Document:

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                                                                   EXHIBIT 10.43
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                           INSITE VISION INCORPORATED
                                       AND
                              PHARMACIA & UPJOHN AB

                            STOCK PURCHASE AGREEMENT

                                NOVEMBER 11, 1999

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                            STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT is made as of November 11, 1999 (the "Agreement"),
by and between INSITE VISION INCORPORATED, a Delaware corporation with its
principal office at 965 Atlantic Avenue, Alameda, California 94501 (the
"Company"), and PHARMACIA & UPJOHN AB, a Swedish corporation with a principal
office at Lindhagensgatan 133,112 87 Stockholm, Sweden ("P&U").

                                    RECITALS

        WHEREAS, the Company and P&U have entered into an ISV-900 Project
Agreement of even date herewith (the "ISV-900 Project Agreement"); and

        WHEREAS, in connection with the ISV-900 Project Agreement, the Company
desires to sell to P&U and P&U desires to purchase from the Company shares of
common stock, par value $.01 per share, of the Company ("Common Stock"), on the
terms and subject to the conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, the parties agree as follows:

                                    ARTICLE 1
                            PURCHASES OF COMMON STOCK

        SECTION 1.1 PURCHASE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, and in reliance on the representations and
warranties contained in this Agreement, the Company agrees to sell to P&U and
P&U agrees to purchase from the Company, at the Closing (as defined below), that
number of shares of InSite Common Stock equal to Two Million U.S. Dollars
($2,000,000) divided by the average weighted closing share price of the InSite
Common Stock for the twenty (20) trading days immediately prior to the Closing
Date for an aggregate consideration of Two Million U.S. Dollars ($2,000,000.00).

                                    ARTICLE 2
                             CLOSING DATE; DELIVERY

        SECTION 2.1 CLOSING; CLOSING DATE. Subject to the terms of Article 5,
the closing of the sale and purchase of shares of Common Stock under Section 1.1
of this Agreement (the "Closing") shall be held at 10:00 a.m. (Eastern Time) on
the closing date at the offices of P&U, or at such other time and place as the
Company and P&U may agree. The date of the Closing ("Closing Date") shall be the
forty-fifth (45th) business day following the date first written above, or, on
such other date as the Company and P&U shall agree in writing.

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        SECTION 2.2 DELIVERY. At the Closing, subject to the terms and
conditions of this Agreement, the Company will deliver to P&U a stock
certificate, in the name of P&U, as applicable, representing, respectively, the
shares of Common Stock deliverable at such closing, dated as of the Closing Date
against payment of the purchase price therefor by wire transfer of immediately
available funds, unless P&U and the Company agree upon other means of payment.

                                    ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        Subject to and except as disclosed by the Company in the Schedule of
Exceptions attached hereto as Exhibit A, the Company represents and warrants to
P&U, on the date hereof and on the Closing Date, as follows:

        SECTION 3.1 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement has been taken or will
be taken prior to or as of the Closing Date. The Company has the requisite
corporate power to enter into this Agreement and carry out and perform its
obligations under the terms of this Agreement. This Agreement has been duly
authorized, executed and delivered by the Company and, upon due execution and
delivery by P&U, this Agreement will be a valid and binding agreement of the
Company, except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws of general application affecting creditors' rights generally or
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

        SECTION 3.2 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement will not result in any violation of, be in
conflict with, or constitute a default under, with or without the passage of
time or the giving of notice: (a) any provision of the Company's Certificate of
Incorporation or Bylaws as either are currently in effect; (b) any provision of
any judgment, decree or order to which the Company is a party or by which it is
bound; (c) any material contract, obligation or commitment to which the Company
is a party or by which it is bound; or (d) to the Company's knowledge, any
statute, rule or governmental regulation applicable to the Company.

        SECTION 3.3 CERTIFICATE OF INCORPORATION; BY-LAWS. Attached hereto as
Exhibits B and C, respectively, are true, correct and complete copies of the
Certificate of Incorporation and Bylaws of the Company, as in effect on the date
hereof.

        SECTION 3.4 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.

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        SECTION 3.5 DISCLOSURE DOCUMENTS. The Company's Form 10-K for the fiscal
year ended December 31, 1998 and Forms 10-Q for the fiscal quarters ended March
31, and June 30, 1999, did not, when filed with the Securities and Exchange
Commission, contain any untrue statements of material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.

        SECTION 3.6   CAPITALIZATION.

               (a) The authorized capital stock of the Company consists of
        30,000,000 shares of Common Stock, of which 20,275,870 shares are issued
        and outstanding on the date hereof, and 5,000,000 shares of Preferred
        Stock, of which 0 shares of Series A Convertible Preferred Stock, par
        value $.01 per share ("Series A Preferred Stock"), are issued and
        outstanding on the date hereof. All such issued and outstanding shares
        have been duly authorized and validly issued, and are fully paid and
        nonassessable. The rights and designations of the Series A Preferred
        Stock are as set forth in the Certificate of Designation included within
        the Certificate of Incorporation.

               (b) The Company has outstanding options to purchase 2,218,723
        shares of Common Stock, outstanding warrants to purchase 317,308 shares
        of Common Stock and outstanding warrants to purchase 70 shares of Series
        A Preferred Stock as of the date hereof. Except as otherwise set forth
        herein or in the Company's Restated Certificate of Incorporation, as
        amended, or Certificate of Designations, Preferences and Rights of
        Series A Convertible Preferred Stock, as corrected, there are no
        preemptive or other outstanding rights, options, warrants, conversion
        rights or Agreements for the purchase or acquisition from the Company of
        any shares of its capital stock or other securities of the Company.

        SECTION 3.7 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly (other than investments in money market funds), and has
no stock or other interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture or entity
except for its wholly-owned subsidiary, InSite Vision Limited.

        SECTION 3.8 VALID ISSUANCE OF SHARES. The shares of Common Stock which
will be purchased by P&U under this Agreement, when issued, sold and delivered
in accordance with the terms of and for the consideration expressed in this
Agreement, will be duly and validly authorized and issued, fully paid and
nonassessable and, based in part upon the representations of P&U in Section 4.3
of this Agreement, will be issued in compliance with all applicable federal and
state securities laws.

        SECTION 3.9 LITIGATION, VALIDITY OF AGREEMENT. There is no action, suit,
proceeding or, to the best of the Company's knowledge, any claim or
investigation pending or currently threatened against the Company, nor, to the
best of the Company's knowledge, is there any basis therefor, which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financial or
otherwise. The foregoing includes, without limitation, any action, suit,
proceeding or investigation, pending or

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threatened, that questions the validity of this Agreement or any other agreement
contemplated hereby or the right of the Company to enter into such agreements.

        SECTION 3.10 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices, qualifications
or filings required or permitted to be filed with certain state or federal
securities commissions or self-regulatory organizations, which notices,
qualifications, or filings will be filed on a timely basis.

        SECTION 3.11 COMPLIANCE WITH LAWS. The Company has complied and is in
compliance in all material respects with all governmental laws, orders, decrees,
rules or regulations applicable to the Company, its assets and business,
employment practices and procedures, employees or operations (except where the
failure to so comply would not have a material adverse effect on the Company,
its business and operations, or the subject matter of the ISV-900 Project
Agreement), including the rules and regulations of the Securities and Exchange
Commission and any exchange or automated inter-dealer quotation system on which
the Common Stock is traded and then current Good Clinical Practices and then
current Good Manufacturing Practices.

        SECTION 3.12 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.

                                    ARTICLE 4
                      REPRESENTATIONS AND WARRANTIES OF P&U

        P&U hereby represents and warrants to the Company, on the date hereof
and on the Closing Date, as follows:

        SECTION 4.1 LEGAL POWER. All corporate action on the part of P&U, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement has been taken. P&U has the requisite corporate
power to enter into this Agreement, to carry out and perform its obligations
under the terms of this Agreement and, at the Closing, will have the requisite
corporate power to purchase the shares of Common Stock to be purchased at such
Closing.

        SECTION 4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by P&U and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of P&U, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting creditors' rights generally or as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.

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        SECTION 4.3 INVESTMENT REPRESENTATIONS. In connection with the purchase
and sale of shares under this Agreement, P&U makes the following
representations:

               (a) P&U is acquiring the shares of Common Stock under this
        Agreement for its own account, not as nominee or agent, for investment
        and not with a view to the resale or distribution or public offering
        thereof within the meaning of the Securities Act of 1933, as amended
        (the "Securities Act"). P&U has no present intention of selling,
        granting any participation in, or otherwise distributing the Common
        Stock acquired hereunder and has not entered into any agreement or
        arrangement with any person with respect to such activities.

               (b) P&U understands that (i) the shares of Common Stock to be
        purchased under this Agreement have not been registered under the
        Securities Act by reason of a specific exemption therefrom, that such
        securities are therefore "Restricted Securities" under the Securities
        Act and must be held by P&U, and that P&U must bear the economic risk of
        such investment, until a subsequent disposition thereof is registered
        under the Securities Act or is exempt from such registration; (ii) each
        certificate representing such shares will be endorsed with the following
        legend:

               THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE
               SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
               RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
               TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
               APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
               EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE
               AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
               ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
               COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

        and (iii) the Company will instruct any transfer agent not to register
        or effect the transfer of the shares of Common Stock unless the
        conditions specified in the foregoing legends are satisfied, until such
        time as a transfer is made, pursuant to the terms of this Agreement, and
        in compliance with Rule 144 or pursuant to a registration statement or,
        if the opinion of counsel referred to above is to the further effect
        that such legend is not required in order to establish compliance with
        any provisions of the Securities Act or this Agreement.

               (c) P&U has such knowledge and experience in financial and
        business matters that it is capable of evaluating the merits and risks
        of the investment in the shares of Common Stock purchased hereunder and
        is financially able to bear the risks thereof.

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               (d) P&U is an "accredited investor" as such term is defined in
        Rule 501 (a) of Regulation D of the General Rules and Regulations
        prescribed by the Securities and Exchange Commission pursuant to the
        Securities Act.

               (e) P&U has had an opportunity to ask questions and receive
        answers from the Company regarding the Company and the terms and
        conditions of the offering of the Common Stock and to obtain additional
        information necessary to verify the accuracy of the information given to
        P&U. P&U has received information that it considers necessary or
        appropriate for deciding whether to purchase the Common Stock.

               (f) P&U is not a party to any agreement or instrument, or subject
        to any charter or other corporate restriction or any judgment, order,
        decree, law, ordinance, regulation or other governmental restriction
        which would prevent or impede, or be breached or violated by, the
        transactions contemplated in this Agreement.

        SECTION 4.4 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.

        SECTION 4.5 ORGANIZATION, GOOD STANDING AND QUALIFICATION. P&U is a
corporation duly organized, validly existing and in good standing under the laws
of Sweden, and has all requisite corporate power and authority to carry on their
business as now conducted and as proposed to be conducted. P&U is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.

        SECTION 4.6 VALIDITY OF AGREEMENT. No action, suit, proceeding or
investigation is pending or threatened that questions the validity of this
Agreement or any other agreement contemplated hereby or the right of P&U to
enter into such agreements.

        SECTION 4.7 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of P&U is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices, qualifications
or filings required or permitted to be filed with certain state or federal
securities commissions or self-regulatory organizations, which notices,
qualifications, or filings will be filed on a timely basis.

                                    ARTICLE 5
                              CONDITIONS TO CLOSING

        SECTION 5.1 CONDITIONS TO OBLIGATIONS OF P&U AT CLOSING. P&U's
obligation to purchase the shares of the Company's Common Stock at the Closing
is subject to the fulfillment to P&U's satisfaction, on or prior to the Closing,
of each of the following conditions, any of which may be waived by P&U:

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               (a) Representations and Warranties/Performance of Obligations.
        The representations and warranties made by the Company in Article 3
        hereof and in the ISV-900 Project Agreement shall be true and correct in
        all material respects on the Closing Date with the same force and effect
        as if they had been made on and as of that date, and the Company shall
        have performed and complied in all material respects with all material
        obligations and conditions required under this Agreement to be performed
        or complied with by it on or prior to the Closing, and a Certificate of
        the Company, certifying the foregoing, shall be delivered to P&U at the
        Closing.

               (b) Proceedings and Documents. All corporate and other
        proceedings in connection with the transactions contemplated at the
        Closing and all documents and instruments incident to such actions shall
        be reasonably satisfactory in substance and form to counsel to P&U, and
        counsel to P&U shall have received all such counterpart originals or
        certified or other copies of such documents as they may reasonably
        require.

