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                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED
                           INVESTORS RIGHTS AGREEMENT

         This Amended and Restated Investors Rights Agreement (the "Agreement")
is entered into as of March 29, 2000 by and among Ista Pharmaceuticals, Inc., a
California corporation (the "Company") and the individuals and entities set
forth on the signature pages attached hereto (the "Investors"). This Agreement
amends and restates the Amended and Restated Investors Rights Agreement dated
June 4, 1999 (the "Prior Rights Agreement").

         1. Right of First Offer.

                  (a) Major Investor. Each Investor who holds at least 100,000
shares of Preferred Stock (as defined in Section 2 below) (or Common Stock of
the Company issued or issuable upon conversion thereof) is hereby defined as a
Major Investor. When applying the term "Major Investor" to any Investor, such
Investor shall be considered to hold all shares held in a trust for the benefit
of such investors and all shares of such stock that such Investor has
distributed to and are held by any general or limited partner or other holder of
the Investor's equity securities and shares of such stock owned by any other
Investor that controls, is controlled by or under common control with such
Investor or that is managed by the same investment manager as such Investor
(collectively, "Affiliates"). Each Major Investor shall be entitled to apportion
the right of first offer hereby granted it among itself and its partners and
Affiliates in such proportions as it deems appropriate.

                  (b) Procedure. Subject to Section 1(d) below, the Company
hereby grants to each Major Investor a right of first offer with respect to
future sales by the Company of its New Securities (as hereinafter defined). Each
time the Company proposes to offer any shares of, or securities convertible into
or exercisable for any shares of, any class of its capital stock ("New
Securities"), the Company shall first make an offering of such New Securities to
the Major Investors in accordance with the following provisions:

                               (i) The Company shall deliver a notice ("Notice")
to each of the Major Investors stating (A) its bona fide intention to offer New
Securities, (B) the number of such New Securities to be offered, and (C) the
price, if any, for which it proposes to offer such New Securities.

                               (ii) Within 20 calendar days after receipt of the
Notice, each Major Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such New Securities
which equals the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of the Preferred Stock then held, by such
Major Investor bears to the total number of shares of Common Stock issued and
held, or issuable upon conversion of the Preferred Stock then held, by all Major
Investors.

                               (iii) If not all of the Major Investors elect to
purchase their pro rata share of the New Securities, then the Company shall
promptly notify in writing the Major Investors who do

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so elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares.

                               (iv) If all such New Securities referred to in
the Notice are not elected to be obtained as provided in Section 1(b) hereof,
the Company may, during the 90-day period following the expiration of the period
provided in Section 1(b) hereof, offer the remaining unsubscribed New Securities
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the New Securities within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the Major Investors right of first offer with respect to such New
Securities provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to each Major Investor in
accordance herewith.

                  (c) Exclusions. The right of first offer in this Section 1
shall not be applicable (i) to the issuance or sale of up to 4,750,000 shares of
Common Stock (or options therefor) to employees, directors and officers and
consultants of the Company, for the primary purpose of soliciting or retaining
their employment or as part of an incentive program, and such additional shares
as are approved by the board of directors, (ii) on or after consummation of a
bona fide, firmly underwritten public offering of shares of Common Stock,
registered under the Act (defined in Section 2(a)(i) below) pursuant to a
registration statement on Form S-1 (iii) to securities issued in connection with
the acquisition of another corporation by the Company by merger of,
reorganization or purchase of all or substantially all of the assets or, (iv) to
securities issued to persons or entities in connection with bank or equipment
lease financing, technology licensing or corporate partnering transactions.

                  (d) Forfeiture of Right of First Offer. Each Major Investor,
who was a Major Investor on November 20, 1998, that elected not to purchase its
pro rata share of New Securities issued pursuant to the Series C Preferred Stock
and Warrant Purchase Agreement and the Common Stock Purchase Agreement, each
dated November 20, 1998, has forfeited all rights to purchase New Securities
under this Section 1.

                  (e) Limitation. Such right of first offer shall terminate upon
the earlier to occur of (i) an underwritten public offering of shares of Common
Stock of the Company, and (ii) a merger, acquisition or other transactions
resulting in a change in control of the Company.

