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                                                                   EXHIBIT 10.17



                                SUPPLY AGREEMENT



        This Supply Agreement (the "Agreement") is dated March 29, 2000, between
Allergan Sales, Inc., a California corporation, and Allergan Sales Ltd., an
Irish corporation ("Allergan" as defined in Section 1.3 below) and Ista
Pharmaceuticals, Inc., a California corporation ("Ista").

                                    RECITALS

        A. Ista has developed and holds patents and patent applications on a
pharmaceutical formulation containing the enzyme hyaluronidase used in the
treatment of ophthalmic diseases, trademarked as "Vitrase(R)".

        B. Ista is currently conducting clinical studies for use in obtaining
Federal Food and Drug Administration approval of Vitrase(R) for the treatment of
vitreous hemorrhage.

        C. Allergan and Ista have entered into a License Agreement (the "License
Agreement") of even date herewith, pursuant to which Ista has granted Allergan
exclusive licenses to market, distribute and sell Vitrase(R) in accordance with
the terms and conditions of the License Agreement.

        D. Allergan and Ista desire to establish a relationship, pursuant to
which Ista will supply, and Allergan (or its appropriate Affiliates) will
purchase from Ista, Vitrase(R) in the form of Finished Product.

        In consideration of the foregoing premises, and the mutual covenants and
obligations set forth herein, Ista and Allergan hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

        1.1 "CAPITALIZED TERMS". All capitalized terms not defined herein shall
have the meaning set forth in the License Agreement.

        1.2 "ACT" means and refers to the United States Food, Drug, and Cosmetic
Act, as amended.

        1.3 "ALLERGAN" means and refers to Allergan Sales, Inc. for purposes of
supply of Product for sale in the United States, and Allergan Sales, Ltd. for
purposes of supply of Product for sale outside the United States.

        1.4 "APPROVED THIRD PARTY CONTRACTOR" means a Third Party contracted by
Ista to manufacture, test, and/or package Finished Product for Allergan, which
has been approved by Allergan under Section 2.1.

        1.5 "cGMP" means current Good Manufacturing Practices promulgated by the
FDA, and their equivalent promulgated by the governing health authority of any
other country for which the Products are manufactured for Allergan under this
Agreement.

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        1.6 "CHANGE IN CONTROL" shall mean the acquisition by any person
(including any syndicate or group deemed to be a "person" under Section 13(d)(3)
of the Exchange Act) of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
shares of capital stock of Ista entitling such person to exercise 50% or more of
the total voting power of all shares of capital stock of Ista entitled to vote
generally in the elections of directors.

        1.7 "DEFECT" means that a unit of Finished Product fails to conform to
the applicable specifications or to the applicable warranties given by Ista
under Section 4.1.

        1.8 "DRUG MASTER FILE" means Ista's, or its Approved Third Party
Contractor's Drug Master File for manufacturing hyaluronidase, as filed with the
FDA and the equivalent filings with the governing health authority of any other
applicable country in the Territory.

        1.9 "FAILS (OR FAILURE) TO ADEQUATELY SUPPLY" shall mean, with respect
to a particular Finished Product, a failure to supply Allergan eighty-five
percent (85%) of the lesser of: (i) the quantity of Finished Product ordered by
Allergan for the applicable period, and (ii) the maximum quantity of Finished
Product that Ista is obligated to supply under Sections 2.4.2 and 2.4.3 for the
applicable period.

        1.10 "FINISHED PRODUCT" means shall mean a single unit of Product
meeting the applicable Finished Product Specifications for sale in a country
within the Territory for use in the Field, with such Labeling, Packaging and
package inserts as established pursuant to this Agreement and required by
Exhibit A.

        1.11 "FINISHED PRODUCT SPECIFICATIONS" means the specifications for the
Finished Product set forth in an applicable and approved Marketing Approval
Application (as defined below) and the key terms of which are set forth in
Exhibit A attached hereto, including (as applicable) statements of
pharmaceutical manufacturing, Labeling, filling, Packaging, storage and quality
control procedures, and labeling and packaging specifications (as such may be
revised from time to time in accordance with the terms of this Agreement by
written agreement executed by the parties).

        1.12 "FUNDAMENTAL CHANGE" shall mean the winding up, liquidation or
dissolution of the affairs of Ista, or the entering into by Ista or its
shareholders of any transaction that would result in a Change of Control, or the
conveyance, sale, lease or other disposition by Ista of all or substantially all
of its property or assets (or the agreement by Ista to do any of the foregoing
at any future time).

        1.13 "LABEL", "LABELED" OR "LABELING" means all labels and other
written, printed or graphic matter upon (i) the Products or any container or
wrapper utilized with the Product, or (ii) any written material accompanying the
Product, including, without limitation, package inserts.

        1.14 "LABORATORY" means an independent testing organization which meets
appropriate standards or a consultant of recognized repute within the United
States pharmaceutical industry mutually agreed upon by the Parties.

        1.15 "LATENT DEFECT" means Defects that are not discoverable upon
reasonable and customary physical inspection or incoming quality assurance
testing.