               (c) Qualifications, Legal Investment. All authorizations,
        approvals, or permits, if any, of any governmental authority or
        regulatory body of the United States or of any state that are required
        in connection with the lawful sale and issuance of the shares of Common
        Stock to be sold and issued pursuant to this Agreement shall have been
        duly obtained and shall be effective on and as of the Closing. No stop
        order or other order enjoining the sale of the shares to be sold at the
        Closing shall have been issued and no proceedings for such purpose shall
        be pending or, to the knowledge of the Company, threatened by the
        Securities and Exchange Commission, or any commissioner of corporations
        or similar officer of any state having jurisdiction over such
        transaction. At the time of the Closing, the sale and issuance of the
        shares of Common Stock to be issued and sold at the Closing shall be
        legally permitted by all laws and regulations to which P&U and the
        Company are subject.

               (d) Opinion of Counsel to the Company. In connection with any
        sale of shares hereunder, P&U shall have received from counsel to the
        Company, an opinion letter addressed to them, dated the date of the
        Closing in substantially the form attached hereto as Exhibit D.

               (e) No Material Adverse Change. The Company shall not have
        suffered a material adverse change to its business taken as a whole
        through the Closing Date.

               (f) No Material Default or Notice of Termination under the
        ISV-900 Project Agreement. In addition to the conditions set forth
        above, P&U's obligation to purchase the shares of the Company's Common
        Stock, as applicable, at the Closing shall also be subject to the
        condition that the Company is not in material default under the ISV-900
        Project Agreement or that a notice of termination of the ISV-900 Project
        Agreement shall not have been duly given by either party under the terms
        of such ISV-900 Project Agreement.

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               (g) Shares Available. The Company has available under its
        Certificate of Incorporation as in effect on the date hereof, and shall
        have available under its Certificate of Incorporation as in effect at
        the Closing Date, sufficient authorized but unissued shares of its
        Common Stock to issue and sell to P&U all of the shares of Common Stock
        to be issued at Closing.

        SECTION 5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING. The
Company's obligation to issue and sell the shares of its Common Stock to be sold
at the Closing, is subject to the fulfillment to the Company's satisfaction, on
or prior to the Closing of each of the following conditions, any of which may be
waived by the Company:

               (a) Representations and Warranties/Performance of Obligations.
        The representations and warranties made by P&U in Article 4 hereof and
        in the ISV-900 Project Agreement shall be true and correct in all
        material respects on the Closing Date, with the same force and effect as
        if they had been made on and as of that date, and P&U shall have
        performed and complied in all material respects with all material
        obligations and conditions required under this Agreement to be performed
        or complied with by it on or prior to the Closing, and a certificate
        duly executed by an officer of P&U, certifying the foregoing, shall be
        delivered to the Company at the Closing.

               (b) Qualifications, Legal Investment. All authorizations,
        approvals, or permits, if any, of any governmental authority or
        regulatory body of the United States or of any state that are required
        in connection with the lawful sale and issuance of the shares of Common
        Stock to be sold and issued pursuant to this Agreement shall have been
        duly obtained and shall be effective on and as of the Closing. No stop
        order or other order enjoining the sale of the shares to be sold at the
        Closing shall have been issued and no proceedings for such purpose shall
        be pending or, to the knowledge of the Company, threatened by the
        Securities and Exchange Commission, or any commissioner of corporations
        or similar officer of any state having jurisdiction over such
        transaction. At the time of the Closing, the sale and issuance of the
        shares of Common Stock to be sold and issued at such closing shall be
        legally permitted by all laws and regulations to which P&U and the
        Company are subject.

               (c) No Material Default or Notice of Termination under the
        License ISV-900 Project Agreement. In addition to the conditions set
        forth above, the Company's obligation to sell the shares of the
        Company's Common Stock at the Closing shall also be subject to the
        condition that P&U is not in material default under the ISV-900 Project
        Agreement or that a notice of termination of the ISV-900 Project
        Agreement shall not have been duly given by either party under the terms
        of such ISV-900 Project Agreement.

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                                    ARTICLE 6
                            COVENANTS OF THE COMPANY

        SECTION 6.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company agrees
that it shall do the following for so long as P&U, together with its affiliates,
owns at least five percent (5%) of the Company's outstanding Common Stock.

               (a) Preserve and maintain its corporate existence and good
        standing in the State of Delaware, and qualify and remain qualified as a
        foreign corporation in each jurisdiction in which the failure to so
        qualify would have a material adverse effect on its business or
        properties.

               (b) Keep adequate (i) records and books of account reflecting all
        financial transactions of the Company's business, (ii) minute books
        containing accurate records of all meetings and accurately reflecting
        all corporate action of its stockholders and its board of directors, and
        (iii) stock books and ledgers correctly recording all transfers and
        issuances of all capital stock.

               (c) Maintain, keep and preserve all the material assets owned,
        leased or used in the Company's business in reasonable operating
        condition and repair, ordinary wear and tear excepted, and discharge and
        pay in full when due, except those disputed in good faith, all material
        obligations of the Company.

               (d) Engage in the Company's research and development and business
        in the ordinary course and use reasonable commercial efforts to preserve
        its business and the goodwill of customers, suppliers and others having
        business relations with the Company.

               (e) Comply with all material terms and conditions of the ISV-900
        Project Agreement.

               (f) Maintain insurance on the assets of the Company comparable to
        that which the Company has customarily maintained in the past.

               (g) Comply in all material respects with all governmental laws,
        orders, decrees, rules or regulations applicable to the Company, its
        assets and business, employment practices and procedures, employees or
        operations, including the rules and regulations of the Securities and
        Exchange Commission and any exchange or automated inter-dealer quotation
        system on which the Common Stock is traded and then current Good
        Clinical Practices and then current Good Manufacturing Practices, except
        where the failure to so comply will not have a material adverse effect
        on the Company, its business and operations, or the Company's ability to
        comply with the terms of the ISV-900 Project Agreement.

               (h) Timely file, all tax returns that are required to be filed
        by it and pay on or before the date they are required to be paid all
        taxes due pursuant to those tax returns or

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        any assessment received by it or otherwise required to be paid, except
        taxes being contested in good faith by appropriate proceedings, if
        applicable.

        SECTION 6.2 NEGATIVE COVENANTS OF THE COMPANY. The Company agrees that,
so long as P&U, individually or collectively with its affiliates owns at least
five percent (5%) of the Company's outstanding Common Stock, it shall not do,
without P&U's prior written approval (which approval shall not be unreasonably
withheld), any of the following:

               (a) Amend its Certificate of Incorporation or its by-laws in any
        manner that would materially and adversely affect the ability of the
        Company to consummate the transactions contemplated by this Agreement or
        the ISV-900 Project Agreement.

               (b) Directly or indirectly sell, lease, or otherwise dispose of
        (other than through a license) any of the assets related to the ISV-900
        Project other than in a merger or sale of the entire Company or all or
        substantially all of the assets. Any successor of InSite pursuant to a
        merger or otherwise shall be bound by all of the obligations of InSite
        as contained herein. However, the Company may license its other products
        to third parties, provided that the Company notifies P&U of any such
        license before that license becomes effective.

               (c) Transfer any of the Company's material assets used in its
        business to any person and thereafter directly or indirectly lease back
        the same or similar property.

               (d) Make any significant change in its accounting policies,
        except for any change required by GAAP or otherwise in the opinion of
        the Company's independent public accountants.

        SECTION 6.3   DEMAND REGISTRATION.

               (a) At any time that P&U owns any Common Stock of the Company,
        P&U shall have the right to cause the Company to register such
        Registrable Shares (as defined below) with the Securities and Exchange
        Commission and qualify such shares with such state securities
        commissions as P&U shall reasonably request in order to allow P&U to
        sell such shares, provided that the Company shall not be required to
        qualify such shares in any state where such qualification would require
        the Company to consent to personal jurisdiction in such state (the
        "Demand Registration Right"). P&U shall be entitled to a total of *
        Demand Registration *. As used in Sections 6.4 through 6.9 and 7.2, the
        term "Registrable Shares" shall mean all Common Stock issued to P&U
        pursuant to this Agreement.

               (b) If, any offering pursuant to the P&U Demand Registration
        Right, involves an underwriting and any other person has piggy-back
        registration rights with respect to such registration, and the managing
        underwriter shall impose a limitation on the number of shares which may
        be included in the registration statement because, in its judgment, such
        limitation is necessary to effect an orderly public distribution or
        because in its

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

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        judgment the inclusion of shares being sold by persons other than P&U
        would adversely affect the offering, then the Company shall not be
        obligated to include in such registration statement any portion of
        shares of any other person or P&U as provided in 6.3(c) below.

               (c) Notwithstanding any other provision of this Section 6.3, if
        the underwriter, in its reasonable judgment, advises the Company in
        writing that marketing factors require a limitation of the number of
        shares to be underwritten, then the Company shall so advise P&U, and any
        other holders of registrable securities which would otherwise be
        underwritten pursuant to such registration statement, and the number of
        shares of registrable securities that may be included in the
        underwriting shall be allocated among all such persons, including P&U,
        first to P&U, and any other persons making such demand together with P&U
        and then to all other persons, and in each case, in proportion (as
        nearly as practicable) to the amount of registrable securities of the
        Company owned by each such person.

               (d) Notwithstanding the foregoing, if the Company shall furnish
        to P&U a certificate signed by the Chief Executive Officer of the
        Company stating that, in the good faith judgment of the Board of
        Directors of the Company, it would be seriously detrimental to the
        Company and its stockholders for such registration statement to be filed
        and it is therefore essential to defer the filing of such registration
        statement, the Company shall have the right to defer taking action with
        respect to such filing for a period of not more than ninety (90) days
        after receipt of the demand of P&U; provided that the Company may not
        utilize this right more than once in any twelve-month period.

        SECTION 6.4   PIGGY-BACK REGISTRATION.

               (a) If the Company shall determine at any time to register for
        its own account or the account of others under the Securities Act any of
        its equity securities, other than on Form S-4 or Form S-8 or their then
        equivalents or otherwise relating to shares of Common Stock to be issued
        in connection with any acquisition of any entity or business or shares
        of Common Stock issuable under stock option or other employee benefit
        plans, it shall send to P&U written notice of such determination and, if
        within five (5) business days after receipt of such notice, P&U shall so
        request in writing, the Company shall use its best efforts to include in
        such registration statement all or any part of the Registrable Shares
        that P&U requests to be registered.

               (b) If, in connection with any offering involving an
        underwriting, the managing underwriter shall impose a limitation of the
        number of shares which may be included in the registration statement
        because, in its judgment, such limitation is necessary to affect an
        orderly public distribution or because in its judgment the inclusion of
        shares being sold by persons other than the Company would adversely
        effect the offering, then the Company shall be obligated to include in
        such registration statement only such limited portion (which may be
        none) of the Registrable Shares with respect to which P&U has requested
        inclusion pursuant hereto as may reasonably be determined by the
        managing underwriter. Any inclusion of Registrable Shares in an
        offering, when the

                                       11
<PAGE>   13

        managing underwriter has so limited the number of shares that may be
        included in such offering, shall be allocated pro rata among the holders
        of similar "piggyback" registration rights granted by the Company
        seeking to include their shares, in proportion to the number of shares
        (whether or not such shares are sought to be included in such offering)
        held by such persons. The Company shall have the right to delay or
        withdraw any registration initiated by it pursuant to Section 6.4
        hereof.

        SECTION 6.5 EFFECTIVENESS. The Company will use its best efforts to
maintain the effectiveness for up to 90 days, (or such shorter period of time as
the underwriters need to complete the distribution of a registered offering or
until the securities are actually sold) of any registration statement pursuant
to which any of the Registrable Shares are being offered, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable state securities laws or regulations.

        SECTION 6.6   INDEMNIFICATION.

