Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of September 26,
2008, by and between ISTA PHARMACEUTICALS, INC., a Delaware corporation (the
“Company”), and those lenders set forth on Schedule 1 to the Facility Agreement
(as defined below) (individually a “Lender” and together, the “Lenders”).

WHEREAS:

A. In connection with the Facility Agreement by and between the parties hereto
of even date herewith (the “Facility Agreement”), the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Lenders Warrants (as defined below) in the amount described in the Facility
Agreement, where each of the Warrants is exercisable into shares of the
Company’s common stock, $0.001 value per share (the “Common Stock”), each upon
the terms and conditions and subject to the limitations and conditions set forth
in the Warrants, all subject to the terms and conditions of the Facility
Agreement; and

B. To induce the Lenders to execute and deliver the Facility Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities Act”), and applicable
state securities laws,

NOW, THEREFORE, In consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:

1. DEFINITIONS.

a. As used in this Agreement, the following terms shall have the following
meanings:

(i) “Additional Filing Deadline” means, with respect to any additional
Registration Statements that may be required pursuant to Section 2(a)(ii), the
30th day following (a) the date or time on which the SEC shall indicate as being
the first date or time that such Registrable Securities may then be included in
a Registration Statement if such Registration Statement is required because the
SEC shall have notified the Company in writing that certain Registrable
Securities were not eligible for inclusion on a previously filed Registration
Statement, or (b) if such additional Registration Statement is required for a
reason other than as described in (a) above, the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required.

(ii) “Additional Registration Deadline” means, with respect to any additional
Registration Statement(s) that may be required to be filed pursuant to
Section 2(a)(ii), the 90th day following (a) the date or time on which the SEC
shall indicate as being the first date or time that such Registrable Securities
may then be included in a Registration Statement if such Registration Statement
is required because the SEC shall have notified the Company in writing that
certain Registrable Securities were not eligible for inclusion on a previously
filed Registration Statement, or (b) if such additional Registration Statement
is required for a reason other than as described in (a) above, the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement(s) is required.

(iii) “Buyer” means any Lender and any transferee or assignee who agrees to
become bound by the provisions of this Agreement in accordance with Section 10
hereof.

(ii) “Filing Deadline,” for each Registration Statement required to be filed
hereunder other than Section 2(a)(ii), shall mean a date that is thirty
(30) calendar days following the date the applicable Warrant is issued and, in
the case of Section 2(a)(ii) shall mean the Additional Filing Deadline.

(iii) “Person” means and includes any natural person, partnership, joint
venture, corporation, trust, limited liability company, limited company, joint
stock company, unincorporated organization, government entity or any political
subdivision or agency thereof, or any other entity.

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(iv) “Registration Deadline” shall mean, other than for purposes of the
Registration Statements required under Section 2(a)(ii), the earlier of (i) the
date that is ninety (90) days after the date that the applicable Registration
Statement is actually filed or (ii) the date that is ninety (90) days after the
applicable Filing Deadline and, with respect to any Registration Statements
required to be filed under Section 2(a)(ii), the Additional Registration
Deadline.

(v) “Warrant(s)” means the warrants issued by the Company pursuant to the
Facility Agreement.

(vi) “Register,” “Registered,” and “Registration” refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis, and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the “SEC”).

(vii) “Registrable Securities,” for a given Registration, means (a) any shares
of Common Stock (the “Warrant Shares”) issued or issuable upon exercise of or
otherwise pursuant to the Warrants (without giving effect to any limitations on
exercise set forth in the Warrants), (b) any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing, (c) any other shares of common stock issuable pursuant to the
terms of the Facility Agreement, the Warrants or this Registration Rights
Agreement, and (d) any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect
to the foregoing.

(viii) “Registration Statement(s)” means a registration statement(s) of the
Company under the Securities Act required to be filed hereunder.