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        1.16 "MARKETING APPROVAL APPLICATION" means a New Drug Application,
Premarket Approval Application, or Biologics License Application, respectively,
as required under the Act and the regulations promulgated thereunder, or a
comparable filing for marketing approval in a country, in each case with respect
to a Product for use within the Field in the Territory.

        1.17 "PACKAGING" means all primary containers, including vials,
syringes, blisters, cartons, shipping cases or any other like matter used in
packaging or accompanying the Product.

        1.18 "SAMPLES" means units of Finished Product which Allergan intends
for uses other than commercial sale, including without limitation as samples for
promotion, training programs, educational programs or customer demonstration,
and which may not be resold.

                                    ARTICLE 2
                        MANUFACTURE, SUPPLY AND PURCHASE

        2.1 SUPPLY AND PURCHASE OBLIGATIONS. During the applicable term of this
Agreement and subject to the terms and conditions herein, Ista shall
manufacture, or cause to be manufactured, and supply all of Allergan's
requirements for Product and shall, except as permitted in the License
Agreement, exclusively supply Finished Product only for Allergan in the
Territory.

               2.1.1 Third Party Contractors. Ista may contract with Third
Parties to perform services or supply facilities or goods in connection with the
manufacture, testing, and/or packaging of Finished Product, subject to such
Third Party complying with the terms hereof and subject to Allergan's approval
of such Third Party contractor, which approval shall not be unreasonably
withheld or delayed. In the event that Allergan does not deny such approval in
writing, stating the reasons for such denial, within thirty (30) days after
receipt of Ista's notice, such alternative supplier shall be deemed an Approved
Third Party Contractor.

        2.2    MANUFACTURING PRACTICES.

               2.2.1 Product Specifications. Ista, and/or its Approved Third
Party Contractor, shall manufacture, fill, package, label and store Finished
Product in conformity with the Finished Product Specifications and in accordance
with all applicable laws and regulations.

               2.2.2 cGMP. Ista, and/or its Approved Third Party Contractor,
shall manufacture the Product in accordance with cGMP and the Marketing Approval
Application. Ista shall advise Allergan of any proposed process changes outside
the Marketing Approval Application prior to implementing such changes.

               2.2.3 Samples and Lot Records. Ista and/or its Approved Third
Party Contractor shall prepare and maintain lot records and an archival sample,
properly stored, from each lot of Product manufactured and shipped hereunder
sufficient to perform each quality control test identified in the Finished
Product Specifications at least twice. Ista and/or its Approved Third Party
Contractor shall comply with all requirements of 2l C.F.R. Section 211.180 (as
may be amended or replaced) in preparing and maintaining lot records and with
the requirements of 2l C.F.R. Section 211.170 (as may be amended or replaced) in
maintaining and storing samples.

               2.2.4 Certificates of Analysis and Origin. Ista shall provide
Allergan with a certificate of analysis, in the form of Exhibit B for each
shipment of the Finished Product



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manufactured and supplied hereunder, and if requested by Allergan, a certificate
of warranty of origin sufficient to satisfy the requirements of any applicable
export regulations and customs authorities.

               2.2.5 Quality Control Information. Ista shall assure the quality
level of the Finished Product, whether manufactured by it or by an Approved
Third Party Contractor, through the use of a formal quality assurance program in
conformance with reasonable industry standards. Such program shall require Ista
or the Approved Third Party Contractor to prepare and maintain written records
sufficient to enable Allergan to trace the history of each Finished Product lot
delivered to Allergan hereunder. Upon the reasonable request of Allergan, Ista
shall provide Allergan with such information, including analytical and
manufacturing documentation, requested by Allergan regarding quality control of
the Finished Product supplied hereunder and which Ista shall maintain in
accordance with applicable laws and regulations.

               2.2.6 Packaging Control. Ista shall evaluate and inspect each
batch of Finished Product in accordance with Packaging guidelines set forth in
the Finished Product Specifications and will provide Allergan with a Product lot
release.

               2.2.7 Inspection. Allergan, or its designee, may, at its own
expense, with prior reasonable notice and during regular business hours, visit
the facilities used by Ista, and/or its Approved Third Party Contractor, to
manufacture Product or Finished Product for delivery to Allergan in order to
review the relevant production records and facilities and to audit compliance
with this Agreement. It is understood, however, that Allergan's inspection
rights may be reasonably limited by confidentiality considerations or by the
relevant agreements between Ista and its Approved Third Party Contractors.

               2.2.8 Inspections by Government Agencies. Ista shall promptly
notify Allergan of any inspections by federal or national; state, province, or
regional; or local regulatory representatives (including, without limitation,
FDA, EPA, EEOC, OSHA, similar state agencies or building code inspectors) of any
facility at which Product or Finished Product is being or will be manufactured
for delivery to Allergan, and shall send Allergan copies of the results of any
such inspections, including actions taken by Ista, its Approved Third Party
Contractor, or any other entity to remedy unsatisfactory conditions cited in
such inspections.

