Exhibit 10.1

 
INSITE VISION INCORPORATED
SEVERANCE PLAN
 
ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE
 
1.1           Establishment of the Plan.  InSite Vision Incorporated, a Delaware
corporation (the “Company”), hereby establishes a severance plan to be known as
the “InSite Vision Incorporated Severance Plan” (the “Plan”).
 
1.2           Purpose of the Plan.  The Plan is designed to provide certain
severance benefits to a select group of management or highly compensated
employees of the Company who become eligible to receive such benefits pursuant
to Article 4 hereof.
 
1.3           Term of the Plan.  The Plan shall commence upon the date of its
approval by the Committee (the “Effective Date”), and shall continue in effect
through December 31, 2011 (such period being referred to herein as the “Term”);
provided, however, that the Term shall be automatically extended for one (1)
additional year on January 1, 2011 and on each annual anniversary of such date
thereafter (each, an “Extension Date”) (such that on January 1, 2011 the Term
would be extended to December 31, 2012), unless the Company has, prior to such
Extension Date, delivered written notice to each Participant then in the Plan
that the Term will not be extended, and if such notice is given, the Plan will
terminate at the end of the Term then in effect (with no extension or further
extension, as the case may be, as to any Extension Date that would otherwise
occur after the giving of such notice).  Notwithstanding the foregoing, in the
event that a Change in Control occurs during the Term (or extended Term, as the
case may be), the Term shall be extended through, and shall end no earlier than,
the later of (i) the date that is two (2) years after such Change in Control or
(ii) the date on which all obligations of the Company hereunder have been
fulfilled.  The termination or expiration of the Term shall not affect the
rights of Participants to benefits pursuant to the Plan to the extent the
Participant’s employment is terminated during the Term.
 
ARTICLE 2
DEFINITIONS
 
Whenever used in the Plan or a Participation Agreement (as defined in Section
3.2), the following terms shall have the meanings set forth below (such defined
terms are in addition to terms defined elsewhere in the Plan) unless the context
clearly indicates to the contrary:
 
 
(a)
“ADEA” means the United States Age Discrimination in Employment Act of 1967, as
amended.

 
 
(b)
“Base Salary” means, as to a particular Participant, the Participant’s
annualized rate of base salary from the Company (or, if the Participant is
employed by a Subsidiary, from the Subsidiary) at the relevant time.

 

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(c)
“Board” means the Board of Directors of the Company.

 
 
(d)
“Cause” means, as to a particular Participant, a termination of the
Participant’s employment by the Company or a Subsidiary for one or more of the
following reasons:

 
 
(i)
the Participant’s conviction of or entrance of a plea of guilty or nolo
contendere to a felony;

 
 
(ii)
fraudulent conduct by the Participant in connection with the business affairs of
the Company or a Subsidiary;

 
 
(iii)
theft, embezzlement, or other criminal misappropriation of funds by the
Participant from the Company or a Subsidiary;

 
 
(iv)
the Participant’s continued willful refusal to perform his or her duties to the
Company or a Subsidiary, or willful failure to follow the lawful orders of the
Board (or board of directors of a Subsidiary by which the Participant is
employed, as applicable) or the officer or other employee (if any) to whom the
Participant reports;

 
 
(v)
the Participant’s willful misconduct in connection with, or in the course of,
carrying out the Participant’s duties and responsibilities to the Company or a
Subsidiary, which has, or would if generally known, materially adversely affect
the good will, business, or reputation of the Company or a Subsidiary; or

 
 
(vi)
the Participant’s material breach of any confidentiality, trade secret,
proprietary information or similar agreement or obligation to the Company or a
Subsidiary;

 
provided, however, that if a cure is reasonably possible in the circumstances
any act, inaction, conduct or other circumstances that would otherwise
constitute “Cause” under clause (iv), (v) or (vi) above shall not constitute
“Cause” unless both (x) the Company (or the Subsidiary that employs the
Participant, as applicable) provides written notice to the Participant of the
condition claimed to constitute Cause, and (y) the Participant fails to remedy
such condition promptly (and in all cases within thirty (30) days) after
receiving such written notice thereof.  For purposes of this definition, no act
or failure to act shall be deemed “willful” unless effected by Participant not
in good faith and without reasonable belief that such action or failure to act
was in the best interests of the Company (or the Subsidiary that employs the
Participant, if the Participant is employed by a Subsidiary).
 
 
(e)
“Change in Control” means the occurrence of any of the following after the
Effective Date:

 

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(i)
The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (a “Person”)) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (1)
the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (2) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however,
that, for purposes of this clause (a), the following acquisitions shall not
constitute a Change in Control; (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any affiliate
of the Company or a successor, (D) any acquisition by any entity pursuant to a
transaction that complies with clauses (ii)(1) and (2) below, and (E) any
acquisition by a Person who owned more than 50% of either the Outstanding
Company Common Stock or the Outstanding Company Voting Securities as of the
Effective Date or an affiliate of any such Person;

 
 
(ii)
Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its Subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its Subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (1) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that, as a result of such transaction, owns the Company or all or
substantially all of the Company 's assets directly or through one or more
subsidiaries (a “Parent”)) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, and (2) no Person (excluding any entity resulting from such Business
Combination or a Parent or any employee benefit plan (or related trust) of the
Company or such entity resulting from such Business Combination or Parent)
beneficially owns, directly or indirectly, more than 50% of, respectively, the
then-outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then-outstanding voting
securities of such entity, except to the extent that the ownership in excess of
50% existed prior to the Business Combination;

 

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(iii)
Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company other than in the context of a transaction that does
not constitute a Change in Control under clause (ii) above.

 
 
(f)
“Change in Control Severance Multiplier” means, as to a particular Participant,
the “Change in Control Severance Multiplier” established by the Committee with
respect to that Participant and set forth in the Participant’s Participation
Agreement for the purpose of calculating any benefits the Participant may become
entitled to under Section 4.2.

 
 
(g)
“Code” means the United States Internal Revenue Code of 1986, as amended.

 
 
(h)
“Committee” means the Stock Plan and Compensation Committee of the Board.  If
there is not then a Stock Plan and Compensation Committee of the Board,
references in this Plan to the “Committee” shall refer to the Board.

 
 
(i)
“Disability” means, as to a particular Participant, the Participant’s inability,
because of physical or mental illness or injury, to perform the essential
functions of his or her customary duties to the Company or a Subsidiary, even
with a reasonable accommodation, and the continuation of such disabled condition
for a period of one hundred eighty (180) continuous days, or for not less than
two hundred ten (210) days during any continuous twenty-four (24) month period.

 
 
(j)
“Eligible Person” means an employee who is an officer or key employee of the
Company or a Subsidiary, as determined by the Committee.

 
 
(k)
“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended.

 
 
(l)
“Good Reason” with respect to a particular Participant will have the meaning
given in that Participant’s Participation Agreement.

 
 
(m)
“Participant” means any Eligible Person who is selected to participate in the
Plan as determined in accordance with Article 3.

 

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(n)
“Separation from Service” means a “separation from service” with the Company or
the Subsidiary that employs the Participant, as applicable, within the meaning
of Treasury Regulation Section 1.409A-1(h).

 
 
(o)
“Severance Multiplier” means, as to a particular Participant, the “Severance
Multiplier” established by the Committee with respect to that Participant and
set forth in the Participant’s Participation Agreement for the purpose of
calculating any benefits the Participant may become entitled to under Section
4.1.

 
 
(p)
“Specified Employee” means a Participant who, as of the date of the
Participant’s Separation from Service, is a “specified employee” within the
meaning of Treasury Regulation Section 1.409A-1(i).

 
 
(q)
“Subsidiary” means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned, directly or
indirectly, by the Company.

 
 
(r)
“Target Bonus” means, as to a particular Participant, the Participant’s target
Company cash bonus opportunity for the Company’s fiscal year in which the
Participant’s Separation from Service occurs (including, if the Participant is
employed by a Subsidiary, any target cash bonus opportunity that may be provided
directly by the Subsidiary for that year).  If the Participant has no such
target cash bonus opportunity, the Participant’s Target Bonus for purposes of
the Plan means the average annual cash bonus paid by the Company (including its
Subsidiaries) for the three (3) years prior to the year in which the
Participant’s Separation from Service occurs (or, if the Participant has not
been employed by the Company or a Subsidiary for such three (3) year period,
over such portion of such period the Participant was employed by the Company or
a Subsidiary).