2. REGISTRATION.

a. MANDATORY REGISTRATION. (i) Following the issuance of any Warrants pursuant
to the Facility Agreement, the Company shall prepare, and, on or prior to the
applicable Filing Deadline (as defined above) file with the SEC a Registration
Statement (the “Mandatory Registration Statement”) on Form S-3 (or, if Form S-3
is not then available, on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the Buyers, which consent will not be unreasonably withheld) covering
the resale of the Registrable Securities issued on the applicable Issuance Date
(as defined below) which Registration Statement, to the extent allowable under
the Securities Act and the rules and regulations promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon exercise of or otherwise pursuant to the Warrants to prevent
dilution resulting from stock splits, stock dividends, stock issuances or
similar transactions. The number of shares of Common Stock initially included in
such Registration Statement shall be no less than the aggregate number of
Warrant Shares that are then issuable upon exercise of or otherwise pursuant to
the Warrants issued on the Issuance Date (as defined herein), without regard to
any limitation on the Buyers’ ability to exercise the Warrants, respectively.
The Company acknowledges that the number of shares initially included in each
Registration Statement represents a good faith estimate of the maximum number of
shares issuable upon exercise of or otherwise pursuant to the Warrants issued on
the applicable Issuance Date and shall be amended if not sufficient. Each
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval, which shall not be unreasonably withheld, of) the
Buyers and their counsel prior to its filing or other submission.

(ii) If for any reason the SEC does not permit all of the Registrable Securities
to be included in the Registration Statement filed pursuant to Section 2(a)(i)
above, or for any other reason any Registrable Securities are not then included
in a Registration Statement filed under this Agreement, then the Company shall
prepare, and, as soon as practicable but in no event later than the Additional
Filing Deadline, file with the SEC an additional Registration Statement covering
the resale of all Registrable Securities not already covered by an existing and
effective Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415.

 

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b. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall determine to file
with the SEC a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its
securities (other than debt securities or securities being registered on Form
S-4 or Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans), then the Company shall send to each Buyer written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, a Buyer shall so request in writing, the Company shall include in such
Registration Statement all or any part of such Buyer’s Registrable Securities
the Buyer requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company, the managing
underwriter(s) thereof shall impose a limitation on the number of Registrable
Securities which may be included in the Registration Statement because, in such
underwriter(s)’ judgment, marketing or other factors dictate such limitation is
necessary to facilitate public distribution, then the Company shall be obligated
to include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which the Buyer has requested inclusion
hereunder as the underwriter shall permit;

PROVIDED, HOWEVER, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled by contract to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and

PROVIDED, FURTHER, HOWEVER, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the contractual right to include
such securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(b) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which a
Buyer is entitled to registration under this Section 2(b) is an underwritten
offering, then such Buyer shall, unless otherwise agreed by the Company, offer
and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement and
the underwriting agreement in such offering, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering (including,
without limitation, execution of an agreement with the managing underwriter or
agent limiting the sale or distribution such Buyer may make of shares of Common
Stock or any securities convertible or exchangeable or exercisable for such
shares of the Company, except as part of such registration). Notwithstanding
anything to the contrary set forth herein, the registration rights of a Buyer
pursuant to this Section 2(b) shall only be available in the event the Company
fails to timely file, obtain effectiveness or maintain effectiveness of any
Registration Statement to be filed pursuant to Section 2(a) in accordance with
the terms of this Agreement.

3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:

a. The Company shall prepare promptly, and file with the SEC as soon as
practicable after each date that any Warrants are issued under the Facility
Agreement (each an “Issuance Date”) (but no later than the Filing Deadline), a
Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its reasonable best efforts to
cause each such Registration Statement relating to Registrable Securities to
become effective as soon as possible after such filing, but in any event shall
cause each such Registration Statement relating to Registrable Securities to
become effective no later than the Registration Deadline, and, subject to
Section 3(q) hereof, shall keep the Registration Statement current and effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities for such Registration Statement
have been sold and (ii) the date on which all of the Registrable Securities for
such Registration Statement (in the opinion of counsel to the Buyers) may be
immediately sold to the public without registration or restriction (including
without limitation as to volume by each holder thereof) under the Securities Act
(the “Registration Period”), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein), except
for information provided by a Buyer or any transferee of a Buyer pursuant to
Section 4(a) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.

