the "Scheduled Vesting
     Date." For purposes of this Retention Agreement, the terms "Liquidity
     Event" and "Liquidity Event Date" shall have the meaning set forth in the
     Stock Agreements.

          (b) On the Liquidity Event Date relating to the transaction with the
     Potential Acquiror you will be granted shares (American Depository Shares
     or American Depository Receipts, hereinafter "ADSs") of the common equity
     of the Potential Acquiror traded in the U.S. having a fair market value on
     the date of closing equal to $110,000.00 (the "Additional Shares"). The
     Additional Shares shall be subject to the



     same restrictions as the Restricted Property and shall be treated for all
     purposes of this Retention Agreement as the Restricted Property. For
     purposes of this Retention Agreement, "fair market value" means the average
     of the closing price of pSivida ADSs on the Nasdaq National Market for each
     of the ten (10) trading days ending on the trading day that is four (4)
     full trading days prior to the Liquidity Event Date.

          (c) Subject to the following sentence, if your employment with the
     Employer terminates for any reason prior to the Scheduled Vesting Date all
     of your Restricted Property shall be automatically and immediately
     forfeited or vested to the extent provided in the Stock Agreements, Amended
     and Restated Control Delivery Systems Change of Control Agreement dated
     August 17, 2004 (the "Change of Control Agreement") and Severance Agreement
     dated February 20, 2004, as amended (the "Severance Agreement"), except
     that in applying the provisions of such agreements the Restricted Property
     shall not be deemed to be vested merely because the Stock Agreements would
     have provided for scheduled vesting earlier than the Scheduled Vesting
     Date. Notwithstanding the foregoing, if your employment with the Employer
     is (i) involuntarily terminated, other than for "Cause" as hereinafter
     defined, by the Employer, or (ii) terminated by the Participant for "Good
     Reason" as hereinafter defined, in either case prior to the Scheduled
     Vesting Date, all of your Restricted Property shall be treated for all
     purposes as having vested in full immediately prior to such termination of
     employment. For purposes of the preceding sentence, "Cause" and "Good
     Reason" shall have the meanings assigned to them in your Change of Control
     Agreement.

     Upon the occurrence of the Liquidity Event Date the sections of your Stock
Agreements captioned "Restrictions on Transfer of Vested Shares" (paragraph (a)
only), "Right of First Refusal on Dispositions of Vested Shares" and "Right of
Repurchase of Vested Shares" shall be of no further force and effect.

     Except as expressly provided in this Retention Agreement, the terms of your
Stock Agreements, Change of Control Agreement, Severance Agreement and other
agreements, if any, with the Employer shall remain in full force and effect.

     Nothing in this Retention Agreement shall be construed as either limiting
or expanding such rights, if any, as you may have to continued employment with
the Employer.

     This Retention Agreement shall be binding on and enforceable against the
Company and its successors and assigns and upon and against you and your heirs
and assigns.

     This Retention Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, except for the conflicts of laws provisions
thereof.


                                       -2-



     If you agree with the terms of this Retention Agreement, please so indicate
by signing the enclosed copy of this Retention Agreement in the space indicated
below and returning the enclosed copy to Cristin Rothfuss, whereupon this
Retention Agreement shall take effect as of the date first set forth above as an
agreement under seal.

                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Michael J. Soja
                                            ------------------------------------
                                            /s/ Paul Ashton
                                            ------------------------------------
                                            Paul Ashton

The undersigned pSvida Limited hereby
acknowledges its obligations
hereunder as the Potential Acquiror
in the event that a Liquidity Event
involving pSivida occurs and agrees
to be bound by this Agreement and to
perform such obligations upon and
after the closing of a Liquidity
Event involving pSivida.

PSIVIDA LIMITED


By: /s/ Gavin Rezos
    ---------------------------------
Name: Gavin Rezos
      -------------------------------
Title: Managing Director
       ------------------------------


                                       -3-



SCHEDULE A

                                Restricted Stock

A. 20,000 Shares Issued on 08/16/04




                                       -4-

                                                                    Exhibit 4.33


September 29, 2005

MICHAEL SOJA

DEAR MR. SOJA:

     As you know, Control Delivery Systems, Inc. (the "Company") is
contemplating certain strategic transactions, including a possible sale or
merger involving the Company and pSvida Ltd. (the "Potential Acquiror"). There
is no assurance that the Company will enter into an agreement with respect to
any such transaction or consummate any such transaction even if such an
agreement is reached. However, the Company has been advised that the prospects
of a combination with the Potential Acquiror would be advanced if you and
certain other key personnel were to agree to certain undertakings designed to
assure the continuation of your services to the Company for at least a
transition period following any such combination. The Company believes that the
terms of this letter agreement (this "Retention Agreement") will be in the best
interests both of you and the shareholders of the Company by assisting in the
realization of the proposed combination.

     The terms of this Retention Agreement set forth herein are as follows:

     The Company and you are parties to a restricted stock award agreement or
agreements (the "Stock Agreements") pursuant to which you currently hold 20,000
shares of common stock of the Company that is subject to a substantial risk of
forfeiture (the "Restricted Stock"). Schedule A hereto lists the Restricted
Stock shares that you hold and the dates on which those shares were awarded to
you. Notwithstanding the provisions of the Stock Agreements or any other
agreement between you and the Company to the contrary, you hereby agree that the
following vesting and forfeiture rules shall apply:

          (a) Except as hereinafter provided, the Restricted Stock subject to
     the Stock Agreements, including your rights to any cash or property paid
     with respect thereto or exchanged therefor in connection with a Liquidity
     Event, or thereafter, (the Restricted Stock and such other securities,
     cash, property or other rights, if any, being herein referred to as the
     "Restricted Property") shall vest on the date that is six (6) months after
     the Liquidity Event Date if you are then employed by the Company or its
     successor (or a parent or subsidiary thereof) (the "Employer"); provided,
     that if there has been no Liquidity Event Date by December 31, 2005, the
     Restricted Property shall vest on June 30, 2006 if you are then still
     employed by the Employer. The applicable vesting date described in the
     preceding sentence is hereinafter referred to as the "Scheduled Vesting
     Date." For purposes of this Retention Agreement, the terms "Liquidity
     Event" and "Liquidity Event Date" shall have the meaning set forth in the
     Stock Agreements.