                  (f) Amendment. With the written consent of not less than (i)
70% of the outstanding shares of Preferred A Shares and Preferred B Shares, each
voting separately, and (ii) 50% of the outstanding shares of Preferred C Shares
and Series D Shares, voting as one class, (or Common Stock issued or issuable
upon conversion thereof) held by the Major Investors, the obligations of the
Company and the rights of the Major Investors under this Section 1 may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its board of
directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Section 1.

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                  (g) Waiver of Right of First Offer. Each Major Investor,
hereby waives its right of first refusal under the Prior Rights Agreement,
including any notice rights pertaining thereto, to purchase the shares of Series
D Preferred Stock being issued and sold pursuant to the Series D Preferred Stock
Purchase Agreement dated as of the date hereof. Such waiver shall be effective
upon the execution of this Agreement by (i) the Company, (ii) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (iii) 50% of the outstanding shares of Preferred C Shares (or
Common Stock issued or issuable upon conversion thereof) held by the Major
Investors. By entering into this Agreement each Major Investor hereby waives any
current or future right of first offer to purchase the Company's securities
other than the rights set forth in this Agreement.

         2. Registration Rights.

                  (a) Definitions.  For purposes of this Section 2:

                               (i) The term "Act" shall mean the Securities Act
of 1933, as amended.

                               (ii) The term "Form S-3" shall mean such form
under the Act as in effect on the date hereof or any registration form under the
Act subsequently adopted by the Securities and Exchange Commission (the "SEC")
which permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.

                               (iii) The term "Holder" shall mean any person
owning or having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 2(l) hereof; and

                               (iv) The term "Preferred Stock" shall mean the
shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock, Series D Preferred Stock and Series D-1 Preferred Stock.

                               (v) The term "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;

                               (vi) The term "Registrable Securities" shall mean
(1) the Common Stock issuable or issued upon conversion of the Preferred Stock,
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Stock or Common Stock, excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which his rights under this Section 2 are not assigned, or (ii) any Registrable
Securities sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.

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                               (vii) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.

                               (viii) The term "Series A Shares" shall mean the
shares of Series A Preferred Stock and Series A-1 Preferred Stock.

                               (ix) The term "Series B Shares" shall mean the
shares of Series B Preferred Stock and Series B-1 Preferred Stock.

                               (x) The term "Series C Shares" shall mean the
shares of Series C Preferred Stock and Series C-1 Preferred Stock.

                               (xi) The term "Series D Shares" shall mean the
shares of Series D Preferred Stock and Series D-1 Preferred Stock.

                  (b) Request for Registration.

                               (i) If at any time after the earlier of (i) four
(4) years from the date hereof or (ii) the first anniversary of the closing of
the Company's initial public offering, the Company shall receive a written
request from the Holders of at least fifty percent (50%) of the outstanding
Registrable Securities (including securities convertible into Registrable
Securities) that the Company file a registration statement under the Act
covering the registration of at least fifty (50%) of the Registrable Securities
(or any lesser number of shares if the anticipated aggregate offering price, net
of underwriting discounts and commissions, would exceed $10,000,000), then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of Section
2(b)(ii), effect as soon as practicable, and in any event within 90 days of the
receipt of such request, the registration under the Act of all Registrable
Securities which the Holders request to be registered within twenty (20) days of
the mailing of such written notice by the Company; provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 2(b)(i):

                                    (A) During the period starting with the date
ninety (90) days prior to the Company's estimated date of filing of, and ending
on the date one hundred eighty (180) days immediately following the effective
date of, any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;

                                    (B) After the Company has effected one such
registration pursuant to this Section 2(b), and such registration has been
declared or ordered effective;

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                                    (C) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2(b) shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Holders; provided, however, that the Company may not utilize this right more
than twice in any 12-month period.

                               (ii) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2(b) and the Company shall include such information in the written
notice referred to in Section 2(b)(i). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2(e)(v)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company, who
shall be reasonably acceptable to the Initiating Holders. Notwithstanding any
other provision of this Section 2(b), if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.

                  (c) Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within ten (10) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 2(h), cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.