 

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b. Subject to Section 3(q) hereof, the Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to
each Registration Statement and the prospectus used in connection with each
Registration Statement as may be necessary to keep each Registration Statement
current and effective at all times during the Registration Period, and, during
such period, comply with any applicable provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by each Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in each Registration
Statement.

c. The Company shall furnish or otherwise make available (on EDGAR or otherwise)
to each Buyer and its legal counsel (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy
of each Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and, in the
case of a Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as a Buyer may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Buyer. The Company will
immediately notify the Buyers by facsimile of the effectiveness of each
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable, but no later than three
(3) business days, following the resolution or clearance of all SEC comments or,
if applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review.

d. The Company shall use its reasonable best efforts to (i) register and
qualify, in any jurisdiction where registration and/or qualification is
required, the Registrable Securities covered by the Registration Statements
under such other securities or “blue sky” laws of such jurisdictions in the
United States as the Buyers shall reasonably request, (ii) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction.

e. Subject to Section 3(q) hereof, as promptly as practicable after becoming
aware of such event, the Company shall notify each Buyer who holds Registrable
Securities of the happening of any event, of which the Company has knowledge, as
a result of which the prospectus included in any Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and use its reasonable best efforts promptly to prepare
a supplement or amendment to any Registration Statement to correct such untrue
statement or omission, and deliver such number of copies of such supplement or
amendment to each Buyer as such Buyer may reasonably request.

f. The Company shall use its reasonable best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Buyer who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.

g. The Company shall permit a single firm of counsel designated by the Buyers to
review such Registration Statement and all amendments and supplements thereto
(as well as all requests for acceleration or effectiveness thereof), at Buyers’
own cost, a reasonable period of time prior to their filing with the SEC (not
less than five (5) business days but not more than eight (8) business days) use
reasonable best efforts to reflect in such documents any comments as such
counsel may reasonably propose and will not request acceleration of such
Registration Statement without prior notice to such counsel.

 

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h. The Company shall hold in confidence and not make any disclosure of
information concerning a Buyer provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws or
the rules of any securities exchange or trading market on which the Company’s
securities are then listed or traded, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning such Buyer is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Buyer
prior to making such disclosure, and allow such Buyer, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.

i. The Company shall use its reasonable best efforts to cause all the
Registrable Securities covered by each Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, and, if listed on
a national exchange, to arrange for at least two market makers to register with
the Financial Industry Regulatory Authority, Inc. (“FINRA”) as such with respect
to such Registrable Securities.

j. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the initial Registration Statement.

k. The Company shall cooperate with each Buyer who holds Registrable Securities
being offered and the managing underwriter or underwriters as reasonably
requested by them with respect to an applicable Registration Statement, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to such Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Buyer may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Buyer may
request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
each Buyer) an appropriate instruction and an opinion of such counsel in the
form required by the transfer agent in order to issue the Registrable Securities
free of restrictive legends.

l. At the request of a Buyer, the Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

m. The Company shall not, and shall not agree to, allow the holders of any
securities of the Company (other than holders of Registrable Securities) to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the Buyers. In addition, the Company shall not offer any
securities for its own account or the account of others in any Registration
Statement under Section 2(a) hereof or any amendment or supplement thereto under
Section 3(b) hereof without the consent of the Buyers.

n. The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Buyers of Registrable Securities pursuant to a
Registration Statement.

o. The Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including
without limitation the Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC).

p. If required by the Financial Industry Regulatory Authority, Inc. Corporate
Financing Department, the Company shall promptly effect a filing with FINRA
pursuant to FINRA Rule 2710 with respect to the public offering contemplated by
resales of securities under the Registration Statement (an “Issuer Filing”), and
pay the filing fee required by such Issuer Filing. The Company shall use
commercially reasonable efforts to pursue the Issuer Filing until FINRA issues a
letter confirming that it does not object to the terms of the offering
contemplated by the Registration Statement.

 

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(q) Notwithstanding anything to the contrary herein, at any time after a
Registration Statement has been declared effective by the SEC, the Company may
delay or suspend the effectiveness of any Registration Statement or the use of
any prospectus forming a part of the Registration Statement due to the
non-disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not in its best interest, in the good faith
opinion of the Company (a “Grace Period”); provided, that the Company shall
promptly notify each Buyer in writing of the existence of a Grace Period in
conformity with the provisions of this Section 3(q) and the date on which the
Grace Period will begin (such notice, a “Commencement Notice”); and, provided
further, that no Grace Period shall exceed 45 days, and such Grace Periods shall
not exceed an aggregate total of 60 days during any 12-month period. For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date specified by the Company in the Commencement
Notice and shall end on and include the date each Buyer receives written notice
of the termination of the Grace Period by the Company (which notice may be
contained in the Commencement Notice). The provisions of Sections 3(a)(ii), 3(b)
and 3(e) hereof shall not be applicable during any Grace Period. Upon expiration
of the Grace Period, the Company shall again be bound by Sections 3(a)(ii), 3(b)
and 3(e) with respect to the information giving rise thereto unless such
material, non-public information is no longer applicable.