          (b) On the Liquidity Event Date relating to the transaction with the
     Potential Acquiror you will be granted shares (American Depository Shares
     or American Depository Receipts, hereinafter "ADSs") of the common equity
     of the Potential Acquiror traded in the U.S. having a fair market value on
     the date of closing equal to $122,497.00 (the "Additional Shares"). The
     Additional Shares shall be subject to the



     same restrictions as the Restricted Property and shall be treated for all
     purposes of this Retention Agreement as the Restricted Property. For
     purposes of this Retention Agreement, "fair market value" means the average
     of the closing price of pSivida ADSs on the Nasdaq National Market for each
     of the ten (10) trading days ending on the trading day that is four (4)
     full trading days prior to the Liquidity Event Date.

          (c) Subject to the following sentence, if your employment with the
     Employer terminates for any reason prior to the Scheduled Vesting Date all
     of your Restricted Property shall be automatically and immediately
     forfeited or vested to the extent provided in the Stock Agreements, Amended
     and Restated Control Delivery Systems Change of Control Agreement dated
     August 17, 2004 (the "Change of Control Agreement") and Severance Agreement
     dated February 20, 2004, as amended (the "Severance Agreement"), except
     that in applying the provisions of such agreements the Restricted Property
     shall not be deemed to be vested merely because the Stock Agreements would
     have provided for scheduled vesting earlier than the Scheduled Vesting
     Date. Notwithstanding the foregoing, if your employment with the Employer
     is (i) involuntarily terminated, other than for "Cause" as hereinafter
     defined, by the Employer, or (ii) terminated by the Participant for "Good
     Reason" as hereinafter defined, in either case prior to the Scheduled
     Vesting Date, all of your Restricted Property shall be treated for all
     purposes as having vested in full immediately prior to such termination of
     employment. For purposes of the preceding sentence, "Cause" and "Good
     Reason" shall have the meanings assigned to them in your Change of Control
     Agreement.

     Upon the occurrence of the Liquidity Event Date the sections of your Stock
Agreements captioned "Restrictions on Transfer of Vested Shares" (paragraph (a)
only), "Right of First Refusal on Dispositions of Vested Shares" and "Right of
Repurchase of Vested Shares" shall be of no further force and effect.

     Except as expressly provided in this Retention Agreement, the terms of your
Stock Agreements, Change of Control Agreement, Severance Agreement and other
agreements, if any, with the Employer shall remain in full force and effect.

     Nothing in this Retention Agreement shall be construed as either limiting
or expanding such rights, if any, as you may have to continued employment with
the Employer.

     This Retention Agreement shall be binding on and enforceable against the
Company and its successors and assigns and upon and against you and your heirs
and assigns.

     This Retention Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, except for the conflicts of laws provisions
thereof.


                                       -2-



     If you agree with the terms of this Retention Agreement, please so indicate
by signing the enclosed copy of this Retention Agreement in the space indicated
below and returning the enclosed copy to Cristin Rothfuss, whereupon this
Retention Agreement shall take effect as of the date first set forth above as an
agreement under seal.

                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Lori Freedman
                                            ------------------------------------
                                            /s/ Michael J.Soja
                                            ------------------------------------
                                            Michael J.Soja

The undersigned pSvida Limited hereby
acknowledges its obligations
hereunder as the Potential Acquiror
in the event that a Liquidity Event
involving pSivida occurs and agrees
to be bound by this Agreement and to
perform such obligations upon and
after the closing of a Liquidity
Event involving pSivida.

PSIVIDA LIMITED


By: /s/ Gavin Rezos
    ---------------------------------
Name: Gavin Rezos
      -------------------------------
Title: Managing Director
       ------------------------------


                                       -3-



SCHEDULE A

                                Restricted Stock


1. 20,000 Shares Issued on 08/16/04

2. 60,040 Shares Issued on 10/20/04 derived from:

3. 14,040 Shares issued on 05/28/03 (transferred to above grant)

4. 36,000 Shares issued on 10/07/03 (transferred to above grant)

5. 10,000 Shares issued on 10/07/03 (transferred to above grant)


                                       -4-

                                                                    Exhibit 4.34

September 29, 2005

LORI FREEDMAN

DEAR LORI FREEDMAN:

     As you know, Control Delivery Systems, Inc. (the "Company") is
contemplating certain strategic transactions, including a possible sale or
merger involving the Company and pSvida Ltd. (the "Potential Acquiror"). There
is no assurance that the Company will enter into an agreement with respect to
any such transaction or consummate any such transaction even if such an
agreement is reached. However, the Company has been advised that the prospects
of a combination with the Potential Acquiror would be advanced if you and
certain other key personnel were to agree to certain undertakings designed to
assure the continuation of your services to the Company for at least a
transition period following any such combination. The Company believes that the
terms of this letter agreement (this "Retention Agreement") will be in the best
interests both of you and the shareholders of the Company by assisting in the
realization of the proposed combination.

     The terms of this Retention Agreement set forth herein are as follows:

     The Company and you are parties to a restricted stock award agreement or
agreements (the "Stock Agreements") pursuant to which you currently hold 20,000
shares of common stock of the Company that is subject to a substantial risk of
forfeiture (the "Restricted Stock"). Schedule A hereto lists the Restricted
Stock shares that you hold and the dates on which those shares were awarded to
you. Notwithstanding the provisions of the Stock Agreements or any other
agreement between you and the Company to the contrary, you hereby agree that the
following vesting and forfeiture rules shall apply:

          (a) Except as hereinafter provided, the Restricted Stock subject to
     the Stock Agreements, including your rights to any cash or property paid
     with respect thereto or exchanged therefor in connection with a Liquidity
     Event, or thereafter, (the Restricted Stock and such other securities,
     cash, property or other rights, if any, being herein referred to as the
     "Restricted Property") shall vest on the date that is six (6) months after
     the Liquidity Event Date if you are then employed by the Company or its
     successor (or a parent or subsidiary thereof) (the "Employer"); provided,
     that if there has been no Liquidity Event Date by December 31, 2005, the
     Restricted Property shall vest on June 30, 2006 if you are then still
     employed by the Employer. The applicable vesting date described in the
     preceding sentence is hereinafter referred to as the "Scheduled Vesting
     Date." For purposes of this Retention Agreement, the terms "Liquidity
     Event" and "Liquidity Event Date" shall have the meaning set forth in the
     Stock Agreements.

          (b) On the Liquidity Event Date relating to the transaction with the
     Potential Acquiror you will be granted shares (American Depository Shares
     or American Depository Receipts, hereinafter "ADSs") of the common equity
     of the Potential Acquiror traded in the U.S. having a fair market value on
     the date of closing equal to $132,497.00 (the "Additional Shares"). The
     Additional Shares shall be subject to the



     same restrictions as the Restricted Property and shall be treated for all
     purposes of this Retention Agreement as the Restricted Property. For
     purposes of this Retention Agreement, "fair market value" means the average
     of the closing price of pSivida ADSs on the Nasdaq National Market for each
     of the ten (10) trading days ending on the trading day that is four (4)
     full trading days prior to the Liquidity Event Date.