                  (d) Form S-3 Registration. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:

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                               (i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and

                               (ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 2(d): (1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President 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 shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than hundred
eighty (180) days after receipt of the request of the Holder or Holders under
this Section 2(d); provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; (4) if the Company has
already effected two (2) registrations on Form S-3 for the Holders pursuant to
this Section 2(d); (5) if the Company has already effected a registrations on
Form S-3 for the Holders pursuant to this Section 2(d) in the past twelve-month
period; or (6) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.

                               (iii) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to this
Section 2(d) and the Company shall include such information in the written
notice referred to in Section 2(d)(i). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2(e)(v)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2(d), if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders

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thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder.

                               (iv) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2(d) shall not be counted as demands for registration or registrations
effected pursuant to Sections 2(b) or 2(c), respectively.

                  (e) Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

                               (i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.

                               (ii) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.

                               (iii) Furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.

                               (iv) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

                               (v) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the holders greater than the obligations set forth in
Section 2(j)(ii).

                               (vi) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to

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state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

                               (vii) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 2, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 2, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.

                  (f) Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.

                  (g) Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 2(b), 2(c) and
2(d), including (without limitation) all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements (not to exceed $25,000) of
one counsel for the selling Holders shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2(b) if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all Participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their demand registration right pursuant
to Section 2(b); provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 2(b).

                  (h) Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2(c) to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Holders greater than the obligations set

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forth in Section 2(j)(ii). If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders) but in no event shall (i) any shares being sold by
a shareholder exercising a demand registration right similar to that granted in
Section 2(b) be excluded from such offering, or (ii) the number of Registrable
Securities to be included in such offering be less than 30% of the total number
of securities to be included in such offering, unless such offering is the
initial public offering of the Company's Common Stock and such registration does
not include shares of any other selling shareholders, in which event any or all
of the Registrable Securities of the Holders may be excluded from such offering.
For purposes of apportionment, any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
shareholder", and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.

                  (i) Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.

                  (j) Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 2:

                               (i) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, amended (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating

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or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 2(j)(i) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.

                               (ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 2(j)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 2(j)(ii) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this Section
2(j)(ii) exceed the net proceeds from the offering received by such Holder.

                               (iii) Promptly after receipt by an indemnified
party under this Section 2(j) of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2(j), deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2(j), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2(j).

                                      -10-
<PAGE>   11
                               (iv) If the indemnification provided for in this
Section 2(j) is unavailable to or insufficient to hold harmless an indemnified
party under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investors
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or an Investor on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and equitable if
contribution pursuant to this subsection (iv) were determined by pro rata
allocation (even if the Investors were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (iv). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above in
this subsection (iv) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (iv), no Investor shall be required to contribute any amount in
excess of the amount by which the net amount received by the Investor from the
sale of the Securities to which such loss relates exceeds the amount of any
damages which such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Investors' obligations in this subsection
(iv) to contribute are several in proportion to their respective sales of
Securities to which such loss relates and not joint.

                               (v) The obligations of the Company and Holders
under this Section 2(j) shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 2, and
otherwise.

                  (k) Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:

                               (i) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;

                                      -11-
<PAGE>   12
                               (ii) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;

                               (iii) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and

                               (iv) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company) or the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

                  (l) Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee who acquires at least 150,000
shares of Registrable Securities, provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be assigned
by a Holder to a limited partner, general partner or other affiliate of an
Investor (the "Transferee") regardless of the number of shares acquired by such
Transferee.

                  (m) Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to include such securities in any registration filed under
Section 2(b) hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included.

                  (n) "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed hundred eighty (180) days (or the shortest period of time agreed to by
any officer, director or 5% shareholder), following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the

                                      -12-
<PAGE>   13
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to donee who agree to be similarly bound) any Common Stock of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that all officers and directors of the Company,
all shareholders holding more than 1% of the outstanding Capital Stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.

                           In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.

                  (o) Amendment of Registration Rights. Any provision of this
Section 2 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities which are or at one time were Registrable
Securities (or which are or were convertible into Registrable Securities), each
future holder of all such securities, and the Company.

