<PAGE>
                                                                  EXHIBIT 10.43


                                                               EXECUTED VERSION

        CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.





                       PREFERRED STOCK PURCHASE AGREEMENT


        THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made on
the 7th day of August, 2002, by and among INSITE VISION INCORPORATED, a Delaware
corporation (the "Company"), and BAUSCH & LOMB INCORPORATED, a New York
corporation (the "Investor").

        WHEREAS, the Company and Investor have entered into the ISV-403
Technology License Agreement of even date herewith (the "License Agreement"),
and as a condition to such License Agreement, the Company and Investor have
agreed to enter into this Agreement;

        THE PARTIES HEREBY AGREE AS FOLLOWS:

1.      Purchase and Sale of Stock.

        1.1. Sale and Issuance of Series A-1 Preferred Stock.

                (a) The Company shall adopt and file with the Secretary of State
        of Delaware on or before the Initial Closing (as defined below) the
        Certificate of Designations, Preferences and Rights in the form attached
        hereto as Exhibit 1.1 (the "Certificate of Designations").

                (b) Subject to the terms and conditions of this Agreement,
        Investor agrees to purchase and the Company agrees to sell and issue to
        Investor up to Fifteen Thousand (15,000) shares of the Company's
        non-voting Series A-1 Preferred Stock with limited convertibility for
        the purchase price of One Thousand and 00/100 Dollars ($1,000) per
        share, to be purchased at up to nine separate closings, as set forth
        herein.

        1.2. Closing. The initial purchase and sale of Two Thousand (2,000)
shares of the non-voting Series A-1 Preferred Stock for consideration totaling
Two Million and 00/100 Dollars ($2,000,000) (the "Initial Closing") shall take
place at the offices of the Company at such time following the satisfaction of
the conditions set forth in Section 8.11 hereof as the Company and Investor
mutually agree. Subsequent purchases and sales of the non-voting Series A-1
Preferred Stock (the "Subsequent Closings") shall take place at such time and
place as shall be agreed to by the parties, within thirty (30) days after
satisfaction of the conditions for each respective Subsequent Closing identified
on Exhibit 1.2 hereto and assuming satisfaction of all other conditions to each
such Subsequent Closing, as set forth herein. The Initial Closing and each of
the Subsequent Closings are referred to herein as a "Closing". At each Closing
the Company shall deliver to Investor a certificate representing the non-voting
Series A-1 Preferred Stock that Investor is purchasing against payment of the
purchase price therefor as such number of shares and purchase price is stated on
Exhibit 1.2 hereto, by check or wire transfer.


<PAGE>

2. Representations and Warranties of the Company. The Company hereby represents,
warrants and covenants to Investor that as of the Initial Closing, except as set
forth on the Schedule of Exceptions (the "Schedule of Exceptions") furnished to
Investor prior to execution hereof and attached hereto as Exhibit 2 and except
as disclosed in the Filings (as defined in Section 2.21 herein), which
exceptions shall be deemed to be representations and warranties as if made
hereunder:

        2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify
could materially or adversely effect the operations or condition, financial or
otherwise, of the Company.

        2.2. Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:

                (a) Preferred Stock. Five Million (5,000,000) shares of
        Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
        Fifteen Thousand (15,000) shares of which are designated Series A-1
        Preferred Stock (the "Series A-1 Preferred"), none of which are issued
        and outstanding and up to all of such Fifteen Thousand (15,000) shares
        of which may be sold pursuant to this Agreement and Seven Thousand
        Seventy (7,070) shares of which are designated Series A Convertible
        Preferred Stock none of which are issued and outstanding. The rights,
        privileges and preferences of the Series A-1 Preferred will be as stated
        in the Certificate of Designations.

                (b) Common Stock. Sixty Million (60,000,000) shares of common
        stock, par value $0.01 per share ("Common Stock"), of which Twenty Four
        Million Nine Hundred Fifty Eight Thousand Twenty Eight (24,958,028) are
        issued and outstanding.

        2.3. Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the License Agreement, the performance of all
obligations of the Company hereunder and under the License Agreement, and the
authorization (or reservation for issuance), sale and issuance of the Series A-1
Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series A-1 Preferred Stock has been taken or will be taken
prior to the Closing. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its respective terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.