(r) Notwithstanding anything else to the contrary contained in this Agreement,
the Company’s obligations under this Agreement (other than the obligations set
forth in Sections 6, 7, 8, 9 and 12) shall terminate upon the expiration of the
Registration Period.

4. OBLIGATIONS OF THE BUYER. In connection with the registration of the
Registrable Securities, each Buyer shall have the following obligations:

a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a Buyer that such Buyer shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five (5) business days prior to the
first anticipated filing date of a Registration Statement, the Company shall
notify each Buyer of the information the Company requires from such Buyer. Any
such information shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein not misleading. A Buyer must provide such
information to the Company at least three (3) business days prior to the first
anticipated filing date of such Registration Statement if such Buyer elects to
have any Registrable Securities included in the Registration Statement.

b. Each Buyer, by such Buyer’s acceptance of the Registrable Securities, agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Buyer has notified the Company in writing of the Buyer’s
election to exclude all of the Buyer’s Registrable Securities from such
Registration Statement.

c. In the event of an underwritten offering pursuant to Section 2(b) in which
any Registrable Securities are to be included, each Buyer agrees to enter into
and perform the Buyer’s obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless the Buyer has
notified the Company in writing of the Buyer’s election to exclude all of the
Buyer’s Registrable Securities from such Registration Statement.

d. Each Buyer agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e), 3(f) or 3(q), the
Buyer will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until the Buyer’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) or notice from the Company of
the termination of the Grace Period, and, if so directed by the Company, the
Buyer shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in the
Buyer’s possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.

 

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5. REGISTRATION FAILURE. In the event of a Registration Failure (as defined in
the Warrants), the Buyers shall be entitled to Failure Payments (as defined in
the Warrants) and such other rights as set forth in the Warrants.

6. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company shall be borne by the
Company.

7. INDEMNIFICATION. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

a. The Company will indemnify, hold harmless and defend (i) each Buyer, (ii) the
directors, officers, partners, managers, members, employees, agents and each
Person who controls any Buyer within the meaning of the Securities Act or the
Exchange Act, if any, (iii) any underwriter (as defined in the Securities Act)
for each Buyer in connection with an underwritten offering pursuant to
Section 2(b) hereof, and (iv) the directors, officers, partners, employees and
each Person who controls any such underwriter within the meaning of the
Securities Act or the Exchange Act, if any (each, an “Indemnified Person”),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”) to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). The Company shall reimburse the Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 7(a) (A) shall not apply to a Claim arising out of or
based upon a Violation to the extent that such Violation occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person for use in connection with the preparation of such
Registration Statement or any such amendment thereof or supplement thereto;
(B) with respect to any preliminary prospectus, shall not inure to the benefit
of any such Person from whom the Person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
Person controlling such Person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it or failed to deliver the correct prospectus as required by the
Securities Act and such correct prospectus was timely made available pursuant to
Section 3(d); (C) shall not be available to the extent such Claim is based on a
failure of the Indemnified Person to deliver or to cause to be delivered the
prospectus made available by the Company, including a corrected prospectus, if
such prospectus or corrected prospectus was timely made available by the Company
pursuant to Section 3(d); and (D) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by a Buyer pursuant to Section 10.

 

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b. Promptly after receipt by an Indemnified Person under this Section 7 of
notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is to be made
against the Company under this Section 7, deliver to the Company a written
notice of the commencement thereof, and the Company shall have the right to
participate in, and, to the extent the Company so desires, to assume control of
the defense thereof with counsel mutually satisfactory to the Company and the
Indemnified Person, as the case may be.

PROVIDED, HOWEVER, that an Indemnified Person shall have the right to retain its
own counsel with the reasonable fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel for the Buyer, the representation by such
counsel of the Indemnified Person and the Company would be inappropriate due to
actual or potential differing interests between such Indemnified Person and any
other party represented by such counsel in such proceeding. The Company shall
pay for only one separate legal counsel for the Indemnified Persons, and such
legal counsel shall be selected by the Buyers. The failure to deliver written
notice to the Company within a reasonable time of the commencement of any such
action shall not relieve the Company of any liability to the Indemnified Person
under this Section 7, except to the extent that the Company is actually
prejudiced in its ability to defend such action. The indemnification required by
this Section 7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.