                  (p) Termination of Registration Rights. No shareholder shall
be entitled to exercise any right provided for in this Section 2 and all such
rights shall terminate on the earlier of (i) the date on which such shareholder
holds less than 1% of the outstanding capital stock and all shares held by such
shareholder can be resold pursuant to Rule 144(k), or (ii) five (5) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public.

         3. Termination of Prior Rights Agreement. Effective upon the execution
of this Agreement by the Company and the holders of not less than (i) 70% of the
outstanding shares of Preferred A Shares and Preferred B Shares, each voting
separately, and (ii) 50% of the outstanding shares of Preferred C Shares (or
Common Stock issued or issuable upon conversion thereof) held by the Major
Investors, the Prior Rights Agreement is null and void and superseded in its
entirety by this Agreement.

         4. Delivery of Financial Statements. The Company shall deliver to each
Major Investor and each Investor holding 10% of the aggregate outstanding Common
Stock and Preferred Stock, together with its Affiliates:

                  (a) Annual Financials. As soon as practicable, but in any
event within ninety (90) days after the end of each fiscal year, a balance
sheet, and statements of operations and cash flow for such fiscal year. Such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
certified by independent public accountants of nationally recognized standing
selected by the Company;

                                      -13-
<PAGE>   14
                  (b) Monthly Financials. Within thirty (30) days of the end of
each month, an unaudited statement of operations and balance sheet for and as of
the end of such month, in reasonable detail and prepared in accordance with
GAAP, subject to year end audit adjustments and the absence of footnotes;

                  (c) Operating Plan. Within thirty (30) days prior to the end
of each fiscal year, a budget and business plan for the next fiscal year,
prepared on a monthly basis, including a balance sheet and statement of
operations for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;

                  (d) Termination of Information and Inspection Covenants. The
covenants set forth in Section 4 shall terminate as to the Investor and be of no
further force or effect when the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934,
whichever event shall first occur.

         5. Visitation Rights. The Company shall allow one representative
designated by each Investor who, together with its Affiliates, holds 150,000
shares of Preferred Stock or Common Stock issued or issuable upon conversion
thereof to attend all meetings of the Company's board of directors in a
nonvoting capacity, and in connection therewith, the Company shall give such
representative copies of all notices, minutes, consents and other materials,
financial or otherwise, which the company provides to its board of directors.

         6. Miscellaneous.

                  (a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

                  (b) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.

                  (c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

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

                  (e) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) upon personal delivery; (ii)
upon transmission by facsimile (receipt

                                      -14-
<PAGE>   15
verified); (iii) upon the fifth day following deposit by registered or certified
mail (return receipt requested), postage prepaid, and , if delivered to a party
overseas, by air mail; or (iv) upon the second day following dispatch by express
courier service (receipt verified), to the party to be notified at the address
indicated for such party in Exhibit A or in the case of the Company on the first
page of this Agreement, or at such other address for a party as shell be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof.

                  (f) Amendments and Waivers. Any provision of Section 4 or
Section 5 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
not less than (i) 70% of the outstanding shares of Preferred A Shares and
Preferred B Shares, each voting separately, and (ii) 50% of the outstanding
shares of Preferred C Shares (or Common Stock issued or issuable upon conversion
thereof) and shares of Preferred D Shares (or Common Stock issued or issuable
upon conversion thereof), voting together as one class, held by the Major
Investors; provided, however, that if Preferred C Shares are treated differently
than Preferred D Shares, a majority of the outstanding shares of Preferred C
Shares and Preferred D Shares held by the Major Investors, each voting
separately. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon all present and future Investors.

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

                  (h) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.

                  (i) Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -15-
<PAGE>   16
         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above respectively.

                                       ISTA PHARMACEUTICALS, INC.

                                       By: /s/ EDWARD H. DANSE
                                          --------------------------------------

                                       Address:   15279 Alton Parkway, Suite 100
                                                  Irvine, CA 92618

<PAGE>   17

                                       -----------------------------------------
                                       Walter K. Brown

<PAGE>   18

                                       -----------------------------------------
                                       David E. Collins

<PAGE>   19
                                       CHANCELLOR VENTURE CAPITAL II, L.P.