 
ARTICLE 3
PARTICIPATION
 
3.1           Participation.  The Committee shall from time to time designate in
writing those Eligible Persons who are, subject to Section 3.2, eligible to
participate in the Plan.  The Committee shall limit the class of persons
selected to participate in the Plan to a select group of management or highly
compensated employees, as set forth in Sections 201, 301 and 401 of ERISA.  Once
a Participant participates in the Plan, the Participant may not be removed from
participation in the Plan, his or her Severance Multiplier and Change in Control
Severance Multiplier may not be reduced and the Plan may not be amended in a
manner materially adverse to the Participant unless the Committee gives written
notice to the Participant that he or she will no longer be a Participant in the
Plan or of such reduction or amendment, as the case may be, in which case the
Participant shall cease to be a Participant in the Plan or such reduction or
amendment, as the case may be, shall be effective at the end of the Term then in
effect (without giving effect, for such purposes, to any extension or further
extension, as the case may be, of the Term pursuant to Section 1.3 after the
date of such notice from the Committee); provided, however, that such notice
shall not be effective if, before the date such change takes effect, either a
Change in Control occurs or the Participant ceases to be employed by the Company
or a Subsidiary.
 

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3.2           Participation Agreement.  To the extent the Committee has
designated an Eligible Person as being eligible to participate in the Plan, the
Eligible Person shall become a Participant only by promptly completing, fully
executing, and returning to the Company a participation agreement (a
“Participation Agreement”) in substantially the form attached hereto as Exhibit
A (or such other form as the Committee may require and provide for at the time
it designates the Eligible Person as being eligible to participate in the Plan).
 
ARTICLE 4
SEVERANCE BENEFITS
 
4.1           Severance Benefits.  Provided that a Participant is not entitled
to any benefits set forth in Section 4.2 below and subject to the other
provisions of the Plan (including, without limitation, Section 4.6 and Articles
5 and 6), if a Participant’s employment with the Company or a Subsidiary is
terminated during the Term by the Company or a Subsidiary without Cause (and
other than due to the Participant’s death or Disability), the Participant shall
be entitled to receive from the Company the following severance benefits:
 
 
(a)
Cash Severance.  A cash payment equal to the Participant’s Severance Multiplier
multiplied by the Participant’s annualized rate of Base Salary in effect at the
time of the Participant’s Separation from Service.

 
 
(b)
COBRA Benefit.  The Company will pay or reimburse the Participant for the
premiums charged to continue medical and dental coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or
reasonably equivalent medical and dental coverage for the Participant (and, if
applicable, the Participant’s eligible dependents) as in effect immediately
prior to the termination of the Participant’s employment with the Company or a
Subsidiary, to the extent that the Participant elects such continued coverage;
provided that the Company’s obligation to make any payment or reimbursement
pursuant to this clause (b) shall commence with continuation coverage for the
month following the month of the Participant’s Separation from Service and shall
continue for a number of months equal to the product of (x) the Severance
Multiplier and (y) twelve; provided that the Company’s obligation to make any
payment or reimbursement pursuant to this clause (b) shall terminate, if earlier
than as provided above, on the first to occur of the Participant’s death, the
date the Participant becomes eligible for coverage under the health plan of a
future employer, the date the Company and its Subsidiaries cease to offer group
medical coverage to their active executive employees or the Company is otherwise
under no obligation to offer COBRA continuation coverage to the Participant.  To
the extent the Participant elects COBRA coverage, the Participant shall notify
the Company in writing of such election prior to such coverage taking effect and
complete any other continuation coverage enrollment procedures the Company may
then have in place.

 

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4.2           Change in Control Severance Benefits.  Notwithstanding Section 4.1
above and subject to the other provisions of the Plan (including, without
limitation, Section 4.6 and Articles 5 and 6), if (1) a Participant’s employment
with the Company or a Subsidiary is terminated during the Term by the Company or
a Subsidiary without Cause (and other than due to the Participant’s death or
Disability) or by the Participant for Good Reason, and (2) such termination of
employment occurs at any time during the period commencing ninety (90) days
prior to the occurrence of a Change in Control and ending two (2) years after
such Change in Control (the “Protected Period”), the Participant shall be
entitled to receive from the Company the following severance benefits:
 
 
(a)
Cash Severance.  A cash payment equal to the sum of (i) the Participant’s Change
in Control Severance Multiplier, multiplied by the Participant’s annualized rate
of Base Salary in effect at the time of the Participant’s Separation from
Service (or, if greater, at the time of the Change in Control) and (ii) the
Participant’s Target Bonus.

 
 
(b)
COBRA Benefit.  The Company will pay or reimburse the Participant for the
premiums charged to continue medical and dental coverage pursuant to COBRA, at
the same or reasonably equivalent medical and dental coverage for the
Participant (and, if applicable, the Participant’s eligible dependents) as in
effect immediately prior to the termination of the Participant’s employment with
the Company or a Subsidiary, to the extent that the Participant elects such
continued coverage; provided that the Company’s obligation to make any payment
or reimbursement pursuant to this clause (b) shall commence with continuation
coverage for the month following the month of the Participant’s Separation from
Service and shall continue for a number of months equal to the product of (x)
the Change in Control Severance Multiplier and (y) twelve; provided that the
Company’s obligation to make any payment or reimbursement pursuant to this
clause (b) shall terminate, if earlier than as provided above, on the first to
occur of the Participant’s death, the date the Participant becomes eligible for
coverage under the health plan of a future employer, the date the Company and
its Subsidiaries cease to offer group medical coverage to their active executive
employees or the Company is otherwise under no obligation to offer COBRA
continuation coverage to the Participant.  To the extent the Participant elects
COBRA coverage, the Participant shall notify the Company in writing of such
election prior to such coverage taking effect and complete any other
continuation coverage enrollment procedures the Company may then have in place.

 

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(c)
Accelerated Stock Award Vesting.  Notwithstanding any other provision in any
stock option or other equity-based award granted by the Company to the
Participant prior to the occurrence of a Change in Control, to the extent such
award is outstanding and has not otherwise vested immediately prior to the
termination of the Participant’s employment with the Company or a Subsidiary,
such award shall automatically become fully vested as of (or, to the extent
necessary to give effect to such acceleration, immediately prior to) such
termination of employment.  Notwithstanding any other provision in any stock
option, stock appreciation right or similar equity-based award granted by the
Company to the Participant prior to the occurrence of a Change in Control, the
post-termination of employment exercise period of such award shall be
automatically extended (beyond the normal expiration date) for six (6) months,
provided that in no case shall any such award be extended beyond its maximum
term and in all cases the award remains subject to earlier termination in
accordance with the change in control or similar provisions of the applicable
equity plan under which the award was granted (or of the applicable award
agreement, to the extent such change in control or similar provisions are
included in the award agreement rather than the equity plan).

 
4.3           Termination for Other Reasons.  For avoidance of doubt, the
Company and its Subsidiaries shall have no obligations (or no further
obligations, as the case may be) to the Participant under the Plan if:
 
 
(a)
the Participant’s employment terminates for any reason prior to the Effective
Date or after the Term; or

 
 
(b)
after the Effective Date,

 
 
(i)
the Participant’s employment is terminated by the Company or a Subsidiary for
Cause;

 
 
(ii)
the Participant voluntarily terminates his or her employment with the Company or
a Subsidiary for any reason (other than a termination for Good Reason in the
circumstances provided in Section 4.2); or

 
 
(iii)
the Participant’s employment with the Company or a Subsidiary terminates due to
the Participant’s Disability or death.

 
4.4           Terminations of Employment Generally.  Notwithstanding anything
else contained in the Plan to the contrary, a Participant shall not be deemed to
have terminated employment with the Company or a Subsidiary if his or her
employment by the Company or a Subsidiary terminates but he or she otherwise
continues, immediately after such termination of employment, as an employee of
the Company or another Subsidiary; provided that whether the Participant has
Good Reason to terminate employment shall be determined by comparing the
relevant aspects of the terms of the Participant’s employment (determined in
light of the Good Reason definition applicable to the Participant) after giving
effect to such change to the relevant aspects of the terms of the Participant’s
employment before giving effect to such change (in each case relative to the
Company and its Subsidiaries on a consolidated basis, not simply with reference
to the Participant’s employer).
 