        2.3    LABELING AND PACKAGING.

               2.3.1 Labeling. Ista and Allergan will discuss the details of
country-by-country specific requirements in the Territory as they are defined.
Ista and Allergan shall mutually agree upon the packaging and Labeling of the
Finished Product, and Ista shall supply the Finished Product packaged as so
agreed and as documented in the Marketing Approval Applications. In conformance
with Sections 5.4 and 9.4 of the License Agreement, the Finished Product
Labeling shall include both the Vitrase(R) trademark and a statement that the
Finished Product has been manufactured by Ista Pharmaceuticals. Ista shall be
responsible for ensuring the accuracy of all information contained on all Labels
and Labeling for the Finished Product and for the compliance of all such Labels
and Labeling with applicable law. Should Ista desire or be required to make any
change in any such Label or Labeling, it shall first obtain the written approval
of Allergan, which shall not be unreasonably withheld or delayed, and thereafter
Ista shall be responsible for the updating of all artwork and text associated
with such change and providing such changes to its Approved Third Party
Contractor, if any. Ista shall make all necessary arrangements for such changed
Labels or



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Labeling to be printed and shall provide to Allergan printer's proofs for
Allergan's review and approval.

               2.3.2 Packaging. Ista will supply all Packaging, and Labels to
manufacture and supply Finished Product under this Agreement.

        2.4    FORECASTS AND ORDERS.

               2.4.1 Forecasts. Beginning not less than six (6) months before
commercial launch of the Finished Product in the first country in the Territory,
and thereafter on a monthly basis, Allergan shall provide Ista with a rolling
twelve month (M1-M12), non-binding forecast for Finished Product by the tenth
(10th) of each month (the next calendar month being M1). Each forecast shall
indicate the estimated quantities of Finished Product identified by the SKU
numbers (if applicable) designated by Ista (which shall be identified, among
other things, by whether the unit is for sale to the trade or is a Sample). Each
forecast shall also identify each anticipated launch date for the Finished
Product in any country in the Territory during the upcoming twelve (12) month
period. Ista shall use Allergan's forecast to plan and purchase all raw
materials, components, and Approved Third Party Contractor committments required
to adequately produce Finished Product to meet the forecast as needed. Ista may
purchase raw materials, components, and Approved Third Party Contractor
committments based on forecasted demand to reduce finished goods lead time,
achieve economic order quantities, cover lead times, and meet Allergan's
forecasts. Ista may also use Allergan's forecast submitted in January of each
year to purchase up to two hundred percent (200%) of the quantity of
hyaluronidase raw material needed to adequately produce Finished Product to meet
the twelve month forecast. If any of the foregoing become outdated, obsolete or
otherwise unusable, for purposes of compliance with this Section 2.4.1, Allergan
shall reimburse Ista's actual cost, as verified by appropriate documentation.
Ista shall use reasonable efforts to mitigate the amount of such reimbursements,
including without limitation, prudent inventory usage, proper storage conditions
and alternative use of third party contractors.

               2.4.2 Supply and Order Obligation. Together with each forecast
provided under Section 2.4.1 above, Allergan shall place its binding, firm order
with Ista, setting forth SKUs, delivery dates and shipping instructions with
respect to each shipment, for delivery in months one (M1) through (M3) of that
quantity of Finished Product equal to or greater than the amount forecast for
those months. The forecasts for months four (M4) through six (M6) shall not be
increased by more than fifty percent (50%) as those months roll forward to month
three (M3). The forecasts for months seven (M7) through twelve (M12) shall not
be increased by more than one hundred percent (100%) as those months roll
forward to month four (M4). Ista may, but is not obligated to, accept orders
from Ista in excess of these amounts.

               Each calendar quarter, Ista shall be required to supply and
deliver to Allergan such quantities of Finished Product as Allergan orders
pursuant to Section 2.4.3 below. If Ista becomes aware of any circumstances
which leads Ista to conclude that it may default in its obligation above to
deliver such quantities of conforming Finished Product as Allergan orders for
any three calendar month period, Ista shall give Allergan prompt written notice
describing such circumstances, together with a proposed course of action to
remedy such failure.

               2.4.3 Orders. Allergan shall make all purchases hereunder by
submitting firm purchase orders to Ista. Each such purchase order shall be in
writing in a form reasonably acceptable to Ista, and shall specify the
description of the Finished Product ordered, the quantity ordered (in



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accordance with Section 2.4.2), the price therefor under Section 3.1 below, the
place of delivery and the required delivery date therefor, which shall not be
less than seventy (70) days after the date of such purchase order. Ista shall
notify Allergan within twenty (20) days from receipt of an order of its ability
to fill any amounts of such order in excess of the quantities that Ista is
obligated to supply. In the event of a conflict between the terms and conditions
of any purchase order and this Agreement, the terms and conditions of this
Agreement shall prevail.

               2.4.4 Changes. The parties may move delivery dates ahead or back
of the dates specified in the purchase order by mutual written agreement. Ista
shall make all reasonable efforts to comply with Allergan's requested delivery
dates, as specified on each accepted purchase order.