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       KME VENTURE III, LP

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       DRAKE & CO., FOR THE ACCOUNT OF
                                       CITIVENTURE III

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

<PAGE>   20
                                     DOMAIN PARTNERS III, L.P.

                                     By: One Palmer Square Associates III, L.P.
                                         its General Partner

                                     By:
                                        ----------------------------------------
                                     General Partner

                                     DP III ASSOCIATES, L.P.

                                     By:  One Palmer Square Associates III, L.P.
                                          its General Partner

                                     By:
                                        ----------------------------------------
                                     General Partner

                                     BIOTECHNOLOGY INVESTMENTS LIMITED

                                     By:  Old Court Limited

                                     By:
                                        ----------------------------------------
                                     Attorney-in-Fact
<PAGE>   21

                                       -----------------------------------------
                                       Gregory A. Hartzler

<PAGE>   22
                                       -----------------------------------------
                                       Geoffrey O. Hartzler
<PAGE>   23
                                       -----------------------------------------
                                       William M. Helvey
<PAGE>   24
                                       -----------------------------------------
                                       Arthur Rock
<PAGE>   25
                                       SANDERLING VENTURE PARTNERS III, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING III LIMITED PARTNERSHIP, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING III BIOMEDICAL, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING VENTURE PARTNERS IV, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING VENTURE PARTNERS IV
                                       CO-INVESTMENT FUND, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING IV LIMITED PARTNERSHIP, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

<PAGE>   26
                                       SANDERLING [FERI TRUST] VENTURE
                                       PARTNERS IV, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING IV BIOMEDICAL, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING IV BIOMEDICAL
                                       CO-INVESTMENT FUND, L.P.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING VENTURES MANAGEMENT

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       SANDERLING MANAGEMENT COMPANY, LLC
                                       RETIREMENT TRUST FBO ROBERT G. MCNEIL

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

<PAGE>   27
                                       WILLIAM N. STARLING & DANA GREGORY
                                       STARLING, TRUSTEES OF THE STARLING FAMILY
                                       TRUST U/D/T DATED AUGUST 15, 1990

                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------
<PAGE>   28
                                       JAMES D. WOODWARD & ELAINE K. WASKI,
                                       TRUSTEES OF THE WOODWARD FAMILY TRUST
                                       U/D/T DATED AUGUST 23, 1990

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

<PAGE>   29
                                       WS INVESTMENT 92B

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

<PAGE>   30
                                       WTI VENTURES

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

<PAGE>   31
                                       ECICS VENTURES PTE. LTD.

                                       By:  ECICS Management Pte. Ltd.

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

                                       ECICS VENTURE 2 LIMITED

                                       By:  ECICS Management Pte. Ltd.

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

                                       IFS MANAGEMENT SERVICES PTE LTD

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

<PAGE>   32
                                       OCBC, WEARNES & WALDEN INVESTMENTS
                                       (SINGAPORE) LIMITED

                                       By:  OCBC, Wearnes & Walden Management
                                            (Singapore) Pte. Ltd.

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

                                       O,W&W INVESTMENTS LIMITED

                                       By:

                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------
<PAGE>   33
                                       UOB VENTURE INVESTMENTS LIMITED

                                       UOB VENTURE INVESTMENTS II LIMITED

                                       By:  UOB Venture Management Pte. Ltd.

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

<PAGE>   34
                                       SINGAPORE BIO-INNOVATIONS PTE. LTD.

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

<PAGE>   35
                                       DIONIS TRUST

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       GRANT GUND 1978 TRUST

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       G. ZACHARY GUND 1978 TRUST

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------

                                       -----------------------------------------
                                       Grant Gund

                                       -----------------------------------------
                                       G. Zachary Gund

                                       -----------------------------------------
                                       Warren Thaler

<PAGE>   36
                                       VERTEX ASIA LIMITED

                                       VERTEX INVESTMENT (II) LIMITED

                                       HWH INVESTMENT PRIVATE LIMITED

                                       By:  Vertex Management, Inc.

                                       By:
                                          --------------------------------------

                                       ALLERGAN PHARMACEUTICALS
                                       (IRELAND) LTD., INC.