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4.5           Termination of Employment - Asset Sale.  Notwithstanding anything
else contained in this Plan to the contrary, a Participant shall not be entitled
to benefits under this Plan as a result of a termination of the Participant’s
employment with the Company or a Subsidiary (or any related circumstances such
as, without limitation, a sale of the business in which the Participant is
employed that might otherwise have constituted Good Reason as to the
Participant) if such termination of employment occurs in connection with a sale
of assets by the Company or a Subsidiary and each of the following conditions is
satisfied in connection with such sale: (1) the Participant becomes employed by
the purchaser of such assets (or one of its parent, subsidiary, or other
affiliated entities) upon or within sixty (60) days following such sale or such
purchaser (or one of its parent, subsidiary, or other affiliated entities)
offers the Participant employment effective upon or within sixty (60) days
following such sale (regardless of whether the Participant actually accepts or
commences such employment) on substantially the same terms; and (2) such
purchaser (or one of its parent, subsidiary, or other affiliated entities)
adopts the Plan (or a substantially similar severance plan) to provide the
Participant (with respect to the Participant’s employment or offer of employment
with such purchaser or one of its parent, subsidiary or other affiliated
entities) with substantially the same severance protections afforded by this
Plan had this Plan continued in effect as to the Participant after such sale on
its terms (subject, without limitation, to any such entity’s right to terminate
the Plan and any Participant’s participation from time to time pursuant to
Sections 1.3 and 3.1) for a period of no less than two (2) years following the
closing of such asset sale.  Whether employment is on “substantially the same
terms” for this purpose shall be determined by comparing the relevant aspects of
the terms of the Participant’s employment (determined in light of the Good
Reason definition applicable to the Participant) before giving effect to such
asset sale to the relevant aspects of the terms of the Participant’s employment
(or offer of employment, as the case may be) with the purchaser (or one of its
parent, subsidiary, or other affiliated entities) after giving effect to such
asset sale.
 
4.6           Benefit Offset.  Notwithstanding anything else contained in the
Plan to the contrary, any severance benefits otherwise payable under the Plan to
a Participant shall be offset or reduced by the amount of severance benefits
payable or deliverable to the Participant under any other plan, program, or
agreement of or with the Company or any of its Subsidiaries (including, without
limitation, any benefits, including pay in lieu of notice and similar
requirements, of the Worker Adjustment and Retraining Notification Act (“WARN”)
and similar laws).
 
4.7           Notice of Termination. Any termination of a Participant’s
employment by the Company or a Subsidiary for Cause or due to Disability, or by
a Participant for Good Reason, shall be communicated by Notice of
Termination.  For purposes of the Plan, a “Notice of Termination” shall mean a
written notice which shall indicate the element of Cause, Disability or Good
Reason, as applicable, relied upon for the termination.  The Notice of
Termination shall be delivered in accordance with the general notice provisions
set forth in Section 12.6.
 
ARTICLE 5
TIMING AND CONDITIONS OF PAYMENTS; TAXES
 
5.1           Form and Timing of Severance Payments.  Subject to Sections 5.2
and 12.8(b) and Article 6, any severance benefits described in Sections 4.1(a)
and 4.2(a), as applicable, that become payable to a Participant in accordance
with the provisions of the Plan shall be paid at the times and in the manner set
forth in this Section 5.1.
 

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(a)
Except as provided below in this Section 5.1, the payments described in Sections
4.1(a) and 4.2(a), as applicable, shall be paid by the Company in cash to the
Participant on or within the seventy four (74) day period following the
Participant’s Separation from Service.

 
 
(b)
In the event a Participant becomes entitled to severance benefits under Section
4.2, such Participant shall not also be entitled to receive severance benefits
under Section 4.1.

 
 
(c)
In the event a Participant becomes entitled to severance benefits under Section
4.1 and a Change in Control occurs within the ninety (90) day period following
the Participant’s Separation from Service, the Participant shall become entitled
to the level of severance benefits under Section 4.2, with the Participant’s
benefit pursuant to Section 4.2(a) to be offset by the amount the Participant
was paid (or is to be paid, as the case may be) pursuant to Section 4.1(a) and
such difference to be paid by the Company on or within the seventy four (74) day
period following such Change in Control.

 
 
(d)
In the event a Participant terminates his or her employment with the Company or
a Subsidiary for Good Reason prior to the Protected Period and a Change in
Control occurs within the ninety (90) day period following the Participant’s
Separation from Service, the Participant shall be entitled to severance benefits
under Section 4.2, with the benefits pursuant to Section 4.2(a) (along with any
reimbursement due to the Participant pursuant to Section 4.2(b) for any period
of coverage prior to the date of such reimbursement) to be paid by the Company
on or within the seventy four (74) day period following such Change in Control.

 
 
(e)
In the event a Participant becomes entitled to severance benefits under Section
4.2 pursuant to the circumstances described in Section 5.1(c) or Section 5.1(d),
any stock option or other equity-based award granted by the Company to the
Participant, to the extent such award had not vested and was cancelled or
otherwise terminated upon or prior to the date of the Change in Control as a
result of the termination of the Participant’s employment under the
circumstances described in Section 4.1, shall be reinstated and shall
automatically become fully vested and, in the case of stock options or similar
awards, the Participant shall be given a reasonable opportunity to exercise such
accelerated portion of the option or other award before it terminates (to the
extent provision has not been made for the cash-out of the awards in connection
with the Change in Control on terms similar to the treatment of the Company’s
then-outstanding employee stock options generally).

 

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(f)
In the event any severance benefits described in Sections 4.1(a) or 4.2(a), as
applicable, become payable to a Participant and such Participant is required to
execute a release pursuant to Section 5.2 and the timing of the execution of
such release may cause such severance benefits to become payable in either of
two consecutive taxable years depending on the timing of the execution of such
release, such severance benefits shall be paid in the latter taxable year
regardless of when such release is executed.

 
5.2           Release.  Notwithstanding anything to the contrary contained in
the Plan, the Company’s obligation to make any payment of benefits with respect
to a Participant under the Plan is subject to the condition precedent that (i)
the Participant execute a release of claims (in the form attached hereto as
Exhibit B or such other form as the Committee may reasonably require in the
circumstances, which other form shall be substantially similar to that attached
hereto as Exhibit B but with such changes as the Committee may determine to be
required or reasonably advisable in order to make the release enforceable and
otherwise compliant with applicable laws) and deliver such release to the
Company so that it is received by the Company in the time period specified
below, and (ii) such release is not revoked by the Participant pursuant to any
revocation rights afforded by applicable law.  In order to satisfy the
requirements of this Section 5.2, a Participant’s release referred to in the
preceding sentence must be delivered by the Participant to the Company so that
it is received by the Company no later than thirty (30) calendar days after the
Participant’s Separation from Service (or such later date as may be required for
an enforceable release of the Participant’s claims under the ADEA, to the extent
the ADEA is applicable in the circumstances, in which case the Participant will
be provided with either twenty one (21) or forty five (45) days, depending on
the circumstances of the termination, to consider the release).  In addition,
the Company may require that the Participant’s release be executed no earlier
than the date of the Participant’s Separation from Service.
 
5.3           Withholding of Taxes.  Notwithstanding anything else herein to the
contrary, the Company may withhold (or cause there to be withheld, as the case
may be) from any amounts otherwise due or payable under or pursuant to the Plan
such federal, state and local income, employment, or other taxes as may be
required to be withheld pursuant to any applicable law or regulation.
 
ARTICLE 6
SECTION 280G
 
Notwithstanding anything contained in this Plan, to the extent that any payment,
distribution, transfer or other benefit of any type to or for a Participant by
the Company or any of its parents, subsidiaries or other affiliates, whether
paid or payable or distributed or distributable pursuant to the terms of this
Plan or otherwise (including, without limitation, any accelerated vesting of
stock options or other equity-based awards granted by the Company or any of its
parents, subsidiaries or other affiliates pursuant to this Plan or otherwise)
(collectively, the “Total Payments”) is or will be subject to the excise tax
imposed under Section 4999 of the Code, then the Total Payments shall be reduced
(but not below zero) so that the maximum amount of the Total Payments (after
reduction) shall be one dollar ($1.00) less than the amount which would cause
the Total Payments to be subject to the excise tax imposed by Section 4999 of
the Code; provided that such reduction to the Total Payments shall be made only
if the total after-tax benefit to the Participant is greater after giving effect
to such reduction than if no such reduction had been made.  If such a reduction
is required, the Company shall reduce the Total Payments by first reducing or
eliminating any cash severance benefits, then by reducing or eliminating any
accelerated vesting of stock options or similar awards, then by reducing or
eliminating any accelerated vesting of restricted stock or similar awards, then
by reducing or eliminating any other remaining Total Payments.  The preceding
provisions of this Article 6 shall take precedence over the provisions of any
other plan, arrangement or agreement governing the Participant’s rights and
entitlements to any benefits or compensation.
 