               (a) In the event that the Company registers any of the
        Registrable Shares under the Securities Act, the Company will indemnify
        and hold harmless P&U and each underwriter of Registrable Shares
        (including their officers, directors, affiliates and partners and
        including any broker or dealer through whom Registrable Shares may be
        sold in such registration) and each person, if any, who controls P&U or
        any such underwriter within the meaning of Section 15 of the Securities
        Act from and against any and all losses, claims, damages, expenses or
        liabilities, joint or several, to which they or any of them become
        subject under the Securities Act, applicable state securities laws or
        under any other statute or at common law or otherwise, as incurred, and,
        except as hereinafter provided, will reimburse P&U, each such
        underwriter and each such controlling person, if any, for any legal or
        other expenses reasonably incurred by them or any of them in connection
        with investigating or defending any actions whether or not resulting in
        any liability, as incurred, insofar as such losses, claims, damages,
        expenses, liabilities or actions arise out of or are based upon any
        untrue statement or alleged untrue statement of a material fact
        contained in the registration statement, in any preliminary or amended
        preliminary prospectus or in the final prospectus (or the registration
        statement or prospectus as from time to time amended or supplemented by
        the Company) or arise out of or are based upon the omission or alleged
        omission to state therein a material fact required to be stated therein
        or necessary in order to make the statements therein not misleading, or
        any violation by the Company of any rule or regulation promulgated under
        the Securities Act or any state securities laws applicable to the
        Company and relating to action or inaction required of the Company in
        connection with such registration, unless (i) such untrue statement or
        alleged untrue statement or omission or alleged omission was made in
        such registration statement, preliminary or amended preliminary
        prospectus or final prospectus in reliance upon and in conformity with
        information furnished in writing to the Company in connection therewith
        by P&U or any such underwriter expressly for use therein, or unless (ii)
        in the case of a sale directly by P&U (including a sale of Registrable
        Shares through any underwriter retained by P&U to engage in a
        distribution

                                       12
<PAGE>   14

        solely on behalf of P&U), such untrue statement or alleged untrue
        statement or omission or alleged omission was contained in a preliminary
        prospectus and corrected in a final or amended prospectus copies of
        which were delivered to P&U or such underwriter on a timely basis, and
        P&U or such underwriter failed to deliver a copy of the final or amended
        prospectus at or prior to the confirmation of the sale of the
        Registrable Shares to the person asserting any such loss, claim, damage
        or liability in any case where such delivery is required by the
        Securities Act; provided, however, that the indemnity agreement
        contained in this subsection 6.6(a) shall not apply to amounts paid in
        settlement of any such loss, claim, damage, expense, liability or action
        if such settlement is effected without the consent of the Company, which
        consent shall not be unreasonably withheld.

               (b) P&U will indemnify and hold harmless the Company, each
        underwriter of Registrable Shares and any other persons selling
        securities in such registration statement (including their officers,
        directors, affiliates and partners and including any broker or dealer
        through whom Registrable Shares may be sold in such registration) and
        each person, if any, who controls the Company, any such underwriter or
        other such person selling securities in such registration statement
        within the meaning of Section 15 of the Securities Act from and against
        any and all losses, claims, damages, expenses or liabilities, joint or
        several, to which they or any of them may become subject, under the
        Securities Act, applicable state securities laws or under any other
        statutes or at common law or otherwise, as incurred, insofar as such
        losses, claims, damages, expenses or liabilities (or actions in the
        respect thereto) arise out of are based upon any untrue statement or
        alleged untrue statement of a material fact contained in the
        registration statement, in any preliminary or amended preliminary
        prospectus or in the final prospectus (or the registration statement or
        prospectus as from time to time amended or supplemented by the Company)
        or arise out of or are based upon the omission or alleged omission to
        state therein a material fact required to be stated therein or necessary
        in order to make the statements therein not misleading, or any violation
        by the Company of any rule or regulation promulgated under the
        Securities Act or any state securities laws applicable to the Company
        and relating to action or inaction required of the Company in connection
        with such registration, in each case to the extent (and only to the
        extent) that such untrue statement, alleged untrue statement, alleged
        omission, omission or violation occurs in reliance upon and in
        conformity with written information furnished by or on behalf of P&U
        expressly for use in connection with such registration; and P&U will
        reimburse, as incurred, the Company, each such underwriter, each such
        other person selling securities in such registration statement and each
        such controlling person, if any, for any legal or other expenses
        reasonably incurred by them or any of them in connection with
        investigating or defending any such loss, claim, damage, liability or
        action, whether or not resulting in any liability; provided, however,
        that the indemnity agreement contained in this subsection 6.6(b) shall
        not apply to amounts paid in settlement of any such loss, claim, damage,
        expense, liability or action if such settlement is effected without the
        consent of P&U, which consent shall not be unreasonably withheld. In any
        event, except in the case of willful misconduct or fraudulent
        misrepresentations, the liability of P&U under the indemnity provisions
        of this Agreement shall be limited to an

                                       13
<PAGE>   15

        amount equal to the gross proceeds received by P&U from the sale of
        shares in any transaction to which such indemnification relates.

               (c) Promptly after receipt by an indemnified person under this
        Section 6.6 of notice of the commencement or threat of any action in
        respect of which indemnity may be sought against the indemnifying party,
        such indemnified person shall notify the indemnifying party in writing
        of the commencement thereof (provided, that failure to so notify the
        indemnifying party shall not relieve the indemnifying party from any
        liability it may have hereunder, except to the extent prejudiced by such
        failure) and, subject to the provisions hereinafter stated, the
        indemnifying party shall be entitled to assume the defense of such
        action (including the employment of counsel) and the payment of expenses
        insofar as such action shall relate to any alleged liability in respect
        of which indemnity may be sought against the indemnifying party.

               (d) An indemnified person under this Section 6.6 shall have the
        right to employ separate counsel in any such action and to participate
        in the defense thereof but the fees and expenses of such counsel
        subsequent to any assumption of the defense by the indemnifying party
        shall not be at the expense of the indemnifying party (but shall be at
        the sole expense of the indemnified person) unless the employment of
        such counsel has been specifically authorized in writing by the
        indemnifying party; provided, however, that, if the defendants in any
        such action include both the indemnified person and the indemnifying
        party and the indemnified person shall have reasonably concluded that
        there may be reasonable defenses available to it which are different
        from or additional to those available to the indemnifying party or if
        the interests of the indemnified person reasonably may be deemed to
        conflict with the interests of the indemnifying party, the indemnified
        person shall have the right to select a separate counsel and to assume
        such legal defenses and otherwise to participate in the defense of such
        action, with the expenses and fees of such separate counsel and other
        expenses related to such participation to be reimbursed by the
        indemnifying party as incurred. At any time, an indemnified person may
        select separate counsel and assume its own legal defense with the
        expenses and fees of such separate counsel and other expenses related to
        such separate counsel to be borne by such indemnified person. An
        indemnifying party shall not be liable to an indemnified person for any
        settlement of any such action effected without the indemnifying party's
        written consent (which consent shall not be unreasonably withheld or
        delayed). An indemnifying party shall not, except with the approval of
        each party being indemnified under this Section 6.6 (which approval
        shall not be unreasonably withheld or delayed), consent to entry of any
        judgment or enter into any settlement which does not include as an
        unconditional term thereof the giving by the claimant or plaintiff to
        the parties being so indemnified of a release from all liability in
        respect to such claim or litigation.

               (e) In order to provide for just and equitable contribution to
       joint liability under the Securities Act in any case in which an
       indemnified person makes a claim for indemnification pursuant to this
       Section 6.6 but indemnification is unavailable to or insufficient to hold
       harmless an indemnified person, or it is judicially determined (by the

                                       14
<PAGE>   16

       entry of a final judgment or decree by a court of competent jurisdiction
       and the expiration of time to appeal or the denial of the last right of
       appeal) that such indemnification may not be enforced in such case
       notwithstanding the fact that this Section 6.6 provides for
       indemnification in such case, then the indemnifying party and the
       indemnified person will contribute to the aggregate losses, claims,
       damages or liabilities to which they may be subject (after contribution
       from others) in such proportion as is appropriate to reflect the relative
       fault of the indemnifying party on the one hand and of the indemnified
       person on the other hand in connection with the statements or omissions
       which resulted in such losses, claims, damages or liabilities, as well as
       any other relevant equitable considerations. The relative fault of the
       indemnifying party on the one hand and of indemnified person on the other
       hand shall be determined by reference to, among other things, whether the
       untrue or alleged untrue statement of a material fact or omission or
       alleged omission to state a material fact relates to information supplied
       by the Company on the one hand or by P&U on the other hand, and each
       party's relative intent, knowledge, access to information and opportunity
       to correct or prevent such statement or omission; provided, however,
       that, in any such case, (A) except in the case of willful misconduct or
       fraudulent misrepresentations, P&U will not be required to contribute any
       amount in excess of the public offering price of all Registrable Shares
       offered by it pursuant to such registration statement; and (B) no person
       or entity guilty of fraudulent misrepresentation (within the meaning of
       Section 11(f) of the Securities Act) will be entitled to contribution
       from any person or entity who was not guilty of such fraudulent
       misrepresentation.

        SECTION 6.7 FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the
preceding Sections of this Article 6, the Company is required to register
Registrable Shares, the Company agrees that it shall also do the following:

               (a) Furnish to P&U such copies of each preliminary and final
        prospectus and such other documents as P&U may reasonable request to
        facilitate the public offerings of the Registrable Shares;

               (b) Use its best efforts to register or qualify the Registrable
        Shares covered by the registration statement under the applicable
        securities or "blue sky" laws of such jurisdictions as P&U may
        reasonably request;

               (c) Permit P&U or its counsel or other representatives to inspect
        and copy such corporate documents and records as may reasonably be
        requested by them, after reasonable advance notice, during normal
        business hours and without undue interference with the operation of the
        Company's business;

               (d) Furnish to P&U a copy of all documents filed with and all
        correspondence from or to the Securities and Exchange Commission in
        connection with any such offering of securities;

                                       15
<PAGE>   17

               (e) Otherwise use its best efforts to comply with all applicable
        rules and regulations of the Securities and Exchange Commission, and (to
        the extent required) make available to its security holders, as soon as
        reasonably practicable, an earning statement covering the period of at
        least twelve months, but not more than eighteen months, beginning with
        the first month after the effective date of the registration statement
        covering a public offering, which earning statement shall satisfy the
        provisions of Section 11(a) of the Securities Act and Rule 158
        thereunder.

        SECTION 6.8 EXPENSES. In the case of each registration effected under
Sections 6.3, 6.4 and 6.7, * shall bear * reasonable costs and expenses of each
such registration *, including, but not limited to, * printing, legal and
accounting fees and expenses, Securities and Exchange Commission and NASD or
AMEX (as applicable) filing fees and "blue sky" fees and expenses; provided,
however, that * shall have no obligation to pay or otherwise bear any portion of
*, or the fees and expenses of counsel for P&U in connection with the
registration of the Registrable Shares.

        SECTION 6.9 TERMINATION OF REGISTRATION RIGHTS. No holder of Registrable
Shares shall be entitled to exercise any right provided for in, and the Company
shall have no obligation pursuant to, Sections 6.3, 6.4, 6.5 or 6.7 hereof after
such time as all Registrable Shares held by a holder may be sold pursuant to
Rule 144 promulgated under the Securities Act during a given ninety-day period;
provided, however, if the Company fails to comply with SEC Rule 144(c)(1), the
Company's obligations pursuant to Section 6.3, 6.4, 6.5 and 6.7 hereof shall be
reinstated for so long as such failure to comply shall continue.

                                    ARTICLE 7
                                COVENANTS OF P&U

SECTION 7.1 STANDSTILL AGREEMENT. Other than shares of Common Stock which it is
purchasing pursuant to this Agreement or that it may become obligated to
purchase under that certain Stock Purchase Agreement dated January 28, 1999, by
and among the Company and Pharmacia & Upjohn AB and Pharmacia and Upjohn SA, P&U
hereby covenants and agrees that it will not, nor will it permit any of its
affiliates (including parents, subsidiaries or other related entities) to
purchase or otherwise acquire, directly or indirectly, any equity securities of
the Company (or any securities convertible, exercisable or exchangeable for any
such securities) without the prior written approval of the Company. This
provision shall terminate and be of no further force or effect thirty (30)
months from the date hereof or such earlier date as shall be agreed to in
writing by the Company; provided, that the restrictions of this Section 7.1
shall automatically terminate upon the occurrence of any of the following
events: (a) the filing with the Securities and Exchange Commission of a Schedule
13D by any person or entity other than P&U or its affiliates or any other party
holding ten percent (10%) or more (or five percent (5%) or more in the case of
subpart (y) below) of any class of the Company's voting equity securities as of
the date hereof indicating that such person or entity has acquired beneficial
ownership of (x) more than 9.99% of any class of the Company's voting equity
securities, or (y) has acquired at least 5% of any class of the Company's voting
equity securities which Schedule 13D expresses

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

                                       16
<PAGE>   18

the filing party's intention to assume control of the Company, whether by tender
offer, merger, proxy contest or otherwise; (b) the commencement of a tender
offer by any person or entity to acquire beneficial ownership of 9.99% or more
of the Company's outstanding voting equity securities; or (c) the solicitation
of proxies by any party other than the Company to which Rule 14(a) of the rules
and regulations under the Securities and Exchange Act of 1934, as amended,
applies and is intended to effect a change in the majority of members of the
Company's Board of Directors.