          (c) Subject to the following sentence, if your employment with the
     Employer terminates for any reason prior to the Scheduled Vesting Date all
     of your Restricted Property shall be automatically and immediately
     forfeited or vested to the extent provided in the Stock Agreements, Amended
     and Restated Control Delivery Systems Change of Control Agreement dated
     August 17, 2004 (the "Change of Control Agreement") and Severance Agreement
     dated February 20, 2004, as amended (the "Severance Agreement"), except
     that in applying the provisions of such agreements the Restricted Property
     shall not be deemed to be vested merely because the Stock Agreements would
     have provided for scheduled vesting earlier than the Scheduled Vesting
     Date. Notwithstanding the foregoing, if your employment with the Employer
     is (i) involuntarily terminated, other than for "Cause" as hereinafter
     defined, by the Employer, or (ii) terminated by the Participant for "Good
     Reason" as hereinafter defined, in either case prior to the Scheduled
     Vesting Date, all of your Restricted Property shall be treated for all
     purposes as having vested in full immediately prior to such termination of
     employment. For purposes of the preceding sentence, "Cause" and "Good
     Reason" shall have the meanings assigned to them in your Change of Control
     Agreement.

     Upon the occurrence of the Liquidity Event Date the sections of your Stock
Agreements captioned "Restrictions on Transfer of Vested Shares" (paragraph (a)
only), "Right of First Refusal on Dispositions of Vested Shares" and "Right of
Repurchase of Vested Shares" shall be of no further force and effect.

     Except as expressly provided in this Retention Agreement, the terms of your
Stock Agreements, Change of Control Agreement, Severance Agreement and other
agreements, if any, with the Employer shall remain in full force and effect.

     Nothing in this Retention Agreement shall be construed as either limiting
or expanding such rights, if any, as you may have to continued employment with
the Employer.

     This Retention Agreement shall be binding on and enforceable against the
Company and its successors and assigns and upon and against you and your heirs
and assigns.

     This Retention Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, except for the conflicts of laws provisions
thereof.


                                       -2-



     If you agree with the terms of this Retention Agreement, please so indicate
by signing the enclosed copy of this Retention Agreement in the space indicated
below and returning the enclosed copy to Cristin Rothfuss, whereupon this
Retention Agreement shall take effect as of the date first set forth above as an
agreement under seal.

                                        CONTROL DELIVERY SYSTEMS, INC.


                                        By: /s/ Michael Soja
                                            ------------------------------------
                                            /s/ Lori Freedman
                                            ------------------------------------
                                            Lori Freedman

The undersigned pSvida Limited hereby
acknowledges its obligations
hereunder as the Potential Acquiror
in the event that a Liquidity Event
involving pSivida occurs and agrees
to be bound by this Agreement and to
perform such obligations upon and
after the closing of a Liquidity
Event involving pSivida.

PSIVIDA LIMITED


By: /s/ Gavin Rezos
    ---------------------------------
Name: Gavin Rezos
      -------------------------------
Title: Managing Director
       ------------------------------


                                       -3-



SCHEDULE A

                                Restricted Stock

1. 20,000 shares Issued on 08/16/04

2. 51,700 shares Issued on 10/20/04

3. 11,700 shares issued on 05/28/03 (transferred to above grant)

4. 30,000 shares issued on 10/07/03 (transferred to above grant)

5. 10,000 shares issued on 10/07/03 (transferred to above grant)


                                       -4-

                                                                    Exhibit 4.35

                            NON-COMPETITION AGREEMENT

     IN CONSIDERATION of and as a condition to my (i) receiving consideration
pursuant to the terms of the Agreement and Plan of Merger, dated October 3, 2005
(the "MERGER AGREEMENT") by and among pSivida Limited ("PARENT"), pSivida Inc.
and Control Delivery Systems, Inc. (the "COMPANY"), and (ii) receiving an offer
of employment with Parent consistent with the terms set forth in Section 2(b)
below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, I, Paul Ashton (referred to herein
as "I", "ME" or as "EXECUTIVE"), agree with Parent as follows:

     1. DEFINITIONS.

          (a) "AGREEMENT" shall mean this Non-Competition Agreement.

          (b) "CAUSE" shall mean, in respect of the termination of Executive's
employment by Parent, (a) willful malfeasance, gross misconduct or gross
negligence in the performance by Executive of the duties of his position that
has a material adverse effect on the Parent, (b) the material breach by
Executive of Sections 3(a), 4, 5 or 6 of this Agreement, (c) fraud or dishonesty
by Executive with respect to Parent or any of its affiliates or his employment,
(d) Executive's conviction of any crime that involves deception, fraud or moral
turpitude or any felony (including, in each case, entry of a guilty or nolo
contendere plea, and, excluding traffic violations or similar minor offenses),
or (e) repeated or prolonged absence from work by Executive other than for
illness, Disability or authorized vacation. Parent may treat a termination of
Executive's employment as termination for Cause only after (i) giving Executive
written notice of the intention to terminate for Cause, including a description
of the conduct that the Parent believes constitutes the basis for a Cause
termination, and of his right to a hearing by Parent's Board of Directors (the
"Board"), (ii) in the event of a termination under clause (a), (b) or (e) above,
providing Executive a 30-day period in which to cure the conduct giving rise to
the Parent's notice of a Cause termination, unless, with respect to clause (a)
and (b) above, (I) in Parent's reasonable judgment, protective action
inconsistent with such cure period (e.g., immediate termination) is necessary to
avoid harm to Parent or (II) Parent reasonably determines that Executive's
conduct is egregious, in which event, Parent may shorten the cure period or
terminate Executive's employment immediately (subject to the requirements set
forth in clauses (iii) and (iv) below), (iii) at least 30 days after giving the
notice, conducting a hearing by the Board at which Executive may be represented
by counsel, and (iv) giving Executive written notice of the results of the
hearing and the factual basis for the Board's determination of Cause, which
shall require a vote of a majority of the members of the Board then in office
other than Executive. Except in connection with Executive's opportunity, if any,
to cure the conduct giving rise to Parent's notice of termination for Cause as
set forth in clause (ii) above, nothing in the foregoing sentence shall prevent
Parent from terminating Executive's employment pending any determination of
Cause as set forth in the foregoing sentence, any such determination shall be
retroactive to the date of termination, and Parent shall not be obligated to
compensate Executive hereunder for the period from such termination until such
time as a determination by Parent's Board of Directors that such termination was
not for Cause. Notwithstanding the foregoing, cause shall not include an act or
failure to act based on authority given pursuant to a resolution duly adopted by
the Board or based on the advice of Parent's General Counsel or willful failure



due to incapacity resulting from Disability or any actual or anticipated failure
after Executive provides written notice of a termination for Good Cause.