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ARTICLE 7
PAYMENT OBLIGATIONS
 
7.1           Payment of Obligations.  The Company’s obligation to make any
benefit payment (or installment thereof) pursuant to the Plan shall immediately
cease upon failure by the Participant (or former Participant) entitled to such
payment to comply with Section 5.2.  Participants shall not be obligated to seek
other employment in mitigation of the amounts payable or arrangements made under
any provision of the Plan, and the obtaining of any such other employment shall
not effect any reduction of the Company’s obligations to make the payments
required to be made under the Plan.
 
7.2           Unsecured General Creditor.  Participants and their heirs,
successors, and assigns shall have no legal or equitable rights, claims, or
interest in any specific property or assets of the Company or any
Subsidiary.  No assets of the Company or any Subsidiary shall be held under any
trust, or held in any way as collateral security, for the fulfilling of the
obligations of the Company under the Plan.  Any and all of the Company’s and
each Subsidiary’s assets shall be, and remain, the general unpledged,
unrestricted assets of the Company or Subsidiary, as applicable (unless pledged
or restricted with respect to such entity’s obligations other than the
Plan).  The Company’s obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Company to pay money in the future, and
the rights of the Participants and their heirs or successors as to benefits
under the Plan shall be no greater than those of unsecured general creditors of
the Company.
 
7.3           Other Benefit Plans.  All payments, benefits and amounts provided
under the Plan shall be in addition to and not in substitution for any pension
rights under the any tax-qualified pension or retirement plan in which the
Participant participates, and any disability, workers’ compensation or other
Company or Subsidiary benefit plan distribution that a Participant is entitled
to (other than severance benefits), under the terms of any such plan, at the
time the Participant ceases to be employed by the Company or a
Subsidiary.  Notwithstanding the foregoing, the Plan shall not create an
inference that any duplicate payments shall be required.  Payments received by a
person under the Plan shall not be deemed a part of the person’s compensation
for purposes of the determination of benefits under any other employee pension,
welfare or other benefit plans or arrangements, if any, provided by the Company
or a Subsidiary, except where explicitly provided under the terms of such plans
or arrangements.
 

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ARTICLE 8
CLAIMS PROCEDURES
 
8.1           Presentation of Claim.  Any Participant (such Participant being
referred to below as a “Claimant”) may deliver to the Committee a written claim
for a determination with respect to the benefits payable to such Claimant
pursuant to the Plan.  If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60) days after
such notice was received by the Claimant.  All other claims must be made within
one hundred eighty (180) days of the date on which the event that caused the
claim to arise occurred.  The claim must state with particularity the
determination desired by the Claimant.
 
8.2           Notification of Decision.  The Committee shall consider a
Claimant’s claim within a reasonable time, but no later than ninety (90) days
after receiving the claim.  If the Committee determines that special
circumstances require an extension of time for processing the claim, written
notice of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period.  In no event shall such
extension exceed a period of ninety (90) days from the end of the initial ninety
(90) day period.  The extension notice shall indicate the special circumstances
requiring an extension of time and the date by which the Committee expects to
render the benefit determination.  The Committee shall notify the Claimant in
writing:
 
 
(a)
that the Claimant’s requested determination has been made, and that the claim
has been allowed in full; or

 
 
(b)
that the Committee has reached a conclusion contrary, in whole or in part, to
the Claimant’s requested determination, and such notice must set forth in a
manner calculated to be understood by the Claimant:

 
 
(i)
the specific reason(s) for the denial of the claim, or any part of it;

 
 
(ii)
specific reference(s) to pertinent provisions of the Plan upon which such denial
was based;

 
 
(iii)
a description of any additional material or information necessary for the
Claimant to perfect the claim, and an explanation of why such material or
information is necessary;

 
 
(iv)
an explanation of the claim review procedure and the time limits applicable to
such procedures set forth in Section 8.3; and

 
 
(v)
a statement of the Claimant’s right to bring a civil action under ERISA Section
502(a) following an adverse determination on review.

 
8.3           Review of a Denied Claim.  On or before sixty (60) days after
receiving a notice from the Committee that a claim has been denied, in whole or
in part, a Claimant (or the Claimant’s duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim.  The Claimant (or the Claimant’s duly authorized representative):
 

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

 
(a)
may, upon request and free of charge, have reasonable access to, and copies of,
all documents, records and other information relevant to the claim for benefits;

 
 
(b)
may submit written comments or other documents; and/or

 
 
(c)
may request a hearing, which the Committee, in its sole discretion, may grant.

 
8.4           Decision on Review.  The Committee shall render its decision on
review promptly, and no later than sixty (60) days after the Committee receives
the Claimant’s written request for a review of the denial of the claim.  If the
Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to the
Claimant prior to the termination of the initial sixty (60) day period.  In no
event shall such extension exceed a period of sixty (60) days from the end of
the initial sixty (60) day period.  The extension notice shall indicate the
special circumstances requiring an extension of time and the date by which the
Committee expects to render the benefit determination.  In rendering its
decision, the Committee shall take into account all comments, documents, records
and other information submitted by the Claimant relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.  The decision must be written in a manner calculated to
be understood by the Claimant, and it must contain:
 
 
(a)
specific reasons for the decision;

 
 
(b)
specific reference(s) to the pertinent Plan provisions upon which the decision
was based;

 
 
(c)
a statement that the Claimant is entitled to receive, upon request and free of
charge, reasonable access to and copies of, all documents, records and other
information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits; and

 
 
(d)
A description of the Claimant's right to bring a civil action under Section
502(a) of ERISA following an adverse benefit determination on review.

 
ARTICLE 9
RESOLUTION OF DISPUTES
 
Notwithstanding anything to the contrary contained in the Plan, the Participant,
in his or her sole discretion, may elect to have any claim or controversy
arising out of or in connection with the Plan and/or a Participation Agreement
submitted to binding arbitration and adjudicated in accordance with this Article
9 without first having to exhaust the claims procedures set forth in Article 8.
 
The Company and each Participant hereby consent to the resolution by mandatory
and binding arbitration of all claims or controversies arising out of or in
connection with the Plan and/or the Participant’s Participation Agreement that
the Company may have against the Participant, or that the Participant may have
against the Company or against any of its officers, directors, employees or
agents acting in their capacity as such, and which are not resolved under the
terms of Article 8 (or which are not required to be resolved under the terms of
Article 8, as the case may be).  Each party’s promise to resolve all such claims
or controversies by arbitration in accordance with the Plan rather than through
the courts is consideration for the other party’s like promise.  It is further
agreed that the decision of an arbitrator on any issue, dispute, claim or
controversy submitted for arbitration, shall be final and binding upon the
Company and the Participant and that judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction.
 

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Except as otherwise provided in this procedure or by mutual agreement of the
parties, any arbitration shall be before a sole arbitrator (the “Arbitrator”)
selected from Judicial Arbitration & Mediation Services, Inc., San Francisco,
California, or its successor (“JAMS”), or if JAMS is no longer able to supply
the arbitrator, such arbitrator shall be selected from the American Arbitration
Association, and shall be conducted in accordance with the provisions of
California Civil Procedure Code Sections 1280 et. seq. as the exclusive remedy
of such dispute.
 
The Arbitrator shall interpret the Plan, any applicable Company policy or rules
and regulations, any applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or applicable federal
law.  If arbitration is brought after the claim or controversy has been
submitted for review by the Committee in accordance with Article 8, the
Arbitrator shall limit his or her review to whether or not the Committee has
abused its discretion in its interpretation of the Plan and such policies,
rules, and regulations; provided, however, that the Arbitrator shall apply a de
novo standard of review with respect to any claim for benefits under the Plan
that arises in connection with or following a Change in Control event.  In
reaching his or her decision, the Arbitrator shall have no authority to change
or modify any lawful Company policy, rule or regulation, or the Plan.  Except as
provided in the next paragraph, the Arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of the Plan, including but not limited to, any claim that all or any
part of the Plan is voidable.  The Arbitrator shall have the authority to decide
dispositive motions.  Following completion of the arbitration, the arbitrator
shall issue a written decision disclosing the essential findings and conclusions
upon which the award is based.
 