c. Each Buyer will indemnify, hold harmless and defend (i) the Company, and
(ii) the directors, officers, partners, managers, members, employees, or agents
of the Company, if any (each, a “Company Indemnified Person”), against any
Claims to which any of them may become subject insofar as such Claims arise out
of or are based upon any Violation which occurs due to the inclusion by the
Company in a Registration Statement of false or misleading information about a
Buyer, where such information was furnished in writing to the Company by such
Buyer for the purpose of inclusion in such Registration Statement. Each Buyer
shall reimburse the Company Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything herein to the contrary, the
indemnity agreement contained in this Section 7(c) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Buyers which consent shall not be unreasonably withheld
or delayed; and provided, further, however, that a Buyer shall be liable under
this Section 7(c) for only that amount of a Claim as does not exceed the net
amount of proceeds received by such Buyer as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company Indemnified Person.

d. Promptly after receipt by a Company Indemnified Person under this Section 7
of notice of the commencement of any action (including any governmental action),
such Company Indemnified Person shall, if a Claim in respect thereof is to be
made against a Buyer under this Section 7, deliver to such Buyer a written
notice of the commencement thereof, and such Buyer shall have the right to
participate in, and, to the extent such Buyer so desires, to assume control of
the defense thereof with counsel mutually satisfactory to such Buyer and the
Company Indemnified Person, as the case may be.

PROVIDED, HOWEVER, that a Company Indemnified Person shall have the right to
retain its own counsel with the reasonable fees and expenses to be paid by the
applicable Buyer, if, in the reasonable opinion of counsel for the Company, the
representation by such counsel of the Company Indemnified Person and such Buyer
would be inappropriate due to actual or potential differing interests between
such Company Indemnified Person and any other party represented by such counsel
in such proceeding. A Buyer shall pay for only one separate legal counsel for
the Company Indemnified Persons, and such legal counsel shall be selected by the
Company, subject to the reasonable approval of such Buyer. The failure to
deliver written notice to a Buyer within a reasonable time of the commencement
of any such action shall not relieve the Buyer of any liability to the Company
Indemnified Person under this Section 7, except to the extent that the Buyer is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.

8. CONTRIBUTION. To the extent any indemnification by the Company or a Buyer is
prohibited or limited by law, the Company and each Buyer agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 7 to the fullest extent permitted by law, based upon a
comparative fault standard, provided that (i) no Person that is guilty of
fraudulent misrepresentation (within the meaning Section 11(f) of the Securities
Act) in connection with such sale shall be entitled to contribution from any
Person who was not guilty of fraudulent misrepresentation; and (ii) contribution
by a Buyer shall be limited in amount to the net amount of proceeds received by
the Buyer from the sale of such Registrable Securities pursuant to a
Registration Statement.

 

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9. REPORTS UNDER THE 1934 ACT. With a view to making available to the Buyers the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Buyers to sell
securities of the Company to the public without registration the Company agrees
to:

a. make and keep public information available, as those terms are understood and
defined in Rule 144;

b. file with the SEC in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

c. so long as the Buyers own Registrable Securities, promptly upon request,
(i) furnish to the Buyers a written statement by the Company that it has
complied with the reporting requirements of the Securities Act and the Exchange
Act as required for applicable provisions of Rule 144, (ii) furnish or otherwise
make available (on EDGAR or otherwise) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) furnish or otherwise make available such other
information as may be reasonably requested to permit the Buyers to sell such
securities pursuant to Rule 144 without registration.

10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be
automatically assignable by each Buyer to any transferee of all or any portion
of the Registrable Securities if: (i) the Buyer agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment,
(ii) the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, and (iii) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein. In the event that a Buyer transfers all or any
portion of its Registrable Securities pursuant to this Section, such Buyer shall
promptly notify the Company and the Company shall thereafter have at least ten
(10) business days to file any amendments or supplements necessary to keep a
Registration Statement current and effective pursuant to Rule 415, and the
commencement date of any Event of Failure (as defined in the Warrants) or Event
of Default (as defined in the Warrants) under the Warrants caused thereby will
be extended by ten (10) days.

11. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company and the holders of a majority in interest of
then-outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this Section 11 shall be binding upon each of the Buyers and the
Company.