                                       By:
                                          --------------------------------------
                                       Its:
                                           -------------------------------------<PAGE>   1

                                                                    EXHIBIT 10.2

                           ISTA PHARMACEUTICALS, INC.

                                 1993 STOCK PLAN

        1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder.

        2. Certain Definitions. As used herein, the following definitions shall
apply:

                (a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

                (b) "Board" means the Board of Directors of the Company.

                (c) "Code" means the Internal Revenue Code of 1986, as amended.

                (d) "Committee" means the Committee appointed by the Board of
Directors in accordance with of Section 4(a) of the Plan.

                (e) "Common Stock" means the Common Stock of the Company.

                (f) "Company" means Ista Pharmaceuticals, Inc., a California
corporation.

                (g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not; provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

                (h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Board, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company

<PAGE>   2

policy adopted from time to time; or (iv) transfers between locations of the
Company or between the Company, its Subsidiaries or its successor.

                (i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

                (j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                (k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

                        (i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;

                        (ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;

                        (iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.

                (l) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

                (m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

                (n) "Option" means a stock option granted pursuant to the Plan.

                (o) "Optioned Stock" means the Common Stock subject to an
Option.

                (p) "Optionee" means an Employee or Consultant who receives an
Option.

                (q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

                                      -2-
<PAGE>   3

                (r) "Plan" means this 1993 Stock Plan.

                (s) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

                (t) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 4,750,000 shares of Common Stock.

        If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

        4. Administration of the Plan.

                (a) Composition of Administrator.

                        (i) Multiple Administrative Bodies. If permitted by Rule
16b-3 promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the Plan
("Rule 16b-3"), and by the legal requirements relating to the administration of
stock plans, if any, of California corporate and securities laws and the Code
(collectively, "Applicable Laws"), the Plan may (but need not) be administered
by different bodies with respect to directors, non-director officers and
Employees who are neither directors nor officers.

                        (ii) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 with respect to
a plan intended to qualify thereunder as a discretionary plan, or (B) a
Committee designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.

                                      -3-
<PAGE>   4

                        (iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to Employees or Consultants
who are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted to satisfy Applicable Laws. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.

                (b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

                        (i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;

                        (ii) to select the officers, Consultants and Employees
to whom Options may from time to time be granted hereunder;

                        (iii) to determine whether and to what extent Options
are granted hereunder;

                        (iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;

                        (v) to approve forms of agreement for use under the
Plan;

                        (vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);

                        (vii) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(f) instead of Common Stock;
and

                        (viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.

                                      -4-
<PAGE>   5

                (c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

        5. Eligibility.

                (a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.

                (b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

                (c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.

                (d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.

        6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.

        7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.

                                      -5-
<PAGE>   6

        8. Option Exercise Price and Consideration.

                (a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:

                        (i) In the case of an Incentive Stock Option

                                (A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                                (B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

                        (ii) In the case of a Nonstatutory Stock Option

                                (A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.

                                (B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.

                (b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (4) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (5) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (6) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the

                                      -6-
<PAGE>   7

Shares not more than twelve months after the date of delivery of the
subscription agreement, (7) any combination of the foregoing methods of payment,
or (8) such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination as to
the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company (Section 315(b) of the California Corporation law).

        9. Exercise of Option.

                (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.

                An Option may not be exercised for a fraction of a Share.

                An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

                Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

                (b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only within ninety (90)
days (or such other period of time as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and not exceeding ninety (90) days) after the date
of such termination (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise his Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise

                                      -7-
<PAGE>   8

the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.

                (c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.

                (d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.

                (e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

                (f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

        10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

        11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option , which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the

                                      -8-
<PAGE>   9

withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").

        All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:

                (a) the election must be made on or prior to the applicable Tax
Date;

                (b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;

                (c) all elections shall be subject to the consent or disapproval
of the Administrator;

                (d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

        In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.

        12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of

                                      -9-
<PAGE>   10

any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

        In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the
Administrator shall notify the Optionee that the Option shall be exercisable for
a period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.

        13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

        14. Amendment and Termination of the Plan.

                (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

                (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

        15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without

                                      -10-
<PAGE>   11

limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

        As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

        16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

        The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

        17. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.

        18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.

