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                                                                   EXHIBIT 10.21
                                LICENSE AGREEMENT

      This License Agreement (the "Agreement") is dated December 13, 2001 (the
"Effective Date"), by and between ISTA Pharmaceuticals, Inc., a Delaware
corporation, with a principal place of business at 15279 Alton Parkway, Suite
100, Irvine, California 92618 ("ISTA"), and Otsuka Pharmaceutical Co., Ltd., a
corporation organized under the laws of Japan, with a principal place of
business at 2-9, Kanda Tsukasa-cho, Chiyoda-ku, Tokyo 101-8535, Japan ("Otsuka")
(each a "Party" and collectively, the "Parties").

                                    RECITALS:

      A. ISTA has developed, and holds patents and patent applications in the
United States and other countries in the world on, a pharmaceutical formulation
containing the enzyme Hyaluronidase (as defined below) used in the treatment of
ophthalmic diseases, trademarked as Vitrase(R).

      B. ISTA is currently conducting Phase III clinical studies on Vitrase(R)
in the United States for treatment of vitreous hemorrhage, and upon completion
of such Phase III clinical studies, intends to seek FDA (as defined below)
approval of the use and sale of Vitrase(R) for treatment of vitreous hemorrhage.

      C. Otsuka desires to obtain, and ISTA desires to grant, an exclusive
license to develop, market, distribute and sell Vitrase(R) product in the
Territory (as defined below) in accordance with the terms and conditions of this
Agreement.

      D. ISTA and Otsuka have, of even date herewith, entered into a Securities
Purchase Agreement, Registration Rights Agreement and Supply Agreement, and the
execution of this Agreement is conditioned upon the execution and delivery of
the Securities Purchase Agreement, Registration Rights Agreement and Supply
Agreement.

      NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
covenants and obligations set forth herein, ISTA and Otsuka agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

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

      1.2 "Affiliate" means any corporation or other entity that at any time
during the term of this Agreement directly or indirectly Controls, or is
Controlled by, or is under common Control with, a Party for so long as such
Control exists.


*  Indicates that information has been omitted pursuant to a request for
   confidential information and filed separately with the United States
   Securities and Exchange Commission.

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      1.3 "Commercially Reasonable Efforts" means that level of effort a Party,
or a similarly situated pharmaceutical company, makes with respect to its
own/other pharmaceutical products of comparable commercial potential, stage of
medical/scientific development, technical and regulatory profile, and patent
protection.

      1.4 "Control" or "Controls" or "Controlled" means (i) in the case of a
corporation, ownership or control, directly or indirectly, of at least fifty
percent (50%) of the shares of stock entitled to vote for the election of
directors, or (ii) in the case of an entity other than a corporation, ownership
or control, directly or indirectly, of at least fifty percent (50%) of the
assets of such entity.

      1.5 "Development Plan" means the development plan prepared by Otsuka and
approved as provided herein relating to the development, clinical trials and
Regulatory Filings to support Regulatory Approval of the Product in the
Territory.

      1.6 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.

      1.7 "Field" means all ophthalmic uses in the posterior segment of the eye,
defined as the rear two thirds of the eyeball (behind the lens) including the
vitreous, retina, optic disc, choroid, pars plana and the portion of the sclera
behind the lens.

      1.8 "First Commercial Sale" means the first bona fide commercial sale of
Product by Otsuka or its Sublicensee (as defined in Section 4.2) in the
Territory following Regulatory Approval.

      1.9 "Hyaluronidase" means enzymes which cleave the glycosidic bonds of any
Polysaccharide or Glycosaminoglycans such as Hyaluronic Acid and Chondroitin
Sulfate and includes enzyme formulations containing one or more of
Alpha-hyaluronidase, Beta-hyaluronidase and Annexin II.

      1.10 "ISTA Improvements" means any and all developments, improvements,
inventions or discoveries in the Field relating to the Licensed Subject Matter
or Product developed, created or conceived by ISTA or by ISTA and a Third Party,
or acquired by ISTA at any time during the term of this Agreement, in all cases
with the right to sublicense to Otsuka as provided herein, and shall include,
but not be limited to, developments intended to enhance the safety and/or
efficacy of the Product, or a new delivery system, new indication within the
Field, combination product or new formulation; provided in all cases that such
modified Product contains Hyaluronidase.

      1.11 "ISTA Trademarks" means the trademarks, and any goodwill associated
with such trademarks, listed on Exhibit A attached hereto, and all applications
and registrations therefor.

      1.12 "Keraform" means ISTA's product intended for treatment of keratoconus
and to be marketed and sold under the Keraform(TM) label and trademark.

      1.13 "Keratase" means ISTA's product intended for treatment of severe
corneal opacification and to be marketed and sold under the Keratase(TM) label
and trademark.

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      1.14 "Know-How" means all trade secrets, clinical, technical, scientific
and medical information, unpatented ideas, knowledge, know-how, methods,
inventions, discoveries, developments, improvements, techniques, practices,
methods, procedures, data, instructions, processes, formulas, quality control,
expert opinions and any other information, including, but not limited to, any
pharmacological, toxicological and clinical test data and results, that are
necessary or useful for the development, testing, use or sale of the Product or
Product In Final Form within the Territory for use in the Field.

      1.15 "Label" or "Labeled" or "Labeling" means all labels and other
written, printed or graphic matter upon (i) the Product In Final Form or any
container or wrapper utilized with the Product In Final Form, or (ii) any
written material accompanying the Product In Final Form, including, without
limitation, package inserts.

      1.16 "Licensed Foreign Patents" means (a) the patent and patent
applications outside of the Territory set forth in Exhibit C, attached hereto
and incorporated herein, and any patents or patent applications outside of the
Territory covering ISTA's method of manufacture of the Product during the term
of this Agreement, now owned or acquired during the term of this Agreement by
ISTA or under which ISTA has the right to grant sublicenses outside the
Territory; (b) all patents arising from such applications identified in (a) and
any divisions, continuations, and continuations-in-part identified in (a); and
(c) any extension, renewal, re-examination or reissue of a patent identified in
(a) or (b); provided, however, Licensed Foreign Patents shall not include any
Licensed Patents.

      1.17 "Licensed Patents" means the patent applications ************** for
Japan and ************** for Japan and other patents and patent applications
(and any patents issuing thereon) in the Territory covering the Product
(including improvements thereto) or its method of manufacture and use, now owned
or acquired by ISTA during the term of the Agreement, as well as divisions,
continuations, and continuations-in-part (to the extent it contains subject
matter deriving a priority date from the original patent application),
extensions, renewals, reissues and re-examinations of the foregoing patents
(including patents issuing on the foregoing patent applications or resulting
from reissues or re-examinations) in the Territory.

      1.18 "Licensed Subject Matter" means the Licensed Patents, any ISTA
Improvements and the Know-How.

      1.19   "Marketing Plan" shall have the meaning set forth in Section 7.1.

      1.20 "MHLW" means the Japanese Ministry of Health, Labor and Welfare in
the Territory or any successor entity thereto.

      1.21 "NDA" means a New Drug Application filed with MHLW for approval by
MHLW of the marketing and sale of the Product In Final Form in the Field in the
Territory.

      1.22 "OPSR" means the Organization for Pharmaceutical Safety and Research
in the Territory or any successor entity thereto.


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      1.23 "Otsuka Improvements" means any and all developments, improvements,
inventions or discoveries relating to the Licensed Subject Matter or Product
developed, created or conceived by Otsuka or by Otsuka and a Third Party, or
acquired by Otsuka at any time during the term of this Agreement, with the right
to sublicense to ISTA as provided herein, and shall include, but not be limited
to, developments intended to enhance the safety and/or efficacy of the Product,
or a new delivery system, new indication, combination product or new
formulation; provided in all cases that such modified Product contains
Hyaluronidase.

      1.24 "Packaging" means all containers, including vials, solvent,
applicators, syringes, sterilized foil packages, blisters, cartons, shipping
cases or any other like matter used in packaging, shipping or accompanying the
Product or Product In Final Form.

      1.25 "Product" or "Products" means any therapeutic composition (i)
containing Hyaluronidase as the active ingredient and manufactured utilizing the
Licensed Subject Matter, or (ii) for which the use, manufacture or sale in the
Territory would infringe, but for the licenses granted herein, one or more Valid
Claims, regardless of form, dose or package.

      1.26 "Product In Final Form" means Product in finished pharmaceutical form
for commercial sale and meeting the applicable Specifications for use and sale
in the Field in the Territory, with such Labeling, Packaging and package inserts
as established pursuant to the Supply Agreement and this Agreement.

      1.27 "Regulatory Approval" means, with respect to any Regulatory Filing, a
written approval or authorization received from the applicable governmental
authority authorizing the use, sale or importation of the Product or Product In
Final Form in the Territory.

      1.28 "Regulatory Filings" means any written application, submission,
notice or other filing seeking a written registration, permit, license,
authorization, approval, or certification from the applicable governmental
authority in the Territory for the clinical development, manufacture, use, sale,
or importation of the Product or Product In Final Form in the Field.

      1.29 "Specifications" means the specifications for the Product and Product
In Final Form in the Territory set forth in a Regulatory Filing which has
received Regulatory Approval and the key terms of which have been established by
ISTA and set forth in Exhibit B attached hereto, which may include but not be
limited to, the specifications for Labeling, filling, Packaging, storage,
chemical composition, physical characteristics, biological characteristics, and
quality control procedures for the Product and Product In Final Form, any of
which may be modified from time to time upon written agreement of the Parties,
such agreement to specify such changes or modifications.

      1.30 "Supply Agreement" means the Supply Agreement between ISTA and
Otsuka, dated on the even date herewith, as may be amended by the Parties in
accordance with its terms.

      1.31   "Territory" means Japan.

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      1.32 "Third Party" means any natural person, corporation, partnership,
joint venture, governmental authority, and any other entity or organization,
other than ISTA or Otsuka (including Otsuka's Sublicensee, subject to conditions
set forth in Sections 4.2 and 5.2).

      1.33 "Valid Claim" means a claim of a pending patent application included
within the Licensed Patents or a claim of any issued and unexpired patent
included within the Licensed Patents which has not been withdrawn or cancelled,
nor held to be revoked, unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unless and until
reinstated, and which has not been admitted to be invalid or unenforceable.