Notwithstanding the foregoing, provisional injunctive relief may, but need not,
be sought by the Participant or by the Company in a court of law while
arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
resolved by the Arbitrator in accordance with the foregoing.  Final resolution
of any dispute through arbitration may include any remedy or relief which would
otherwise be available at law and which the Arbitrator deems just and
equitable.  The Arbitrator shall have the authority to award full damages as
provided by law.  Any award or relief granted by the Arbitrator hereunder shall
be final and binding on the parties hereto and may be enforced by any court of
competent jurisdiction.
 
The Company shall pay the reasonable fees and expenses of the Arbitrator and of
a stenographic reporter, if employed.  Each party shall bear its own attorneys
fees and costs (other than for payment of the forum costs which in any event
shall be born by the Company as provided in the preceding sentence).  Subject to
Section 12.8(b), any such payment or reimbursement shall be made promptly after
the expenses are incurred by the Participant (and in no event later than the
taxable year of the Participant after the Participant’s taxable year in which
such expenses are incurred).  The Participant agrees to provide the Company with
reasonable documentation of such expenses.

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

ARTICLE 10
SUCCESSORS AND ASSIGNMENT
 
10.1           Successors to the Company.  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Company or of any division or subsidiary thereof (the business and/or assets of
which constitute all or substantially all of the total business and/or assets of
the Company) to expressly assume and agree to perform the Company’s obligations
under the Plan in the same manner and to the same extent that the Company would
be required to perform them if such succession had not taken place.  
 
10.2           Assignment by the Participant.  None of the benefits, payments,
proceeds or claims of any Eligible Person or Participant shall be subject to any
claim of any creditor and, in particular, the same shall not be subject to
attachment or garnishment or other legal process by any creditor, nor shall any
such Eligible Person or Participant have any right to alienate, anticipate,
commute, pledge, encumber or assign any of the benefits or payments or proceeds
which he or she may expect to receive, contingently or otherwise, under the
Plan.  Notwithstanding the foregoing, benefits which are in pay status may be
subject to a court-ordered garnishment or wage assignment, or similar order, or
a tax levy.  The Plan shall inure to the benefit of and be enforceable by each
Participant’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees.  If a Participant dies
while any amount would still be payable to him or her hereunder had he or she
continued to live, all such amounts, unless otherwise provided herein, shall be
paid to the Participant’s estate in accordance with the terms of the Plan.
 
ARTICLE 11
ADMINISTRATION OF THE PLAN
 
11.1           Administration - General.  The Company shall be the plan
administrator (within the meaning of Section 3(16)(A) of ERISA).  The Company
delegates its duties under the Plan to the Committee.  The Committee delegates
the day-to-day ministerial duties with respect to the Plan to the Company’s
management.  The Committee and its delegates shall be named fiduciaries of the
Plan to the extent required by ERISA.
 
11.2           Powers and Duties of the Committee.  The Committee shall enforce
the Plan in accordance with its terms, shall be charged with the general
administration of the Plan, and shall have all powers necessary to accomplish
its purposes, including, but not by way of limitation, the power and authority
to do the following:
 
(a)           To determine eligibility for and participation in the Plan;
 

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

(b)           To construe and interpret the terms and provisions of the Plan;
 
(c)           To compute and certify to the amount and kind of benefits payable
to Participants and their beneficiaries, and to determine the amount of
withholding taxes to be deducted pursuant to Section 5.3;
 
(d)           To maintain all records that may be necessary for the
administration of the Plan;
 
(e)           To provide for the disclosure of all information and the filing or
provision of all reports and statements to Participants, beneficiaries or
governmental agencies as shall be required by law;
 
(f)           To make and publish such rules for the regulation of the Plan and
procedures for the administration of the Plan as are not inconsistent with the
terms hereof; and
 
(g)           To appoint a plan manager or any other agent, and to delegate to
them such powers and duties in connection with the administration of the Plan as
the Committee may from time to time prescribe.
 
11.3           Committee Action.  Subject to Article 8, the Committee shall act
with respect to the Plan at meetings by affirmative vote of a majority of the
members of the Committee.  Any action permitted to be taken at a meeting with
respect to the Plan may be taken without a meeting if, prior to such action, a
written consent to the action is signed by all members of the Committee and such
written consent is filed with the minutes of the proceedings of the
Committee.  A member of the Committee shall not vote or act upon any matter
which relates solely to himself or herself as a Participant.  The Chairman or
any other member or members of the Committee designated by the Chairman may
execute any certificate or other written direction on behalf of the Committee.
 
11.4           Construction and Interpretation. The Committee shall have full
discretion to construe and interpret the terms and provisions of the Plan and
any and all Participation Agreements, which interpretation or construction
shall, subject to Article 9, be final and binding on all parties, including but
not limited to the Company and any Participant, beneficiary or other person.
 
ARTICLE 12
MISCELLANEOUS
 
12.1           Employment Status.  Except as may be provided under any other
written agreement between a Participant and the Company or a Subsidiary (other
than the Plan and the Participation Agreement entered into with respect to the
Plan), the employment of each Participant by the Company or any Subsidiary is
“at will,” and may be terminated by either the Participant or the Company (or,
if the Participant is employed by a Subsidiary, by the Subsidiary) at any time.
 

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

12.2           Payments on Behalf of Persons Under Incapacity.  In the event
that any amount becomes payable under the Plan to a person who, in the sole
judgment of the Committee, is considered by reason of physical or mental
condition to be unable to give a valid receipt therefor the Committee may direct
that such payment be made to any person found by the Committee, in its sole
judgment, to have assumed the care of such person.  Any payment made pursuant to
such determination shall constitute a full release and discharge of the
Committee and the Company.
 
12.3           Gender and Number.  Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.
 
12.4           Severability.  In the event any provision of the Plan or any
Participation Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid, prohibited or unenforceable under any present or
future law, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of the Plan or Participation
Agreement, as applicable, or affecting the validity or enforceability of such
provision in any other jurisdiction.  Furthermore, in lieu of such invalid or
unenforceable provision there will be added automatically as a part of the Plan
or Participation Agreement, as applicable, a legal, valid and enforceable
provision as similar in terms to such invalid or unenforceable provision as may
be possible.  Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of the Plan or Participation Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.
 
12.5           Modification; Waiver.  The Committee may from time to time amend
the Plan or Participation Agreement in any way it determines to be advisable;
provided that no such amendment shall materially and adversely affect the rights
of any Participant (or former Participant) under the Plan or Participation
Agreement, as applicable, without that Participant’s (or former Participant’s,
as the case may be) consent.  For purposes of clarity, a notice of non-renewal
of the Term pursuant to Section 1.3 or a notice of any change as contemplated by
and in accordance with Section 3.1 shall not, however, constitute an amendment
that requires the Participant’s consent.  Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under the
Plan or any Participation Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence.  No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
 
12.6           Notice.  All notices under or with respect to the Plan or any
Participation Agreement shall be in writing and shall be either personally
delivered or mailed postage prepaid, by certified mail, return receipt
requested:
 

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

(a)           if to the Company:
 
InSite Vision Incorporated
Attention: Compensation Committee
965 Atlantic Avenue
Alameda, CA 94501
 
                                with a copy to:
 
O’Melveny & Myers LPP
Attention: Timothy Curry, Esq.
2765 Sand Hill Road
Menlo Park, CA 94025
 
 
(b)
if to the Participant, to the address most recently on file in the payroll
records of the Company.

 
Notice shall be effective when personally delivered, or five (5) business days
after being so mailed.  Any party may change its address for purposes of giving
future notices pursuant to the Plan and any Participation Agreement by notifying
the other party in writing of such change in address, such notice to be
delivered or mailed in accordance with the foregoing.
 