          (c) "CLOSING" shall have the meaning set forth in the Merger
Agreement.

          (d) "DEVELOPMENTS" shall have the meaning set forth in Section 5(a).

          (e) "DISABILITY" shall mean physical or mental incapacity of a nature
which prevents Executive, in the professional judgment of Executive's physician
or, at Parent's election, a board-certified physician mutually agreed upon by
Parent and Executive, from performing the essential functions of Executive's
position with Parent with or without a reasonable accommodation for a period of
ninety (90) consecutive days or one hundred eighty (180) days during any
consecutive 12-month period.

          (f) "EFFECTIVE TIME" shall have the meaning set forth in the Merger
Agreement.

          (g) "GOOD CAUSE" shall mean, in respect of the termination of
Executive's employment by Executive, (i) failure by Parent to maintain Executive
in the positions of Head of R&D Ophthalmology for the Surviving Company and
Executive Director Strategy of Parent, without Executive's consent, (ii) a
material diminution of Executive's duties and responsibilities in such positions
or a material diminution of Executive's authority with respect to such
positions, as described in Section 2(b) hereof and otherwise set forth in the
employment agreement referenced therein (assuming the parties execute such
employment agreement), excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by Parent
promptly after receipt of written notice thereof given by Executive, (iii) a
breach by Parent of any material term of this Agreement or the employment
agreement referenced in Section 2(b) (assuming the parties execute such
employment agreement), or (iv) relocation of Executive's principal place of work
to a location more than thirty (30) miles from Executive's address set forth in
Section 11(e) below without Executive's consent. Executive may treat a
resignation from employment as termination for Good Cause only after (a) giving
Parent written notice of the intention to terminate for Good Cause, (b)
providing Parent at least 30 days after receipt of such notice to cure the
conduct or action giving rise to Good Cause, unless, with respect to clause (i)
and (ii), Executive reasonably determines that Parent's conduct is egregious and
has resulted in significant, irreparable harm to Executive, in which event,
Executive may shorten the cure period or terminate his employment immediately,
and (c) if applicable, Parent has failed to cure the action or conduct giving
rise to Good Cause during the 30 day cure period.

          (h) "MERGER" shall have the meaning set forth in the Merger Agreement.

          (i) "PROPRIETARY INFORMATION" shall have the meaning set forth in
Section 4(a).

          (j) "REAR-OCULAR DRUG DELIVERY BUSINESS" shall have the meaning set
forth in Section 3(b)(i).

          (k) "RESTRICTED ACTIVITIES" shall have the meaning set forth in
Section 3(b).


                                      -2-



          (l) "SURVIVING COMPANY" shall have the meaning set forth in the Merger
Agreement.

     2. EFFECTIVENESS.

          (a) This Agreement shall enter into full force and effect as of the
Effective Time. In the event that the Merger Agreement is terminated prior to
the Effective Time, this Agreement shall be null and void and neither party
shall have any rights or obligations hereunder.

          (b) Parent represents that, prior to the Effective Time, it shall
provide Executive with an employment agreement setting forth the material terms
of his employment with Parent as of the Effective Time. Such employment
agreement shall include, among other things, the following material terms: (i) a
title Head of Research & Development Ophthalmology of the Surviving Company,
responsible for duties typically associated with such position; (ii) a title
with Parent of Executive Director Strategy, reporting directly to Parent's chief
executive officer, responsible for, among other things, the production of
overall strategic business and development plans; (iii) a title of interim
President of the Surviving Company, responsible for, among other things,
ensuring effective communication among Parent business units particularly with
respect to milestones and participation in the general management of Parent
including regular meetings and discussions with Parent's chief executive officer
and chairman; (iv) a compensation package commensurate with other senior
executives of Parent, which shall include, without limitation: (A) a base salary
of $300,000 per year, (B) annual discretionary bonus eligibility on terms that
are no less favorable than that which Executive was entitled as of the date of
this Agreement, (C) entitlement to benefits that are no less favorable than
those to which Executive was entitled as of the date of this Agreement, and (D)
a grant of options to purchase capital stock in the Parent commensurate with
other senior executives of Parent, including without limitation, subject to
confirmation of Parent's remuneration committee and shareholder approval,
500,000 options vesting as to half in 12 months and the balance in 24 months,
subject to achieving milestones; (v) four (4) weeks paid vacation per calendar
year; (vi) a principal work location located no more than thirty (30) miles from
Executive's address set forth in Section 11(e) below without Executive's
consent; and (vii) eligibility for severance and related post-termination
benefits on terms no less favorable to Executive than those set forth in that
certain Severance Agreement between Executive and Company dated February 20,
2004, as amended on August 17, 2004 (the "Severance Agreement") and no greater
than those set forth in that certain Change in Control Agreement between
Executive and Company dated August 17, 2004 (the "Change in Control Agreement"),
which shall supercede and/or terminate Executive's entitlement to severance and
related post-termination benefits pursuant to the Severance Agreement and the
Change in Control Agreement. Parent and Executive agree to negotiate in good
faith and use their reasonable best efforts to finalize the employment agreement
consistent with the terms of this Agreement and the contracts referenced herein.

          (c) If (i) Parent fails to offer Executive an employment agreement
consistent with the requirements of Section 2(b), or Parent revokes such offer
prior to the Effective Time for any reason and (ii), as a result of any of the
above, Executive declines Parent's offer of employment on or before the
Effective Time, then (I) this Agreement shall be null and void and neither party
shall have any obligations hereunder, and (II) both the Severance Agreement and
Change in Control Agreement shall continue to be in effect as of the Effective
Time.


                                      -3-



          (d) If (i) Parent offers Executive an employment agreement consistent
with the requirements of Section 2(b) and (ii) Executive declines Parent's offer
of employment for any reason (other than his death or Disability), then (I) this
Agreement shall continue in full force and effect as of the Effective Time and
(II) the Severance Agreement but not the Change in Control Agreement shall
continue to be in effect upon the Effective Time. Such declination by Executive
shall be deemed a termination of employment with Parent by Executive for other
than Good Cause under Section 3(b) below.