        2.5    DELIVERY AND ACCEPTANCE.

               2.5.1 Delivery. Ista shall ship quantities of Finished Product
that Ista is obligated to supply pursuant to Section 2.1 to arrive on or about
the dates specified in Allergan's purchase orders submitted and accepted in
accordance with Section 2.4.3 above and as required by Section 2.5.2 below. All
Finished Product delivered pursuant to the terms of this Agreement shall be
suitably packed for shipment by Ista and marked for shipment to the destination
point indicated in Allergan's purchase order. Each shipment of Finished Product
hereunder shall be accompanied by the documentation specified in Section 2.2.4.
All Finished Product supplied under this Agreement shall be shipped F.O.B.
Ista's or its Approved Third Party Contractor's manufacturing facility to such
location as designated by Allergan in the applicable purchase order. The carrier
shall be selected by Allergan. The packaging for shipment shall be in accordance
with good commercial practice with respect to protection of the Finished Product
during transportation. Allergan shall pay all freight, insurance charges, taxes,
import and export duties, inspection fees and other charges applicable to the
sale and transport of Finished Product purchased by Allergan hereunder. Title
and risk of loss and damages to Finished Product purchased by Allergan hereunder
shall pass to Allergan upon delivery to Allergan's designated carrier.

               2.5.2 Acceptance, Rejection, and Cure. Allergan shall, promptly
upon receipt of each shipment of Finished Product perform customary inspection
in accordance with the applicable Finished Product Specifications. All shipments
(i.e., quantities or packaging of Finished Product) and all shipping and other
charges shall be deemed correct unless Ista receives from Allergan, no later
than thirty (30) days after Allergan's receipt of a given shipment, a written
notice specifying the shipment, the purchase order number, and the exact nature
of the discrepancy between the order and the shipment or the exact nature of the
discrepancy in the shipping or other charges, as applicable. The nonconforming
shipment of Finished Product, or the nonconforming portion thereof, shall be
held for Ista's disposition, or shall be returned to Ista, at Ista's expense, as
directed by Ista.

                      (a) Ista shall use its commercially reasonable efforts to
replace each nonconforming shipment of Finished Product, or the nonconforming
portion thereof, with conforming Finished Product as soon as reasonably
practicable after receipt of notice of rejection thereof, and in any event shall
do so within forty-five (45) days after receipt of notice of rejection thereof.
Ista shall give Allergan written instructions as to how Allergan should, at
Ista's expense, dispose of or rework any non-conforming Finished Product, and
such instructions shall comply with all appropriate governmental requirements.

                      (b) Ista shall analyze Finished Product rejected by
Allergan for Defects, and shall inform Allergan within thirty (30) calendar days
upon receipt of the rejected unit



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of Finished Product of the results of the analysis. In the event that Allergan
and Ista agree that any quantity of Finished Product failed to comply with such
Finished Product Specifications at the time of shipment to Allergan, the
shipping cost of replacement (including freight and insurance) will be borne by
Ista, and otherwise by Allergan. In case of a disagreement between the Parties,
the claim shall be submitted for tests and decision to a Laboratory, the
appointment of which shall not be unreasonably withheld or delayed by either
party. The determination of such entity with respect to all or part of any
shipment of Finished Product shall be final and binding upon the parties. The
fees and expenses of the Laboratory making such determination shall be paid by
the party against which the determination is made.

               2.5.3 Latent Defects. As soon as either party becomes aware of a
Latent Defect in any lot of Finished Product, but in no case later than thirty
(30) days after such reaching such awareness, it shall immediately notify the
other party, and the lot or batch involved, at Allergan's election, shall be
deemed rejected as of the date of such notice, and the provisions of Section
2.5.2 shall apply. To the extent such units of Finished Product have been sold
by Allergan, Ista shall reimburse Allergan for its actual costs incurred in
replacing units returned by its customers. At its election, Allergan may recover
amounts to which it may become entitled under this Section 2.5.3 by offsetting
such amounts from amounts then due or that may subsequently become due to Ista
hereunder.

        2.6 ADDITIONAL OBLIGATIONS OF ISTA. During the term of this Agreement,
Ista shall:

               2.6.1 Use reasonable efforts to qualify and maintain a second
source for the lyophilized Product and for supply of Finished Product as
promptly as reasonably practicable. Ista shall ensure that all such facilities
comply with the applicable Product specifications, Finished Product
Specifications, and cGMP, that such facilities are approved by the FDA, and will
give Allergan prior written notice of any such arrangement to the extent that
such arrangement would require changes to any marketing approval within the
Territory.

               2.6.2 Use reasonable efforts to minimize temperature constraints
for Finished Product bulk shipping and storage and extend shelf life for
Finished Product.

               2.6.3 Permit Allergan to examine those technical records (i.e.,
master batch records, procedures, specifications and methods, and standard
operating procedures) made by Ista (and any of Approved Third Party Contractors
whose records are in Ista's possession or are readily accessible by Ista) that
relate only to the Finished Product and are specified in the Marketing Approval
Applications. Such technical records shall not include Ista operations
generally, any descriptions related in whole or in part to any other product of
Ista, nor any parts related to any other customer of Ista.

               2.6.4 Obtain Allergan's written approval prior to implementing
any proposed change in the suppliers of raw material used in the Finished
Product, containers, Packaging, Labeling, Finished Product Specifications,
manufacturing process, testing or the facilities which are related to the
manufacturing of Finished Product. In the event that Allergan does not deny such
approval in writing, stating the reasons for such denial, within thirty (30)
days after receipt of Ista's notice of such proposed change, Allergan will be
deemed to have given its approval.