        2.4. Valid Issuance of Preferred and Common Stock. The Series A-1
Preferred Stock that is being purchased by the Investor hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed


                                       2
<PAGE>

herein, will be duly and validly issued, fully paid and nonassessable and will
be free of restrictions on transfer, other than restrictions on transfer under
this Agreement, the Certificate of Designations and under applicable state and
federal securities laws. The Common Stock issuable upon the limited conversion
rights of the Series A-1 Preferred Stock purchased under this Agreement (the
"Conversion Shares") has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Company's Amended and Restated
Certificate of Incorporation, as amended, (the "Certificate of Incorporation)
and the Certificate of Designations, will be duly and validly issued, fully paid
and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.

        2.5. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for such filings as are required pursuant to applicable
federal and state securities laws and blue sky laws, which filings will be
effected within the statutory period.

        2.6. Offering. Subject in part to the truth and accuracy of the
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series A-1 Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), and the qualification or registration requirements
of the Law or other applicable blue sky laws.

        2.7. Litigation. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement or the right of the Company to
enter into such agreement or to consummate the transactions contemplated hereby,
or that might result, either individually or in the aggregate, in any material
adverse changes on the operations or condition, financially or otherwise, or any
change in the current equity ownership, of the Company. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company intends to initiate.

        2.8. Compliance with Other Instruments. The Company is not in violation
of any provision of its Certificate of Incorporation, as amended, or Bylaws nor,
to its knowledge, in any material respect, of any instrument, judgment, order,
writ, decree or contract, statute, rule or regulation to which the Company is
subject and a violation of which would have a material adverse effect on the
condition, financial or otherwise, or operations of the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation, or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision or an event that results in
the creation of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit,



                                       3
<PAGE>

license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.

        2.9. Financial Statements. The Company has delivered to the Investor its
audited financial statements at December 31, 2001 and for the fiscal year then
ended (the "Financial Statements"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the period indicated. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the date, and for the period, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 2001 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results, of the Company. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

        2.10. Changes. Since December 31, 2001, there has not been:

                (a) any damage, destruction or loss, whether or not covered by
        insurance, materially and adversely affecting the financial condition or
        operating results, of the Company;

                (b) any waiver by the Company of a valuable right or of a
        material debt owed to it; or

                (c) any satisfaction or discharge of any lien, claim or
        encumbrance or payment of any obligation by the Company, except in the
        ordinary course of business and that is not material to the assets,
        properties, financial condition, operating results or business of the
        Company.

        2.11. Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business, the lack of which
could materially and adversely affect the financial condition and operations of
the Company. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.

        2.12. Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and, to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.

        2.13. Disclosure. The Company has fully provided Investor with all the
information that such Investor has requested for deciding whether to purchase
the Series A-1 Preferred Stock. To its knowledge, neither this Agreement
(including all the exhibits and schedules hereto) nor any other statements or
certificates made or delivered in



                                       4
<PAGE>

connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading in light of the circumstances under which they were made.

        2.14. Title to Property and Assets. The property and assets the Company
owns are owned by the Company free and clear of all mortgages, liens, loans and
encumbrances, except (i) as reflected in the Financial Statements, (ii) for
statutory liens for the payment of current taxes that are not yet delinquent,
and (iii) for liens, encumbrances and security interests that arise in the
ordinary course of business and minor defects in title, none of which,
individually or in the aggregate, materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company is in material compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).

        2.15. Filings. The Company has timely filed all reports, registration
statements and other documents (the "Filings") required to be filed by it with
the SEC under the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, without limitation, the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2002, Annual Report on Form
10-K for the fiscal year ended December 31, 2001 and Annual Report to
Stockholders for the fiscal year ended December 31, 2001. As of its filing date
and as of the date hereof, no such report or statement contained or contains any
untrue statement of material fact or omitted or omits to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

3. Representations and Warranties of the Investors. Investor hereby represents,
warrants and covenants that:

        3.1. Authorization. Investor has full power and authority to enter into
this Agreement and the License Agreement, and each such agreement constitutes
its valid and legally binding obligation, enforceable in accordance with its
terms.