12.7           Applicable Law.  The Plan and any Participation Agreement will be
governed by and construed in accordance with ERISA and, to the extent not
preempted thereby, the laws of the State of California, without giving effect to
any choice of law or conflicting provision or rule (whether of the State of
California or any other jurisdiction) that would cause the laws of any
jurisdiction other than United States federal law and the law of the State of
California to be applied.  In furtherance of the foregoing, applicable federal
law and, to the extent not preempted by applicable federal law, the internal law
of the State of California, will control the interpretation and construction of
the Plan and any Participation Agreement even if under such jurisdiction’s
choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.  Any statutory reference in the Plan or any
Participation Agreement shall also be deemed to refer to all applicable final
rules and final regulations promulgated under or with respect to the referenced
statutory provision.
 
12.8           Construction - Section 409A.  
 
 
(a)
To the extent that the Plan is subject to Section 409A of the Code, the Plan
shall be construed and interpreted to the maximum extent reasonably possible to
avoid the imputation of any tax, penalty or interest pursuant to Section 409A of
the Code.

 
 
(b)
Notwithstanding any other provision herein, if a Participant is a Specified
Employee as of the date of such Separation from Service, the Participant shall
not be entitled to and shall not be paid any distribution of his or her benefits
hereunder until the earlier of (i) the date which is six (6) months after his or
her Separation from Service for any reason other than death, or (ii) the date of
the Participant’s death.  The preceding sentence shall only apply if, and only
to the extent, required to avoid the imputation of any tax, penalty or interest
pursuant to Section 409A of the Code.  Any amounts otherwise payable to a
Participant upon or in the six (6) month period following the Participant’s
Separation from Service that are not so paid by reason of this paragraph shall
be paid (without interest) as soon as practicable (and in all events within ten
(10) days) after the first to occur of (i) the date that is six (6) months after
the Participant’s Separation from Service or (ii) the date of the Participant’s
death.

 

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

 
(c)
To the extent that any reimbursement obligations contemplated by Article 9 or by
a release agreement entered into with a Participant pursuant to Section 5.2 are
taxable to the Participant, such benefits are not subject to liquidation or
exchange for another benefit and the amount of such benefits that the
Participant receives in one taxable year shall not affect the amount of such
benefits that the Participant receives in any other taxable year.

 
12.9           Headings.  Headings and subheadings of the Plan and Participation
Agreements are inserted for convenience of reference only and are not to be
considered in the construction of the provisions hereof or thereof, as
applicable.
 
 
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute the Plan on the 28th day of April, 2009.
 
 

 
INSITE VISION INCORPORATED,
a Delaware corporation
           
By:
/s/ Louis Drapeau             Its: Interim Chief Executive Officer, Vice
President and Chief Financial Officer          

 
                                

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

 
EXHIBIT A
 
FORM OF PARTICIPATION AGREEMENT
 
[Date]
 
_______________
_______________
_______________

 
Dear ______________:
 
 
You have been selected to participate in the InSite Vision Incorporated
Severance Plan (the “Plan”), subject to your execution and return of this letter
agreement (this “Participation Agreement”) to InSite Vision Incorporated (the
“Company”).
 
For purposes of determining any severance benefits you may become entitled to
under the Plan, your “Severance Multiplier” will be [0.5 (meaning, in general,
one-half year or six months of severance)] and your “Change in Control Severance
Multiplier” will be [1.0 (meaning, in general, one year or twelve months of
severance)].
 
With respect to your participation in the Plan, the term “Good Reason” means the
occurrence of any one or more of the following conditions without your express
written consent:
 
(i)           a material diminution in your rate of base compensation;
 
 
(ii)
a change in the location of your principal workplace for the Company (or the
Subsidiary that employs you, as applicable) to a location that is more than
thirty (30) miles from your principal workplace as of the date immediately
preceding the occurrence of a Change in Control and that results in an increased
commute for you from your principal residence (except for periods of travel
required for the business of the Company or a Subsidiary substantially
consistent with the travel demands placed on you prior to the Change in
Control);

 
 
(iii)
a material breach by the Company (or, if you are employed by a Subsidiary, the
Subsidiary) of any agreement with you; or

 
 
(iv)
a material diminution in your authority, duties or responsibilities, provided,
however, that a change in status of the Company from a publicly-traded company
to a company the securities of which are not publicly-traded (including any
related termination of the Company’s reporting obligations under the Exchange
Act) and/or the Company becoming a subsidiary of another entity (in each case,
together with the changes in authorities, duties and responsibilities that are
customarily attendant to such a change in the status of the Company) shall not
constitute Good Reason or a material reduction in the nature or status of your
authorities, duties, and/or responsibilities;

 

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

provided, however, that any such condition shall not constitute “Good Reason”
unless both (x) you provide written notice to the Company (such notice to be
given in accordance with the notice provisions of the Plan) of the condition
claimed to constitute Good Reason within ninety (90) days of the initial
existence of such condition, and (y) the Company fails to remedy (or fails to
cause the Subsidiary that employs you to remedy, as the case may be) such
condition within thirty (30) days of receiving such written notice thereof; and
provided, further, that in all events the termination of your employment with
the Company (or the Subsidiary that employs you, as applicable) shall not be
treated as a termination for “Good Reason” unless such termination occurs not
more than one (1) year following the initial existence of the condition claimed
to constitute “Good Reason.”
 
By signing this Participation Agreement you specifically agree that you have
received and read the Plan and agree to be bound by its terms.  The Plan is
incorporated into (made a part of) this Participation Agreement by this
reference.  You acknowledge and agree that the Company has not made any promises
or representations to you concerning the Plan other than as set forth in the
Plan and this Participation Agreement.
 
Please note that you are not required to participate in the Plan, and may
decline participation in the Plan by not returning this Participation
Agreement.  If you want to accept participation in the Plan, you must execute
this Participation Agreement and see that it is returned in person or via
facsimile to the Company’s [___________] at (___) ___-____so that it is received
no later than [____________].  This Participation Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
 
 

 
INSITE VISION INCORPORATED,
a Delaware corporation
           
By:
              Name:               Title:            

ACCEPTED AND AGREED:

________________________________________________
Print Participant’s Name:______________________________
 
 

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

PARTICIPATION AGREEMENT
 
[Date]
 
Louis Drapeau
_______________
_______________

 
Dear Louis:
 
 
You have been selected to participate in the InSite Vision Incorporated
Severance Plan (the “Plan”), subject to your execution and return of this letter
agreement (this “Participation Agreement”) to InSite Vision Incorporated (the
“Company”).
 
For purposes of determining any severance benefits you may become entitled to
under the Plan, your “Severance Multiplier” will be 1.0 (meaning, in general,
one year of severance) and your “Change in Control Severance Multiplier” will be
1.5 (meaning, in general, one and one-half years of severance).
 
Notwithstanding anything contained in Section 4.2 of the Plan to the contrary
but subject to the other provisions of the Plan (including, without limitation,
Section 4.6 and Articles 5 and 6 of the Plan), you shall be entitled to the
severance benefits provided in Section 4.2 of the Plan upon the occurrence of a
Change in Control regardless of whether your employment is terminated under any
circumstances upon or following such Change in Control, provided that you are
employed by the Company at the time of such Change in Control or your employment
is terminated by the Company without Cause within the ninety (90) day period
prior to the Change in Control.  You agree to be reasonably available to provide
reasonable transition services for a period of thirty (30) days following such
Change in Control (for no additional compensation), to the extent the Company or
any successor to all or substantially all of the business or assets of the
Company requests such services from you at such time.  If you become entitled to
the benefits described in this Section 4.2, you will not be entitled to any
benefits under the Plan in connection with any termination of your employment
upon or following the Change in Control.
 
Notwithstanding anything contained in the Plan to the contrary, the provisions
of Section 4.5 of the Plan shall not apply to you.
 
By signing this Participation Agreement you specifically agree that you have
received and read the Plan and agree to be bound by its terms.  The Plan is
incorporated into (made a part of) this Participation Agreement by this
reference.  You acknowledge and agree that the Company has not made any promises
or representations to you concerning the Plan other than as set forth in the
Plan and this Participation Agreement.
 

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Please note that you are not required to participate in the Plan, and may
decline participation in the Plan by not returning this Participation
Agreement.  If you want to accept participation in the Plan, you must execute
this Participation Agreement and see that it is returned in person or via
facsimile to the Company’s [___________] at (___) ___-____so that it is received
no later than [____________].  This Participation Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
 
 
 

 
INSITE VISION INCORPORATED,
a Delaware corporation
           
By:
              Name:               Title:            

ACCEPTED AND AGREED:

________________________________________________
Print Participant’s
Name:______________________________                                                                 

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EXHIBIT B
 
FORM OF RELEASE AGREEMENT1
 
This Release Agreement (this “Release Agreement”) is entered into this ___ day
of _________ 20__, by and between _____________________, an individual
(“Executive”), and InSite Vision Incorporated, a Delaware corporation (the
“Company”).
 