        SECTION 7.2 REGISTRATION. Whenever under the preceding Sections of
Article 6, P&U is registering Registrable Shares pursuant to any registration
statement, (i) P&U agrees to timely provide to the Company, at its request, such
information and materials as it may reasonably request in order to effect the
registration of such Registrable Shares and (ii) if the offering is
underwritten, the Company and P&U agrees to execute an underwriting agreement
containing customary terms and conditions.

        SECTION 7.3 VOTING AGREEMENT. P&U agrees that it shall, so long as it
holds shares of Common Stock, vote such shares with respect to any proposed
merger or combination or sale of all or substantially all of the assets of the
Company, with or to any other entity in the same proportion as the shares of the
Company's equity securities voted in favor of such transaction by other parties
who are not themselves a party to any such merger, combination or asset sale;
provided, however, that the foregoing voting requirement shall not apply to P&U
in any transaction which is not approved by the Company's Board of Directors or
in the event of a proposed merger or combination or sale of substantially all of
the assets of the Company to a competitor of P&U.

        SECTION 7.4 LIMITATION ON SECURITIES ISSUED PURSUANT TO THIS AGREEMENT.
Unless permitted by the applicable rules and regulations of the American Stock
Exchange, in no event shall the total number of shares of Common Stock issued
pursuant to this Agreement exceed the maximum number of shares of Common Stock
that the Company can so issue pursuant to Rule 713(a) of the American Stock
Exchange (or any successor rule or comparable rule of an applicable exchange or
automated quotation system) which, as of the date of this Agreement shall be
19.99% of shares outstanding on the date of this Agreement.

                                    ARTICLE 8
                                  MISCELLANEOUS

        SECTION 8.1 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State of New York and
the United States of America, without regard to choice of law rules thereof.

        SECTION 8.2 PUBLIC STATEMENTS. Any statement to the public regarding
this Agreement or any aspect of this Agreement shall be made subject to and in
accordance with the terms of the ISV-900 Project Agreement.

                                       17
<PAGE>   19

        SECTION 8.3 ASSIGNMENT. The rights and obligations under this Agreement
may not be assigned by either the Company or P&U without the prior written
consent of the other party; provided, however, that the Company may, without the
prior consent of P&U, assign the rights and obligations under this Agreement to
the acquiring company or any of its affiliates in connection with a merger,
combination or sale of all or substantially all of the assets of the Company.

        SECTION 8.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, and permitted assigns of the Company and
P&U.

        SECTION 8.5 ENTIRE AGREEMENT. This Agreement and the ISV-900 Project
Agreement (and all of their exhibits and appendices (collectively, the
"Agreements")) set forth all of the covenants, promises, agreements, warranties,
representations, conditions, and understandings between the Company and P&U and
supersede and terminate all prior agreements and understandings between these
parties with respect to the subject matter hereof and thereof. There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Company and P&U other than
as set forth in the Agreement, the ISV-900 Project Agreement (and all of their
exhibits and appendices). The Agreements are intended to define the full extent
of the legally enforceable undertakings of the Company and P&U and no promise or
representation, whether written or oral, which is not set forth explicitly
herein or therein is intended by either party to be legally binding. The Company
and P&U acknowledges that, in deciding to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, neither has
relied upon any statement or representation, written or oral, other than those
explicitly set forth in this Agreement.

        SECTION 8.6 SEVERABILITY. Whenever possible, each provision of the
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of the Agreement. In the event of such invalidity, the parties shall seek to
agree on an alternative enforceable provision that preserves the original
purpose of this Agreement.

        SECTION 8.7 AMENDMENT AND WAIVER. Except as otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and P&U. No amendment to
this Agreement shall be binding upon the parties unless reduced to writing and
signed by the respective authorized officers of the parties. Any amendment or
waiver effected in accordance with this Section shall be binding upon any holder
of any securities purchased under this Agreement (including securities into
which such securities have been converted), each future holder of all such
securities, and the Company.

                                       18
<PAGE>   20

        SECTION 8.8 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
and received (a) upon personal delivery, (b) on the fifth day following mailing
by registered or certified mail return receipt requested postage prepaid,
addressed to the Company or P&U at their respective addresses listed below (or
at such other address for a party as shall be specified by like notice;
provided, that notices of a change of address shall be effective only upon
receipt thereof), (c) upon transmission by facsimile (with telephonic notice),
or (d) upon confirmed delivery by overnight commercial courier service:

        If to the Company, address to:      InSite Vision Incorporated
                                            Attention:  Chief Executive Officer
                                            965 Atlantic Avenue
                                            Alameda, CA  94501

        with a copy to:                     Brobeck, Phleger & Harrison LLP
                                            Attention:  Timothy R. Curry
                                            Two Embarcadero Place
                                            2200 Geng Road
                                            Palo Alto, CA  94303

        If to P&U, address to:              Pharmacia & Upjohn
                                            Attention: Vice President, Licensing
                                            100 Route 206 North
                                            Peapack, NJ  07977

        with a copy to:                     Pharmacia & Upjohn
                                            Attention:  Vice President,
                                            Corporate Law
                                            100 Route 206 North
                                            Peapack, NJ  07977

        SECTION 8.9 FEES AND EXPENSES. Except as otherwise provided herein, the
Company and P&U shall bear their own expenses and legal fees incurred on their
behalf with respect to this Agreement and the transactions contemplated hereby.

        SECTION 8.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

        SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

                                       19
<PAGE>   21

        IN WITNESS WHEREOF, this Agreement is executed and delivered by the
parties as of the date first above written.

                                            INSITE VISION INCORPORATED

                                            By: /s/ S. KUMAR CHANDRASEKARAN
                                                --------------------------------
                                                Name: S. Kumar Chandrasekaran
                                                Title: CEO

                                            PHARMACIA & UPJOHN AB

                                            By: /s/ HAKAN ASTROM
                                                --------------------------------
                                                Name: Hakan Astrom
                                                Title: Sr. VP Corp. Strategy &
                                                       Investor Relations

                                            By: /s/ MATS PETTERSSON
                                                --------------------------------
                                                Name: Mats Pettersson
                                                Title: Senior Vice President

                                       20
<PAGE>   22
                                    EXHIBIT A

                             SCHEDULE OF EXCEPTIONS

                                      None

                                      A-1
<PAGE>   23

                                    EXHIBIT B

                          CERTIFICATE OF INCORPORATION

                                      B-1
<PAGE>   24

                                    EXHIBIT C

                                     BYLAWS

                                      C-1
<PAGE>   25

                                    EXHIBIT D

                               OPINION OF COUNSEL

Pharmacia & Upjohn AB
c/o Pharmacia & Upjohn Company
100 Route 206 North
Peapack, New Jersey 07977

               Re: InSite Vision Incorporated

Ladies and Gentlemen:

               We have acted as counsel to InSite Vision Incorporated, a
Delaware corporation (the "Company") in connection with the transactions set
forth and contemplated by the Stock Purchase Agreement to be entered into
contemporaneously herewith by and between Pharmacia & Upjohn AB and the Company
(the "Stock Purchase Agreement"). This opinion is furnished to you pursuant to
Section 5.1(d) of the Stock Purchase Agreement.

               In rendering the opinions expressed below, we have examined and
are familiar with originals or copies of the Company's Certificate of
Incorporation, and all amendments thereto, as certified by the Delaware
Secretary of State (the "Certificate"), the Company's Bylaws, a Certificate of
Good Standing for the Company issued by the Delaware Secretary of State and such
other agreements, instruments and documents as we have deemed necessary as a
basis for such opinions.

               In rendering the opinions set forth herein, we have assumed (i)
the genuineness of all signatures on all documents submitted to us, (ii) the
capacity and competence of each natural person who executed any of these
documents, (iii) the authenticity of all documents submitted to us as originals
and of the originals of all documents submitted to us as copies, (iv) the
conformity with the original documents of all documents submitted to us as
copies and (v) the filing by the Company of all legal forms and documents
required to be filed by the Company, and such filings being made in conformity
with law.

               Based on the foregoing and subject to the qualifications and
limitations set forth herein, we are of the opinion that:

               1. InSite Vision Incorporated is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified and in good standing as a foreign corporation in each
jurisdiction in which such qualification is required or necessary.

               2. The authorized capital of the Company is as set forth in the
Certificate as certified by the Delaware Secretary of State on the date hereof.

                                       D-1
<PAGE>   26

               3. The Company has full corporate power and authority to execute
and deliver the Stock Purchase Agreement and all agreements related thereto, and
to carry out the transactions contemplated thereby.

               4. The Stock Purchase Agreement and all agreements related
thereto, have been duly authorized and approved by such directors and officers
that are legally required therefor, have been duly executed and delivered by the
Company.

               5. The execution and delivery of the Stock Purchase Agreement and
all other agreements or instruments entered into or delivered in connection with
the transactions contemplated thereby and the performance by the Company of
their terms (i) do not conflict with or result in a violation of the Company's
Certificate or Bylaws or any judgment, order or decree of any court or agency to
which the Company or its assets is subject and (ii) do not conflict with and
will not, with or without notice or lapse of time, constitute a material breach
or default of or result in any lien under any material contract, undertaking,
indenture or other agreement or instrument by which the Company is bound or to
which it is a party.

               6. No notice, consent, authorization, approval or order is
required to be given or obtained by the Company of any court or governmental
agency or body for the consummation by the Company of the transactions
contemplated by the Stock Purchase Agreement or any of the other agreements
related thereto.

               7. There is no suit, action, or legal, administrative,
arbitration, or other proceeding pending, or threatened against the Company
pertaining to the transactions contemplated by the Stock Purchase Agreement.

               The opinions expressed herein are solely for benefit of, and may
be relied upon by, the addressee hereof. The opinions may not be relied upon for
any other purpose or relied upon by any other person, firm or entity for any
purpose. The opinions expressed herein are as of the date hereof.

                                Very truly yours,

                                BROBECK PHLEGER & HARRISION

                                       D-2<PAGE>   1

                                                                   EXHIBIT 10.44
                                CREDIT AGREEMENT

                                     between

                           INSITE VISION INCORPORATED,

                                  as Borrower,

                                       and

                           PHARMACIA & UPJOHN COMPANY,

                                    as Lender

                          Dated as of November 11, 1999

--------------------------------------------------------------------------------
                           $4,000,000 Credit Facility
--------------------------------------------------------------------------------
<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                <C>
Article 1. - Definitions ....................................................       1

      Section 1.1   "Affiliate" .............................................       1
      Section 1.2   "Agreement" .............................................       1
      Section 1.3   "Base Rate" .............................................       1
      Section 1.4   "Business Day" ..........................................       1
      Section 1.5   "Credit Documents" ......................................       1
      Section 1.6   "Credit Loan" ...........................................       1
      Section 1.7   "Credit Note" ...........................................       2
      Section 1.8   "Debt" ..................................................       2
      Section 1.9   "Default" ...............................................       2
      Section 1.10  "Default Rate" ..........................................       2
      Section 1.11  "Environmental Laws" ....................................       2
      Section 1.12  "ERISA" .................................................       2
      Section 1.13  "Event of Default" ......................................       3
      Section 1.14  "GAAP" ..................................................       3
      Section 1.15  "Hazardous Substance" ...................................       3
      Section 1.16  "ISV-900 Agreements" ....................................       3
      Section 1.17  "Initial Loan Date" .....................................       3
      Section 1.18  "ISV-900 Project" .......................................       3
      Section 1.19  "ISV-900 Project Agreement" .............................       3
      Section 1.20  "Lien" ..................................................       3
      Section 1.21  "Obligations" ...........................................       3
      Section 1.22  "Permitted Debt" ........................................       4
      Section 1.23  "Permitted Liens" .......................................       4
      Section 1.24  "Person" ................................................       5
      Section 1.25  "Plan" ..................................................       5
      Section 1.26  "Termination Date" ......................................       5

Article 2. - Amount and Terms of the Credit Loan ............................       5