                                    ARTICLE 2
                            INTER-RELATED AGREEMENTS

      2.1 Equity Investment. Pursuant to a Securities Purchase Agreement and
Registration Rights Agreement between the Parties of even date herewith, Otsuka
will purchase that number of shares of ISTA common stock as may be purchased for
an aggregate purchase price of four million dollars (USD $4,000,000.00) at a
price per share equal to the lesser of (i) the average last reported sale price
per share of ISTA common stock on a daily basis as reported on the NASDAQ/NMS
for the five (5) trading days immediately preceding the Effective Date and (ii)
the last reported sale price per share of ISTA common stock on the trading day
immediately preceding the Effective Date.

      2.2 Supply Agreement. Pursuant to a Supply Agreement between the Parties
of even date herewith, ISTA shall supply all of Otsuka's requirements of Product
and Product In Final Form for development and commercial sale in the Territory.

                                    ARTICLE 3
                             COORDINATION COMMITTEE

      3.1 Coordination Committee. Not later than ninety (90) days after the
Effective Date, ISTA and Otsuka shall establish a joint committee comprised of
three (3) representatives from each of ISTA and Otsuka respectively
("Coordination Committee"). The Coordination Committee shall be responsible for
facilitating communication and cooperation between the Parties in connection
with the development and commercialization of the Product in the Field in the
Territory. The Coordination Committee shall meet in person, or in such other
forms (e.g., by telephone or teleconference) as the Parties may mutually agree,
on a semi-annual basis, or at other times agreed to by the Parties, to review
and discuss Otsuka's development and commercialization activities in connection
with the Product (including, without limitation, the planning and performance of
clinical trial plans, the judgment and report of the results of clinical trials,
the planning and preparation of Regulatory Filings, and commercialization plans,
activities and results). The Coordination Committee will also discuss ISTA's
development and commercialization status regarding the Product outside the
Territory.

      3.2 Membership. The Coordination Committee shall be comprised of an equal
number of representatives from each of ISTA and Otsuka, selected by such Party.
Either Party may replace its Coordination Committee representatives or appoint a
designee at any time, with prior written notice

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to the other Party. With the consent of the Coordination Committee members,
other representatives of ISTA or Otsuka may attend Coordination Committee
meetings as observers. Each Party shall bear its own personnel and travel costs
and expenses relating to Coordination Committee meetings.

      3.3 Coordination. The Parties acknowledge and agree that coordination of
Otsuka's Development Plan and Marketing Plan with ISTA's plans for Product
outside the Territory is an important objective. To that objective, Otsuka
agrees to keep the Coordination Committee informed as to the progress and
results of its activities under the Development Plan, by way of periodic reports
to the Coordination Committee, or as the Parties may otherwise agree from time
to time.

                                    ARTICLE 4
                                 LICENSE GRANTS

      4.1         License Grants.

            4.1.1 Subject to the terms and conditions of this Agreement, ISTA
hereby grants Otsuka an exclusive license during the term of this Agreement,
with the limited right to sublicense in accordance with Section 4.2, to utilize
and practice all Licensed Subject Matter, to (i) clinically develop and use the
Product, and (ii) market, distribute, import, offer to sell and sell the Product
In Final Form; in all cases in the Field in the Territory.

            4.1.2 ISTA hereby grants Otsuka a non-exclusive, worldwide,
conditional royalty-bearing license during the term of this Agreement, with the
limited right to sublicense in accordance with Section 4.2, to utilize and
practice the Licensed Subject Matter and Licensed Foreign Patents to manufacture
or have manufactured the Product and Product In Final Form for development, use
or sale only in the Field in the Territory ("Manufacturing License"); provided
that Otsuka may not exercise any rights under its Manufacturing License unless
permitted to do so pursuant to Section 2.14 of the Supply Agreement, and in such
event shall only do so in accordance with Section 2.14 of the Supply Agreement.

      4.2 Sublicensees. Otsuka may sublicense the rights granted in Section
4.1.1 only to Otsuka Pharmaceutical Factory, Inc. ("Sublicensee") in the
Territory, provided that such sublicense may remain in effect so long as
Sublicensee (i) remains in the Control of Otsuka and (ii) agrees in writing to
be bound by the terms and conditions of this Agreement. Otsuka may sublicense
the rights granted in Section 4.1.2 to any Third Party manufacturer located
anywhere in the world, provided that such Third Party manufacturer manufactures
the Product and/or Product In Final Form only for Otsuka, or as ISTA may
otherwise approve, in accordance with the Specifications set forth in the Supply
Agreement and agrees in writing to be bound by the applicable terms and
conditions of this Agreement.

      4.3 Delivery of Licensed Subject Matter. Promptly after the execution of
this Agreement, and thereafter during the term of this Agreement, ISTA shall
furnish and disclose to Otsuka copies of such written documents in the
possession or control of ISTA or any ISTA Affiliate that embody or contain any
Licensed Subject Matter, or that may be reasonably necessary to enable Otsuka to
perform its obligations under this Agreement, perform clinical trials using the
Product, or to register,

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distribute, market, promote, advertise and sell the Products or Products In
Final Form for use in the Field in the Territory. If and when Otsuka is
permitted to exercise the Manufacturing License pursuant to Section 4.1.2, ISTA
shall promptly provide Otsuka with ISTA's Know-How for manufacturing the Product
and Product In Final Form, including, but not limited to, such documents in the
possession or control of ISTA or any ISTA Affiliate that embody or contain any
Licensed Subject Matter or any Licensed Foreign Patents, or that may be
reasonably necessary to enable Otsuka to manufacture or have manufactured the
Product and Product In Final Form. Otsuka shall promptly acknowledge, in
writing, receipt of such materials, and shall maintain such records and the
information of ISTA contained therein in confidence in accordance with Article
11 below and shall not use such records or information of ISTA except to the
extent otherwise permitted by this Agreement.

      4.4         Restrictions.

            4.4.1 ISTA. Subject to Section 4.4.3 below and except in accordance
with this Agreement, as partial consideration for Otsuka's payments under
Article 8, during the term of this Agreement, ISTA and its Affiliates shall not,
directly or indirectly, (i) market or sell in the Territory for use in the Field
any Product or product which contains Hyaluronidase, or (ii) manufacture, market
or sell such products that contain Hyaluronidase or Hyaluronidase in bulk form
for or to any Third Party which ISTA knows, or has reason to believe, will use
such products containing Hyaluronidase or Hyaluronidase in bulk form to
manufacture, use or sell such products in the Territory for use in the Field.

            4.4.2 Otsuka. During the term of this Agreement, and as partial
consideration for the license and rights granted hereunder, Otsuka agrees that
neither Otsuka nor its Affiliates shall directly or indirectly, market or sell
in the Territory any pharmaceutical product other than Product that (i) has been
approved by applicable governmental authorities in the Territory for the
treatment of vitreous hemorrhage, or (ii) contains Hyaluronidase for use in the
treatment of diabetic retinopathy.

            4.4.3 Exceptions. The Parties agree that ISTA's "Keratase" and
"Keraform" products are expressly excluded from the restrictions and obligations
set forth in Sections 4.4.1 and 4.4.2 above, provided that, at all times during
the term of this Agreement, each such product: (i) (x) is not approved for
administration by intravitreal injection; (y) is not sold with substantially the
same Hyaluronidase unit dose and delivery volume as the Product; and (z) is
contra-indicated for intravitreal injection; or (ii) is not sold to any person
or entity (other than Otsuka) which ISTA or any of its Affiliates knows or has
reason to believe, shall use or sell such product in the Territory for use in
the Field. If, at any time during the term of this Agreement, either all of
subsections (i)(x), (i)(y) and (i)(z) above, or subsection (ii) above, no longer
apply with respect to Keratase or Keraform, then the restrictions and
obligations in Sections 4.4.1 and 4.4.2 above shall apply to each such
product(s). For purposes of illustration and clarification, if the Keratase
product is sold with substantially the same Hyaluronidase unit dose and delivery
volume as the Product, is not approved for administration by intravitreal
injection, but is not contraindicated for intravitreal injection, the


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Keratase product would continue to be excluded from the restrictions and
obligations set forth in Sections 4.4.1 and 4.4.2.

      4.5 Reservation of Rights. Except as expressly provided in this Article 4,
no right, title or interest is granted, whether express or implied, by ISTA to
Otsuka relating to other ISTA products. Nothing in this Agreement shall be
deemed to restrict ISTA's right to exploit the Product, technology, Know-How,
Licensed Subject Matter, patents or any other intellectual property rights
either outside the Territory, or in products other than the Product inside the
Territory. ISTA reserves the right to license and/or appoint other authorized
distributors or resellers outside the Territory without restriction, except as
provided in this Agreement. It is further understood that, subject to the
licenses granted in this Article 4 and compliance with the provisions of this
Article 4, ISTA may promote, market, distribute and sell products other than
those covered by this Agreement in the Territory, either directly or indirectly,
for any and all uses.

      4.6 Independent Contractors. The relationship of ISTA and Otsuka
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either Party the
power to direct and control the day-to-day activities of the other, (ii)
constitute the Parties as partners, joint venturers, co-owners or otherwise as
participants in a joint venture or common undertaking, or (iii) allow Otsuka to
create or assume any obligation on behalf of ISTA for any purpose whatsoever.

                                    ARTICLE 5
                             LICENSE FOR TRADEMARKS

      5.1 License Grant. In connection with Otsuka's promotion, marketing,
distribution and sale of Product, ISTA hereby grants to Otsuka an exclusive,
royalty-free license, with the limited right to sublicense in accordance with
Section 5.2, during the term of this Agreement and subject to Section 5.7, to
use the ISTA Trademarks in the Field in the Territory on all Labels, Packaging,
advertisements, promotional materials and literature for the Product.

      5.2 Sublicensee. Otsuka may sublicense the rights in the Territory granted
in Section 5.1 only to Sublicensee, provided that such sublicense shall remain
in effect so long as Sublicensee (i) remains under the Control of Otsuka and
(ii) agrees in writing to be bound by the terms and conditions of this
Agreement. Notwithstanding anything in this Agreement to the contrary, ISTA
acknowledges that Otsuka and Sublicensee are authorized to sell Product with
ISTA Trademarks to any Third Party in the Territory, and that such Third Party
may resell or use such Products only in the Field in the Territory.