               2.6.5 Promptly notify Allergan of any comments, responses or
notice received from the FDA, or other applicable regulatory authorities, which
relate to or may impact the Finished



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Product or the manufacture of the Finished Product. At its own cost, obtain and
maintain any and all Federal and state regulations and/or licenses with respect
to the manufacture, by Ista, of the Finished Product.

        2.7    SHORTAGE OF SUPPLY.

               2.7.1  Joint Efforts.

                      (a) If at any time Ista becomes aware of a deficiency in
its manufacturing capabilities and concludes that such deficiency might result
in the inability to supply Allergan's requirements for Finished Product as
required pursuant to Sections 2.4.2 and 2.4.3, or the parties mutually conclude
the same, then in such event the parties shall immediately convene a "Joint
Manufacturing Team," consisting of an equal number of representatives from each
of Ista and Allergan, to address the problem, which may include locating
alternative suppliers and facilities to increase production and identifying
other actions necessary to resolve the problem. Ista shall implement all
commercially reasonable measures established by the Joint Manufacturing Team to
prevent potential shortage.

                      (b) In the event there is a disagreement among the Joint
Manufacturing Team that cannot be resolved by the senior executives of Ista and
Allergan as to commercially reasonable efforts that should be undertaken to
remedy or prevent a shortfall, the matter shall be resolved in accordance with
Section 15.6 of the License Agreement, as referenced in Section 7 below.

               2.7.2 Allocation. Upon expiration of the License Agreement and
this Agreement in the U. S. pursuant to Section 12.1 of the License Agreement,
if Ista, despite the foregoing measures, is unable to supply all of the
worldwide requirements of the Product or Finished Product, and quantities
ordered by Allergan under Sections 2.4.2 and 2.4.3 above due to force majeure,
Ista shall allocate the quantities of Finished Product and/or Product that Ista
has in inventory, and that Ista is able to produce, so that Allergan receives at
least its proportional share of available supplies as determined based on
reasonable forecasts (taking into consideration past sales and sales performance
against forecast) of Allergan, Ista, and Ista's other distributors.

               2.7.3 Right to Manufacture. Pursuant to Section 2.8 below, Ista
will grant to Allergan a right to manufacture (or have manufactured) anywhere in
the world Finished Product for sale in the Territory for use within the Field if
the following conditions are met:

                      (a) Beginning six (6) months after the first commercial
sale of the Finished Product: (i) Ista Fails to Adequately Supply Allergan's
requirements of such Finished Product as required pursuant to Sections 2.4.2 and
2.4.3 for any three (3) consecutive calendar months, or for six (6) months out
of any calendar year; or (ii) Ista fails to supply 50% of such required Finished
Product during any two (2) calendar months; and

                      (b) Ista's failure to supply, as defined above, will or
does result in an interruption of supply of such Finished Product to the
commercial market; and

                      (c) Ista's failure to supply, as defined above, is not due
to action or inaction of Allergan; and



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                      (d) Allergan determines, in good faith, that neither Ista
nor its suppliers will be able to remedy the failure within a reasonable period
of time.

               Such right shall continue for the term of this Agreement.
Notwithstanding the foregoing, to the extent that Ista is able to supply
Finished Product to Allergan pursuant to Sections 2.4.2 and 2.4.3 herein,
Allergan shall use good faith efforts, consistent with its reasonable business
judgment to continue ordering Finished Product from Ista.

               2.7.4 Exclusive Remedies. EXCEPT FOR WILLFUL BREACH BY ISTA OF
ITS OBLIGATIONS TO SUPPLY ALLERGAN THE QUANTITIES OF FINISHED PRODUCT ORDERED
PURSUANT TO Sections 2.4.2 and 2.4.3 ABOVE OR REQUIRED BY SECTION 2.7.2 ABOVE,
WHICHEVER IS LESS, SECTION 2.7 IS ALLERGAN'S SOLE AND EXCLUSIVE REMEDY FOR A
FAILURE BY ISTA TO SUPPLY QUANTITIES OF FINISHED PRODUCT PURSUANT TO THIS
ARTICLE 2.

        2.8 ALLERGAN'S LICENSE TO MANUFACTURE FINISHED PRODUCTS. In the event
that Allergan becomes entitled to a right to manufacture Finished Product under
the terms of Section 2.7.3, Ista will grant to Allergan a non-exclusive license
under the Ista Technology necessary to make and/or have made Finished Product
anywhere in the world for use and sale within the Field in the Territory (the
"Manufacturing License"). Such Manufacturing License shall be subject to all
other terms and conditions of this Agreement and the following:

               2.8.1 Exercise of the Manufacturing License. Allergan agrees to
exercise any of its rights under the Manufacturing License, only to the extent
expressly permitted in Section 2.7.3 above. In such event, Ista shall provide to
Allergan, no later than within thirty (30) calendar days, copies of all
documentation within Ista's control that is reasonably necessary for Allergan to
manufacture (or have manufactured) Finished Product, and shall cooperate with
Allergan to establish alternative supply, including sources of materials. In the
event that Allergan has Finished Product manufactured by a Third Party, such
Third Party shall enter into a confidentiality agreement with Ista to protect
against the unauthorized use and disclosure of Ista's Confidential Information.