        3.2. Purchase Entirely for Own Account. This Agreement is made with
Investor in reliance upon Investor's representation to the Company, which by
Investor's execution of this Agreement Investor hereby confirms, that the Series
A-1 Preferred Stock to be received by Investor and the Common Stock issuable
upon conversion thereof (collectively, the "Securities") will be acquired for
investment for Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Investor has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities.

        3.3. Disclosure of Information. Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the



                                       5
<PAGE>

Series A-1 Preferred Stock. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Series A-1 Preferred Stock and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investor to
rely thereon.

        3.4. Investment Experience. Investor acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Series A-1 Preferred
Stock. If other than an individual, such Investor also represents it has not
been organized for the purpose of acquiring the Series A-1 Preferred Stock.

        3.5. Accredited Investor. Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation
D, as presently in effect.

        3.6. Restricted Securities. Investor understands that the Securities it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may not be resold without registration
under the Act. In the absence of an effective registration statement covering
the Securities or an available exemption from registration under the Act, the
Securities must be held indefinitely. In this connection, such Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act, including
without limitation the Rule 144 condition that current information about the
Company be available to the public. In addition, except to the extent described
in Section 3.9 below, the Series A-1 Preferred is not transferable.

        3.7. Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends, provided that paragraph
(b) below shall apply only to the certificates evidencing the Series A-1
Preferred Stock:

                (a) "These securities have not been registered under the
        Securities Act of 1933, as amended. They may not be sold, offered for
        sale, pledged or hypothecated in the absence of a registration statement
        in effect with respect to the securities under such Act or an opinion of
        counsel satisfactory to the Company that such registration is not
        required or unless sold pursuant to Rule 144 of such Act."

                (b) "These securities may not be sold, offered for sale, pledged
        or hypothecated except to an affiliate of Bausch & Lomb Incorporated."

                (c) Any legend required by any applicable state securities laws.



                                       6
<PAGE>

        3.8. Tax Advisors. Investor has reviewed with Investor's own tax
advisors the federal, state and local tax consequences of this investment, where
applicable, and the transactions contemplated by this Agreement. Investor is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents and understands that Investor (and not the
Company) shall be responsible for Investor's own tax liability that may arise as
a result of this investment or the transactions contemplated by this Agreement.

        3.9. Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, and:

                (a) The Series A-1 Preferred shall not be transferable by
        Investor except to an affiliate;

                (b) The Conversion Shares shall not be transferable by Investor,
        unless:

                        (i) There is then in effect a registration statement
                under the Act covering such proposed disposition and such
                disposition is made in accordance with such registration
                statement; or

                        (ii) If requested by the Company, Investor shall have
                furnished the Company with an opinion of counsel, reasonably
                satisfactory to the Company that such disposition will not
                require registration of such shares under the Act. It is agreed
                that the Company will not require opinions of counsel for
                transactions made pursuant to Rule 144 except in unusual
                circumstances.

        3.10. Organization. Investor is a corporation duly organized and validly
existing and in good standing under the laws of New York, with all requisite
power and authority to own its properties and conduct its business as now being
conducted.

        3.11. Compliance with Law. Investor is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction or, to its
actual knowledge, any judgment, order, decree, law, ordinance, regulation or
other governmental restriction which would prevent or impede, or be breached or
violated by, the transactions contemplated in this Agreement.

4. Conditions of Investor's Obligations at Closing. The obligations of Investor
under subsection 1.1(b) of this Agreement are subject to the fulfillment on or
before the Initial Closing and each Subsequent Closing of each of the following
conditions, the waiver of which shall not be effective against Investor if
Investor does not consent thereto:



                                       7
<PAGE>

        4.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.

        4.2. Satisfaction of Triggering Condition. The condition set forth in
Exhibit 1.2 with respect to the purchase at each Closing shall have been met,
provided that if all actions otherwise necessary to meet such condition have
been taken, and the achievement of such condition is delayed for a period in
excess of three months as a result of a documented decision of the Joint Review
Committee (as defined in the License Agreement), then the condition shall be
deemed to have been satisfied at the time of such decision of the Joint Review
Committee.

        4.3. Performance. The License Agreement shall not have been terminated
(for any reason), and the Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing, and
shall have complied in all material respects with the License Agreement.

        4.4. Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.

        4.5. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.