        19. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, a balance sheet and an income statement at least annually. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure their access to equivalent
information.

                                      -11-
<PAGE>   12

                           ISTA PHARMACEUTICALS, INC.

                             STOCK OPTION AGREEMENT

                                    UNDER THE

                                 1993 STOCK PLAN

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

       IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

        THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.

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

        Unless otherwise defined herein, the terms defined in the Ista
Pharmaceuticals, Inc. 1993 Stock Plan (the "Plan") shall have the same meanings
in this Stock Option Agreement.

        Optionee's Name:
                            ---------------------------

        Address:
                            ---------------------------

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

<PAGE>   13

I. NOTICE OF STOCK OPTION GRANT

        You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option Agreement,
as follows:

        Optionee's Name:
                                            ---------------------------

        Date of Grant:
                                            ---------------------------

        Total Number of Shares Granted:
                                            ---------------------------

        Exercise Price per Share:          $
                                            ---------------------------

        Total Exercise Price:              $
                                            ---------------------------

        Term/Expiration Date:
                                            ---------------------------

        Vesting Start Date:
                                            ---------------------------

        Type of Option:                          Incentive Stock Option
                                            ----
                                                 Nonstatutory Stock Option
                                            ----

        Vesting Schedule: This Option may be exercised, in whole or in part, in
accordance with the following "Vesting Schedule":

        [With respect to the above-referenced options, one forty-eighth (1/48)
        of the total number of shares subject to each option shall become
        execrable at the end of each calendar month following the Vesting Start
        Date, based upon such individuals' continued relationship with the
        corporation.]

        Termination Period: The "Termination Period" during which this Option
may be exercised is 30 days (3 months maximum for Incentive Stock Options) after
termination of Optionee's employment or consulting relationship, or such longer
period as may be applicable upon death or Disability of Optionee as provided in
the Plan, but in no event later than the Term/Expiration Date as provided above.

                                      -2-
<PAGE>   14

        II. AGREEMENT

        1. Grant of Option. The Company hereby grants to the Optionee named in
the Notice of Grant set forth as Part I above (the "Optionee"), an option (the
"Option") to purchase a total number of shares of Common Stock (the "Shares")
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price") subject to the terms, definitions and
provisions of the Plan, which is incorporated herein by reference.

        If designated an Incentive Stock Option ("ISO"), this Option is intended
to qualify as an incentive stock option as defined in Section 422 of the Code.
If designated a Nonstatutory Stock Option ("NSO"), this Option is not intended
to qualify as an incentive stock option.

        2. Exercise of Option.

                (a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Stock Option Agreement. In the
event of Optionee's death, Disability or other termination of Optionee's
employment or consulting relationship, the exercisability of the Option is
governed by the applicable provisions of the Plan and this Stock Option
Agreement. Notwithstanding the foregoing, this Option shall only be exercisable
if stockholder approval of the Plan is obtained within twelve months of the
adoption of the Plan by the Board.

                (b) Method of Exercise. This Option is exercisable by delivery
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares as
to which the Option is being exercised (the "Exercised Shares") and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price and any required withholding tax.

        No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

        3. Investment Representations; Restrictions on Transfer.

                (a) By receipt of this Option, by its execution and by its
exercise in whole or in part, Optionee represents to the Company the following:

                        (i) Optionee understands that this Option and any Shares
purchased upon its exercise are securities, the issuance of which requires
compliance with federal and state securities laws.

                                      -3-
<PAGE>   15

                        (ii) Optionee is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
securities. Optionee is acquiring these securities for investment for Optionee's
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").

                        (iii) Optionee acknowledges and understands that the
securities constitute "restricted securities" under the Securities Act and must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Optionee
further acknowledges and understands that the Company is under no obligation to
register the securities. Optionee understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of Corporations of the
State of California and any other legend required under applicable state
securities laws.

                        (iv) Optionee is familiar with the provisions of Rule
701 and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of exercise of the Option by the
Optionee, such exercise will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph 3(a)(iv), the Optionee acknowledges
and agrees to the restrictions set forth in paragraph 3(b).

        In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company: (2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and (3) in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.

                        (v) Optionee understands that transfer of the Shares may
be restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner.