        2.9 ALLERGAN'S SECOND-SOURCE LICENSE TO MANUFACTURE FINISHED PRODUCTS.
In the event that Ista undergoes a Fundamental Change or a Change in Control,
Allergan thereafter shall have the right, for good cause, to receive a
non-exclusive license under the Ista Technology to make and/or have made
Finished Product anywhere in the world for use and sale within the Field in the
Territory (the "Second Source License"). Under such license, Allergan shall be
entitled to manufacture (or have manufactured) the quantities of Finished
Product as may be mutually agreed by the parties. Such Second Source License
shall be subject to all other terms and conditions of this Agreement and the
following:

               2.9.1 Exercise of the Second Source License. Allergan agrees to
exercise any of its rights under the Second Source License, only to the extent
expressly permitted in Section 2.9 above. In such event, Ista shall provide to
Allergan, no later than within thirty (30) calendar days, copies of all
documentation within Ista's control that is reasonably necessary for Allergan to
manufacture (or have manufactured) Finished Product, and shall cooperate with
Allergan to establish alternative supply, including sources of materials. In the
event that Allergan has Finished Product manufactured by a Third Party, such
Third Party shall enter into a confidentiality agreement with Ista to protect
against the unauthorized use and disclosure of Ista's Confidential Information.



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                                    ARTICLE 3
                             PRICE AND PAYMENT TERMS

        3.1 PRICE. Allergan shall purchase from Ista all Finished Product which
is accepted pursuant to Section 2.5.2 above at a price equal to [*] per unit.
Commencing the January 1 after the first full calendar year after First
Commercial Sale of Finished Product in the United States and on each January 1
thereafter, the unit cost may be adjusted upward by the increases in the actual
amounts paid per unit of Finished Product by Ista to its Approved Third Party
Contractor(s) (provided such increase is a result of arms-length transactions
between Ista and such Approved Third Party Contractor(s)) or suppliers thereto,
but such increases shall be limited to the percentage increase of the
Pharmaceutical Manufacturers' Producer Price Index for the United States over
the previous year. Notwithstanding the foregoing, Allergan may identify a
reasonable quantity of Finished Product as Samples, which Ista shall price at
[*] less that that otherwise provided for in this Section.

        3.2 INVOICING. Upon shipment of Finished Product to Allergan, Ista shall
submit invoices therefor to Allergan. Allergan shall pay each invoice in full
within thirty (30) days after the date of invoice. All payment shall be made in
U.S. Dollars to an account designated by Ista.

        3.3 SALES AND USE TAXES. Allergan shall not be responsible for the
payment of any excise, sales, use, value added, withholding or other taxes that
may be applicable to the transfer of Finished Product to Allergan hereunder, all
of which shall be Ista's responsibility.

                                    ARTICLE 4
                               PRODUCT WARRANTIES

        4.1    PRODUCT WARRANTIES.  Ista warrants and represents that:

               4.1.1 all Finished Product shipped by Ista to Allergan hereunder
shall (i) comply with the Finished Product Specifications for such Finished
Product; and (ii) conform with the information shown on the Certificate of
Analysis provided for the particular shipment of Finished Product.

               4.1.2 none of the Finished Product shipped by Ista to Allergan
hereunder shall be adulterated or misbranded within the meaning of the Act, as
amended and in effect at the time of shipment, or within the meaning of any
state or municipal laws in the United States applicable to the Finished Product
and containing terms with substantially similar meanings as the meanings of
adulteration or misbranding under the Act;

               4.1.3 all Finished Product will be shipped to Allergan within
sixty (60) days of manufacture and with a remaining shelf life of sixteen (16)
months from date of shipping;

               4.1.4 Ista, its Approved Third Party Contractors, all Finished
Product shipped by Ista to Allergan hereunder, and all facilities used by Ista,
or its Approved Third Party Contractors, to manufacture the Products hereunder
shall meet all United States regulatory requirements for commercialization,
including, without limitation, compliance with then current cGMPs, demonstration
of commercial production capability, and demonstration of acceptable stability
of such


*Certain information on this page has been omitted and filed
 separately with the Commission. Confidential treatment has
 been requested with respect to the omitted portions.

                                      -10-
<PAGE>   11

Products, as well as ISO 9000 regulatory requirements as such may apply to the
manufacture of pharmaceutical products.

        4.2 ALLERGAN REPRESENTATIONS AND WARRANTIES. Allergan hereby represents
and warrants that (i) it has the full right, power and corporate authority to
enter into this Agreement and to make the promises set forth in this Agreement
and that there are no outstanding agreements, assignments or encumbrances in
existence inconsistent with the provisions of this Agreement, (ii) the
execution, delivery and performance of this Agreement does not conflict with any
agreement, instrument or understanding, oral or written, to which Allergan is a
party or by which it is bound, nor to Allergan's knowledge, violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it, and (iii) to the extent that Allergan is
manufacturing Finished Product pursuant to the Manufacturing License or Second
Source License, it makes the same representations and warranties as Ista in
Sections 4.1.1, 4.1.2, and 4.1.4.