12. MISCELLANEOUS.

a. A Person is deemed to be a holder of Registrable Securities whenever such
Person owns of record or beneficially through a “street name” holder such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

b. Any notices required or permitted to be given under the terms hereof shall be
sent by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile and shall be effective five days after being placed in the mail, if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:

If to the Company:

ISTA Pharmaceuticals, Inc.

15295 Alton Parkway

Irvine, CA 92618

Fax: (949) 789-7740

Attn: Chief Executive Officer

 

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With copy to:

Stradling Yocca Carlson & Rauth

660 Newport Center Drive, Suite 1600

Newport Beach, California 92660

Attention: Michael A. Hedge, Esq.

Fax: (949) 725-4100

If to a Buyer:

c/o Deerfield Capital, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

Fax: (212) 599-1248

Attn: Alexander Karnal

With a copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022

Fax: (212) 940-8776

Attn: Mark I. Fisher, Esq.

Elliot Press, Esq.

Each party shall provide notice to the other party of any change in address.

c. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

d. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by jury.
If either party shall commence an action or proceeding to enforce any provision
of this Agreement, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

 

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e. This Agreement, the Warrants and the Facility Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Warrants and the
Facility Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

f. Subject to the requirements of Section 10 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.

g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

h. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

i. Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

j. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Buyers by vitiating the intent and purpose of
the transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for breach of its obligations hereunder will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of any of
the provisions hereunder, that the Buyers shall be entitled, in addition to all
other available remedies in law or in equity, to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.

k. The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

l. In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.

m. In the event a Buyer shall sell or otherwise transfer any of such holder’s
Registrable Securities, each transferee shall be allocated a pro rata portion of
the number of Registrable Securities included in a Registration Statement for
such transferor.

n. There shall be no oral modifications or amendments to this Agreement. This
Agreement may be modified or amended only in writing.

[Remainder of page left intentionally blank]

[Signature page follows]

 

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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.

 

COMPANY:   BUYER: ISTA PHARMACEUTICALS, INC.   DEERFIELD PRIVATE DESIGN FUND,
L.P. By:   /s/ Vicente Anido, Jr., Ph.D.     By:   /s/ James Flynn   Name:   
Vicente Anido, Jr., Ph.D.       Name:    James Flynn   Title:   President and
Chief Executive Officer       Title:   General Partner BUYER:   BUYER: DEERFIELD
PRIVATE DESIGN INTERNATIONAL, L.P.   DEERFIELD SPECIAL SITUATIONS FUND, L.P. By:
  /s/ James Flynn     By:   /s/ James Flynn   Name:    James Flynn       Name: 
  James Flynn   Title:   General Partner       Title:   General Partner BUYER:  
BUYER: DEERFIELD SPECIAL SITUATIONS FUND INTERNATIONAL LIMITED   SANDERLING
VENTURE PARTNERS VI CO-INVESTMENT FUND, L.P.   By: Middleton, McNeil, Mills &
Associates VI, LLC By:   /s/ James Flynn     By:   /s/ Robert G. McNeil   Name: 
  James Flynn       Name:    Robert G. McNeil   Title:   General Partner      
Title:   Managing Director BUYER:   BUYER: SANDERLING VI LIMITED PARTNERSHIP  
SANDERLING VI BETEILIGUNGS GMBH & CO. KG By: Middleton, McNeil, Mills &
Associates VI, LLC   By:   /s/ Robert G. McNeil     By:   /s/ Robert G. McNeil  
Name:    Robert G. McNeil       Name:    Robert G. McNeil   Title:   Managing
Director       Title:   Managing Director BUYER:   BUYER: SANDERLING VENTURES
MANAGEMENT VI   SPROUT CAPITAL IX, L.P.   By: DLJ Capital Corporation   Its:
Managing General Partner By:   /s/ Robert G. McNeil     By:   /s/ Craig L.
Slutzkin   Name:    Robert G. McNeil       Name:    Craig L. Slutzkin   Title:  
Owner       Title:   Attorney in Fact BUYER:   BUYER: SPROUT ENTREPRENEURS’
FUND, L.P.   SPROUT IX PLAN INVESTORS, L.P. By: DLJ Capital Corporation   By:
DLJ LBO Plans Management Corporation II Its: General Partner   Its: General
Partner By:   /s/ Craig L. Slutzkin     By:   /s/ Craig L. Slutzkin   Name:   
Craig L. Slutzkin       Name:    Craig L. Slutzkin   Title:   Attorney in Fact  
    Title:   Attorney in Fact