      Section 2.1   Total Credit ............................................       5
      Section 2.2   Credit Loans ............................................       5
      Section 2.3   Interest Rate ...........................................       6
      Section 2.4   Payments of Principal, Interest and Costs ...............       6
      Section 2.5   Voluntary Prepayments ...................................       7
      Section 2.6   Method of Payment .......................................       8
      Section 2.7   Use of Proceeds .........................................       8
      Section 2.8   Application .............................................       8

Article 3. - Conditions of Lending ..........................................       8

      Section 3.1   Conditions of Borrowing .................................       8
      Section 3.2   Credit Documents ........................................       9
      Section 3.3   Conditions Precedent to All Credit Loans ................       9

Article 4. - Representations and Warranties .................................      10

      Section 4.1   Representations, Warranties and Covenants of the Borrower      10
      Section 4.2   Survival of Representations .............................      12
</TABLE>

                                       i
<PAGE>   3

<TABLE>
<S>                                                                                <C>
Article 5. - Covenants of the Borrower ......................................      12

      Section 5.1   Affirmative Covenants ...................................      12
      Section 5.2   Negative Covenants ......................................      13
      Section 5.3   Public Filings ..........................................      14

Article 6. - Default ........................................................      14

      Section 6.1   Events of Default .......................................      14
      Section 6.2   Obligation to Lend; Acceleration ........................      15
      Section 6.3   Right of Set-off ........................................      16

Article 7. - Miscellaneous ..................................................      16

      Section 7.1   Notices .................................................      16
      Section 7.2   Indemnity ...............................................      17
      Section 7.3   Entire Agreement; Modification of Agreement .............      17
      Section 7.4   Assignment/Sale of Interest .............................      17
      Section 7.5   Reimbursement of Expenses ...............................      18
      Section 7.6   Indulgences Not Waivers .................................      18
      Section 7.7   Severability ............................................      18
      Section 7.8   Successors and Assigns ..................................      18
      Section 7.9   General Waivers by the Borrower .........................      19
      Section 7.10  Incorporation by Reference ..............................      19
      Section 7.11  Execution in Counterparts; Facsimile Signatures .........      19
      Section 7.12  Governing Law; Consent to Forum .........................      19
      Section 7.13  Waiver of Jury Trial ....................................      19
      Section 7.14  Accounting Terms ........................................      19
      Section 7.15  Construction/Headings ...................................      19
</TABLE>

                                       ii
<PAGE>   4

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT is made as of November 11, 1999 (the "Effective
Date"), by and between InSite Vision Incorporated, a Delaware corporation (the
"Borrower"), with its chief executive office located at 965 Atlantic Avenue,
Alameda, California, 94501, and Pharmacia & Upjohn Company, a Delaware
corporation (the "Lender"), with an office located at 100 Route 206 North,
Peapack, NJ 07977.

                                   ARTICLE 1.
                                   DEFINITIONS

         For purposes of this Agreement, the following terms, whether used in
the singular or plural, shall have the following meanings:

         SECTION 1.1 "Affiliate" means a Person (1) which owns or otherwise has
an interest in five percent or more of any equity interest of the Borrower
(except Lender or its Affiliates), (2) five percent or more of the equity
interests of which the Borrower (or any shareholder, director, officer, employee
or Subsidiary of the Borrower or any combination thereof) owns or otherwise has
an interest in, or (3) which, directly or through one or more intermediaries, is
controlled by, controls, or is under common control with the Borrower. For
purposes of subpart (3) above, "control" means the ability, directly or
indirectly, to affect the management or policies of a Person by virtue of an
ownership interest, by right of contract or any other means.

         SECTION 1.2 "Agreement" means this Credit Agreement, as amended,
renewed, restated, replaced or otherwise modified from time to time.

         SECTION 1.3 "Base Rate" means the rate of interest announced publicly
by Chase Manhattan Bank in New York City from time to time as its prime rate or
other designation in replacement of the prime rate announced publicly by such
bank. Such rate is only a reference rate and may not be the lowest rate offered
by such bank or the Lender.

         SECTION 1.4 "Business Day" means a day on which banks in New York City
are open for business to the general public other than a Saturday or Sunday.

         SECTION 1.5 "Credit Documents" means this Agreement, the Credit Note
and any other agreements or documents existing on or after the Initial Loan Date
evidencing or securing any Credit Loan and any amendments, renewals,
restatements, replacements or other modifications of the foregoing from time to
time.

         SECTION 1.6 "Credit Loan" means any loan made by the Lender as provided
in Section 2.2 of this Agreement.

<PAGE>   5

         SECTION 1.7 "Credit Note" means the Credit Note to be executed by the
Borrower on or about the Initial Loan Date in favor of the Lender to evidence
the Credit Loans made pursuant to Section 2.2 of this Agreement, which shall be
substantially in the form of Exhibit A, as the same may be amended, renewed,
replaced, consolidated or otherwise modified from time to time after execution
and delivery thereof.

         SECTION 1.8 "Debt" means, collectively, (1) indebtedness or liability
for borrowed money; (2) obligations evidenced by bonds, debentures, notes or
other similar instruments; (3) obligations for the deferred purchase price of
property or services; (4) obligations as lessee under capital leases; (5)
current liabilities in respect of unfunded vested benefits under Plans covered
by ERISA; (6) reimbursement obligations under letters of credit or acceptance
facilities; (7) all guarantees, Debt of another of the types referred to in
clauses (1) through (6) guaranteed or effectively guaranteed through
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person or entity, or otherwise to
assure a creditor against loss; and (8) obligations secured by a Lien, whether
or not the obligations have been assumed.

         SECTION 1.9 "Default" means an event or condition the occurrence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

         SECTION 1.10 "Default Rate" has the meaning provided in Section 2.3(b)
of this Agreement.

         SECTION 1.11 "Environmental Laws" means any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, policy, consent decree or judgment, relating to the protection of
environment or Hazardous Substances, including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
Section 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.;
the Oil Pollution Act of 1990, 33 U.S.C. Section 1001 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Section 1801 et seq.; the
Atomic Energy Act, as amended, 42 U.S.C. Section 2011 et seq.; The Occupational
Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.; or the Federal
Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq.; and any
laws relating to protection of safety, health or the environment which regulate
the use of biological agents or substances including medical or infectious
wastes as any such laws have been amended.

         SECTION 1.12 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and all rules and regulations from time
to time promulgated thereunder.

                                       2
<PAGE>   6

         SECTION 1.13 "Event of Default" has the meaning provided in Section 6.1
of this Agreement.

         SECTION 1.14 "GAAP" means generally accepted accounting principles in
effect from time to time in the United States of America.

         SECTION 1.15 "Hazardous Substance" means any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous air pollutants," "pollutants," "contaminants," "toxic chemicals,"
"petroleum or petroleum products," "toxics," "hazardous chemicals," "extremely
hazardous substances," "pesticides" or related materials, as now or in the past
defined in any applicable Environmental Law or any petroleum or petroleum
products, natural or synthetic gas, radioactive materials, asbestos-containing
materials, urea formaldehyde foam insulation, and radon.

         SECTION 1.16 "ISV-900 Agreements" has the meaning set forth in the
ISV-900 Project Agreement.

         SECTION 1.17 "Initial Loan Date" means the second anniversary of the
Effective Date.

         SECTION 1.18 "ISV-900 Project" means all existing and future patent,
license and contractual rights and assets arising out of or related to the
ISV-900 Agreements to which Lender is granted rights under the ISV-900 Project
Agreement.

         SECTION 1.19 "ISV-900 Project Agreement" means the ISV-900 Project
Agreement between Lender and Borrower dated the date hereof, as such agreement
is amended, modified or supplemented from time to time.

         SECTION 1.20 "Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any of
the foregoing).

         SECTION 1.21 "Obligations" means all Credit Loans and all other
advances, debts, liabilities, obligations, covenants and duties owing, arising,
due or payable from the Borrower to the Lender of any kind or nature, existing
or future, whether or not evidenced by any note, letter of credit, guaranty or
other instrument, arising under this Agreement or any of the other Credit
Documents and whether direct or indirect (including, without limitation, those
acquired by assignment), absolute or contingent, primary or secondary, due or to
become due, existing on or after the Initial Loan Date and however acquired, and
all amendments, renewals, restatements,

                                       3
<PAGE>   7

replacements or other modifications of the foregoing from time to time. The term
includes, without limitation, all principal, interest, fees, expenses and any
other sums chargeable to the Borrower under any of the Credit Documents.

         SECTION 1.22      "Permitted Debt" means any of the following:

         (a)      accrued expenses and trade account payables incurred in the
                  ordinary course of the Borrower's business;

         (b)      Debt to the Lender;

         (c)      Debt which is subordinated to the Obligations pursuant to the
                  terms of a subordination agreement satisfactory to the Lender
                  in its sole discretion;

         (d)      Debt appearing on the latest available balance sheet as of the
                  Initial Loan Date, less principal payments or prepayments
                  thereof after the date of such balance sheet and extensions,
                  renewals and refinancings thereof, provided that the principal
                  amount is not thereby increased; and

         (e)      Debt for borrowed money pursuant to which the lender thereof
                  specifically disclaims any rights in or to the ISV-900
                  Project, ISV-900 Project Agreement, and the ISV-900
                  Agreements;

         (f)      obligations in respect of equipment or facility leases;

         (g)      investments permitted pursuant to Section 5.2(c); and

         (h)      other Debt approved in advance by the Lender in writing.

         SECTION 1.23      "Permitted Liens" means any of the following:

         (a)      Liens for taxes, assessments or governmental charges not
                  delinquent or being contested in good faith and by appropriate
                  proceedings and for which adequate reserves in accordance with
                  GAAP are maintained on the Borrower's books;

         (b)      Liens arising out of deposits in connection with workers'
                  compensation, unemployment insurance, old age pensions or
                  other social security or retirement benefits legislation;

         (c)      deposits or pledges to secure bids, tenders, contracts (other
                  than contracts for the payment of money), leases, statutory
                  obligations, surety and appeal bonds, and other obligations of
                  like nature arising in the ordinary course of the Borrower's
                  business;

         (d)      Liens imposed by law, such as mechanics', workers',
                  materialmen's, carriers' or other like Liens arising in the
                  ordinary course of the Borrower's business which

                                       4
<PAGE>   8

                  secure the payment of obligations which are not past due or
                  which are being diligently contested in good faith by
                  appropriate proceedings and for which adequate reserves in
                  accordance with GAAP are maintained on the Borrower's books;

         (e)      rights of way, zoning restrictions, easements and similar
                  encumbrances affecting the Borrower's real property which do
                  not materially interfere with the use of such property; and

         (f)      Liens in respect of Debt for borrowed money but only to the
                  extent the lienholder expressly disclaims any rights in or to
                  any of the ISV-900 Project, the ISV-900 Project Agreement and
                  the ISV-900 Agreements;

         (g)      Liens in favor of the Lender;

         (h)      Liens upon or in any equipment acquired or held to secure the
                  purchase price thereof or Debt incurred for the purpose of
                  financing the acquisition of such equipment or property;

         (i)      restrictions and other minor encumbrances on real property
                  that do not materially impair the use or value thereof; and

         (j)      Liens in respect of royalties concerning intellectual property
                  rights.

         SECTION 1.24 "Person" means an individual, corporation, partnership,
trust, governmental entity or any other entity, organization or group
whatsoever.

         SECTION 1.25 "Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) maintained for employees of the Borrower on or after the
Initial Loan Date.

         SECTION 1.26 "Termination Date" means the third annual anniversary of
the Initial Loan Date.

                                   ARTICLE 2.
                       AMOUNT AND TERMS OF THE CREDIT LOAN

         SECTION 2.1 Total Credit. The Lender agrees, subject to the terms and
conditions of this Agreement, to make a total credit of up to Four Million U.S.
Dollars ($4,000,000) available to the Borrower upon its request. Subject to the
terms and conditions hereof, the Borrower shall be entitled to borrow, repay and
re-borrow up to the total amount of the credit made available hereunder, during
the term hereof.

         SECTION 2.2 Credit Loans.

         (a)      General. The Lender agrees, subject to the terms and
                  conditions of this Agreement, to make Credit Loans to the
                  Borrower, on no more than a monthly

                                       5
<PAGE>   9
                  basis, from the Initial Loan Date to the Business Day
                  immediately preceding the Termination Date up to a maximum
                  principal amount at any time outstanding equal to $4,000,000.
                  In no event shall the Lender be obligated to make any Credit
                  Loan if any Default exists or would result from the making of
                  such Credit Loan.

         (b)      Credit Note. All Credit Loans shall be evidenced by, and shall
                  be payable in accordance with the terms and conditions of, the
                  Credit Note, as amended, renewed, restated, replaced or
                  otherwise modified from time to time.