      5.3 Acknowledgement. Otsuka acknowledges that: (i) the ISTA Trademarks are
owned exclusively by ISTA; (ii) Otsuka has no right, title or interest in and to
the ISTA Trademarks, except the rights conferred by this Agreement; and (iii)
all goodwill associated with the ISTA Trademarks inures to the benefit of ISTA.

      5.4 Registration. ISTA agrees to obtain and maintain the ISTA Trademarks,
at its own expense, in the Territory, including the preparation and recordation
of registered user agreements

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and/or licenses necessary or reasonably deemed necessary by Otsuka in order to
comply with local laws.

      5.5 Use of Trademarks. Otsuka agrees to market and sell the Product
exclusively with the ISTA Trademarks unless the Parties agree that good
commercial reason exists to do otherwise. All Packaging materials, Labels and
promotional materials for the Product sold in the Territory also shall display
the tradename of ISTA in the context of the Product as manufactured or licensed
by or for Otsuka (whether in English or in Japanese); in all cases in a typeface
and size to be agreed upon in writing by the Parties. In the event that the use
of the ISTA Trademarks is prohibited by law or regulatory authorities in the
Territory, then Otsuka will use an alternative ISTA trademark, which ISTA will
designate following consultation with Otsuka.

      5.6 Infringements. Otsuka shall promptly call to the attention of ISTA the
use by any Third Party of the ISTA Trademarks, tradename or any trademarks
similar to the mark covered by this Agreement, of which it may become aware and
which it may reasonably consider to be an infringement or passing off of the
ISTA Trademarks, or an unfair use that may result in damage or dilution to
ISTA's Trademarks or tradename. ISTA shall have the right to decide whether or
not to bring proceedings against Third Parties. Such proceedings shall be at the
expense of ISTA. Otsuka shall cooperate fully with ISTA to whatever extent is
deemed reasonably necessary by ISTA to prosecute such action. In the event that
ISTA recovers damages from prosecution of such action, ISTA shall retain all
amounts received for such damages except that Otsuka shall be entitled to
reimbursement of its costs, expenses, and attorneys' fees attributable to such
action (or in proportionate amounts thereof should ISTA recover an insufficient
amount for both Parties' such costs and expenses). In the event ISTA decides not
to prosecute, and Otsuka reasonably determines that the failure to prosecute
would adversely affect the rights of Otsuka under this Agreement, Otsuka shall
have the right, but not the obligation, to prosecute such action at its own
expense. ISTA shall cooperate fully with Otsuka to whatever extent is deemed
reasonably necessary by Otsuka to prosecute such action. In the event that
Otsuka recovers its damages from prosecution of such action, Otsuka shall retain
amounts received for such damages except that ISTA shall be entitled to
reimbursement of its costs, expenses, and attorneys' fees attributable to such
action (or in proportionate amounts thereof should Otsuka recover an
insufficient amount for both Parties' such costs and expenses). Otsuka shall not
settle or compromise any suit for infringement without the express approval of
ISTA.

      5.7 Term and Termination. The term of this Trademark License shall be the
term specified in Section 15.1 of this Agreement. Upon termination of this
Agreement, Otsuka shall discontinue all use of the ISTA Trademarks and tradename
inside the Territory and shall not thereafter adopt a mark or name which is
confusingly similar.

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                                    ARTICLE 6
                                   DEVELOPMENT

      6.1         Clinical Development.

            6.1.1 Development Plan. Within ninety (90) days after the receipt by
Otsuka of ISTA's pre-clinical data and clinical data summarized in final
clinical study reports for the Product for the treatment of vitreous hemorrhage
(including all such data from each completed phase I, phase II and phase III
clinical study, and all such data from each clinical pivotal study, all of which
shall be in English), Otsuka shall submit to ISTA for approval, Otsuka's written
plan for completing the clinical development (and associated pre-clinical
effort) of, and obtaining Regulatory Approval for marketing, sale and use of,
the Product in the Territory for the treatment of vitreous hemorrhage (or
subsequently for another indication within the Field as the Parties may agree
to) ("Development Plan"); such approval not to be unreasonably delayed or
withheld. ISTA shall provide Otsuka with the above referenced pre-clinical and
clinical data summarized in the final clinical study reports for the Product no
later than the date on which ISTA first files the clinical section of its New
Drug Application for Vitrase(R) with the FDA.

      Except with respect to revisions expressly identified to ISTA, Otsuka
shall prepare the initial Development Plan for the Product based on the
protocols used by ISTA in conducting the clinical studies on Vitrase(R) in
the United States for the treatment of vitreous hemorrhage (or subsequently for
another indication in the Field as the Parties may agree to), and shall submit
such Development Plan to ISTA for approval, such approval not to be unreasonably
withheld or delayed. Otsuka shall revise the Development Plan to incorporate
ISTA's comments with respect to any clinical study protocols before Otsuka files
its first Regulatory Filing with MHLW that contains the detailed clinical trial
protocols or proposals for the Product. After Otsuka files its first Regulatory
Filing with MHLW that contains the detailed clinical protocols or proposals for
the Product, Otsuka will submit proposed material updates and changes to the
clinical trial protocols that were not requested by MHLW to ISTA for approval,
such approval not to be unreasonably withheld or delayed, and Otsuka will revise
the Development Plan to incorporate ISTA's comments. After Otsuka files its
first Regulatory Filing with MHLW that contains the detailed clinical protocols
or proposals for the Product, Otsuka will submit proposed material updates and
changes to the clinical trial protocols that were requested by MHLW to ISTA for
comment. In any event, Otsuka shall submit proposed updates and changes to the
Development Plan to ISTA at least annually.

            6.1.2 Due Diligence. In accordance with the Development Plan, Otsuka
shall use Commercially Reasonable Efforts to conduct and complete in a timely
manner the pre-clinical and clinical studies of the Product in the Field in the
Territory, including, but not limited to, all product development, clinical
studies, pre-clinical studies, and all safety, toxicology, pharmacology (local
and general), ADME, and other development activities required to pursue, obtain
and maintain Regulatory Approval for marketing, sale and use of the Product in
the Territory (collectively, the "Data"). Except as otherwise provided in this
Agreement, Otsuka shall bear the full cost and expense of such efforts.

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      6.2         Regulatory Matters.

            6.2.1 ISTA shall use Commercially Reasonable Efforts to obtain all
Regulatory Approvals from the FDA that are necessary in order to make, use and
sell Vitrase(R) product in the Field in the United States.

            6.2.2 Otsuka shall be responsible for preparing, filing and
maintaining the Regulatory Filings, and for securing the Regulatory Approvals,
for the marketing, use and sale of the Product in the Field in the Territory.
Except as otherwise provided in this Agreement and the Supply Agreement, Otsuka
shall bear the full cost and expense of such Regulatory Filings and Regulatory
Approvals. Otsuka shall prepare, file and maintain such Regulatory Filings for
the Product in Otsuka's name. Subject to reassignment pursuant to Section
15.6.2, Otsuka shall own the rights to such Regulatory Filings.

      6.3 Exchange of Data. Otsuka shall keep ISTA promptly informed as to its
progress regarding the Development Plan in the Territory, including status of
clinical studies, developmental and regulatory activities, and ISTA shall keep
Otsuka promptly informed as to its progress regarding development of the Product
outside the Territory. Otsuka shall provide ISTA, upon reasonable request, with
access to detailed analyses, data, reports, and Regulatory Filings for the
Product in the Territory, which access shall include the inspection of and
preparation of copies of such documents (at ISTA's expense). ISTA shall provide
Otsuka with access, upon reasonable request, to Regulatory Filings and detailed
analyses, data, reports, filed in support of such Filings for the Product
outside the Territory, which access shall include the inspection of and
preparation of copies of such documents (at Otsuka's expense). For the purpose
of this Article 6, the Party requesting a document to which it may be entitled
to access under this Article 6 will be responsible for translating such document
and will bear any costs and expenses for translations into English or other
language translations. Prior to the first Regulatory Filing that contains the
detailed clinical trial protocols or proposals related to the Product and that
is to be filed by or under authority of Otsuka with the MHLW, including without
limitation any detailed Developmental Plan, Otsuka shall provide ISTA with
access to such Regulatory Filing for review and approval by ISTA (or its
designee) within a reasonable period prior to filing, such approval not to be
unreasonably delayed or withheld. Prior to filing such first Regulatory Filing
with the MHLW, Otsuka shall incorporate ISTA's comments concerning the detailed
clinical trial protocols or proposals for the Product, or Product Labelling into
the final version of such first Regulatory Filing to be submitted to MHLW. With
respect to any Regulatory Filings thereafter that contain material revisions to
the clinical trial protocols or Product Labelling, Otsuka shall (i) provide ISTA
(or its designee) with access to such Regulatory Filing for review by ISTA (or
its designee) within a reasonable period prior to filing; and (ii) revise such
Regulatory Filing to incorporate ISTA's comments except with respect to any
revisions to the detailed clinical protocols or Product Labelling that were
requested by MHLW. ISTA acknowledges that the documents and Regulatory Filings
to be made available to ISTA hereunder may be written in Japanese. Each Party
shall promptly notify the other Party in writing upon receiving any Regulatory
Approval for the Product.

                                11                                 CONFIDENTIAL
<PAGE>
      6.4 Reference Rights. Each party shall have the right, free of charge, to
use any information and data provided by the other Party pursuant to Section
6.3, including, without limitation, data and information generated by the other
Party or Party's Affiliates in the development and clinical testing of the
Product as follows in this Section 6.4. It is understood and agreed by the
Parties that ISTA and its licensees outside the Territory shall have the right,
free of charge, to refer to, access, cross reference and use all clinical
information and data filed with regulatory agencies in the Territory (including,
without limitation, all communications between Otsuka or those acting on behalf
of Otsuka, and such regulatory authorities concerning the Product) by or on
behalf of Otsuka or its Sublicensee with respect to the Product. It is
understood and agreed by the Parties that Otsuka shall have the right, free of
charge, to refer to, access, cross reference and use all clinical information
and data filed with regulatory agencies outside the Territory (including,
without limitation, all communications between ISTA or those acting on behalf of
ISTA, and such regulatory authorities concerning the clinical information and
data for the Product) by or on behalf of ISTA (including by ISTA's licensees
outside the Territory) with respect to the Product for indications within the
Field in support of Otsuka's Regulatory Filings in the Territory.