                (b) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for

                                      -4-
<PAGE>   16

the purchase of, or otherwise dispose of any shares of Common Stock of the
Company held by Optionee (other than those shares included in the registration)
without the prior written consent of the Company or the underwriters managing
such initial underwritten public offering of the Company's securities for ninety
(90) days from the effective date of such registration, and (2) further agrees
to execute any agreement reflecting (1) above as may be requested by the
underwriters at the time of the public offering.

        4. Restrictive Legends and Stop-Transfer Orders.

                (a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:

        THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.

        IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

                (b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

                (c) Refusal to Transfer. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.

        5. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

                (a) cash; or

                (b) check; or

                (c) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price.

                                      -5-
<PAGE>   17

        6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

        7. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate.

        8. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

        9. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.

        10. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.

                (a) Exercise of Incentive Stock Option. If this Option qualifies
as an ISO, there will be no regular federal income tax liability or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the fair market value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to the alternative minimum
tax in the year of exercise.

                (b) Exercise of Nonstatutory Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.

                                      -6-
<PAGE>   18

                (c) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price.

                (d) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.

                                            ISTA PHARMACEUTICALS, INC.,
                                            a California corporation

                                            By:
                                               ---------------------------------

                                            Title:
                                                  ------------------------------

                                      -7-
<PAGE>   19

        OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

        Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan.

Dated:
      -----------------------------         ------------------------------------
                                            Optionholder

                                            ------------------------------------
                                            Address

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

                                            ------------------------------------
                                            Social Security No.

                                      -8-
<PAGE>   20

                                    EXHIBIT A

                           ISTA PHARMACEUTICALS, INC.

                                 1993 STOCK PLAN

                                 EXERCISE NOTICE

Ista Pharmaceuticals, Inc.
15279 Alton Parkway
Building 100
Irvine, California 92618
Attention:  Secretary

        1. Exercise of Option. Effective as of today, ___________, _______, the
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Ista Pharmaceuticals, Inc. (the "Company")
under and pursuant to the Company's 1993 Stock Plan (the "Plan") and the Stock
Option Agreement dated (the "Option Agreement"). The aggregate purchase price
for the Shares shall be $________, as required by the Option Agreement.

        2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.

        3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions. Purchaser acknowledges
the representations made in the Option Agreement.

        4. Rights as Stockholder. Subject to the terms and conditions of this
Agreement, Purchaser shall have all of the rights of a stockholder of the
Company with respect to the Shares from and after the date the stock certificate
evidencing such Shares is issued, as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company.

        5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

        6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and such agreement is governed by
California law except for that body of law pertaining to conflict of laws.

                                      -1-
<PAGE>   21

Submitted by:                               Accepted by:

PURCHASER:                                  ISTA PHARMACEUTICALS, INC.

                                            By:
-----------------------------------            ---------------------------------
Signature

                                            Its:
-----------------------------------             --------------------------------
Print Name

Address:                                    Address:

                                            15279 Alton Parkway
-----------------------------------         Building 100
                                            Irvine, CA 92618

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

                                      -2-
<PAGE>   22

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE:

COMPANY:       ISTA PHARMACEUTICALS, INC.

SECURITY:      COMMON STOCK

AMOUNT:

DATE:

        In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:

                (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

                (b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.

                (c) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted

                                      -1-
<PAGE>   23

securities" acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the grant of
the Option to the Optionee, the exercise will be exempt from registration under
the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

        In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

                (d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

                (e) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.

                                            Signature of Optionee:

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

                                      -2-
<PAGE>   24

                                  ATTACHMENT 1

              STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE

         Title 10. Investment - Chapter 3. Commissioner of Corporations

        260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.

        (b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:

        (1) to the issuer;

        (2) pursuant to the order or process of any court;

        (3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;

        (4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;

        (5) to holders of securities of the same class of the same issuer;

        (6) by way of gift or donation inter vivos or on death;

        (7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;

        (8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;

        (9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;

        (10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;

                                      -1-
<PAGE>   25

        (11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;

        (12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;

        (13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;

        (14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or

        (15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;

        (16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;

        (17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.

        (c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:

        "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

                                      -2-

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