         SECTION 2.3 Interest Rate.

         (a)      Credit Loans. Interest shall accrue on the outstanding
                  principal balance at the end of day of each Credit Loan under
                  the Credit Note at the Base Rate on the day such Credit Loan
                  is initially advanced plus three percent (3%). Interest shall
                  be calculated on a daily basis (computed on the actual number
                  of days elapsed over a year of 360 days), commencing on the
                  date each Credit Loan is made but excluding the last day, and
                  shall be based upon the outstanding principal balance of each
                  Credit Loan at the end of each day.

         (b)      Default Rate. Upon or after the occurrence and during the
                  continuation of any Event of Default, the principal amount of
                  the Credit Loan shall bear interest, calculated daily
                  (computed on the actual days elapsed over a year of 360 days),
                  at a rate per annum equal to * above the interest rate that
                  would otherwise apply under Sections 2.3(a) (the "Default
                  Rate").

         (c)      Usury. In no event shall the aggregate amount which is deemed
                  interest hereunder or under the Credit Note, and charged or
                  collected pursuant to the terms of this Agreement or any other
                  Credit Documents exceed the highest rate permissible under any
                  law which a court of competent jurisdiction shall, in a final
                  determination, deem applicable thereto. In the event that such
                  a court determines that the Lender has charged or received
                  interest hereunder or under the other Credit Documents in
                  excess of the highest applicable rate, the Lender shall apply
                  such excess to any other Obligations then due and payable,
                  whether principal, interest, fees or otherwise, and shall
                  refund the remainder of such excess interest, if any, to the
                  Borrower, and such rate shall automatically be reduced to the
                  maximum rate permitted by such law.

         SECTION 2.4 Payments of Principal, Interest and Costs. Except as
otherwise provided in this Agreement, the Obligations shall be due and payable
as provided below.

         (a)      Credit Loan.

                  (i)      Interest. Accrued interest on outstanding principal
                           balance of the Credit Loans shall be due and payable
                           on the Termination Date.

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

                                       6
<PAGE>   10

                  (ii)     Principal. The outstanding principal balance of the
                           Credit Loans shall be due and payable on the
                           Termination Date.

         (b)      At the election of Borrower, principal and interest on the
                  Credit Loans due and payable on the Termination Date may be
                  paid upon the Termination Date in shares of Borrower's common
                  stock. In the event Borrower elects to repay the Credit Loans
                  in Borrower common stock, the following shall apply:

                  (i)      shares of Borrower's common stock must be listed for
                           trading on a nationally recognized stock exchange or
                           automated quotation system;

                  (ii)     in connection with the issuance of the shares of
                           Borrower common stock pursuant hereto, Borrower must
                           grant Lender an additional * demand registration *
                           and unlimited "piggyback" registration rights;

                  (iii)    the number of shares issuable to Lender as repayment
                           shall be calculated as follows:

                                       PI / (AWP x *), where

                                       PI is the outstanding amount of principal
                                       and interest under the Credit Loans being
                                       converted and AWP is the average weighted
                                       closing share price of the Borrower's
                                       common stock for the twenty (20) trading
                                       days immediately prior to the repayment
                                       date; and

                  (iv)     upon any distribution of shares to Lender pursuant to
                           this Section, Lender shall be deemed to have repeated
                           the representations set forth in Section 4.3 of the
                           Stock Purchase Agreement dated of even date herewith
                           between Borrower and Lender (the "Stock Purchase
                           Agreement") in respect of the shares distributed
                           pursuant hereto, and Borrower shall be deemed to have
                           made the representation contained in Section 3.8 of
                           the Stock Purchase Agreement. Such shares shall be
                           subject legends as set forth in the Stock Purchase
                           Agreement.

         (c)      Other Obligations. Costs, fees and expenses and any other
                  Obligations payable pursuant to this Agreement or the other
                  Credit Documents shall be payable as and when provided in this
                  Agreement or the other Credit Documents, as the case may be,
                  or, if no specific provision for payment is made, on demand.

         SECTION 2.5 Voluntary Prepayments. The Borrower shall have the right,
without penalty or premium, to prepay the Credit Loans, in whole or in part, at
any time and from time to time after the Initial Loan Date on the following
terms and conditions: (a) the Borrower shall give the Lender at least one
Business Day's prior written notice of its intent to prepay any Credit Loan; and
(b) each prepayment shall be in amount of not less than $50,000 (or, if less,
the entire outstanding principal balance of the Credit Loans).

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

                                       7
<PAGE>   11

         SECTION 2.6 Method of Payment. Payments due the Lender under this
Agreement and the other Credit Documents shall be made in immediately available
funds to the Lender at its office described in the introductory paragraph hereof
unless the Lender gives notice to the contrary. Payments so received at or
before 1:00 p.m. Eastern time on any Business Day shall be deemed to have been
received by the Lender on that Business Day. Payments received after 1:00 p.m.
Eastern time on any Business Day shall be deemed to have been received on the
next Business Day, and interest, if payable in respect of such payment, shall
accrue thereon until such next Business Day.

         SECTION 2.7       Use of Proceeds.

         (a)      General. The Credit Loans shall be used for general corporate
                  and working capital purposes.

         (b)      Margin Loan. Notwithstanding anything herein to the contrary,
                  the Borrower shall not, directly or indirectly, use any part
                  of the Credit Loan proceeds for the purpose of purchasing or
                  carrying any margin stock within the meaning of Regulation U
                  of the Board of Governors of the Federal Reserve System
                  otherwise than in accordance with the requirements of
                  Regulation U, or to extend credit to any Person for the
                  purpose of purchasing or carrying any such margin stock
                  otherwise than in accordance with the requirements of
                  Regulation U, or for any purpose which violates, or is
                  inconsistent with, Regulation X of such Board of Governors.

         SECTION 2.8 Application. Each payment by or on behalf of the Borrower
hereunder shall, be applied (i) first, to any fees, costs, expenses and other
amounts (other than principal and interest) due the Lender pursuant to the
Credit Documents; (ii) second, to accrued and unpaid interest due the Lender
pursuant to the Credit Documents; and (iii) third, to principal due the Lender.

                                   ARTICLE 3.
                              CONDITIONS OF LENDING

         SECTION 3.1 Conditions of Borrowing. In addition to the conditions set
forth in Section 3.3, the Lender's obligation to make Credit Loans under this
Agreement at and after the Initial Loan Date is subject to the Borrower's
satisfaction of the following conditions precedent: (1) the Borrower shall give
the Lender notice of its intention to borrower under any Credit Loan at least
one Business Day before the date of such Credit Loan, which notice shall specify
(a) the date of such Credit Loan, (b) the amount of such Credit Loan, and (c) a
statement from the chief financial officer, treasurer or similar financial
officer of the Borrower to the Lender stating that the Borrower is in material
compliance with all of its obligations and covenants under this Agreement and
the other Credit Documents; and (2) the Lender shall not be obligated to make a
Credit Loan to the Borrower if the Lender has made a Credit Loan to or for the
benefit of the Borrower at any time within the preceding 30 days. All notices
given under this Section by the Borrower shall be irrevocable and shall be given
not later than 1:00 p.m. Eastern time on the day

                                       8
<PAGE>   12

which is not less than the number of Business Days specified above for such
notice. For purposes of this Section, the Borrower agrees that the Lender may
rely and act upon any request for a Credit Loan from any individual who the
Lender reasonably believes to be a representative of the Borrower.

         SECTION 3.2 Credit Documents. Notwithstanding anything herein or in the
other Credit Documents to the contrary, the Lender shall not be obligated to
make the initial Credit Loan under this Agreement to the Borrower until the
Lender shall have received the following documents, duly executed and delivered
by all parties thereto, and otherwise reasonably satisfactory in form and
content to the Lender:

         (a)      Credit Agreement.  This Agreement;

         (b)      Credit Note.  The Credit Note;

         (c)      Credit Loan Disbursement Instructions. Written instructions
                  from the Borrower to the Lender directing the account to which
                  proceeds of the Credit Loans made pursuant to this Agreement
                  are to be paid;

         (d)      Opinion of Borrower's Counsel. The favorable written opinion
                  of Borrower's outside counsel to the Lender, regarding the
                  incorporation of the Borrower, and the authorization and
                  execution of the Credit Documents but specifically excluding
                  an enforceability opinion;

         (e)      Certificate of Borrower's Secretary. A certificate executed by
                  the Borrower's secretary whereby such secretary affirms that
                  attached to such certificate is (1) an accurate copy of the
                  Borrower's board resolutions authorizing the execution,
                  delivery and performance of the Credit Documents, (2) a copy
                  of the Borrower's by-laws then in effect, (3) a copy of the
                  Borrower's articles or certificate of incorporation and all
                  amendments thereto, certified by the Secretary of State or
                  other appropriate official of the Borrower's jurisdiction of
                  incorporation, and (4) a certificate of good standing for the
                  Borrower, dated within three Business Days prior to the
                  initial Credit Loan, from the Secretary or State of the state
                  of incorporation of the Borrower; and

         (f)      Other Items. Such other agreements and documents as the Lender
                  may reasonably request in connection with the transactions
                  described in or contemplated by the Credit Documents.

         SECTION 3.3 Conditions Precedent to All Credit Loans. The obligation of
the Lender to make each Credit Loan under this Agreement (including, without
limitation, the initial Credit Loan) shall be subject to the further conditions
precedent that, on the date of each such Credit Loan:

         (a)      The following statements shall be true: (1) the
                  representations and warranties of the Borrower contained in
                  the Credit Documents (including, without limitation,

                                       9
<PAGE>   13

                  those contained in Section 4 hereof) are correct on and as of
                  the date of such Credit Loan as though made on and as of such
                  date except to the extent such representations and warranties
                  are made as of a specific date, in which event they shall be
                  true and correct as of such date, and (2) there exists no
                  Default or Event of Default as of such date, nor would any
                  Default or Event of Default result from the making of the
                  Credit Loan requested by the Borrower;

         (b)      The Borrower shall have signed and sent to the Lender, if the
                  Lender so requests, a request for advance, setting forth in
                  writing the amount of the Credit Loan requested and the other
                  information required pursuant to Section 3.1 hereof; provided,
                  however, that the foregoing condition precedent shall not
                  prevent the Lender, if it so elects in its sole discretion,
                  from making a Credit Loan pursuant to the Borrower's
                  non-written request therefor;

         (c)      The Lender shall have received such other documents as it may
                  reasonably request; and

         (d)      There shall not be or have been a material, uncured breach as
                  determined by Borrower under the ISV 900 Project Agreement the
                  Development Committee or Executive Committee, as the case may
                  be, as each such Committee is defined in the ISV-900 Project
                  Agreement.

         The Borrower agrees that the making of a request by the Borrower for a
         Credit Loan, whether in writing, by telephone or otherwise, shall
         constitute a certification by the Borrower that all representations and
         warranties of the Borrower in the Credit Documents are true as of the
         date thereof except to the extent such representations and warranties
         are made as of a specific date, in which event they shall be true and
         correct as of such date and that all required conditions to the making
         of the Credit Loan have been met.

                                   ARTICLE 4.
                         REPRESENTATIONS AND WARRANTIES

         SECTION 4.1 Representations, Warranties and Covenants of the Borrower.
The Borrower hereby represents, warrants to the Lender as follows on the date
hereof and on each date a Credit Loan is made:

         (a)      Organization and Existence. The Borrower (1) is a corporation
                  duly incorporated, validly existing and in good standing under
                  the laws of the state of its incorporation, (2) is in good
                  standing in all other jurisdictions in which it is required to
                  be qualified to do business as a foreign corporation, except
                  where failure to be so qualified would not have a material
                  adverse effect, and (3) has obtained all licenses and permits
                  and has filed all registrations necessary to the operation of
                  its business (except where the failure to so qualify or to
                  obtain such licenses or permits would not materially and
                  adversely affect the business, financial condition or
                  operations of the Borrower, a "Material Adverse Effect").

                                       10
<PAGE>   14

         (b)      Authorization by the Borrower. The execution, delivery and
                  performance by the Borrower of the Credit Documents (1) are
                  within the Borrower's corporate powers, (2) have been duly
                  authorized by all necessary corporate action, (3) do not
                  contravene the Borrower's articles or certificate of
                  incorporation or by-laws, or any material law or contractual
                  restriction binding on or affecting the Borrower or its
                  properties, and (4) do not result in or require the creation
                  of any Lien upon any of Borrower real or personal property.