      6.5 Review of Protocols, Clinical Studies, and Adverse Reports. It is
understood and agreed that all clinical development activities to be conducted
by or on behalf of Otsuka for the Product within the Territory must conform to
regulations within the Territory applicable to the development, marketing and
sale of Product. In order to ensure conformance with such regulations, upon
request by ISTA, Otsuka shall: (i) promptly provide to ISTA any significant
documents that Otsuka receives from, or proposes to send to, a regulatory agency
in the Territory, such as detailed clinical trial protocols or proposals,
amendments thereto and adverse event reports, with such clinical trial proposals
and protocols provided to ISTA in Japanese prior to submission to such
regulatory agency; (ii) provide ISTA with advance notice of any meetings or
telephone conferences with any regulatory authorities and allow ISTA to attend
such meeting or telephone conference at ISTA's sole expense, subject to such
regulatory agency's agreement; provided that in any meeting or teleconference
with any regulatory authority in the Territory in which ISTA attends, Otsuka
will lead all discussions in any meeting or teleconference and ISTA may
participate as an observer (unless the Parties agree to ISTA's active role in a
specific meeting); (iii) allow ISTA and/or its designee the opportunity to audit
any and all clinical development documentation for the Product; and (iv) permit
any designee of ISTA to review such clinical development activities in a
consulting role. Unless otherwise agreed by Otsuka, ISTA shall not appoint a
designee (as that term is used in this Article 6) who is, or maintain a designee
who becomes, an employee, consultant, agent or representative of a company or an
Affiliate of a company that is developing, marketing or selling a product in the
Field in the Territory. Otsuka shall cooperate with and assist ISTA and/or its
designee in connection with such activities.

      6.6 Data. Otsuka shall maintain and retain its records and documents
relating to the pre-clinical and clinical studies for the Product in accordance
with applicable regulations in the Territory. Any retained records and documents
shall be in sufficient detail and in good scientific manner appropriate for
patent and regulatory purposes and shall properly reflect all work done and
results achieved in the performance of the Development Plan and any subsequent
pre-clinical or clinical studies related to the Product. Such records may
include books, records, reports, research


                                12                                  CONFIDENTIAL
<PAGE>

notes, charts, graphs, comments, computations, analyses, recordings,
photographs, computer programs and documentation thereof, computer information
storage means, samples of materials and other graphic or written data generated
in connection with the clinical development activities. ISTA has the right to
inspect such records, and Otsuka shall provide copies of all requested records
at ISTA's cost, to the extent reasonably required for the exercise of ISTA's
rights under this Agreement; provided, however, that ISTA shall maintain such
records and the information of Otsuka contained therein in confidence in
accordance with Article 11 below and shall not use such records or information
of Otsuka except to the extent otherwise permitted by this Agreement.

                                    ARTICLE 7
                             PROMOTION AND MARKETING

      7.1 Marketing Plan. Otsuka shall prepare a marketing plan for the Product
In Final Form in the Territory that includes plans related to the prelaunch,
launch, promotion and sale of the Product In Final Form (the "Marketing Plan").
Beginning no later than three (3) months after receiving Regulatory Approval for
sale of the Product In Final Form in the Field in the Territory and annually
thereafter, Otsuka shall submit an English copy of such Marketing Plan to ISTA
for its review and comment. Not later than March 15 of each calendar year after
the Yakka is established for the Product In Final Form, Otsuka shall provide the
Coordination Committee a good faith estimate of the quantity of Product In Final
Form it anticipates selling in the Territory during Otsuka's subsequent fiscal
year and the Yakka for such units.

      7.2 Promotional Effort. After the Yakka has been established for the
Product In Final Form for sale in the Field in the Territory, Otsuka shall use
Commercially Reasonable Efforts to promote, market and distribute the Product In
Final Form in the Territory and maximize sales of the Product In Final Form in
the Territory. Such efforts shall include at least the following: (i)
face-to-face sales presentations to appropriate health care professionals by
sales representatives including, without limitation, discussions with health
care professionals, meetings with or presentations to drug wholesaler entities,
purchasing decision-makers or formulary committees of health care providers;
(ii) participation in conventions and continuing education programs; and (iii)
conducting clinical trials and/or studies which are performed essentially for
marketing purposes, expressly excluding all clinical studies and trials which
are required to pursue, obtain, and maintain Regulatory Approval in the
Territory. Otsuka shall also perform such marketing efforts under this Article 7
at substantially the same level of effort as expended by (or for) ISTA outside
the Territory with respect to the Product In Final Form, taking into
consideration the approved indications obtained, the relative market size, the
competitive environment in the Territory and the relative maturity of the market
outside the Territory; the foregoing applying to the degree ISTA provides Otsuka
with the necessary marketing information for outside of the Territory. Otsuka
shall also be solely responsible, at its expense, for all activities ancillary
thereto (including, without limitation, warehousing and shipping after receipt
of the Product In Final Form in the designated delivery point within the
Territory). Upon the First Commercial Sale of the Product In Final Form in the
Territory, Otsuka shall list the Product In Final Form in its catalogs and make
such Product available to its customers.



                                13                                  CONFIDENTIAL
<PAGE>

      7.3 Sales Efforts. Within twelve (12) months after the Yakka (as that term
is defined in the Supply Agreement) has been established for the Product In
Final Form for sale in the Field in the Territory, Otsuka, itself or its
Sublicensee, shall make the First Commercial Sale of the Product In Final Form
in the Territory.

      7.4 Materials. Otsuka shall provide to ISTA samples of all promotional,
marketing, advertising, exhibition, training and educational materials prepared
by or on behalf of Otsuka and relating to the Product In Final Form, for
purposes of review by ISTA, a reasonable period prior to the date of intended
commercial release of such materials or commencement of such programs such that
ISTA will have time to complete its review as described in this Section 7.4, and
Otsuka will have time to take into account ISTA's comments, if any, regarding
such materials. ISTA will provide comments and suggestions relating to such
materials to Otsuka, if any, within ten (10) business days after receipt of such
materials. If ISTA has reasonable belief that any such materials makes
inappropriate use of ISTA Trademarks or claims, suggests, advertises, or
otherwise promotes inappropriate uses, applications, or effects of the Product
In Final Form, then ISTA may so notify Otsuka prior to the expiration of the ten
(10) business day period, and Otsuka shall then (i) correct the usage or
expression of the ISTA Trademarks and/or (ii) delete all references to
inappropriate uses, applications or effects of the Product In Final Form.

      7.5 Sales Force. Otsuka shall ensure that its sales force is sufficiently
trained prior to the commercial launch of the Product In Final Form to promote
and sell the Product In Final Form for its approved indications. Otsuka shall
also ensure that its sales force for the Product In Final Form has a sufficient
number of sales representatives to adequately cover the Territory. Otsuka shall
cause its sales force, and all other employees and approved agents and
representatives, to comply with the terms and conditions of this Agreement, and
all applicable laws and regulations in connection with the promotion, marketing,
distribution and sales of Product in the Territory.

      7.6 Other Reporting. Within a reasonable period after Otsuka publishes or
obtains any articles, manuscripts, abstracts or other literature relating to the
Product In Final Form generated by investigators or others, Otsuka shall provide
ISTA, at ISTA's expense, with copies of such materials.

                                    ARTICLE 8
                             PAYMENTS AND MILESTONES

      8.1 Closing Date Contingency. Unless otherwise agreed to by ISTA and
notwithstanding any other provision herein, this Agreement, including all rights
and licenses, shall only become effective if ISTA receives all payments due from
Otsuka pursuant to Sections 2.1 and 8.2 in cash within ten (10) business days of
the Effective Date. If ISTA does not receive all such monies by such date, then
this Agreement will be deemed void and without effect on either Party.

      8.2 Initial Payment. In consideration for the exclusive licenses granted
herein, Otsuka shall make a non-refundable, non-creditable cash payment to ISTA
of *************************************. The amount payable under this Section
8.2 is the net amount to be received by ISTA after Otsuka's payment of any
withholding taxes in the Territory with respect to such payment.



                                14                                  CONFIDENTIAL
<PAGE>

      8.3 Milestone Payment. As additional consideration for the exclusive
licenses and other rights granted to Otsuka hereunder, Otsuka shall pay to ISTA
a one-time, non-refundable, non-creditable cash payment to ISTA of
*********************************** within thirty (30) days after Otsuka's
receipt of the MHLW's first written approval of an NDA for marketing and selling
the Product in the Field in the Territory. The amount payable under this Section
8.3 is the net amount to be received by ISTA after Otsuka's payment of any
withholding taxes in the Territory with respect to such payment.

      8.4 Payment Method. All payments under this Agreement shall be made by
wire transfer or other means acceptable to ISTA, as specified by ISTA. All
dollar amounts specified in this Article 8, and all payments made hereunder, are
and shall be made in United States dollars.

                                    ARTICLE 9
             ADVERSE EVENTS, COMPLAINTS AND OTHER REGULATORY MATTERS

      9.1 Adverse Event (or Experience) Reporting. Each of ISTA and Otsuka
recognizes that each may be required to submit information and file reports,
including without limitation adverse event reports and annual reports, to the
FDA or corresponding regulatory agencies in the Territory on compounds under
clinical investigation or licensed for market. Of particular importance,
information must be submitted at the time of initial filing for investigational
use in humans and at the time of a request for market approval of a new drug. In
addition, supplemental information must be provided on compounds at periodic
intervals and adverse events must be reported at more frequent intervals
depending on the severity of the experience. Consequently, with respect to the
Product, each Party agrees to:

            (a) provide to the other Party for initial/follow-up and/or periodic
submission to government agencies significant information on the Product from
pre-clinical laboratory, animal toxicology and pharmacology studies, ADME, as
well as serious adverse event ("SAE") reports from clinical trials and SAEs and
non-serious adverse events relating to the Product from commercial experiences
with the Product;

            (b) in connection with use of the Product in the investigational
phase of clinical development, report to the other Party within seven (7)
calendar days of the initial receipt of a report of any unexpected or SAE, as
those terms are defined in either 21 CFR Section 312.32 or the ICH-E2A
Guidelines, with the Product or sooner if required for either Party to comply
with regulatory requirements; and

            (c) in connection with the Product following Regulatory Approval,
report to the other Party within seven (7) calendar days of the initial receipt
of a report of any SAE with the Product, as these terms are defined in either 21
CFR Section 314.80 or the ICH-E2A Guidelines, or sooner if required for either
Party to comply with regulatory requirements either inside or outside the
Territory.