        4.6. Opinion of Counsel. On the Initial Closing, Investor shall have
received an opinion of Brobeck, Phleger & Harrison LLP, counsel for the Company
in a form reasonably acceptable to Investor.

5. Conditions of the Company's Obligations at Closing. The obligations of the
Company to Investor under this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions by that Investor:

        5.1. Representations and Warranties. The representations and warranties
of Investor contained in Section 3 shall be true on and as of the Initial
Closing and each Subsequent Closing with the same effect as though such
representations and warranties had been made on and as of the date of each
Closing.

        5.2. Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Exhibit 1.2 with respect to each such Closing.

        5.3. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.


                                       8
<PAGE>

        5.4. Satisfaction of Triggering Condition. The condition set forth in
Exhibit 1.2 with respect to the purchase at each Closing shall have been meet,
provided that if all actions otherwise necessary to meet such condition have
been taken, and the achievement of such condition is delayed for a period in
excess of three months as a result of a documented decision of the Joint Review
Committee (as defined in the License Agreement), then the condition shall be
deemed to have been satisfied at the time of such decision of the Joint Review
Committee.

        5.5. Performance. The License Agreement shall not have been terminated
(for any reason), and the Investor shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing, and
shall have complied in all material respects with the License Agreement.

        5.6. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.

6. Conversion Rights. Upon termination of the License Agreement by Investor (a)
at any time in accordance with Section 19.3 thereof or (b) in accordance with
Section 19.4 thereof prior to the later to occur of January 1, 2004 or
completion of the Milestone/Investment Condition identified by letter (b) in
Exhibit 1.2 hereto (an "Investor Termination"), Investor, at Investor's sole
option, may convert shares of Series A-1 Preferred Stock into (y) shares of
Common Stock and (z), if necessary, exchange shares of Series A-1 Preferred
Stock for a promissory note in accordance with Article 7 hereof, in each case
upon two (2) business days' written notice (the "Notice") within sixty (60) days
following such termination in accordance with the following provisions:

               (i) if Investor elects to convert the Series A-1 Preferred Stock
into Common Stock and, if necessary, exchange for a promissory note, all shares
of Series A-1 Preferred Stock must be so converted and exchanged so that after
one conversion no shares of Series A-1 Preferred Stock will remain outstanding.

               (ii) Shares of Series A-1 Preferred Stock shall be converted
first into the aggregate number of shares of Common Stock of the Company that is
equal to (A) the aggregate Value of all shares of Series A-1 Preferred Stock
divided by (B) the then current Fair Market Value of the Common Stock up to a
maximum of 4,300,000 shares of Common Stock, as may be adjusted for stock
splits, stock dividends, recapitalizations and the like. Any remaining shares of
Series A-1 Preferred Stock which are not so converted shall be redeemed and
exchanged for a promissory note of the Company in accordance with Article 7
hereof.

           (c) The "Value" of a share of Series A-1 Preferred Stock for purposes
of such conversions shall be the actual purchase price of such share of Series
A-1 Preferred Stock, plus accumulated and unpaid dividends (without any interest
thereon) on such share of Series A-1 Preferred Stock.



                                       9
<PAGE>

           (d) The "Fair Market Value" of the Company's Common Stock is equal to
the average of the closing sales prices for the five trading days immediately
preceding the date of the Notice of conversion of the Company's Common Stock on
any national securities exchange, or on the National Association of Securities
Dealers Automated Quotation System (NASDAQ), or if the Common Stock is not
traded on any such market, based on the reasonable opinion of value of an
independent investment banker of national reputation reasonably acceptable to
Investor and the Company.

7. Exchange of Series A-1 Preferred Stock for Promissory Notes.

           (a) In the event that Investor elects to convert the Series A-1
Preferred Stock into Common Stock pursuant to Section 6 hereof upon an Investor
Termination, subject to Section 160 of the Delaware General Corporation Law and
other applicable law, all then outstanding shares of Series A-1 Preferred Stock
which have not been converted into Common Stock in accordance with Section 6
(the "AVAILABLE SHARES") shall be repurchased and redeemed by the Company by
issuing to the holder thereof a promissory note, in the form set forth in
Exhibit 7-A attached hereto, with a principal balance equal to the aggregate
Value of the Series A-1 Preferred Stock so redeemed and a rate per annum equal
to the Exchanged Share Interest Rate (expressed as a percentage) without
compounding. For purposes hereof, the "EXCHANGED SHARE INTEREST RATE" shall be
equal to the "prime" rate of interest published by Citibank N.A. for loans to
its commercial customers, plus 2.00% per annum.