WHEREAS, Executive has been employed by the Company or one of its subsidiaries;
and
 
WHEREAS, Executive’s employment by the Company or one of its subsidiaries has
terminated and, in connection with the Company’s Severance Plan (the “Plan”),
the Company and Executive desire to enter into this Release Agreement upon the
terms set forth herein;
 
NOW, THEREFORE, in consideration of the covenants undertaken and the releases
contained in this Release Agreement, and in consideration of the obligations of
the Company (or one of its subsidiaries) to pay severance benefits (conditioned
upon this Release Agreement) under and pursuant to the Plan, Executive and the
Company agree as follows:
 
1.           Termination of Employment.  Executive’s employment with the Company
terminated on [______________, _____] (the “Separation Date”).  Executive waives
any right or claim to reinstatement as an employee of the Company and each of
its affiliates.  Executive hereby confirms that Executive does not hold any
position as an officer, director, employee, member, manager and in any other
capacity with the Company and each of its parents, subsidiaries and other
affiliates.  Executive acknowledges and agrees that Executive has received all
amounts owed for Executive’s regular and usual salary (including, but not
limited to, any severance (other than any benefits due pursuant to the Plan),
overtime, bonus, accrued vacation, commissions, or other wages), reimbursement
of expenses, and usual benefits, and that all payments due to Executive from the
Company have been received.2
 
 
 

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1 The Company reserves the right to modify this form as to any Participant
employed outside of California.
 
2 The Company shall pay any salary for the pay period in which the Participant’s
termination occurs, as well as any accrued and otherwise unpaid vacation and any
expense reimbursements due, upon or promptly following the termination of the
Participant’s employment and the release will be revised to the extent such
amounts have not been paid prior to the execution of this document.

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2.           Release.  Executive, on behalf of himself or herself, his or her
descendants, dependents, heirs, executors, administrators, assigns, and
successors, and each of them, hereby covenants not to sue and fully releases and
discharges the Company and each of its parents, subsidiaries and affiliates,
past and present, as well as its and their trustees, directors, officers,
members, managers, partners, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them, hereinafter together and collectively referred to as the
“Releasees,” with respect to and from any and all claims, wages, demands,
rights, liens, agreements or contracts (written or oral), covenants, actions,
suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees,
damages, judgments, orders and liabilities of whatever kind or nature in law,
equity or otherwise, whether now known or unknown, suspected or unsuspected, and
whether or not concealed or hidden (each, a “Claim”), which he or she now owns
or holds or he or she has at any time heretofore owned or held or may in the
future hold as against any of said Releasees (including, without limitation, any
Claim arising out of or in any way connected with Executive’s service as an
officer, director, employee, member or manager of any Releasee, Executive’s
separation from his or her position as an officer, director, employee, manager
and/or member, as applicable, of any Releasee, or any other transactions,
occurrences, acts or omissions or any loss, damage or injury whatever), whether
known or unknown, suspected or unsuspected, resulting from any act or omission
by or on the part of said Releasees, or any of them, committed or omitted prior
to the date of this Release Agreement including, without limiting the generality
of the foregoing, any Claim under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1967, the Americans with Disabilities
Act, the Family and Medical Leave Act of 1993, the California Fair Employment
and Housing Act, the California Family Rights Act, or any other federal, state
or local law, regulation, or ordinance, or any Claim for severance pay, bonus,
sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers’ compensation or disability (the
“Release”); provided, however, that the foregoing Release does not apply to any
obligation of the Company to Executive pursuant to any of the following: (1) any
equity-based awards granted by the Company or any of its parents, subsidiaries
or affiliates to Executive, to the extent that such awards continue after the
termination of Executive’s employment in accordance with the applicable terms of
such awards (and subject to any period in which to exercise such awards
following such termination of employment); (2) any right to indemnification that
Executive may have pursuant to the Bylaws of the Company or any of its parents,
subsidiaries or affiliates, its Certificate of Incorporation or under any
written indemnification agreement with the Company (or any corresponding
provision of any parent, subsidiary or affiliate of the Company) or applicable
state law with respect to any loss, damages or expenses (including but not
limited to attorneys’ fees to the extent otherwise provided) that Executive may
in the future incur with respect to his or her service as an employee, officer
or director of the Company or any of its parents, subsidiaries or affiliates;
(3) with respect to any rights that Executive may have to insurance coverage for
such losses, damages or expenses under any Company (or parent, subsidiary or
affiliate) directors and officers liability insurance policy; (4) any rights to
continued medical or dental coverage that Executive may have under COBRA (or
similar applicable state law); (5) any rights to benefits payable under the Plan
in accordance with the terms of the Plan; or (6) any rights to payment of
benefits that Executive may have under a retirement plan sponsored or maintained
by the Company that is intended to qualify under Section 401(a) of the Internal
Revenue Code of 1986, as amended.  In addition, this Release does not cover any
Claim that cannot be so released as a matter of applicable law.  Executive
acknowledges and agrees that he or she has received any and all leave and other
benefits that he or she has been and is entitled to pursuant to the Family and
Medical Leave Act of 1993.
 
3.           1542 Waiver.  It is the intention of Executive in executing this
Release Agreement that the same shall be effective as a bar to each and every
Claim hereinabove specified.  In furtherance of this intention, Executive hereby
expressly waives any and all rights and benefits conferred upon him or her by
the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly
consents that this Release Agreement (including, without limitation, the Release
set forth above) shall be given full force and effect according to each and all
of its express terms and provisions, including those related to unknown and
unsuspected Claims, if any, as well as those relating to any other Claims
hereinabove specified. SECTION 1542 provides:
 

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“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”
 
Executive acknowledges that he or she may hereafter discover Claims or facts in
addition to or different from those which Executive now knows or believes to
exist with respect to the subject matter of this Release Agreement and which, if
known or suspected at the time of executing this Release Agreement, may have
materially affected this settlement.  Nevertheless, Executive hereby waives any
right, Claim or cause of action that might arise as a result of such different
or additional Claims or facts.  Executive acknowledges that he or she
understands the significance and consequences of such release and such specific
waiver of SECTION 1542.
 
4.           [ADEA Waiver.  Executive expressly acknowledges and agrees that by
entering into this Release Agreement, Executive is waiving any and all rights or
Claims that he or she may have arising under the Age Discrimination in
Employment Act of 1967, as amended (the “ADEA”), which have arisen on or before
the date of execution of this Release Agreement.  Executive further expressly
acknowledges and agrees that:
 
A.           In return for this Release Agreement, Executive will receive
consideration beyond that which Executive was already entitled to receive before
entering into this Release Agreement;
 
B.           Executive is hereby advised in writing by this Release Agreement to
consult with an attorney before signing this Release Agreement;
 
C.           Executive has voluntarily chosen to enter into this Release
Agreement and has not been forced or pressured in any way to sign it;
 
D.           Executive was given a copy of this Release Agreement on
[_________________, 20__] and informed that he or she had [twenty one (21)/forty
five (45)] days within which to consider this Release Agreement and that if he
or she wished to execute this Release Agreement prior to expiration of such
[21-day/45-day] period, he or she should execute the Endorsement attached
hereto;
 
E.           Executive was informed that he or she had seven (7) days following
the date of execution of this Release Agreement in which to revoke this Release
Agreement, and this Release Agreement will become null and void if Executive
elects revocation during that time.  Any revocation must be in writing and must
be received by the Company during the seven-day revocation period.  In the event
that Executive exercises his or her right of revocation, neither the Company nor
Executive will have any obligations under this Release Agreement;
 

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F.           Nothing in this Release Agreement prevents or precludes Executive
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs from doing so, unless specifically authorized by federal
law.]3
 
5.           No Transferred Claims.  Executive warrants and represents that
Executive has not heretofore assigned or transferred to any person not a party
to this Release Agreement any released matter or any part or portion thereof and
he or she shall defend, indemnify and hold the Company and each of its
affiliates harmless from and against any claim (including the payment of
attorneys’ fees and costs actually incurred whether or not litigation is
commenced) based on or in connection with or arising out of any such assignment
or transfer made, purported or claimed.
 