        4.3 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 4 OR IN THE
LICENSE AGREEMENT, ISTA MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS TO THE FINISHED PRODUCT, AND ISTA HEREBY EXPRESSLY DISCLAIMS ANY AND ALL
IMPLIED OR STATUTORY WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY, INFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE

                                    ARTICLE 5
                              TERM AND TERMINATION

        5.1 EXPIRATION OF THIS AGREEMENT. Unless terminated earlier pursuant to
this Article 5, this Agreement shall expire in conjunction with termination or
expiration of the License Agreement on a country-by-country basis.

        5.2 TERMINATION OF THIS AGREEMENT FOR BREACH. This Agreement may be
terminated by one party upon written notice by reason of a material breach by
the other party that the breaching party fails to remedy within ninety (90) days
after written notice thereof by the non-breaching party, or in the case that
such breach cannot be cured within such period, the breaching party continues to
use diligent efforts to cure such breach until actually cured.

        5.3    TERMINATION IN EVENT OF BANKRUPTCY.

               5.3.1 Either party may terminate this Agreement upon bankruptcy,
insolvency, dissolution or winding up of the other.

               5.3.2 All licenses granted under this Agreement are deemed to be,
for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to
"intellectual property" as defined in Section 101 of such Code. The parties
agree that Allergan may fully exercise all of its rights and elections under the
Bankruptcy Code. The parties further agree that, in the event Allergan elects to
retain its rights as a licensee under such Code, Allergan shall be entitled to
complete access to the Licensed Technology licensed to it hereunder and all
embodiments of such Licensed Technology, for the purposes of exploitation of the
licenses granted under this Agreement. Such embodiments of the Licensed
Technology shall be delivered to Allergan not later than: (i) the commencement
of bankruptcy proceedings against Ista, upon written request, unless Allergan
elects to perform its



                                      -11-
<PAGE>   12

obligations under the Agreement, or (ii) if not delivered under (a) above, upon
the rejection of this Agreement by or on behalf of the Allergan, upon written
request.

        5.4 EFFECT OF EXPIRATION OR TERMINATION OF THIS AGREEMENT. Expiration or
termination of this Agreement for any reason shall not relieve the Parties of
any obligation that accrued prior to such expiration or termination (including
without limitation the obligation of Ista to deliver Finished Product in
accordance with purchase orders previously delivered and accepted, or the
obligation of Allergan to pay for all orders manufactured pursuant to such
accepted purchase orders and to pay all outstanding invoices).

        5.5 RESIDUAL MANUFACTURING RIGHT. Upon expiration of this Agreement in
any country of the Territory pursuant to Section 12.1 of the License Agreement,
Allergan shall have a right, with the right to sublicense, under the Licensed
Know-How, to manufacture and distribute Product or Finished Product for use in
the Field only in such country. In addition to the rights provided in Article
12.5(e) of the License Agreement, two (2) years prior to the date of expiration
in any country, Allergan shall have a limited right, with the right to
sublicense, to manufacture Product or Finished Product in support of an effort
to meet the applicable regulatory requirements for manufacturing, including,
without limitation, compliance with then current cGMPs, demonstration of
commercial production capability, and demonstration of acceptable stability of
such Product, as well as ISO 9000 regulatory requirements as such may apply to
pharmaceutical products. It is understood and agreed that such right does not
include a right to manufacture Product or Finished Product for commercial sale.

        5.6 SURVIVAL. The provisions of Sections 4, 5, 6, and 7 shall survive
the expiration or termination of this Agreement.

                                    ARTICLE 6
                          INDEMNIFICATION AND INSURANCE

        6.1 INSURANCE. Ista shall maintain comprehensive general liability (CGL)
insurance, including broad form contractual liability and product liability
coverages, in an amount of at least five million dollars ($5,000,000) for bodily
injury and property damage. Allergan shall be named as an additional insured
under Ista's CGL policy. Ista shall maintain such insurance during the term of
this Agreement and thereafter for a period of five (5) years. Allergan shall
obtain by the date of the first marketing approval for the Product, at its cost,
a comprehensive general liability insurance policy, including broad form
contractual liability and product liability coverages in amounts customary in
the pharmaceutical industry, but no less than five million dollars ($5,000,000)
and shall maintain such insurance for the term of this Agreement and thereafter
for a period of five (5) years. Ista shall be named as an additional insured
under Allergan's CGL policy. Each party upon request shall provide the other
party with a certificate of insurance as evidence of the requested coverages and
shall give the other party at least thirty (30) days notice of any cancellation,
termination or change in such insurance.

        6.2 BY ISTA. Ista shall indemnify, defend and hold Allergan, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind which arise out of the
manufacture of the Finished Product by Ista and/or its Approved Third Party
Contractor, including, without limitation, the failure of the Finished Product
to meet the warranties set forth



                                      -12-
<PAGE>   13

herein, except to the extent such damages give rise to an indemnification claim
of Ista under Section 6.3 below, or Section 12.2 of the License Agreement.

        6.3 BY ALLERGAN. Allergan shall indemnify, defend and hold Ista, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind arising out of Allergan's or
its Affiliates' or sublicensees' handling, possession, use, marketing,
distribution or sale of any Finished Product following delivery of the Finished
Product to Allergan at Ista's shipping point, except to the extent such damages
give rise to an indemnification claim of Allergan under Section 6.2 above, or
Section 12.1 of the License Agreement. Notwithstanding the foregoing, in the
event that Allergan exercises its Manufacturing License or Second Source License
pursuant to Sections 2.8 or 2.9 herein, then Allergan shall be required to
provide the indemnification requirements of Section 6.2 as if it were Ista for
purposes of that Section.