      The Parties agree and understand that none of the foregoing provisions of
this Section 9.1 relieve, or are intended to interfere with, each Party's legal
obligations to report adverse events.



                                15                                  CONFIDENTIAL
<PAGE>

      9.2 Product Complaints and Inquiries. Any medical or technical
Product-related inquiries from consumers, physicians or other Third Party
customers who reside within the Territory shall be handled by Otsuka. ISTA shall
supply Otsuka with copies of its standard response information for the Product
as well as any updates thereto. Otsuka shall use such information to respond to
any such inquiries from the Territory. Otsuka shall prepare and maintain a
database containing responses to such inquiries from consumers, physicians or
other Third Party customers who reside in the Territory for which it is
responsible, and shall make the contents available to ISTA promptly upon ISTA's
request.

      9.3 Product Recall. In the event either Party determines that an event,
incident or circumstance has occurred that may result in the need for a recall
or other removal of the Product, or any lot or lots thereof, from the market
outside or within the Territory, such Party shall advise the other Party and the
Parties shall consult with respect thereto. In the event that, within the
Territory, (a) any government authority issues a request, directive or order
that the Product be recalled, or (b) a court of competent jurisdiction orders
such a recall, or (c) Otsuka and ISTA, after consultation with each other,
determine that the Product should be recalled, or (d) either Otsuka or ISTA is
otherwise legally required to make such recall, the Parties shall take all
appropriate corrective actions, and shall cooperate in the investigations
surrounding the recall. No action under this Section 9.3 is intended to either
interfere with or impede the legal obligations of the holder of the relevant
regulatory approval. The holder of the relevant regulatory approval shall handle
(i) all communications and requests with regulatory agencies regarding any
recalls, and (ii) notification of customers and return of Product from
customers. Except as provided below, if a Product (or any lot or lots thereof)
is recalled or otherwise removed from the market, the costs and expenses of such
recall or removal shall be borne by Otsuka except as set forth below. For the
purpose of this Agreement, the expenses of recall shall include, without
limitation, the expenses of notification and destruction or return of the
recalled Product, cost for the Product recalled, legal expenses, inventory
write-offs and penalties resulting from Third Party contracts, but shall not
include goodwill, lost profits or other similar intangible or speculative
claims. If such recall results from any cause or event arising from a sole
responsibility of ISTA as set forth in this Agreement or is solely attributable
to ISTA, ISTA shall be responsible for all expenses of the recall and Otsuka may
deduct any such expenses borne by Otsuka from any payment due to ISTA under this
Agreement. If such recall results from a sole responsibility of Otsuka as set
forth in this Agreement or is solely attributable to Otsuka, Otsuka shall be
responsible for the expenses of recall and shall reimburse ISTA for expenses
incurred by ISTA for such recall. In the event that the recall results from any
cause(s) or event(s) arising from a joint responsibility of the Parties or
partially from a responsibility of ISTA and partially from a responsibility of
Otsuka, ISTA and Otsuka shall be jointly responsible for expenses of the recall
in proportion to each such Party's proximate fault with respect to the recall.
If the Parties are unable to agree on the allocation of such fault, then such
dispute shall be subject to the dispute resolution provisions of Section 16.2.
This Section 9.3 shall not limit any rights either Party may have pursuant to
Section 4.1.2 and Articles 10 and 13 of this Agreement, or any rights either
Party may have pursuant to the Supply Agreement.

      9.4 Governmental Contact Reporting. Otsuka shall promptly notify ISTA upon
being contacted by the FDA, or any competent governmental authority or agency
within the Territory, for


                                16                                  CONFIDENTIAL
<PAGE>

any regulatory purpose pertaining to this Agreement. Excepting routine matters
and matters relating to applications for Regulatory Approval, Otsuka shall not
respond to the authority or agency before consulting with ISTA, unless, under
the circumstances pursuant to which the authority or agency contacts Otsuka, it
is not practical or lawful for Otsuka to give ISTA advance notice. In any event,
Otsuka shall inform ISTA of such contact as soon as practical and lawful. Each
Party shall keep the other Party advised with respect to information concerning
the safety or efficacy of any Product, including but not limited to providing,
within five (5) business days or seven (7) calendar days, whichever is greater,
of the creation or receipt thereof, all information regarding such safety,
efficacy and medical information issues and copies of safety reports filed with
the FDA or any authority or agency inside or outside the Territory.

      9.5 Communication of New Efficacy and Safety Information. Each Party shall
promptly inform the other Party of any desired or required changes in the
manufacturing status, marketing status, Labeling or Packaging for the Product In
Final Form due to measures taken to prevent the onset or spread of risks to
public health, the discontinuation of manufacture, importation or marketing of
Product due to efficacy or safety/adverse event information, Product recalls in
the Territory, disposal of Product relating to efficacy or safety/adverse event
issues. In addition, each Party shall promptly inform the other Party of new
safety information related to the Product, including but not limited to,
periodic update safety reports (PSURs) and "Dear Doctor" letters issued to
inform physicians of new safety information.

                                   ARTICLE 10
                              PATENTS, IMPROVEMENTS

      10.1 Prosecution and Maintenance. At all times during the term of this
Agreement, ISTA shall be responsible for and shall diligently carry out and
shall bear all costs (including attorney fees) for the preparation, filing,
prosecution, maintenance, and extensions, if any, of all patents or patent
applications within the Licensed Patents in the Territory. In addition, ISTA
shall promptly advise Otsuka of all material correspondence, filings and notices
of action between ISTA and the patent office in the Territory concerning the
Licensed Patents. In the event that Otsuka reasonably determines that the
failure of ISTA to pursue the filing and prosecution of a patent application
within the Licensed Patents would adversely affect the rights of Otsuka under
this Agreement, Otsuka may, but does not have the obligation to, file or
continue prosecution of such application or maintain such patent at ISTA's
expense. If Otsuka so elects, ISTA shall be responsible for the reasonable costs
incurred by Otsuka in connection with such filing, prosecution or maintenance in
the Territory, and Otsuka may deduct any such costs borne by Otsuka from any
payment due to ISTA under the Supply Agreement.

      10.2 Improvements by ISTA. All right, title and interest in and to any
ISTA Improvements shall be owned by ISTA. ISTA shall promptly notify Otsuka of
any ISTA Improvements and of any efforts by ISTA to patent ISTA Improvements in
the Territory. Any patent application in respect of such ISTA Improvement and
any patent issued therefrom shall become part of the Licensed Patents with
respect to the Field and Territory. Any ISTA


                                17                                  CONFIDENTIAL
<PAGE>

Improvement, whether or not patented, shall automatically become part of the
Licensed Subject Matter with respect to the Field and the Territory.

      10.3 Improvements by Otsuka. All right, title and interest in and to any
Otsuka Improvements shall be owned by Otsuka. Otsuka shall promptly notify ISTA
of any Otsuka Improvements and of any efforts by Otsuka to patent Otsuka
Improvements. Otsuka hereby grants to ISTA, at no additional cost, a
non-exclusive, irrevocable, royalty-free, perpetual license outside the
Territory and both within and outside the Field under any Otsuka Improvement and
any patent disclosing such Otsuka Improvement that is first conceived or reduced
to practice during the term of this Agreement.

      10.4 Enforcement of Patent Rights. If either Otsuka or ISTA has knowledge
of any infringement or likely infringement of a Licensed Patent or unauthorized
use of Licensed Subject Matter, then the Party having such knowledge shall
promptly inform the other Party in writing, and the Parties shall promptly
consult with one another regarding the action to be taken. ISTA shall defend the
Licensed Patents against any material infringement by any Third Party in the
Territory, and Otsuka shall have the right, at its election, to participate and
have input in such action. If ISTA does not institute an infringement suit
within ninety (90) days after Otsuka's written notice, Otsuka may institute and
prosecute such action in ISTA's name (if necessary to have standing for such
action) and with counsel of Otsuka's choice. Both Parties shall cooperate with
one another in the prosecution of the action or proceeding with respect to the
Territory. If ISTA prosecutes such claim without the participation of Otsuka,
the costs and expenses incurred in connection with such action or claim shall be
borne by ISTA. However, if Otsuka participates in the action or claim, the costs
and expenses incurred in connection with such action or claim with respect to
the Territory shall be shared equally by ISTA and Otsuka. If Otsuka does not
participate in the prosecution of the action or claim, or unless otherwise
provided in this Section 10.4, any offer of settlement and any settlement with
respect to the Territory shall be in ISTA's discretion, provided that any offer
of settlement or settlement does not conflict with licenses granted under
Article 4. If Otsuka participates in the prosecution of the action or claim,
then any offer of settlement and any settlement with respect to the Territory
shall be subject to the prior approval of both Otsuka and ISTA. Each Party
agrees not to unreasonably withhold its approval of any such settlement. If
Otsuka does not participate in the prosecution of the action or claim, any
recovery of damages or other payments received in connection with such action or
claim shall be realized by ISTA. If Otsuka participates in the prosecution, any
recovery of damages or other payments received in connection with such shall be
allocated between and disbursed to Otsuka and ISTA as follows: (i) first, to
reimburse Otsuka and ISTA for their respective costs and expenses incurred in
connection with such action, and (ii) second, the balance of recovery or other
payments with respect to the Territory to be divided fifty percent (50%) to
Otsuka and fifty percent (50%) to ISTA. In the event that the recovery of
damages with respect to the Territory is not sufficient to cover costs and
expenses incurred by the Parties in connection with such action, each Party
shall be reimbursed on a pro rata basis according to each Party's percentage of
the total costs and expenses incurred by the Parties together.

      10.5 Infringement of Third Party Patent Rights.



                                18                                  CONFIDENTIAL
<PAGE>

            10.5.1 If a claim or suit is brought against Otsuka alleging (a)
infringement of any patent or unauthorized use of any Licensed Subject Matter in
the Territory owned by a Third Party by reason of Otsuka's exercise of its
licenses hereunder or (b) an interest in any patent under the Licensed Patents,
Otsuka shall promptly give written notice to ISTA and ISTA shall be responsible
for the defense of such claim and bear the costs thereof. The Parties shall
furnish each other with reasonable assistance regarding such claim or suit as
may be requested by the other Party. No settlement, consent judgment or other
voluntary final disposition of a suit or action under this section may be
entered into without the prior written approval of the other Party, such
approval not to be unreasonably withheld or delayed.