           (b) The Company, at the Company's sole option, may in the event of a
Corporate Change (as defined below), subject to Section 160 of the Delaware
General Corporation Law and other applicable law, repurchase and redeem (a
"CORPORATE CHANGE REDEMPTION") all then outstanding shares of Series A-1
Preferred Stock by issuing to the holder thereof a promissory note, in the form
set forth in Exhibit 7-B attached hereto, with a principal balance equal to the
aggregate Value of the Series A-1 Preferred Stock then outstanding and a rate
per annum equal to the Corporate Change Redemption Interest Rate (expressed as a
percentage) without compounding. For purposes hereof, the "CORPORATE CHANGE
REDEMPTION INTEREST RATE" shall be equal to the quotient of: (i) the product of
(a) the aggregate purchase price paid for the Series A-1 Preferred Stock being
exchanged for the promissory note and (b) 0.06 over (ii) the aggregate Value of
the Series A-1 Preferred Stock being exchanged for the promissory note.

           (c) In the event of a Corporate Change Redemption, all Subsequent
Closings that take place after the date of the Corporate Change Redemption will
be debt financings in lieu of equity financings. Upon payment of each
"INVESTMENT AMOUNT" set forth on Exhibit 1.2 to this Agreement, the Company in
lieu of issuing Series A-1 Preferred Stock shall issue to Investor a promissory
note, in the form set forth in Exhibit 7-B attached hereto, with a principal
balance equal to the "INVESTMENT AMOUNT" bearing interest at a rate of 6% per
annum (without compounding).



                                       10
<PAGE>

           (d) Upon the issuance of any promissory notes pursuant to this
Section 7, all provisions in this Agreement and the provisions in the License
Agreement relating to the Series A-1 Preferred Stock, preferred stock or equity
securities issued to the Investor shall be deemed to refer to the promissory
notes and all rights and obligations relating to the Series A-1 Preferred Stock
under this Agreement and the License Agreement shall apply to the promissory
notes, including but not limited to Section 5.1(b), 5.1(c) and Section 19.5 of
the License Agreement pertaining to forfeiture of the equity interests;
provided, however, any promissory notes issued pursuant to Section 7(a) shall
not be convertible into shares of the Company's Common Stock.

           (e) For purposes of this Agreement, "CORPORATE CHANGE" shall mean (i)
any acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) and pursuant to which the holders of the outstanding voting
securities of the Company immediately prior to such merger or other form of
corporate reorganization fail to hold equity securities representing a majority
of the voting power of the Company or surviving entity immediately following
such merger or other form of corporate reorganization or (ii) a sale of all or
substantially all of the assets of the Company.

8. Miscellaneous.

        8.1. Survival. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investors or the Company. 8.2. Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

        8.3. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, without reference to its principles
regarding conflicts of laws.

        8.4. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.



                                       11
<PAGE>

        8.5. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the address
as set forth on the signature page hereof or at such other address as such party
may designate by ten days advance written notice to the other parties hereto.

        8.6. Expenses. Irrespective of whether the Closing is effected, each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement.

        8.7. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor.

        8.8. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

        8.9. Counterparts. This Agreement may be executed 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.

        8.10. Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.

        8.11. Condition Precedent. All obligations of the parties hereunder
shall be subject to the receipt by B&L of (i) the written consent of SSP Co.
Ltd., copied to B&L, to the sublicense by Licensor to B&L of Licensor's rights
under the SSP License (as contained herein) and (ii) a copy of an amendment to
the SSP License that requires [***].

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.