         (c)      Approval of Governmental Bodies. Based in part upon the
                  representations of the Lender pursuant to Section 2.4, no
                  authorization or approval or other action by, and no notice to
                  or filing with, any governmental authority or regulatory body
                  is required for the due execution, delivery and performance by
                  the Borrower of the Credit Documents or the exercise by the
                  Lender of its rights thereunder.

         (d)      Enforceability of Obligations. The Credit Documents are the
                  legal, valid and binding obligations of the Borrower
                  enforceable against the Borrower in accordance with their
                  respective terms, except as the enforceability thereof may be
                  limited by bankruptcy, insolvency, reorganization, moratorium,
                  or similar laws affecting the enforceability of creditors'
                  rights generally and subject to the discretion of courts in
                  applying equitable remedies.

         (e)      Financial Statements. All financial statements of the Borrower
                  which have been furnished to the Lender fairly present the
                  financial condition of the Borrower, as of the dates reflected
                  on the financial statements, and fairly present the results of
                  its operations for the period covered thereby, all in
                  accordance with GAAP, except for the omission of footnotes in
                  interim financial statements and subject to normal year-end
                  adjustments.

         (f)      Litigation. There is no pending or to the knowledge of
                  Borrower threatened action or proceeding affecting the
                  Borrower or its properties before any court, governmental
                  agency or arbitrator which, if determined adversely to the
                  Borrower, could reasonably be expected to result in a Material
                  Adverse Effect.

         (g)      Existing Debt. The Borrower has no Debt other than Permitted
                  Debt and Debt reflected on its most recent financial
                  statements submitted to the Lender.

         (h)      Taxes. The Borrower has filed all required federal, state,
                  local and other tax returns and has paid, or made adequate
                  provision for the payment of, any taxes due pursuant thereto
                  or pursuant to any assessment received by the Borrower except
                  such taxes, if any, as are being contested in good faith and
                  as to which adequate reserves have been provided.

         (i)      Hazardous Materials. The Borrower has complied in all material
                  respects with all Environmental Laws and all of its
                  facilities, leaseholds, assets and other property comply in
                  all material respects with all Environmental Laws. To the
                  Borrower's knowledge, there are no outstanding or threatened
                  citations, notices or orders of

                                       11
<PAGE>   15

                  non-compliance issued to the Borrower or relating to its
                  facilities, leaseholds, assets or other property. The Borrower
                  has been issued all material licenses, certificates, permits
                  or other authorizations required under any Environmental Law
                  or by any federal, state or local governmental or
                  quasi-governmental entity.

         (j)      Title to Property. The Borrower has good and marketable title
                  to all material assets and other property owned by it, and
                  reflected in the latest available publicly filed financial
                  statements of the Borrower.

         (k)      Insolvency. After the execution and delivery of the Credit
                  Documents and the disbursement of the initial Credit Loan
                  hereunder, the Borrower will not be insolvent within the
                  meaning of the United States Bankruptcy Code or unable to pay
                  its debts as they mature.

         SECTION 4.2 Survival of Representations. All representations and
warranties made in Section 4.1 shall survive the execution and delivery of the
Credit Documents and the making of the Credit Loans and are remade after the
date hereof only as specifically set forth herein.

                                   ARTICLE 5.
                            COVENANTS OF THE BORROWER

         SECTION 5.1 Affirmative Covenants. So long as any Obligations remain
unpaid or the Lender shall have any commitment to extend credit to or for the
benefit of the Borrower, unless otherwise consented to in writing by the Lender,
the Borrower covenants to the Lender as follows:

         (a)      Compliance with Laws. The Borrower shall comply in all
                  material respects with all material, applicable laws, rules,
                  regulations and orders affecting the Borrower or its
                  properties, including, without limitation, all Environmental
                  Laws.

         (b)      Reporting Requirements. The Borrower shall furnish to the
                  Lender:

                  (i)      Quarterly Statements. As soon as available and in any
                           event within 45 days after the end of each quarter of
                           each fiscal year of the Borrower, an internally
                           prepared balance sheet of the Borrower as of the end
                           of such quarter and internally prepared income
                           statements as of the end of such quarter for such
                           quarter and for the fiscal year-to-date, each
                           certified by the Borrower's chief financial officer;

                  (ii)     Audited Year-End Statements. As soon as available and
                           in any event within 90 days after the end of each
                           fiscal year of the Borrower, final audited financial
                           statements (as described above but including a
                           statement of changes in financial position) as of the
                           end of such fiscal year of the Borrower prepared by
                           independent certified accountants.

                                       12
<PAGE>   16

        (c)       Preservation of Business and Corporate Existence. The Borrower
                  shall: (1) carry on and conduct its principal business
                  substantially as it is now being conducted; (2) maintain in
                  good standing its existence and its right to transact business
                  in those states in which it is now or may after the Initial
                  Loan Date be doing business except where failure to be so
                  qualified does not have a material adverse effect; (3)
                  maintain all licenses, permits and registrations necessary to
                  the conduct of its business, and (4) comply with its material
                  covenants and obligations as set forth in the ISV 900 Project
                  Agreement.

         (d)      Notice of Default. The Borrower shall give prompt notice in
                  writing to the Lender of any events of default under this
                  Agreement or the other Credit Documents or any development or
                  the occurrence of any event, financial or otherwise, which may
                  or shall materially and adversely affect the business,
                  properties or affairs of the Borrower or its ability to pay
                  and perform its obligations under this Agreement or the other
                  Credit Documents.

         (e)      Further Assurances. The Borrower further agrees to execute,
                  deliver or perform, or cause to be executed, delivered or
                  performed, all such documents, agreements or acts, as the case
                  may be, as the Lender may reasonably request from time to time
                  to evidence and give effect to, the Lender's rights and
                  remedies under, or as contemplated by, the Credit Documents or
                  at law or in equity.

         SECTION 5.2 Negative Covenants. So long as any Obligations except
inchoate obligations remain unpaid or the Lender shall have any commitment to
extend credit to or for the benefit of the Borrower, unless otherwise consented
to in writing by the Lender, the Borrower covenants to the Lender as follows:

         (a)      Liens. The Borrower shall not create or suffer to exist any
                  Lien, except for Permitted Liens, upon or with respect to any
                  of its properties, whether the Borrower owns or has an
                  interest in such properties on the Initial Loan Date or at any
                  time thereafter.

         (b)      Debt. The Borrower shall not create or suffer to exist any
                  Debt except for Permitted Debt.

         (c)      Restricted Investments. The Borrower will not purchase or make
                  investments in any Person except for (i) investments made in
                  accordance with the Borrower's investment policy approved by
                  its Board of Directors, (ii) investments in the Borrower's
                  majority-owned subsidiaries, (iii) extensions of credit in the
                  ordinary course of business and (iv) investments in joint
                  ventures or other business ventures approved by the Board of
                  Directors of the Borrower.

         (d)      Corporate Structure; Disposition of Assets. Unless all
                  outstanding Obligations are repaid to Lender in cash prior to
                  such event, Borrower shall not merge or consolidate with or
                  otherwise acquire, or be acquired by, any other Person.

                                       13
<PAGE>   17

         (e)      Conflicting Agreements. The Borrower shall not enter into any
                  agreement any term or condition of which conflicts with any
                  provision of this Agreement or the other Credit Documents.

         (f)      Transactions With Affiliates. The Borrower shall not enter
                  into or be a party to any transaction or arrangement,
                  including without limitation, the purchase, sale or exchange
                  of property of any kind or the rendering of any service, with
                  any Affiliate, except pursuant to the reasonable requirements
                  of the Borrower's business and upon fair and reasonable terms
                  substantially as favorable to the Borrower as those which
                  would be obtained in a comparable arms-length transaction with
                  a non-Affiliate.

         (g)      Distributions. The Borrower shall not pay any dividends on or
                  make any other distributions in respect of any stock of the
                  Borrower or redeem or otherwise acquire any such stock.

         SECTION 5.3 Public Filings. The Borrower shall not be required to
provide copies of any information required pursuant to Section 5.1 to the extent
such information is contained in any filings made by the Borrower with the
Securities and Exchange Commission or national exchange on which the Borrower's
shares are traded.

                                   ARTICLE 6.
                                    DEFAULT

         SECTION 6.1 Events of Default. Each of the following events shall
constitute an Event of Default hereunder:

         (a)      The Borrower fails to pay any principal, interest, fee,
                  expense or other monetary obligation of the Borrower to the
                  Lender under the Credit Documents in accordance with the terms
                  thereof, and the Borrower fails to cure such default within 5
                  days after written notice from the Lender specifying in
                  reasonable detail the nature of such default is received by
                  the Borrower; or

         (b)      The Borrower fails to perform or observe any term, covenant or
                  other provision contained in Sections 5.1 or 5.2 of this
                  Agreement in accordance with the terms thereof provided Lender
                  gives Borrower thirty (30) days to cure any default under
                  Section 5.1; or

         (c)      The Borrower fails to perform or observe any other term,
                  covenant or other provision in any Credit Document (other than
                  any term, covenant or provision addressed in Sections 6.1(a)
                  or 6.1(b) above) in accordance with the terms thereof, and the
                  Borrower fails to cure such default within 30 days after
                  written notice from the Lender specifying in reasonable detail
                  the nature of such default is received by the Borrower;
                  provided, however, that if such breach is not capable of being
                  cured within such 30 day period and Borrower diligently
                  pursues such cure then the cure period shall be extended to
                  such date as may be requested by

                                       14
<PAGE>   18

                  Borrower, but in no event more than 90 days from the date of
                  the initial notice of breach; or

         (d)      Any "event of default" occurs (as such term is defined in any
                  other Credit Document to which the Borrower is a party) or
                  other default in any material agreement to which Borrower is a
                  party occurs in either case, where such default results or
                  reasonably could result in a material adverse effect to
                  Borrower; or

         (e)      Any material representation or warranty made or furnished by
                  the Borrower in connection with this Agreement, the other
                  Credit Documents or the ISV 900 Project Agreement, prove to be
                  incorrect, incomplete or misleading in any material respect
                  when made, or the occurrence of an event under Section 3.3(d)
                  pursuant to which Lender is not obligated to make a Credit
                  Loan; or

         (f)      The Borrower fails to pay any Debt for borrowed money (other
                  than Debt due the Lender) or any material Debt for trade
                  payables or perform or observe any other obligation or term in
                  respect of such Debt, and, as a result of any such failure,
                  the holder of such Debt accelerates the maturity thereof; or

         (g)      The Borrower suffers the appointment of a receiver, trustee,
                  custodian or similar fiduciary or makes an assignment for the
                  benefit of creditors; or any petition for an order for relief
                  is filed by or against the Borrower under the federal
                  Bankruptcy Code or any similar state insolvency statute
                  (except, in the case of a petition filed against the Borrower,
                  if such proceeding is dismissed within 60 days after the
                  petition is filed); or the Borrower makes any offer of
                  settlement, extension or composition to their respective
                  unsecured creditors generally; or

         (h)      The Borrower challenges or contests in any action, suit or
                  proceeding the validity or enforceability of any of the Credit
                  Documents; or

         (i)      One or more judgments, decrees or orders for the payment of
                  money in excess of $250,000 in the aggregate is rendered
                  against the Borrower which judgment remains unsatisfied,
                  unvacated or unstayed pending appeal for 60 days or more after
                  entry thereof; or

         SECTION 6.2 Obligation to Lend; Acceleration. Upon or after the
occurrence and during the continuation of any Event of Default (after taking
into account any applicable cure periods), the Lender may declare the obligation
of the Lender to make Credit Loans or to otherwise extend credit hereunder to be
terminated, whereupon the same shall forthwith terminate. Upon or after the
occurrence and during the continuation of any Event of Default, the Lender may
declare the Credit Note, all interest thereon, and all other Obligations to be
forthwith due and payable, whereupon the Credit Note, all such interest thereon
and all such other Obligations shall become and be forthwith due and payable,
without presentment, protest or further notice or demand of any kind, all of
which are hereby waived by the Borrower.

                                       15
<PAGE>   19

         SECTION 6.3 Right of Set-off. Upon the expiration of any cure periods
after the occurrence and during the continuation of any Event of Default, the
Lender is authorized, from time to time, without notice to the Borrower (any
such notice being hereby waived by the Borrower), to set off any indebtedness or
other obligations owing by the Lender to or for the credit or the account of the
Borrower against any and all of the Obligations irrespective of whether or not
the Lender shall have made any demand under this Agreement or the other Credit
Documents and although such Obligations may be unmatured. The rights of the
Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Lender may
have. The Lender agrees to promptly notify the Borrower of any such set-off.