            10.5.2 In the event ISTA should acquire or license any patent rights
of a Third Party having the effect of reducing or eliminating the amount of
actual or potential liability to such Third Party under Section 10.5.1 based, in
part, on any actual or potential infringement by Otsuka of such Third Party's
patent or intellectual property rights in the Territory, such amount shall be
paid by ISTA as an indemnification expense pursuant to Section 13.2 without the
right to reimbursement from Otsuka.

                                   ARTICLE 11
                                 CONFIDENTIALITY

      11.1 Confidential Information. Each of Otsuka and ISTA (each, as the case
may be, a "Receiving Party") shall keep strictly confidential any information
disclosed in writing, orally, visually or in any other manner by the other Party
(the other, as the case may be, a "Disclosing Party") hereunder or otherwise
made available to the Receiving Party hereunder which the Disclosing Party
considers to be and treats as proprietary or confidential ("Confidential
Information"). Without limiting the generality of the foregoing, all proprietary
information concerning the Disclosing Party's business, operations, suppliers,
products, product manufacture, sale, marketing or distribution, trade secrets
and intellectual property shall be considered Confidential Information by the
Receiving Party. The Disclosing Party shall use commercially reasonable efforts
to designate any written Confidential Information disclosed to the other Party
as Confidential Information by prominently marking it "confidential," provided
that the failure to so mark shall not exclude such written information from the
provisions of this Article 11. Confidential Information shall not include
information which:

            (a) is or becomes generally available to the public other than as a
result of unauthorized disclosure thereof by the Receiving Party;

            (b) is lawfully received by the Receiving Party on a non
confidential basis from a Third Party that is not itself under any obligation of
confidentiality or nondisclosure to the Disclosing Party or any other person
with respect to such information;

            (c) by written evidence can be shown by the Receiving Party to have
been independently developed by or for the Receiving Party; or



                                19                                  CONFIDENTIAL
<PAGE>

            (d) is established by competent proof that was in the possession of
the Receiving Party at the time of disclosure by the other Party and was not
acquired, directly or indirectly, from the other Party under any obligation of
confidentiality.

      11.2 Nondisclosure of Confidential Information. The Receiving Party shall
use Confidential Information solely for the purposes of this Agreement and,
except as provided in this Agreement, shall not disclose or disseminate any
Confidential Information to any Third Party at any time without the Disclosing
Party's prior written consent, except for disclosure to those of its directors,
officers, employees, accountants, attorneys, advisers, agents and
representatives whose duties reasonably require them to have access to such
Confidential Information, provided that such directors, officers, employees,
accountants, attorneys, advisers, agents and representatives are required to use
the Confidential Information solely for purposes of this Agreement and maintain
the confidentiality of such Confidential Information to the same extent as if
they were Parties hereto.

      11.3 Other Permitted Disclosures. Neither ISTA nor Otsuka shall be
obligated to maintain any Confidential Information in confidence to the extent
that (i) the Confidential Information is or becomes public knowledge other than
through the fault of the Receiving Party, (ii) the Confidential Information was
known to the Receiving Party prior to receiving the information, and this prior
knowledge can be documented, (iii) the Confidential Information is or becomes
available on an unrestricted basis to ISTA or Otsuka, as the case may be, from a
source other than ISTA or Otsuka (or their representatives) and this can be
documented, (iv) the Confidential Information is required to be disclosed by
law, court order or government action, (v) this Agreement permits a Party to
disclose Confidential Information to Third Parties, or (vi) such disclosure is
reasonably necessary in connection with the conduct of the activities to be
conducted hereunder, in filing or prosecuting patent applications, prosecuting
or defending litigation, conducting clinical trials, or making a permitted
sublicense or otherwise exercising its rights hereunder. If either Party is
required to make any such disclosure of the other Party's Confidential
Information, it will give reasonable advance notice to the latter Party of such
disclosure and, save to the extent inappropriate in the case of patent
applications, will use its best efforts to secure confidential treatment of such
information prior to its disclosure (whether through protective orders or
otherwise). Further, either Party may disclose Confidential Information received
under this Agreement to existing or potential investors, acquirers, merger
partners, collaborators or licensees, or to professional advisors (e.g.,
attorneys, accountants and prospective investment bankers) involved in such
activities, for the limited purpose of evaluating such investment, transaction,
or license and under appropriate conditions of confidentiality, only to the
extent necessary and with the agreement by these permitted individuals to
maintain such Confidential Information in strict confidence.

      11.4 Other Agreements. The Parties have entered into a Confidential
Disclosure Agreement dated January 18, 1999 ("CDA"). The CDA shall remain in
full force and effect as to its confidentiality requirements for the terms
specified therein. However, on and after the Effective Date of this Agreement,
all subject matter conveyed or covered under this Agreement shall be governed in
all respects by the confidentiality provisions contained in this Article 11,
which shall supercede the CDA with respect to such subject matter. The
obligations of the Parties set forth in


                                20                                  CONFIDENTIAL
<PAGE>

this Article 11 shall apply during the term hereof and for a period of five (5)
years after the date of any termination or expiration of this Agreement.

      11.5 Publicity. The Parties agree that upon the execution of this
Agreement, a press release approved by both Parties shall be issued. Except for
such press release and periodic disclosures by ISTA or Otsuka required by law or
regulation or, as to ISTA, in the ordinary course of its SEC filings, neither
Party shall (a) originate any publicity, news release or other public
announcement, written or oral, whether to the public press, stockholders or
otherwise, relating to this Agreement, any amendment hereto or performance
hereunder, or (b) use the name of the other Party in any publicity, news release
or other public announcement, except (i) with the prior written consent of the
other Party, or (ii) as required by law, in which case the originating Party
shall give to the other Party at least ten (10) days prior notice of such
proposed disclosure to complete a review in order to offer comments and
modifications. Consistent with applicable law, the other Party shall have the
right to request reasonable changes to the disclosure to protect its interests.
In all other cases, the originating Party shall give the consenting Party at
least ten (10) days to complete a review in order to offer comments,
modifications or to give such consent. The Party required to give consent shall
endeavor to respond in less than ten (10) days if practicable.

                                   ARTICLE 12
                         REPRESENTATIONS AND WARRANTIES

      12.1 ISTA Representations and Warranties. ISTA hereby represents and
warrants that:

            12.1.1 Authority. ISTA has the full right, power and corporate
authority to enter into and perform this Agreement, and to make the promises and
grant the licenses, rights and sublicenses set forth in this Agreement. This
Agreement does not violate or conflict with any other agreements, assignments or
encumbrances to which ISTA is a party or any law or regulation applicable to
ISTA.

            12.1.2 Ownership, Title. As of the Effective Date, ISTA is the sole
and exclusive owner or exclusive licensee of the entire right, title and
interest in and to each of the Licensed Patents, ISTA Trademarks and all of the
Licensed Subject Matter, and has the right to grant the licenses and rights
therein to Otsuka in the Territory as set forth in this Agreement. As of the
Effective Date, all employees, consultants, advisors or contractors who have
developed or assisted in the development, or will develop or assist in the
development, of the Licensed Subject Matter, have executed valid assignments of
their rights to ISTA.

            12.1.3 Litigation. To best of ISTA's knowledge as of the Effective
Date, there are no litigation actions, claims or suits by a Third Party pending
before any court or governmental agency or other tribunal, and no cease and
desist letters by a Third Party received within the last twelve (12) months
prior to the Effective Date, alleging that ISTA, or any ISTA Affiliate is
infringing (including with respect to the manufacture, use or sale) upon any
patent, patent application, trademark, trade name, technical know-how or other
intellectual property rights ("Intellectual Property Rights") of a Third Party.



                                21                                  CONFIDENTIAL
<PAGE>

            12.1.4 No Third Party Rights. ISTA has not authorized (other than
with respect to its existing relationship with Allergan Sales, Ltd.), and shall
not during the term of this Agreement authorize Third Parties to practice the
Licensed Patents or the Licensed Subject Matter in the Field in the Territory or
otherwise grant rights or licenses to market and sell the Product in the Field
in the Territory, or use the ISTA Trademarks in the Territory inconsistent with
the rights granted to Otsuka herein.

            12.1.5 Validity and Infringement. As of the Effective Date, ISTA is
not aware of any prior act or any fact which would cause it to conclude that any
Licensed Patent is invalid or unenforceable, PROVIDED HOWEVER, THAT ISTA
EXPRESSLY DOES NOT WARRANT THAT ANY LICENSED PATENT IS VALID OR ENFORCEABLE.

            12.1.6 Product Formulation. To the best of ISTA's knowledge as of
the Effective Date, there are no defects in design or formulation of the Product
which would adversely and unduly affect its performance or create an unusual and
undue risk of injury to person or property beyond those as may be expected from
a pharmaceutical product which has not received marketing approval in the United
States.

            12.1.7 Regulatory Matters. To the best of ISTA's knowledge as of the
Effective Date, all of ISTA's regulatory filings and regulatory approvals
outside of the Territory are free of any misrepresentations or omissions on the
part of ISTA, its Affiliates, predecessors-in-interest or agents, all steps
taken by ISTA, its Affiliates, predecessors-in-interest or agents in the
collection, assembly and presentation of the data in such regulatory filings and
regulatory approvals were legitimate and reasonable when viewed within the
standards of the industry, and that all responses of ISTA, its Affiliates,
predecessors-in-interest or agents to any inquiries of the FDA were made in good
faith.

      12.2 Otsuka Representations and Warranties. Otsuka hereby represents and
warrants that:

            12.2.1 Authority. Otsuka has the full right, power and corporate
authority to enter into this Agreement, and to make the promises and grant the
licenses set forth in this Agreement and that there are no outstanding
agreements, assignments or encumbrances in existence inconsistent with the
provisions of this Agreement.

            12.2.2 No Conflict. The execution, delivery and performance of this
Agreement does not conflict with any agreement, instrument or understanding,
oral or written, to which Otsuka is a Party or by which it is bound, nor to
Otsuka's knowledge, violate any law or regulation of any court, governmental
body or administrative or other agency having jurisdiction over it.