                                       12
<PAGE>

In each case, the form and substance of the documents referred to in (i) and
(ii) above shall be acceptable to B&L, which shall be evidenced by B&L's written
acknowledgment to Licensor. If the conditions set forth herein are not achieved
on or before [***], this Agreement shall be of no further effect.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.*



                                              INSITE VISION INCORPORATED


                                              By:
                                                 ------------------------------
                                              Name:
                                                   ----------------------------
                                              Title:
                                                    ---------------------------


                                              Address: 965 Atlantic Avenue
                                                       Alameda, CA 94501


                                              INVESTOR


                                              BAUSCH & LOMB INCORPORATED


                                              By:
                                                 ------------------------------
                                              Name:
                                                   ----------------------------
                                              Title:
                                                    ---------------------------


                                              Address: One Bausch & Lomb Place
                                                       Rochester, NY 14604



----------

*  See Section 8.11, Condition Precedent.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.


                                       13
<PAGE>

                                   EXHIBIT 1.1


                           CERTIFICATE OF DESIGNATIONS




                                       14
<PAGE>

                                  EXHIBIT 1.2

                        SCHEDULE OF SUBSEQUENT CLOSINGS



<TABLE>
<CAPTION>
                                                                   Number of              Estimated               Investment
Milestones/Investment Conditions for Subsequent Closings:           Shares:                Timing:                 Amount:
---------------------------------------------------------          ---------              ---------              ------------
<S>                                                               <C>                    <C>                    <C>
(a)   [***]                                                                                 Q1 2003                 [***]

(b)   [***]                                                                                 Q4 2003                 [***]


(c)   [***]                                                                                 Q3 2004                 [***]


(d)   [***]                                                                                 Q2 2004                 [***]


(e)   [***]                                                                                 Q1 2005                 [***]


(f)   [***]                                                                                 Q3 2005                 [***]

(g)   [***]                                                                                 Q3 2005                 [***]


(h)   [***]                                                                                 Q2 2006                 [***]
</TABLE>

----------

*       At each milestone, the following conditions and characteristics of the
        Product shall continue to be established by valid scientific evidence:

-       [***]

-       [***]

-       [***]

-       [***]


[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.


                                       15
<PAGE>

                                                               EXECUTED VERSION


                                   EXHIBIT 1.3

                                LICENSE AGREEMENT



                                       16
<PAGE>

                                    EXHIBIT 2

                             SCHEDULE OF EXCEPTIONS




                                  NO EXCEPTIONS





                                       17
<PAGE>

                                   EXHIBIT 7-A


                             FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY OTHER APPLICABLE SECURITIES LAWS. IT MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNDER CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR SUCH OTHER LAWS.


$[_______________]                                         Dated: _____________


        FOR VALUE RECEIVED, the undersigned, Insite Vision Incorporated (the
"Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of
[______________] (the "Lender"), the principal sum of [______________________]
DOLLARS ($_______________) (the "Loan"). This Promissory Note is a demand note
and the outstanding principal amount of the Loan shall be due and payable on the
Business Day following demand on any date after five years following the date
hereof by the Lender (the "Maturity Date").

        The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note from the date hereof until maturity, in
arrears, on the Maturity Date, at a rate per annum equal to [_____]% without
compounding. All computations of interest shall be made on the basis of a year
of 365 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.

        All payments hereunder shall be made in lawful money of the United
States of America and in same day or immediately available funds, to the Lender,
at One Bausch & Lomb Place, Rochester, New York 14604, or at such other place or
to such account as the Lender from time to time shall designate in a written
notice to the Borrower.

        Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would otherwise
occur, on a day other than a Business Day (as defined below), then such payment
shall be made, and such interest payment date or other date shall occur, on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder. As used herein,
"Business Day" means a day (i) other than Saturday or Sunday, and (ii) on which
commercial banks are open for business in San Francisco, California.

        Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on the
basis



                                       18
<PAGE>

provided for in this Promissory Note, together with all fees, charges and other
payments which are treated as interest under applicable law, as provided for
herein or in any other document executed in connection herewith, would exceed
the amount of such interest computed on the basis of the Highest Lawful Rate,
the Borrower shall not be obligated to pay, and the Lender shall not be entitled
to charge, collect, receive, reserve or take, interest in excess of the Highest
Lawful Rate, and during any such period the interest payable hereunder shall be
computed on the basis of the Highest Lawful Rate. As used herein, "Highest
Lawful Rate" means the maximum non-usurious rate of interest, as in effect from
time to time, which may be charged, contracted for, reserved, received or
collected by the Lender in connection with this Promissory Note under applicable
law.