     3. COVENANT NOT TO COMPETE.

          (a) I understand that Parent is engaged worldwide in the development,
production and commercialization of drug delivery and other products based on
platform technologies. As of the Effective Time, I agree that I will not, during
my employment with Parent, render (as a provider of services, consultant or
otherwise) any services related to the business of Parent to anyone other than
Parent.

          (b) In the event of: (i) the termination of my employment with Parent
(other than termination by reason of death or Disability) by me for any reason
(whether voluntary on my part, or involuntary) other than Good Cause; or (ii)
the termination of my employment with Parent (other than termination by reason
of death or Disability) by Parent for Cause, I agree that for a period of twelve
(12) months from the date of such termination, I will neither:

               (i) engage directly for myself, or in conjunction with or on
     behalf of any person or entity, or otherwise own, manage, operate, control,
     acquire, hold any interest in, or participate in the ownership, management,
     operation or control of any person or entity engaged in the development,
     production or commercialization of systems for the delivery of therapeutic
     drugs to the tissues in the posterior segment of the eye (the "REAR-OCULAR
     DRUG DELIVERY BUSINESS"), nor

               (ii) work for or become employed by or associated with (in any
     capacity, including without limitation officer, director, employee,
     partner, stockholder, owner, member, proprietor, consultant, investor,
     salesperson, co-owner, trustee, promoter, technician, engineer, analyst,
     agent, representative, distributor, supplier, lender, advisor or manager)
     any person or entity that is engaged in the Rear-Ocular Drug Delivery
     Business (the activities set forth in (i) and (ii) (as modified by the
     following paragraph) are collectively referred to as the "RESTRICTED
     ACTIVITIES").

Notwithstanding the foregoing, Parent accepts that nothing in this Section 3(b)
shall prevent Executive from and after the date six (6) months after termination
of Executive's employment from engaging in activities predominantly academic
(and not commercial) in nature, including without limitation teaching,
lecturing, writing and publishing articles or engaging in research; provided
that (I) unless approved by Parent in writing or otherwise described below,
Executive receives no compensation (including without limitation salary,
benefits, bonus, profit sharing, dividends, commissions, gifts, gratuities, or
any other payments, whether in cash or otherwise, present or future) whatsoever
for such activities, other than reimbursement of expenses, for any period in
which he is receiving severance payments from the Parent under this Agreement,
his employment agreement with Parent or any other agreement between Executive
and Parent,


                                      -4-



except where the payment of compensation is required by the academic institution
and Executive agrees in writing to donate the full amount of such compensation
to a registered charitable organization; and (II) in the course of engaging in
such activities Executive does not breach his obligations under this Agreement,
including without limitation any obligations under Sections 4 and 5 herein.

Within six (6) months after the termination of my employment for the reasons set
forth above, Parent may at its sole discretion extend my obligations under this
Section 3(b) for an additional twelve-month period; provided that in such a case
Parent will pay me an amount equal to my annual base salary as of the date of
termination, to be paid in equal monthly installments over such additional
twelve-month period.

          (c) In the event of the termination of my employment with Parent
(other than termination by reason of death or Disability) (x) by me for Good
Cause, or (y) by Parent for any reason other than for Cause, I agree that, at
Parent's option, exercisable by written notice given:

               (i)  not less than 30 days after Parent receives notice of such
                    termination by me hereunder; and/or

               (ii) at the time of such termination by Parent hereunder; and/or

               (iii) with respect to a follow-on notice to Executive, no later
                    than six months after the termination of my employment with
                    Parent hereunder,

for a period of up to twenty-four (24) months from the date of such termination,
as specified in Parent's notice or notices, I will not engage in any Restricted
Activities; provided that in such case Parent will pay me an amount equal to
1/24th of $800,000 for each month in the period specified, which amount may be
offset against any severance or other payments owed to me in connection with the
termination of my employment as described in this Section 3(c). I understand
that any payments made to me pursuant to the preceding sentence are made in
consideration of my not engaging in any Restricted Activities or otherwise
violating the terms of this Agreement, and that, in addition to any other rights
or remedies available to Parent at law or in equity, Parent shall have the right
to terminate such payments if, and only if, I engage in Restricted Activities
during the specified period or otherwise violate the terms of this Agreement and
such conduct continues following my receipt of written notice from the Company
that describes the basis for the Company's contention that I have engaged in
Restricted Activities or otherwise violated the terms of this Agreement. I
understand that the Company may provide more than one written notice to extend
the noncompete period under this Section 3(c), provided that such notices are
sent within the six (6) month period after the termination of my employment.

          (d) My obligations under this Section 3 shall extend to all
geographical areas of the world in which Parent, or any of its related
companies, is offering its services, either directly or indirectly, through
licenses or otherwise, during the time period specified in this Section 3.


                                      -5-



          (e) I further agree that while I remain employed by Parent and for the
duration of any period during which I am prohibited from engaging in the
Restricted Activities pursuant to this Section 3, I will not, on behalf of
myself or any other person or entity, (i) compete for, or engage in the
solicitation of, or attempt to divert or take away from the Company, Parent or
any of their affiliates, any customer of the Company, Parent or any of their
affiliates who has done business with the Company, Parent or any of their
affiliates, as the case may be, during the period of my employment by Parent;
(ii) compete for, solicit or attempt to divert or take away from the Company,
Parent or any of their affiliates, any prospective customer that has within the
twelve (12) month period prior to such termination, expressed an interest in
doing business with the Company, Parent or any of their affiliates and about
which I learned during my employment with Parent; or (iii) hire or engage or
attempt to hire or engage any individual, or attempt to induce an individual to
terminate their employment or other service arrangement, who was an employee of
or other service provider to the Company, Parent or any of their affiliates at
any time during the twelve (12) month period prior to my termination from
employment.

          (f) Further, while I remain employed by Parent and for the duration of
any period during which I am prohibited from engaging in the Restricted
Activities pursuant to this Section 3, I shall not, directly or indirectly, make
or cause to be made to any Person any disparaging, derogatory or other negative
statement about the Company, Parent or any of their affiliates, including their
businesses, products, services, policies, practices, operations, employees,
sales representatives, agents, officers, members, managers or directors.
Similarly, during the period set forth in the preceding sentence, Parent shall
not and shall not authorize or encourage any members of its Board of Directors
or employees to directly or indirectly, make or cause to be made to any person
any disparaging, derogatory or other negative statement about Executive,
including the performance of his duties on behalf of the Company or the
circumstances surrounding his separation from employment.