      12.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF
ANY KIND EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR VALIDITY
OF ANY LICENSED PATENTS ISSUED OR PENDING.



                                22                                  CONFIDENTIAL
<PAGE>

                                   ARTICLE 13
                          INDEMNIFICATION AND INSURANCE

      13.1 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
(USD$5,000,000) for bodily injury and property damage. Otsuka 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. Otsuka shall obtain by the date of the first marketing approval for
the Product, at its own 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 (USD$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 Otsuka'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.

      13.2 By ISTA. ISTA shall indemnify, defend and hold Otsuka, 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 are asserted by a Third Party
and that: (i) arise from a breach of a representation or warranty in Section
12.1; (ii) arise out of the negligent act or omission or willful misconduct by
ISTA, its Affiliate or any ISTA Contract Manufacturer in the performance of its
obligations under this Agreement; or (iii) arise from claims that the Product,
the Product In Final Form or its manufacture, use or sale in the Territory
infringes a patent, trademark or other proprietary right of a third party;
except, in all cases, to the extent that such claim does not arise out of the
negligence or willful misconduct of Otsuka or its Affiliates, or the breach by
Otsuka of any representations or warranties given by Otsuka in Section 12.2
above.

      13.3 By Otsuka. Otsuka 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 that are asserted by a Third
Party and that: (i) arise from a breach of representation or warranty in Section
12.2, or (ii) arise out of the negligence or willful misconduct of Otsuka or its
Affiliates in the performance of its obligations under this Agreement; except,
in all cases, to the extent that such claim arises out of the negligence or
willful misconduct of ISTA, its Affiliates or ISTA Contract Manufacturer, or the
breach by of any warranties given by ISTA in Section 12.1 above.

      13.4 Condition of Indemnification. If either Party expects to seek
indemnification under this Article 13, 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


                                23                                  CONFIDENTIAL
<PAGE>

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 14
                             LIMITATION OF LIABILITY

      EXCEPT AS OTHERWISE PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR ANY
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
RELATING TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST PROFITS, ARISING
FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF
THE POSSIBILITY OF SUCH DAMAGES OR THE FAILURE OF ANY REMEDY; PROVIDED HOWEVER,
THIS LIMITATION SHALL NOT APPLY TO LOSSES ARISING FROM THIRD PARTY CLAIMS FOR
WHICH A PARTY IS INDEMNIFIED UNDER ARTICLE 13 OF THIS AGREEMENT.

                                   ARTICLE 15
                              TERM AND TERMINATION

      15.1 Term. Unless terminated earlier pursuant to this Article 15, this
Agreement shall expire, and the licenses granted by ISTA to Otsuka shall become
fully paid and irrevocable within the Field in the Territory, on the later to
occur of: (i) expiration of the last Valid Claim of the Licensed Patents
covering the sale or use of the Product in the Territory; or (ii) fifteen (15)
years from the date of the First Commercial Sale of the Product by or under the
authority of Otsuka in the Territory.

      15.2 Termination for Material Breach. In the event either Party has
breached any material term, condition, obligation, representation, warranty or
covenant in this Agreement, and such Party fails to cure the breach within sixty
(60) days after receiving written notice identifying the breach by the other
Party, the non-breaching Party may terminate this Agreement by providing written
notice of termination to the breaching Party.

      15.3 Termination by ISTA. ISTA may terminate this Agreement in the event
that: (i) Otsuka fails to file an NDA with regulatory authorities in the
Territory for the Product within twelve (12) months after the pre-New Drug
Application meeting with the OPSR in which the OPSR has determined that the data
and information gathered in the clinical trials has sufficiently established, to
the satisfaction of the OPSR, the safety and effectiveness of the Product, and
no additional clinical studies in the Territory are necessary for Otsuka to
obtain Regulatory Approval of the Product for use or sale in the Field in the
Territory; or (ii) Otsuka violates its obligations pursuant to Section 7.3
herein.

      15.4 Termination by Otsuka. Otsuka may terminate this Agreement, at any
time in its sole discretion, upon six (6) months prior written notice to ISTA.



                                24                                  CONFIDENTIAL
<PAGE>

      15.5 Termination in Event of Bankruptcy. Either Party may terminate this
Agreement effective upon at written notice to the other Party if: (a) the
non-notifying Party becomes insolvent or makes an assignment for the benefit of
creditors; (b) a receiver is appointed for the non-notifying Party; or (c)
bankruptcy proceedings are instituted by or against the non-notifying Party;
further provided in all cases that such receiver is not removed within sixty
(60) days, or such assignment or proceedings are not withdrawn within sixty (60)
days. Without limiting any of Otsuka's rights under any other provision of this
Agreement, Otsuka's rights under this Agreement will include those afforded by
11 U.S.C. Section365(n) of the United States Bankruptcy Code and any successor
thereto (the "Code"). If the bankruptcy trustee of ISTA as a debtor or ISTA as a
debtor-in-possession rejects this Agreement under 11 U.S.C. Section365(n) of the
Code, Otsuka may elect to retain its rights licensed from ISTA hereunder for the
duration of the term of this Agreement and may avail itself of all rights and
remedies to the extent contemplated by this Agreement, 11 U.S.C. Section365(n),
and any other relevant sections of the Code, or other relevant non-bankruptcy
law. All licenses granted under this Agreement are deemed to be, for purposes of
Section 365(n) of the Code, licenses of right to "intellectual property" as
defined in Section 101 of the Code. The Parties further agree that, in the event
Otsuka elects to retain its rights as a license under such Code, Otsuka shall be
entitled to complete access to the Licensed Subject Matter licensed to it
hereunder and all embodiments of such Licensed Subject Matter, in all cases as
exist at the time that this Section 15.5 comes into effect.

      15.6 Effect of Termination.

            15.6.1 Accrued Rights and Obligations. Expiration or termination of
this Agreement shall not release any Party from liability accrued under this
Agreement prior to such expiration or termination, nor preclude either Party
from pursuing any rights or remedies accrued prior to such expiration or
termination or accrued at law or in equity with respect to any breach of this
Agreement. It is understood and agreed that monetary damages may not be a
sufficient remedy for any breach of this Agreement and that the non-breaching
Party may be entitled to injunctive relief as a remedy for any such breach.

            15.6.2 Reassignment of Regulatory Approval. Upon termination of this
Agreement by ISTA under Sections 15.2 or 15.3, or by Otsuka under Sections 15.2
or 15.4, Otsuka shall promptly assign to ISTA all Regulatory Filings and
Approvals related to the Product in the Territory. Otsuka further agrees to
execute and deliver such instruments and take such other actions, at its own
expense, as ISTA shall reasonably request in order to carry out this provision.

      15.7 Phase-Out Period. Upon early termination of this Agreement under this
Article 15, Otsuka may continue to market, sell or otherwise dispose of its
inventory of Products on hand as of the effective date of termination, or
ordered Products delivered to Otsuka after the effective date of termination,
and may fill any orders for Products accepted prior to the effective date of
termination, whether delivered before the effective date of termination or not,
for a period of six (6) months after the later to occur of (i) the effective
date of termination or (ii) the date of receipt of the last shipment of Product
to Otsuka under the Supply Agreement; but in no event to exceed twelve (12)
months after the effective date of termination (the "Phase Out Period"). During
such Phase-Out Period, Otsuka may continue to fill all outstanding orders for
Products and Otsuka shall refer any new orders


                                25                                  CONFIDENTIAL
<PAGE>

for Products to ISTA. Otsuka shall promptly return all promotional materials for
Products to ISTA and shall delete the Products from its catalogues and price
lists as soon as reasonably practical. In the event of any problems relating to
the Products or customer relations issues during the Phase-Out Period, Otsuka
shall cooperate fully with ISTA to ensure compliance with all applicable laws
and regulations and to avoid disruptions of service to existing customers in the
Territory. In the event that, as of the date of such termination, Otsuka is
manufacturing Product In Final Form for commercial sale pursuant to its
Manufacturing License in Section 4.1.2, then references to Product orders in
this Section 15.7 will mean and refer to Otsuka's documents that are analogous
to the Product purchase orders described in Sections 2.9 and 2.10 of the Supply
Agreement and are used to initiate manufacturing of Product In Final Form
pursuant to such Manufacturing License.

      15.8 Survival. The provisions of Articles 1, 9, 11, 12, 13, 14 and 16 and
Sections 5.7, 6.6, 10.3, 15.1 (only in the case of expiration and not
termination), 15.5 (only to the extent provided for therein), 15.6, 15.7, and
15.8 shall survive expiration or termination of this Agreement for any reason.
Except as otherwise provided in this Article 15, all rights and obligations of
the Parties under this Agreement shall terminate upon expiration or termination
of this Agreement for any reason.

                                   ARTICLE 16
                                  MISCELLANEOUS

      16.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with, the laws of the State of California, without reference to
conflict of laws principles. The United Nations Convention on Contracts for the
International Sale of Goods shall not apply.

      16.2 Dispute Resolution. Except with respect to matters pertaining to
injunctive relief, if the Parties are unable to resolve any dispute between them
arising out of or in connection with this Agreement, either Party may, by
written notice to the other, have such dispute referred to the Chief Executive
Officers ("CEO") of each ISTA and Otsuka (or their respective executive officer
level designees) for attempted resolution by good faith negotiations within
sixty (60) days after such notice is received, and in such event, each Party
shall cause its CEO to meet and to be available to attempt to resolve such
issue. During such period of good faith negotiations, any applicable time
periods under this Agreement shall be tolled. In the event such executives are
unable to resolve such dispute within such sixty (60) day period, the Parties
shall submit their dispute to binding arbitration before a panel of three (3)
arbitrators, either in (i) Orange County, California pursuant to the rules of
the American Arbitration Association if Otsuka initiated the arbitration, or
(ii) in Tokyo, Japan pursuant to the Rules of Arbitration of the International
Chamber of Commerce if ISTA initiated the arbitration. The arbitrators may
permit limited discovery as they deem appropriate in the circumstances of the
dispute. The arbitration shall be conducted, and all documents submitted to the
arbitrators shall be, in English. The arbitrators shall have no power to include
an award of attorneys' fees and costs to the prevailing Party, or to award
punitive, special, incidental or consequential damages. The award to be rendered
shall be final and binding upon all Parties.