        The Borrower may prepay the outstanding amount hereof in whole or in
part at any time, without premium or penalty. Together with any such prepayment
the Borrower shall pay accrued interest on the amount prepaid.

        The Lender shall have all rights and remedies provided for at law, in
equity and by agreement of the parties.

        The Borrower agrees to pay on demand all the losses, costs, and expenses
(including, without limitation, attorneys' fees and disbursements) which the
Lender incurs in connection with enforcement or attempted enforcement of this
Promissory Note, or the protection or preservation of the Lender's rights under
this Promissory Note, whether by judicial proceedings or otherwise. Such costs
and expenses include, without limitation, those incurred in connection with any
workout or refinancing, or any bankruptcy, insolvency, liquidation or similar
proceedings.

        The Borrower hereby waives diligence, demand, presentment, protest or
further notice of any kind. The Borrower agrees to make all payments under this
Promissory Note without setoff or deduction and regardless of any counterclaim
or defense.

        No single or partial exercise of any power under this Promissory Note
shall preclude any other or further exercise of such power or exercise of any
other power. No delay or omission on the part of the Lender in exercising any
right under this Promissory Note shall operate as a waiver of such right or any
other right hereunder.

        This Promissory Note shall be binding on the Borrower and its successors
and assigns, and shall be binding upon and inure to the benefit of the Lender,
any future holder of this Promissory Note and their respective successors and
assigns. Neither party may assign or transfer this Promissory Note or any of its
obligations hereunder without the other party's prior written consent.



                                       19
<PAGE>

        THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH NEW YORK LAW.


                                           INSITE VISION INCORPORATED


                                           By
                                             ----------------------------------
                                             Title:


                                           Address:

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



                                       20
<PAGE>

                                   EXHIBIT 7-B


                       FORM OF CONVERTIBLE PROMISSORY NOTE


THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNDER
CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933 OR SUCH OTHER LAWS.


$[_______________]                                         Dated: _____________


        FOR VALUE RECEIVED, the undersigned, Insite Vision Incorporated (the
"Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of
[______________] (the "Lender"), the principal sum of [______________________]
DOLLARS ($_______________) (the "Loan"). This Promissory Note is a demand note
and the outstanding principal amount of the Loan shall be due and payable on the
Business Day following the date of termination of the ISV-403 Technology License
Agreement, dated July ___, 2002 (the "License Agreement") between the Borrower
and Bausch & Lomb Incorporated pursuant to Section 19 thereof (the "Maturity
Date") unless earlier converted into shares of capital stock or other securities
of Borrower as set forth herein and in the License Agreement.

        The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note from the date hereof until maturity, in
arrears, on the Maturity Date, unless earlier converted into shares of capital
stock of Borrower, at a rate per annum equal to [_____]% without compounding.
All computations of interest shall be made on the basis of a year of 365 days
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.

        Unless earlier converted into shares of capital stock of Borrower, all
payments hereunder shall be made in lawful money of the United States of America
and in same day or immediately available funds, to the Lender, at One Bausch &
Lomb Place, Rochester, New York 14604, or at such other place or to such account
as the Lender from time to time shall designate in a written notice to the
Borrower.

        Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would otherwise
occur, on a day other than a Business Day (as defined below), then such payment
shall be made, and such interest payment date or other date shall occur, on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder. As used herein,
"Business Day" means a day (i) other



                                       21
<PAGE>

than Saturday or Sunday, and (ii) on which commercial banks are open for
business in San Francisco, California.

        Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Promissory Note, together with all fees, charges and
other payments which are treated as interest under applicable law, as provided
for herein or in any other document executed in connection herewith, would
exceed the amount of such interest computed on the basis of the Highest Lawful
Rate, the Borrower shall not be obligated to pay, and the Lender shall not be
entitled to charge, collect, receive, reserve or take, interest in excess of the
Highest Lawful Rate, and during any such period the interest payable hereunder
shall be computed on the basis of the Highest Lawful Rate. As used herein,
"Highest Lawful Rate" means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Lender in connection with this Promissory Note
under applicable law.