          (g) I REPRESENT AND WARRANT THAT THE KNOWLEDGE, SKILLS AND ABILITIES I
POSSESS ARE SUFFICIENT TO PERMIT ME, IN THE EVENT OF TERMINATION OF MY
EMPLOYMENT WITH PARENT FOR ANY REASON, TO EARN, FOR A PERIOD OF UP TO
TWENTY-FOUR (24) MONTHS FROM SUCH TERMINATION, A LIVELIHOOD SATISFACTORY TO ME
WITHOUT VIOLATING ANY PROVISION OF SECTION 3 HEREOF, FOR EXAMPLE BY USING SUCH
KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A PERSON OR
ENTITY WHO OR WHICH DOES NOT COMPETE WITH PARENT AS DESCRIBED HEREIN.

     4. PROPRIETARY INFORMATION.

          (a) I agree that all information and know-how, whether or not in
writing, of a private, secret or confidential nature concerning the Company,
Parent or any of their affiliates or their respective businesses, financial
affairs or operations (collectively, "PROPRIETARY INFORMATION") is and shall be
the exclusive property of the Company, Parent or any of their affiliates, as the
case may be. By way of illustration, but not limitation, Proprietary Information
may include inventions, products, manufacturing and other processes, methods,
techniques, formulas, compositions, compounds, projects, developments, plans,
research data, financial data, personnel data, computer programs, and customer
and supplier lists. I will not disclose any Proprietary Information to others
outside the Company, Parent or any of their affiliates, provided


                                      -6-



that my obligation not to disclose shall not apply to any information that (i)
has become generally available to the public other than as a result of a breach
by Executive of his obligations hereunder, (ii) may be required or appropriate
in response to any summons or subpoena or in connection with any litigation, or
investigation or review by any governmental agency or authority and (iii) must
be disclosed in order to comply with any law, order, regulation or ruling
applicable to Executive. I will not use any Proprietary Information for any
purposes other than my work for the Company, Parent or any of their affiliates,
without prior written approval by the Board of Directors of Parent, either
during or after my providing services. If I have any questions as to what
constitutes Proprietary Information, I will consult with the Board of Directors
of Parent or an individual designated by the Board of Directors for this
purpose.

          (b) I agree that all files, letters, memoranda, reports, records,
data, sketches, drawings, program listings, or other written, photographic, or
other tangible material containing Proprietary Information, whether created by
me or others, which shall come into my custody or possession, shall be and are
the exclusive property of the Company, Parent or any of their affiliates, as the
case may be, to be used by me only in the performance of my duties for Parent.
All such records or copies thereof and all tangible property of the Company,
Parent or any of their affiliates in my custody or possession shall be delivered
to Parent within ten (10) calendar days from the earlier of (i) a request by
Parent or (ii) termination of my providing services to Parent. After such
delivery, I shall not retain any such records or copies thereof or any such
tangible property.

          (c) I agree that my obligation not to disclose or to use information,
know-how and records of the types set forth in paragraphs (a) and (b) above, and
my obligation to return records and tangible property, set forth in paragraph
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company, Parent or any of their affiliates
or suppliers to the Company, Parent or any of their affiliates or other third
parties who may have disclosed or entrusted the same to Parent or to me in the
course of Parent's business with an expectation or understanding that such
information was to be maintained as confidential.

     5. DEVELOPMENTS.

          (a) I will make full and prompt disclosure to Parent of all
inventions, improvements, discoveries, methods, developments, products,
processes, techniques, formulas, compositions, compounds, software, works of
authorship and all ideas for trademarks, trade-names and the like, related in
any way to the Parent's current, planned or potential products or services,
whether patentable or not and whether copyrightable or not, which are created,
made, conceived or reduced to practice by me or under my direction or jointly
with others during my employment by Parent, whether or not during normal working
hours or on the premises of Parent (all of which are collectively referred to in
this Agreement as "DEVELOPMENTS").

          (b) Except as hereinafter provided, I agree to assign and do hereby
assign to Parent (or any person or entity designated by Parent) all my right,
title and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. I expressly agree that all
of my Developments capable of protection under copyright laws shall be deemed
and are works made for hire with the understanding that Parent shall own all of
the


                                      -7-



exclusive rights to such developments under the United States Copyright Act and
all international copyright conventions and foreign laws, and any successor laws
thereto.

          (c) I agree to cooperate fully with Parent, both during and after my
employment with Parent, with respect to the procurement, maintenance and
enforcement of copyrights and patents (both in the United States and foreign
countries) relating to Developments. I shall sign all papers, including, without
limitation, copyright applications, patent applications, trademark or service
mark applications, declarations, oaths, formal assignments, assignment of
priority rights, and powers of attorney, which Parent may deem necessary or
desirable in order to protect its rights and interests in any Development.

     6. CURRENT EMPLOYMENT; NO CONTRARY AGREEMENTS.

          I hereby represent that I am not bound by the terms of any agreement
with any current or previous employer or other party to refrain from using or
disclosing any trade secret or confidential or Proprietary Information in the
course of my employment with Parent or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. I
further represent that, and agree that, in the performance of my duties as a
provider of services to Parent, I will not breach any agreement to keep in
confidence Proprietary Information, knowledge or data acquired by me in
confidence or in trust prior to my employment with Parent, and I will not
disclose to Parent or induce Parent to use any confidential or proprietary
information or material belonging to any previous employer or others. I
represent and warrant to Parent that I am not now under any obligation of a
contractual nature to any person, firm or corporation which is inconsistent or
in conflict with this Agreement.

     7. INJUNCTIVE RELIEF.

          The restrictions contained herein are necessary for the protection of
the business and goodwill of the Company, Parent and their affiliates and are
considered by me to be reasonable for such purposes. I understand and agree that
Parent will suffer irreparable harm in the event that I breach any of my
obligations under this Agreement and that monetary damages will be inadequate to
compensate Parent for such breach. Accordingly, I agree that, in the event of a
breach or threatened breach by me of any of the provisions of this Agreement,
Parent, in addition to and not in limitation of any other rights, remedies or
damages available to Parent at law or in equity, shall be entitled to a
permanent injunction in order to prevent or to restrain any such breach by me,
or by my partners, agents, representatives, employers, employees and/or any and
all persons directly or indirectly acting for or with me.

     8. ACCOUNTING FOR PROFITS.

          I covenant and agree that, if I shall violate any of my covenants or
agreements under this Agreement, Parent, at its own expense, shall be entitled
to an accounting and repayment of all profits, compensation, commissions,
remunerations or benefits which I directly or indirectly have realized and/or
may realize as a result of, growing out of or in connection with any such
violation; such remedy shall be in addition to and not in limitation of any
injunctive relief or other rights or remedies to which Parent is or may be
entitled at law, in equity or under this Agreement.