                                   ARTICLE 7.
                                  MISCELLANEOUS

         SECTION 7.1 Notices. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto to be effective shall be in
writing and shall be personally delivered, mailed by certified or registered
mail, return receipt requested, sent prepaid by reliable overnight courier or
sent by facsimile transmission. Unless otherwise expressly provided herein,
notices shall be deemed to have been validly given when delivered against
receipt; or, in the case of mailing, five (5) Business Days after deposit in the
mail in the continental United States, postage prepaid; or, in the case of
reliable overnight courier, on the Business Day after the courier accepts
delivery of such item for next Business Day delivery; or, in the case of
facsimile transmission, when sent against confirmation of receipt prior to 5:00
p.m. local time at the recipient's office, in each case addressed as follows:

                           If to the Lender:

                                    Pharmacia & Upjohn Company
                                    100 Route 206, North
                                    Peapack, New Jersey 07977
                                    Attn.:  Vice President-Licensing
                                    Fax No.: 908-901-1813

                           With a copy to:

                                    Pharmacia & Upjohn Company
                                    100 Route 206, North
                                    Peapack, New Jersey 07977
                                    Attn.:  Vice President-Corporate Law
                                    Fax No.: 908-901-1862

                           If to the Borrower:

                                    InSite Vision Incorporated
                                    965 Atlantic Avenue
                                    Alameda, California  94501
                                    Attn.:  Chief Financial Officer

                                       16
<PAGE>   20

                                    Fax No.:  510-865-7830

                           With a copy to:
                                    Brobeck, Phleger & Harrison
                                    2200 Geng Road
                                    Two Embarcadero Place
                                    Palo Alto, California  94303
                                    Attn:  Timothy R. Curry

or to such other address or telecopy number as each party may designate for
itself by like notice given in accordance with this Section.

         SECTION 7.2 Indemnity. The Borrower indemnifies, and agrees to
indemnify, the Lender and its shareholders, directors, officers, employees and
agents and hold the Lender and such other indemnitees harmless from and against
any liability, loss, expense, damage, suit, action or proceeding on or after the
Initial Loan Date suffered or incurred by the Lender or such other indemnitees
as the result of such Lender's Credit Loans hereunder and the Borrower's failure
to observe, perform or discharge any of the Borrower's duties under any of the
Credit Documents or any misrepresentation made by or on behalf of the Borrower
under any of the Credit Documents. Without limiting the generality of the
foregoing, this indemnity shall extend to any claims asserted against the Lender
or such other indemnitees by any Person under any Environmental Laws or similar
laws by reason of the Borrower's or any other Person's failure to comply with
laws applicable to Hazardous Substances. All indemnities given by the Borrower
to the Lender under the Credit Documents, including, without limitation, the
indemnities set forth in this Section, shall survive the repayment of the Credit
Loans and the termination of this Agreement. Notwithstanding anything herein to
the contrary, in no event shall Borrower be required to indemnify Lender or any
other indemnity in respect of (a) any taxes (except to the extent set forth in
Section 7.5) or (b) any damage, loss, liability, expense or cost resulting from
the gross negligence or willful default of the Lender or any other indemnitee.

         SECTION 7.3 Entire Agreement; Modification of Agreement. This Agreement
and the other Credit Documents, together with all other instruments, agreements
and certificates incorporated herein by reference or executed by the parties in
connection herewith and therewith or with reference thereto, embody the entire
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by the
Borrower and the Lender.

         SECTION 7.4 Assignment/Sale of Interest. The Borrower may not sell,
assign or transfer any interest in this Agreement or any of the other Credit
Documents, or any portion thereof, including, without limitation, the Borrower's
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
The Lender may, with the prior written consent of the Borrower not to be
unreasonably withheld (provided that Borrower may refuse to consent to
assignment to a competitor of Borrower in its sole discretion), grant
participations, sell, assign, transfer or otherwise dispose, at any time or
times on or after the Initial Loan Date, of this

                                       17
<PAGE>   21

Agreement and any of the other Credit Documents, or of any portion hereof or
thereof, including, without limitation, the Lender's rights, title, interests,
remedies, powers and duties hereunder or thereunder.

         SECTION 7.5 Reimbursement of Expenses. If, upon or after and during the
continuation of any Event of Default, the Lender employs counsel for advice or
other representation, in connection with any attempt to enforce any rights of
the Lender against the Borrower or any other Person which may be obligated to
the Lender by virtue of this Agreement or any of the other Credit Documents,
irrespective of whether litigation is commenced in pursuance of such rights;
then, in any such event, all reasonable costs and expenses of such counsel shall
be payable, on demand, by the Borrower to the Lender, and shall be additional
Obligations hereunder. Additionally, if any taxes (excluding taxes imposed upon
or measured by the income of the Lender and any foreign taxes imposed on Lender
as a result of (i) entry of this Agreement, (ii) maintenance of any Credit Loans
or (iii) receipt of any payment pursuant hereto) shall be payable on account of
the execution or delivery of this Agreement or the other Credit Documents, or
the execution, delivery, issuance or recording of any of the Credit Documents,
or the creation of any of the Obligations hereunder, by reason of any federal,
state or local statute or other law existing on or after the Initial Loan Date,
the Borrower will pay all such taxes, including, but not limited to, any
interest and penalties thereon, and will indemnify and hold the Lender harmless
from and against liability in connection therewith.

         SECTION 7.6 Indulgences Not Waivers. The Lender's failure, at any time
or times on or after the Effective Date, to require strict performance by the
Borrower of any provision of this Agreement or the other Credit Documents shall
not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by the
Lender of a Default or an Event of Default by the Borrower under this Agreement
or any of the other Credit Documents shall not suspend, waive or affect any
other Default or Event of Default by the Borrower under this Agreement or any of
the other Credit Documents, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of the Borrower contained
in this Agreement or any of the other Credit Documents and no Default or Event
of Default by the Borrower under this Agreement or any of the other Credit
Documents shall be deemed to have been suspended or waived by the Lender, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of the
Lender and directed to the Borrower.

         SECTION 7.7 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

         SECTION 7.8 Successors and Assigns. This Agreement and the other Credit
Documents, shall be binding upon and inure to the benefit of the successors and
assigns of the Borrower and the Lender. This provision, however, shall not be
deemed to modify Section 7.4 hereof.

                                       18
<PAGE>   22

         SECTION 7.9 General Waivers by the Borrower. Except as otherwise
expressly provided for in this Agreement, the Borrower waives: (a) presentment,
protest, demand for payment, notice of dishonor, demand and protest and notice
of presentment, default, notice of nonpayment; (b) any and all other notices,
demands and consents in connection with the delivery, acceptance, performance,
default or enforcement of this Agreement or any of the other Credit Documents
and/or any of the Lender's rights thereunder.

         SECTION 7.10 Incorporation by Reference. All of the terms of the other
Credit Documents are incorporated in and made part of this Agreement by
reference; provided, however, that to the extent of any inconsistency between
this Agreement and such other Credit Documents, this Agreement shall prevail and
govern.

         SECTION 7.11 Execution in Counterparts; Facsimile Signatures. This
Agreement and the other Credit Documents may be executed in any number of
counterparts and by different parties thereto, each of which when so executed
and delivered shall be deemed to be an original and all of which counterparts
taken together shall constitute but one and the same instrument. A signature of
a party to any of the Credit Documents sent by facsimile or other electronic
transmission shall be deemed to constitute an original and fully effective
signature of such party.

         SECTION 7.12 Governing Law; Consent to Forum. This Agreement shall be
governed by the laws of the State of New York without giving effect to any
choice of law rules thereof. As part of the consideration for new value this day
received, the Borrower hereby consents to the jurisdiction of any state court
located within New York or federal court in New York, and waives personal
service of any and all process upon it and consents that all such service of
process be made by certified or registered mail directed to the borrower at the
address stated in Section 7.1 hereof and service so made shall be deemed to be
completed upon actual receipt thereof. The Borrower waives any objection to
jurisdiction and venue of any action instituted against it as provided herein
and agrees not to assert any defense based on lack of jurisdiction or venue. The
Borrower further agrees not to assert against the Lender (except by way of a
defense or counterclaim in a proceeding initiated by the Lender) any claim or
other assertion of liability with respect to the Credit Documents, the Lender's
conduct or otherwise in any jurisdiction other than the foregoing jurisdictions.

         SECTION 7.13 Waiver of Jury Trial. To the fullest extent permitted by
law, and as separately bargained-for consideration, the parties hereby waive any
right to trial by jury in any action, suit, proceeding or counterclaim of any
kind arising out of or otherwise relating to any of the Credit Documents.

         SECTION 7.14 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.

         SECTION 7.15 Construction/Headings. This Agreement shall be construed
without regard to any presumption or rule requiring construction against the
party causing such instrument or any portion thereof to be drafted. The Section
and other headings in this Agreement and the index at the beginning of this
Agreement are for convenience of reference

                                       19
<PAGE>   23

only and shall not limit or otherwise affect any of the terms hereof. Any
pronoun used herein shall be deemed to cover all genders.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first above written.

                                            INSITE VISION INCORPORATED

                                            By: /s/ S. KUMAR CHANDRASEKARAN
                                               ---------------------------------
                                            Name: S. Kumar Chandrasekaran
                                            Title: CEO

                                            PHARMACIA &UPJOHN COMPANY

                                            By: /s/ MATS PETTERSSON
                                               ---------------------------------
                                            Name: Mats Pettersson
                                            Title: Senior Vice President

                                       20
<PAGE>   24

                                    EXHIBIT A

THIS NOTE AND THE STOCK ISSUABLE IN RESPECT HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT.

                                   CREDIT NOTE

$4,000,000                                                    November  __, 1999

         For value received, the undersigned, INSITE VISION INCORPORATED, a
Delaware corporation (the "Borrower"), promises to pay to the order of PHARMACIA
& UPJOHN COMPANY, a Delaware corporation (the "Lender"; which term shall include
any subsequent holder hereof), in lawful money of the United States of America,
the principal sum of Four Million and 00/100 U.S. Dollars ($4,000,000.00), or,
if less, the amount outstanding under Section 2.2 of the Credit Agreement (as
defined below).

         This is the Credit Note referred to in, is issued pursuant to, and is
subject to the terms and conditions of, the Credit Agreement, dated as of the
Effective Date, between the Borrower and the Lender, as amended, renewed,
restated, replaced or otherwise modified from time to time (the "Credit
Agreement"). To the extent of any direct conflict between the terms and
conditions of this Credit Note and the terms and conditions of the Credit
Agreement, the terms and conditions of the Credit Agreement shall prevail and
govern. Capitalized terms used and not defined in this Credit Note shall have
the meanings given to them in the Credit Agreement.

         Interest shall accrue on the outstanding principal balance of this
Credit Note as provided in the Credit Agreement.

         Principal, interest and all other amounts, if any, payable in respect
of this of this Credit Note shall be payable on the Termination Date as provided
in the Credit Agreement. The Borrower's right to prepay this Credit Note is
subject to the terms and conditions of the Credit Agreement.

         The termination of the Credit Agreement or the occurrence of an Event
of Default shall entitle the Lender, at its option, to declare the then
outstanding principal balance hereof, all accrued interest thereon, and all
other amounts, if any, payable in respect of this Credit Note to be, and the
same shall thereupon become, immediately due and payable without notice to or
demand upon the Borrower, all of which the Borrower hereby waives.

                                       21
<PAGE>   25

         Time is of the essence of this Credit Note. To the fullest extent
permitted by applicable law, the Borrower, for itself and its successors and
assigns, expressly waives presentment, demand, protest, notice of dishonor, and
any and all other notices, demands and consents in connection with the delivery,
acceptance, performance, default or enforcement of this Credit Note, and hereby
consents to any extensions of time, renewals, releases of any parties to or
guarantors of this Credit Note, waivers and any other modifications that may be
granted or consented to by the Lender from time to time in respect of the time
of payment or any other provision of this Credit Note.

         This Credit Note shall be governed by the laws of the State of New
York, without regard to any choice of law rule thereof giving effect to the laws
of any other jurisdiction.

         IN WITNESS WHEREOF, the Borrower has executed and delivered this Credit
Note as of the date first above written.

                                            INSITE VISION INCORPORATED

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

                                            PHARMACIA & UPJOHN COMPANY

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

                                       22

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