        At the sole option of the Borrower, any portion of the outstanding
principal balance plus any portion of accrued and unpaid interest on this
Promissory Note may be converted into shares of the Borrower's common stock (the
"Common Stock"). The number of shares of Borrower's Common Stock into which
amounts due under this Promissory Note shall be converted shall be equal to the
quotient obtained by dividing (a) the aggregate outstanding principal balance
that is being converted, plus any accrued and unpaid interest being converted on
the date of conversion by (b) the then current Fair Market Value of the Common
Stock. Notwithstanding the foregoing, in no event shall Borrower be entitled to
convert any portion of the principal balance outstanding or any portion of
accrued and unpaid interest on this Promissory Note if such conversion (together
with any prior conversions pursuant to this Promissory Note or any other
Promissory Note issued pursuant to the Agreement (as defined below)) would cause
the issuance of more than 4,300,000 shares of Common Stock, as may be adjusted
for stock splits, stock dividends, recapitalizations and the like. The "FAIR
MARKET VALUE" of the Borrower's Common Stock is equal to the average of the
closing sales prices for the five trading days immediately preceding the date of
notice of conversion of the Borrower's Common Stock on any national securities
exchange, or on the National Association of Securities Dealers Automated
Quotation System (NASDAQ), or if the Common Stock is not traded on any such
market, based on the reasonable opinion of value of an independent investment
banker of national reputation reasonably acceptable to Lender and the Borrower.

        The Borrower may prepay the outstanding amount hereof in whole or in
part at any time, without premium or penalty. Together with any such prepayment
the Borrower shall pay accrued interest on the amount prepaid.

        All provisions in (a) the preferred stock purchase agreement (the
"Agreement") by and among the Borrower and Bausch & Lomb Incorporated ("B&L");
and (b) the ISV-403 Technology License Agreement (the "License Agreement") by
and among Borrower and B&L relating to the Series A-1 Preferred Stock, preferred
stock or equity securities issued to B&L shall be deemed to refer to this
promissory note and all



                                       22
<PAGE>

rights and obligations relating to the Series A-1 Preferred Stock, preferred
stock or equity securities issued to B&L shall apply to this promissory note,
including but not limited to Section 5.1(b), 5.1(c) and Section 19.5 of the
License Agreement pertaining to forfeiture of the equity interests.

        The Lender shall have all rights and remedies provided for at law, in
equity and by agreement of the parties.

        The Borrower agrees to pay on demand all the losses, costs, and expenses
(including, without limitation, attorneys' fees and disbursements) which the
Lender incurs in connection with enforcement or attempted enforcement of this
Promissory Note, or the protection or preservation of the Lender's rights under
this Promissory Note, whether by judicial proceedings or otherwise. Such costs
and expenses include, without limitation, those incurred in connection with any
workout or refinancing, or any bankruptcy, insolvency, liquidation or similar
proceedings.

        The Borrower hereby waives diligence, demand, presentment, protest or
further notice of any kind. The Borrower agrees to make all payments under this
Promissory Note without setoff or deduction and regardless of any counterclaim
or defense.

        If the Common Stock issuable upon conversion of this Promissory Note
shall be changed into the same or a different number of shares of any other
class or classes of stock, or into any other property whether by
recapitalization, reclassification, reorganization or otherwise (other than a
subdivision or combination of shares) in any such event the Promissory Note
shall thereafter be convertible into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification,
reorganization or other change by holders of the maximum number of shares of
Common Stock into which this Promissory Note could have been converted
immediately prior to such recapitalization, reclassification or change.

        No single or partial exercise of any power under this Promissory Note
shall preclude any other or further exercise of such power or exercise of any
other power. No delay or omission on the part of the Lender in exercising any
right under this Promissory Note shall operate as a waiver of such right or any
other right hereunder.

        This Promissory Note shall be binding on the Borrower and its successors
and assigns, and shall be binding upon and inure to the benefit of the Lender,
any future holder of this Promissory Note and their respective successors and
assigns. Neither party may assign or transfer this Promissory Note or any of its
obligations hereunder without the other party's prior written consent.



                                       23
<PAGE>

        THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH NEW YORK LAW.


                                           INSITE VISION INCORPORATED


                                           By
                                             ----------------------------------
                                             Title:


                                           Address:


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

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

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