                                26                                  CONFIDENTIAL
<PAGE>

      16.3 Notices. Any notice or report required or permitted to be given or
made under this Agreement by either Party shall be in writing and delivered to
the other Party at its address indicated below (or to such other address as a
Party may specify by notice hereunder) by overnight courier service or by
facsimile; provided, however, that all facsimile notices shall be promptly
confirmed, in writing, by overnight courier service. All notices shall be
effective as of the date received by the addressee.

      If to ISTA:       ISTA Pharmaceuticals, Inc.
                        15279 Alton Parkway, Suite 100
                        Irvine, California 92618
                        Attn: Chief Financial Officer
                        Fax: (949) 789-7740
                        Tel: (949) 788-6000

      with a copy to:   Wilson Sonsini Goodrich & Rosati, P.C.
                        One Market, Spear Tower, 33rd Floor
                         San Francisco, California 94104
                        Attention:  David Boyko, Esq.
                        Fax:  (415) 947-2104
                        Tel:  (415) 947-2099

      If to Otsuka:     Otsuka Pharmaceutical Co., Ltd.
                        3-2-27, Otedori
                        Chuo-ku
                        Osaka, Japan
                        Attn:  Division of Dermatologicals & Ophthalmologicals
                        Fax:  81-(6)-6942-7397
                        Tel: 81-(6)-6231-7067

      with a copy to:   Heller, Ehrman, White & McAuliffe, LLP
                        701 Fifth Avenue, Suite 6100
                        Seattle, WA 98104
                        Attn:  Kevin F. Kelly
                        Fax:  206-447-0849
                        Tel:  206-447-0900


      16.4 Binding Effect; Assignment. Except as otherwise provided herein, this
Agreement may not be assigned, in whole or in part, by either Party without the
prior written consent of the other Party, and any attempted assignment without
such consent shall be null and void. Notwithstanding the foregoing, no prior
written consent shall be required in the event that a Third Party acquires
substantially all of the assets or outstanding shares of, or merges with, the
assigning Party, but only so long as (i) such Third Party agrees to be bound by
all of the assigning Party's responsibilities and obligations hereunder and (ii)
the non-assigning Party has determined, in the

                                27                                  CONFIDENTIAL
<PAGE>
exercise of its reasonable commercial judgment, that the interests of such Third
Party are not in conflict with the interests of such other non-assigning Party
with respect to the Product in the territory for which the non-assigning Party
has such interests. No assignment of this Agreement or of any rights hereunder
shall relieve the assigning Party of any of its obligations or liability
hereunder. This Agreement shall inure to the benefit of and be binding upon each
of the Parties hereto and their respective successors and permitted assigns.

      16.5 Force Majeure. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, including but not limited to fire, floods,
embargoes, war, acts of war (whether war is declared or not), insurrections,
terrorist attack, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party; provided, however, that the Party so
affected shall use reasonable commercial efforts to avoid or remove such causes
of nonperformance, and shall continue to perform hereunder with reasonable
dispatch whenever such causes are removed. Either Party shall provide the other
Party with prompt written notice of any delay or failure to perform that occurs
by reason of force majeure. The Parties shall mutually seek a resolution of the
delay or the failure to perform as noted above.

      16.6 Amendment. This Agreement may be modified, amended or extended only
by the written agreement of the Parties through their duly authorized officers
or representatives, specifically referring to this Agreement.

      16.7 Severability. If any provision hereof should be held invalid, illegal
or unenforceable in any jurisdiction, the Parties shall negotiate in good faith
a valid, legal and enforceable substitute provision that most nearly reflects
the original intent of the Parties and all other provisions hereof shall remain
in full force and effect in such jurisdiction and shall be liberally construed
in order to carry out the intentions of the Parties hereto as nearly as may be
possible. Such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

      16.8 Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.

      16.9 Entire Agreement. This Agreement with the exhibits hereto, the Supply
Agreement with the exhibits thereto, the Securities Purchase Agreement with the
exhibits thereto and the Registration Rights Agreement represent and constitute
the entire agreement between the Parties with respect to the subject matter
hereof, and supersedes and merges all prior negotiations, agreements and
understandings, oral or written, with respect to the matters covered by this
Agreement.

      16.10 Conflict of Terms. In the event of any conflict between the terms
and conditions of this Agreement and any terms and conditions that may be set
forth on any order, invoice, verbal agreement or otherwise, the terms and
conditions of this Agreement shall govern. Unless otherwise

                                28                                  CONFIDENTIAL
<PAGE>
explicitly stated, in the event of any conflict between the terms of this
Agreement and the terms and conditions of any of the exhibits hereto, the terms
of this Agreement shall prevail.

      16.11 No Waiver of Rights. No failure or delay on the part of either Party
in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or of any other right or power. The waiver by
either Party of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any other or subsequent breach hereunder.

      16.12 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.



ISTA Pharmaceuticals, Inc.              Otsuka Pharmaceutical Co., Ltd.

By:   /s/ J.C. MacRae                   By :   /s/ Ichiro Otsuka
    --------------------------------       -------------------------------------

Name:    J.C. MacRae                    Name:      Ichiro Otsuka
     -------------------------------        ------------------------------------

Title:   Executive Vice President,      Title:    Managing Director
      ------------------------------          ----------------------------------
         Chief Operating Officer and
         Chief Financial Officer




                                29                                  CONFIDENTIAL
<PAGE>



                                    EXHIBIT A

           ISSUED TRADEMARKS OF ISTA PHARMACEUTICALS, INC. AS OF _____

             JAPANESE TRADEMARK APPLICATION ***********************



<PAGE>


                                    EXHIBIT B

                                SPECIFICATIONS
                  (PRELIMINARY- SUBJECT TO REGULATORY APPROVAL)


PART NUMBER:      ***
LOT NUMBER:       ***
PRODUCT NAME:     ***************************************
                  *********************************************


<TABLE>
<CAPTION>
          Test                 Specification                                      Method
          ----                 -------------                                      ------
<S>                      <C>                                               <C>
COMPENDIAL TESTS:
pH                       **********************                            *******************

Water Content            ****                                              ****************************

Limit of Tyrosine        ***********************                           ***********************
                         *************                                     *************

Hyaluronidase Potency    **************************                        *************************
Assay Average            *********************                             ***************************

Content Uniformity       ********************

Appearance of            *************************                         ********************
Reconstituted Solution   **************************
                         *************************

Particulate Matter       ************************************              ********

Appearance of Powder     *****************                                 *****************

Bacterial Endotoxins     ***********************************               ********
                         *******************

Sterility                ***************                                   ********

Container Closure        ****************************                      *****************
Integrity                *************

ADDITIONAL TESTS:
*********************    ******************                                ******************
                         ******
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                      <C>                                               <C>
*****************        ********************************************      *****************

Specific Activity        ************************                          **************************
                         ***********************
                         *******

SDS-PAGE                 ***********************                           **************************
                         ********************                              ************
</TABLE>

                                 2                                  CONFIDENTIAL

<PAGE>



                             PRODUCT SPECIFICATIONS
                  (PRELIMINARY- SUBJECT TO REGULATORY APPROVAL)



Composition, Type, and Size of Container-Closure:



********************************************************************************
********************************************************************************
*****************************************************

Fill volume will be ******

INCLUDED IN PRODUCT KIT:
*******************************************************
***************************************************************************
***********
**************************************************************************
********************************************************************************
***************************************************************************




                                 3                                  CONFIDENTIAL
<PAGE>
                                    EXHIBIT C

                            LICENSED FOREIGN PATENTS

                  ISSUED PATENTS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 1, 2001



<TABLE>
<CAPTION>
       REF NO.           COUNTRY         PATENT NO.                          TITLE                           ISSUE DATE
       -------           -------         ----------                          -----                           ----------
<S>                      <C>             <C>          <C>                                                    <C>

 ISTA.016A                 USA           5,866,120    Method for Accelerating Clearance of Hemorrhagic       02/02/1999
                                                      Blood from the Vitreous Humor with Hyaluronidase

 ISTA.016C1                USA           6,039,943    Method for Accelerating Clearance of Hemorrhagic       03/21/2000
                                                      Blood from the Vitreous Body with Hyaluronidase
</TABLE>

            PENDING PATENT APPLICATIONS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 1, 2001

<TABLE>
<CAPTION>
       REF NO.           COUNTRY         SERIAL NO.                          TITLE                           FILING DATE
       -------           -------         ----------                          -----                           -----------
<S>                    <C>               <C>          <C>                                                    <C>
 ISTA.016C2                ***           *********    ****************************************               **********
                                                      ****************************************
                                                      ************************************* *****

 ISTA.016CPC1              ***           *********    ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.036A                 ***           *********    ************************************                   **********
                                                      *****************************************
                                                      ***************

 ISTA.016QAU            *********         ********    ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.016QBR              ******                      ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********
</TABLE>
<PAGE>
<TABLE>
<S>                      <C>             <C>          <C>                                                    <C>
 ISTA.016QCA              ******          *******     ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.016QCN              *****          **********   ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.016QEP               ***           **********   ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.016QKR              *****                       ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

 ISTA.016QMX              ******          *******     ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********
</TABLE>
<PAGE>
            PENDING PATENT APPLICATIONS OF ISTA PHARMACEUTICALS, INC.
                             AS OF DECEMBER 1, 2001

<TABLE>
<CAPTION>
      REF NO.            COUNTRY         SERIAL NO.                          TITLE                           FILING DATE
      -------            -------         ----------                          -----                           -----------
<S>                     <C>             <C>           <C>                                                    <C>
ISTA.016QRU               ******                      ******************************************             **********
                                                      ****************************************
                                                      **************************************
                                                      *********

ISTA.016VAU             *********         ********    *************************************                  **********
                                                      ***************************************

ISTA.016VBR               ******        ***********   *************************************                  **********
                                                      ***************************************

ISTA.016VCA               ******          *******     *************************************                  **********
                                                      ***************************************

 ISTA.016VCN              *****          **********   *************************************                  **********
                                                      ***************************************

 ISTA.016VEP               ***           **********   *************************************                  **********
                                                      ***************************************

 ISTA.016VHK            *********        **********   *************************************
                                                      ***************************************

 ISTA.016 VKR             *****         ***********   *************************************                  **********
                                                      ***************************************

 ISTA.016VNX              ******           ******     *************************************                  **********
                                                      ***************************************

 ISTA.016VRU              ******          ********    **************************************                 **********
                                                      ***************************************
</TABLE>