                                      -8-



     9. NO EMPLOYMENT CONTRACT.

          I understand that this Agreement does not constitute a contract of
employment and does not imply that my employment will continue for any period of
time.

     10. ENFORCEABILITY AND SCOPE.

          In the event that any Section of this Agreement, or any provision of
any such Section, shall for any reason be held to be wholly invalid, illegal or
unenforceable, such invalidity, illegality, or unenforceability shall not affect
any other Section hereof, or any other provision of an affected Section, and
this Agreement shall be construed as if, and enforced as fully as if, such
invalid, illegal or unenforceable Section or provision had never been contained
herein. In the event any Section, or any provision thereof, is found to be
partially invalid, illegal or unenforceable (on the ground, for example, that it
is excessive in scope), then such Section or provision shall be enforced to the
extent not invalid, illegal or unenforceable, and its partial invalidity,
illegality or unenforceability shall not affect any other Section or provision
of this Agreement. If any restriction set forth in Section 3 above is found by a
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time, over too great a range of activities or in too broad a
geographic area, such restriction shall be interpreted to extend only over the
maximum period of time, maximum range of activities or maximum geographic area
as to which it may be deemed to be enforceable.

     11. GENERAL.

          (a) This Agreement supersedes all prior agreements, written or oral,
between me and Parent relating to the subject matter of this Agreement, except
for the the Change in Control Agreement and the Severance Agreement, which are
referenced herein. This Agreement may not be modified, changed or discharged in
whole or in part, except by an agreement in writing signed by me and Parent. I
agree that any change or changes in my duties, salary or compensation after the
signing of this Agreement shall not affect the validity or scope of this
Agreement.

          (b) This Agreement will be binding upon my heirs, executors and
administrators and will inure to the benefit of and be binding upon Parent and
its successors and assigns.

          (c) No delay or omission by Parent in exercising any right under this
Agreement will operate as a waiver of that or any other right. A waiver or
consent given by Parent on any one occasion is effective only in that instance
and will not be construed as a bar to or waiver of any right on any other
occasion.

          (d) I expressly consent to be bound by the provisions of this
Agreement for the benefit of the Company, Parent or any of their affiliates to
whose employ or other service providing arrangement I may be transferred without
the necessity that this Agreement be re-signed at the time of such transfer.


                                      -9-



          (e) Any notices required or permitted to be sent under this Agreement
shall be effective when delivered by hand or mailed by registered or certified
mail, return receipt requested, and addressed as follows:

     If to Parent:

          pSivida Limited
          Level 12, BGC Centre
          28 The Esplanade, Perth
          WA 6000 Australia
          GPO Box 2535
          Perth, WA 6831

     With a copy to:

          Curtis, Mallet-Prevost, Colt & Mosle LLP
          101 Park Avenue
          New York, NY 10178
          Attn: Lawrence Goodman, Esq.

     If to Executive:

          Paul Ashton
          19 Brimmer Street
          Boston, MA 02108

Either party may change its address for receiving notices by giving notice to
the other party.

          (f) This Agreement is governed by and will be construed as a sealed
instrument under and in accordance with the laws of the Commonwealth of
Massachusetts.

     I ACKNOWLEDGE AND UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO
COMPETE WITH PARENT OR TO DISCLOSE AND USE PARENT'S PROPRIETARY INFORMATION OR
DURING AND AFTER MY EMPLOYMENT.

     I HAVE READ ALL OF THE PROVISIONS OF THIS AGREEMENT CAREFULLY AND I
UNDERSTAND, AND AGREE TO, EACH OF SUCH PROVISIONS.

                     [SIGNATURE PAGE TO IMMEDIATELY FOLLOW]


                                      -10-



     IN WITNESS WHEREOF, I have executed this Agreement under seal as of this 3
day of October, 2005.


                                        /s/ Paul Ashton
                                        ----------------------------------------
                                        Paul Ashton

ACKNOWLEDGED AND AGREED:

PSIVIDA LIMITED


By: /s/ Gavin Rezos
    ---------------------------------
Name: Gavin Rezos
Title: Managing Director

                                                                    Exhibit 4.36

                         Control Delivery Systems, Inc.

                                  Stock Option
                    Granted Under the 1997 Stock Option Plan
                    ----------------------------------------

     Stock Option granted by Control Delivery Systems, Inc., a Delaware
corporation (the "Company"), to Paul Ashton (the "Optionee") pursuant to the
Company's 1997 Stock Option Plan (the "Plan").

1.   Grant of Option.
     ---------------

     This certificate evidences the grant by the Company on September 18, 1997
to Optionee of an option to purchase, in whole or in part, on the terms herein
provided, a total of 15,000 shares of common stock of the Company (the
"Shares") at $6.25 per Share, which is not less than the fair market value of
the Shares on the date of grant of this option. This option must be exercised
before 5:00 p.m., E.S.T. on September 18, 2007 ("Final Exercise Date").

     This option is exercisable in the following installments prior to the
Final Exercise Date:

up to 3,750 shares on and after September 18, 1998;
up to an additional 3,750 shares on and after September 18, 1999;
up to an additional 3,750 shares on and after September 18, 2000; and
up to an additional 3,750 shares on and after September 18, 2001.

2.   Exercise of Option.

     Each election to exercise this option shall be in writing, signed by the
Optionee or Optionee's executor or administrator or the person or persons to
whom this option is transferred by will or the applicable laws of descent and
distribution (the "Legal Representative"), and received by the Company at its
principal office, accompanied by this certificate, and payment in full as
provided in the Plan. The exercise price may be paid by delivery of cash, a
certified check, bank draft or money order payable to the Company, common stock
of the Company which have been outstanding at least six months and which have a
fair market value equal to an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or any combination of the foregoing. In the event that this option is
exercised by the Optionee's Legal Representative, the Company shall be under no
obligation to deliver Shares hereunder unless and until the Company is
satisfied as to the authority of the person or persons exercising this option.

3.   Notice of Disposition.
     ---------------------

                                      -1-


     The person exercising this option shall notify the Company when making any
disposition of the Shares acquired upon exercise of this option, whether by
sale, gift or otherwise.

4.   Application of Stock Transfer Agreement.

     If at the time this option is exercised the Company is a party to any
agreement restricting the transfer of any outstanding shares of its Common
Stock, this option may be exercised only if the Shares so acquired are made
subject to the transfer restrictions set forth in that agreement (or if more
than one such agreement is then in effect, the agreement specified by the Board
of Directors of the Company).