        6.4 CONDITION OF INDEMNIFICATION. If either party expects to seek
indemnification under this Article, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any Third Party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after receipt
by the other party of such claim or suit; provided, however, that the failure to
give notice within such time period shall not relieve the indemnifying party of
its obligation to indemnify unless it shall be materially prejudiced by the
failure. Each such party shall cooperate fully with the other party in the
defense of all such claims or suits. No offer of settlement, settlement or
compromise shall be binding on a party hereto without its prior written consent
(which consent shall not be unreasonably withheld) unless such settlement fully
releases the other party without any liability, loss, cost or obligation to such
party.

                                    ARTICLE 7
                                  MISCELLANEOUS

        Articles 14, and 15 of the License Agreement shall apply to this
Agreement as if set forth in full herein.

        IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized representative as of the day and year
first above written.

ALLERGAN SALES, INC.                         ISTA PHARMACEUTICALS, INC.


By:   /s/ [ILLEGIBLE]                        By:   /s/ Edward H. Danse
      -----------------------------                -----------------------------
Its:  Chief Executive Officer                Its:  Chief Executive Officer
      -----------------------------                -----------------------------
Date: March 29, 2000                         Date: March 29, 2000
     ------------------------------               ------------------------------


ALLERGAN SALES, LTD.


By:   /s/ [ILLEGIBLE]
      -----------------------------
Its:  Chief Executive Officer
      -----------------------------
Date: March 29, 2000
     ------------------------------



                                      -13-
<PAGE>   14

                                    EXHIBIT A

                      FINISHED PRODUCT SPECIFICATIONS (US)

                 (PRELIMINARY - SUBJECT TO REGULATORY APPROVAL)

PRODUCT NAME:     Vitrase(R) (Hyaluronidase) Injection, 1500 I.U./mL

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
              Test                                Specification                    Method
----------------------------------------------------------------------------------------------
<S>                                <C>                                          <C>
CHEMICAL:                                                                       As described
pH                                 6.3-7.2 (in saline TS)                       in the NDA

Osmolality                         270-345 mOsm/kg

Limit of Tyrosine                  <0.25 (mu)g per I.U. Hyaluronidase
                                   -

Assay                              1300-2000 I.U.mL
----------------------------------------------------------------------------------------------
PHYSICAL:                                                                       As described
Appearance of Solution             Solution is colorless and meets USP           in the NDA
                                   requirements for injections <1>

Particulate Matter                 Meets USP requirements <788>

Container Closure Integrity        Seal and Stopper intact by visual
                                   inspection
----------------------------------------------------------------------------------------------
BIOLOGICAL:                                                                     As described
Bacterial Endotoxins               <0.2 endotoxin units per I.U. Hyaluronidase   in the NDA
                                   -

                                 Passes USP <71>
Sterility
----------------------------------------------------------------------------------------------
</TABLE>

Composition, Type, and Size of Container-Closure


Vitrase(R) (Hyaluronidase) Ophthalmic Intravitreal Injection, 1500 I.U./mL will
be marketed in a 3mL Type I glass vial with 13mm butyl stoppers and 13 mm
aluminum seals or equivalent as described in the NDA.

Fill volume will be 0.3mL

INCLUDED IN PRODUCT KIT:
1 mL Luer Lok(R) Syringe (Becton Dickinson or equivalent)

Filter Needle with 5 Micron Filter, 19 Gauge, 1.5 inch (Becton Dickinson or
equivalent)

    Precision Glide(R) Needle 30 Gauge 0.5 inch (Becton Dickinson or equivalent)

<PAGE>   15

                                    EXHIBIT B

                      FORM OF CERTIFICATE OF ANALYSIS (US)

                                  (PRELIMINARY)

PART NUMBER:          TBD
LOT NUMBER:           TBD
PRODUCT NAME:         Vitrase(R) (Hyaluronidase) Injection, 1500 I.U./mL

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
            Test                      Specification                    Results
------------------------------------------------------------------------------------------
<S>                            <C>                                     <C>
CHEMICAL:
PH                             6.3-7.2 (in saline TS)

Osmolality                     270-345 mOsm/kg

Limit of Tyrosine              < 0.25 (mu)g per I.U.
                               -
                               Hyaluronidase

Assay                          1300-2000 I.U./mL

------------------------------------------------------------------------------------------
PHYSICAL:
Appearance of Solution         Solution is colorless and
                               meets USP requirements for
                               injections <1>

Particulate Matter             Meets USP requirements <788>

Container Closure Integrity    Seal and Stopper intact by
                               visual inspection

------------------------------------------------------------------------------------------
BIOLOGICAL:
Bacterial Endotoxins           < 0.2 endotoxin units per
                               I.U. Hyaluronidase

Sterility                      Passes USP <71>

------------------------------------------------------------------------------------------
</TABLE>

EXPIRATION DATE:



                      APPROVED BY:
                                  ----------------------------------------------
                                    James Cook
                                    Director, Quality and Technical Development