6.           Compliance With Participation Agreement.  Executive warrants and
represents that Executive has complied fully with his or her obligations
pursuant to that certain Participation Agreement entered into by Executive in
connection with the Plan.  Executive covenants that he or she will continue to
abide by the applicable provisions of such Participation Agreement and the Plan.
 
7.           Severability.  It is the desire and intent of the parties hereto
that the provisions of this Release Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.  Accordingly, if any particular provision of this
Release Agreement shall be adjudicated by a court of competent jurisdiction to
be invalid, prohibited or unenforceable under any present or future law, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Release Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction; furthermore, in lieu
of such invalid or unenforceable provision there will be added automatically as
a part of this Release Agreement, a legal, valid and enforceable provision as
similar in terms to such invalid or unenforceable provision as may be
possible.  Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Release Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
 
8.           Counterparts.  This Release Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
 
9.           Successors.  This Release Agreement is personal to Executive and
shall not, without the prior written consent of the Company, be assignable by
Executive.  This Release Agreement shall inure to the benefit of and be binding
upon the Company and its respective successors and assigns and any such
successor or assignee shall be deemed substituted for the Company under the
terms of this Release Agreement for all purposes.  As used herein, “successor”
and “assignee” shall include any person, firm, corporation or other business
entity which at any time, whether by purchase, merger, acquisition of assets, or
otherwise, directly or indirectly acquires the ownership of the Company,
acquires all or substantially all of the Company’s assets, or to which the
Company assigns this Release Agreement by operation of law or otherwise.
 
 

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 3 Except as noted below, Section 4 will be included if Executive is age 40 or
older as of the date that Executive’s employment by the Company terminates or in
such other circumstances (if any) as Executive may have claims under the
ADEA.  In the event Section 4 is included, whether Executive has 21 days, 45
days, or some other period in which to consider the Release Agreement will be
determined with reference to the requirements of the ADEA in order for such
waiver to be valid in the circumstances.  The determinations referred to in the
preceding two sentences shall be made by the Company in its sole discretion.  In
any event (regardless of the applicability of the ADEA in the circumstances) the
Release Agreement will include Executive’s acknowledgements and agreements set
forth in clauses 4.A, 4.B, and 4.C.

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

10.           Governing Law.  THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT NOT
PREEMPTED BY UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE
(WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE LAWS OF ANY JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW OF
THE STATE OF CALIFORNIA TO BE APPLIED.  IN FURTHERANCE OF THE FOREGOING,
APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL
LAW, THE INTERNAL LAW OF THE STATE OF CALIFORNIA, WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS RELEASE AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
 
11.           Amendment and Waiver.  The provisions of this Release Agreement
may be amended and waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Release Agreement shall be construed as a waiver of such
provisions or affect the validity, binding effect or enforceability of this
Release Agreement or any provision hereof.
 
12.           Descriptive Headings.  The descriptive headings of this Release
Agreement are inserted for convenience only and do not constitute a part of this
Release Agreement.
 
13.           Construction.  Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates.  The language used in this Release
Agreement shall be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall be applied against
any party.
 
14.           Arbitration.  The Company and Executive hereby consent to the
resolution by mandatory and binding arbitration of all claims or controversies
arising out of or in connection with this Release Agreement that the Company may
have against Executive, or that Executive may have against the Company or
against any of its officers, directors, employees or agents acting in their
capacity as such.  Each party’s promise to resolve all such claims or
controversies by arbitration in accordance with this Release Agreement rather
than through the courts is consideration for the other party’s like promise.  It
is further agreed that the decision of an arbitrator on any issue, dispute,
claim or controversy submitted for arbitration, shall be final and binding upon
the Company and Executive and that judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction.
 

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Except as otherwise provided in this procedure or by mutual agreement of the
parties, any arbitration shall be before a sole arbitrator (the “Arbitrator”)
selected from Judicial Arbitration & Mediation Services, Inc., San Francisco,
California, or its successor (“JAMS”), or if JAMS is no longer able to supply
the arbitrator, such arbitrator shall be selected from the American Arbitration
Association, and shall be conducted in accordance with the provisions of
California Civil Procedure Code Sections 1280 et. seq. as the exclusive remedy
of such dispute.
 
The Arbitrator shall interpret this Release Agreement, any applicable Company
policy or rules or regulations, any applicable substantive law (and the law of
remedies, if applicable) of the state in which the claim arose, or applicable
federal law.  If arbitration is brought after the claim or controversy has been
submitted for review by the Committee (as such term is defined in the Plan) in
accordance with Article 2 of the Plan, the Arbitrator shall limit his or her
review to whether or not the Committee has abused its discretion in its
interpretation of the Plan and such policies, rules, and regulations; provided,
however, that the Arbitrator shall apply a de novo standard of review with
respect to any claim for benefits under the Plan in connection with a Change in
Control (as such term is defined in the Plan).  In reaching his or her decision,
the Arbitrator shall have no authority to change or modify any lawful Company
policy, rule or regulation, or this Release Agreement.  Except as provided in
the next paragraph, the Arbitrator, and not any federal, state or local court or
agency, shall have exclusive and broad authority to resolve any dispute relating
to the interpretation, applicability, enforceability or formation of this
Release Agreement, including but not limited to, any claim that all or any part
of this Release Agreement is voidable.  The Arbitrator shall have the authority
to decide dispositive motions.  Following completion of the arbitration, the
arbitrator shall issue a written decision disclosing the essential findings and
conclusions upon which the award is based.
 
Notwithstanding the foregoing, provisional injunctive relief may, but need not,
be sought by Executive or the Company in a court of law while arbitration
proceedings are pending, and any provisional injunctive relief granted by such
court shall remain effective until the matter is finally resolved by the
Arbitrator in accordance with the foregoing.  Final resolution of any dispute
through arbitration may include any remedy or relief which would otherwise be
available at law and which the Arbitrator deems just and equitable.  The
Arbitrator shall have the authority to award full damages as provided by
law.  Any award or relief granted by the Arbitrator hereunder shall be final and
binding on the parties hereto and may be enforced by any court of competent
jurisdiction.
 
The Company shall pay the reasonable fees and expenses of the Arbitrator and of
a stenographic reporter, if employed.  Each party shall pay its own legal fees
and other expenses and costs incurred with respect to the arbitration.
 

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15.           Nouns and Pronouns.  Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
 
16.           No Wrongdoing.  This Release Agreement does not constitute an
adjudication or finding on the merits and it is not, and shall not be construed
as, an admission or acknowledgement by any party of any violation of any policy,
procedure, state or federal law or regulation, or any unlawful or improper act
or conduct, all of which is expressly denied.  Moreover, neither this Release
Agreement nor anything in this Release Agreement shall be construed to be, or
shall be, admissible in any proceeding as evidence of or an admission by any
party of any violation of any policy, procedure, state or federal law or
regulation, or any unlawful or improper act or conduct.  This Release Agreement
may be introduced, however, in any proceeding to enforce this Release Agreement
or the Plan.
 
17.           Legal Counsel.  Each party recognizes that this is a legally
binding contract and acknowledges and agrees that they have had the opportunity
to consult with legal counsel of their choice.  Executive acknowledges and
agrees that he or she has read and understands this Release Agreement
completely, is entering into it freely and voluntarily, and has been advised to
seek counsel prior to entering into this Release Agreement and he or she has had
ample opportunity to do so.
 
The undersigned have read and understand the consequences of this Release
Agreement and voluntarily sign it.  The undersigned declare under penalty of
perjury under the laws of the State of California that the foregoing is true and
correct.
 

EXECUTED this ________ day of ________ 20__, at [_________],
California.             
 
 

  “Executive”                 Print Name:
___________________________________________          
INSITE VISION INCORPORATED,
a Delaware corporation
           
By:
              Name:               Title:            

                                     

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ENDORSEMENT
 
I, _______________________, hereby acknowledge that I was given [21/45] days to
consider the foregoing Release Agreement and voluntarily chose to sign the
Release Agreement prior to the expiration of the [21-day/45-day] period.
 
I declare under penalty of perjury under the laws of the United States and the
State of California that the foregoing is true and correct.
 
EXECUTED this [____] day of [_____________ 20__], at [_______], California.
 

             
 
          Print Name:______________________________________