5.   Withholding.

     No Shares will be issued pursuant to the exercise of this option unless and
until the person exercising this option shall have remitted to the Company an
amount sufficient to satisfy any federal, state or local withholding tax
requirements, or shall have made other arrangements satisfactory to the Company
with respect to such taxes.

6.   Nontransferability of Option.

     This option is not transferable by the Optionee otherwise than by will or
the laws of descent and distribution, and is exercisable during the Optionee's
lifetime only by the Optionee.

7.   Provisions of the Plan.

     This option is subject to the provisions of the Plan, as amended from time
to time, which shall be controlling in the event of any conflicting or
inconsistent provisions. A copy of the Plan has been provided to the Optionee
previously.

     IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.


                                       Control Delivery Systems, Inc.

                                       By: /s/ Michael J. Soja
                                           --------------------------

Dated: July 10, 2002


                                      -2-

                         Control Delivery Systems, Inc.

                             Incentive Stock Option
                    Granted Under the 1997 Stock Option Plan

     Incentive Stock Option granted by Control Delivery Systems, Inc., a
Delaware corporation (the "Company"), to Paul Ashton (the "Optionee") pursuant
to the Company's 1997 Stock Option Plan (the "Plan").

1.   Grant of Option

     This certificate evidences the grant by the Company on August 26, 1999 to
Optionee of an option to purchase, in whole or in part, on the terms herein
provided, a total of 10,000 shares of common stock of the Company (the "Shares")
at $8.00 per Share, which is not less than [110%] of the fair market value of
the Shares on the date of grant of this option. This option must be exercised
before 5:00 p.m., E.S.T. on August 25, 2009 ("Final Exercise Date"). It is
intended that the option evidenced by this certificate shall be an incentive
stock option as defined in section 422 of the Internal Revenue Code of 1986, as
amended from time to time, (the "Code").

     This option is exercisable in the following installments prior to the
Final Exercise Date:

up to 3,333 shares on and after August 26, 2000;
up to an additional 3,333 shares on and after August 26, 2001; and
up to an additional 3,334 shares on and after August 26, 2002.

2.   Exercise of Option.

     Each election to exercise this option shall be in writing, signed by the
Optionee or Optionee's executor or administrator or the person or persons to
whom this option is transferred by will or the applicable laws of descent and
distribution (the "Legal Representative"), and received by the Company at its
principal office, accompanied by this certificate, and payment in full as
provided in the Plan. The exercise price may be paid by delivery of cash, a
certified check, bank draft or money order payable to the Company, common stock
of the Company which have been outstanding at least six months and which have a
fair market value equal to an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or any combination of the foregoing. In the event that this option is
exercised by the Optionee's Legal Representative, the Company shall be under no
obligation to deliver Shares hereunder unless and until the Company is
satisfied as to the authority of the person or persons exercising this option.

                                      -1-

3.   Notice of Disposition.

     The person exercising this option shall notify the Company when making any
disposition of the Shares acquired upon exercise of this option, whether by
sale, gift or otherwise.

4.   Application of Stock Transfer Agreement.

     If at the time this option is exercised the Company is a party to any
agreement restricting the transfer of any outstanding shares of its Common
Stock, this option may be exercised only if the Shares so acquired are made
subject to the transfer restrictions set forth in that agreement (or if more
than one such agreement is then in effect, the agreement specified by the Board
of Directors of the Company).

5.   Withholding

     No Shares will be issued pursuant to the exercise of this option unless
and until the person exercising this option shall have remitted to the Company
an amount sufficient to satisfy any federal, state or local withholding tax
requirements, or shall have made other arrangements satisfactory to the Company
with respect to such taxes.

6.   Nontransferability of Option.

     This option is not transferable by the Optionee otherwise than by will or
the laws of descent and distribution, and is exercisable during the Optionee's
lifetime only by the Optionee.

7.   Provisions of the Plan.

     This option is subject to the provisions of the Plan, as amended from time
to time, which shall be controlling in the event of any conflicting or
inconsistent provisions. A copy of the Plan has been provided to the Optionee
previously.



     IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.


                                       Control Delivery Systems, Inc.


                                       By /s/ ILLEGIBLE
                                          -----------------------------


Dated: July 10, 2002
       -------------



ASHTON P. 8.26.99                      -2-

                                                                     Exhibit 8.1


                   Exhibit 8.1 to Annual Report on Form 20-F
                              Of pSivida Limited

                             List of Subsidiaries


AION Diagnostics Limited, Australia
pSiMedica Limited, United Kingdom
pSiOncology Pte. Limited, Singapore
pSivida Inc., United States

EXHIBIT 12.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) AND RULE
15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS AMENDED.

                                 CERTIFICATIONS

I, GAVIN REZOS, certify that:

1. I have reviewed this annual report on Form 20-F of PSIVIDA LIMITED;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of,
and for, the periods presented in this report;

4. The company's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

(c) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the company's internal control over
financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and

5. The company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
company's auditors and the audit committee of the company's board of directors
(or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal control over
financial reporting.

Date: JANUARY 18, 2006


/s/ GAVIN REZOS*
- ---------------------------------------------
Gavin Rezos

CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR
- ---------------------------------------------
Title

*The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.

EXHIBIT 12.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) AND RULE
15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS AMENDED.

                                 CERTIFICATIONS


I, AARON FINLAY, certify that:

1. I have reviewed this annual report on Form 20-F of PSIVIDA LIMITED;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of,
and for, the periods presented in this report;

4. The company's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC release Nos. 33-8238 and 34-47986];

(c) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(d) Disclosed in this report any change in the company's internal control over
financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and

5. The company's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
company's auditors and the audit committee of the company's board of directors
(or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal control over
financial reporting.

Date: JANUARY 18, 2006


/s/ AARON FINLAY*
- ---------------------------------------------
Aaron Finlay


CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
- ---------------------------------------------
Title


*The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.

Exhibit 13.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.

     In connection with the Annual Report of pSivida Limited (the "Company") on
Form 20-F for the period ending June 30, 2005, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"). I, Gavin Rezos, Chief
Executive Officer and Managing Director of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that: (1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company.

Date: JANUARY 18, 2006

/s/ Gavin Rezos*
- ------------------------
Gavin Rezos

CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR
- ------------------------------------------------
Title

*The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.

EXHIBIT 13.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.

     In the connection with the Annual Report of pSivida Limited (the "Company")
on Form 20-F for the period ending June 30, 2005, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Aaron Finlay,
Chief Financial Officer and Company Secretary of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

Date:  JANUARY 18, 2006

/s/ AARON FINLAY*
- ---------------------
    Aaron Finlay

CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
- --------------------------------------------------
Title

*The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.