COLLATERAL
      AGENCY AND INTERCREDITOR AGREEMENT

    


    This
      COLLATERAL
      AGENCY AND INTERCREDITOR AGREEMENT (this
      “Agreement”)
      dated
      as of December 30, 2005 is entered into among THE
      BANK OF NEW YORK,
      a
      company organized under the laws of the State of New York, as collateral agent
      (“Collateral
      Agent”)
      and
      (i) the undersigned holders from time to time of the 2003 Senior Notes (as
      defined below) (each, together with its successors and assigns, a “2003
      Holder”
and
      collectively the “2003
      Holders”)
      and
      (ii) the undersigned holders from time to time of the 2005 Senior Notes (as
      defined below) (each, together with its successors and assigns, a “2005
      Holder,”
      collectively the “2005
      Holders”
and,
      together with the 2003 Holders, each a “Holder,”
and
      collectively, the “Holders”),
      and,
      for purposes of Section 4.03 hereof only, InSite Vision Incorporated, a Delaware
      corporation (the “Company”).

     

    R
      E C I T A L S

     

    A. The
      Company has issued to each 2003 Holder a promissory note, the form of which
      is
      attached hereto as Exhibit B (each such note, as amended, restated, supplemented
      or modified from time to time, a “2003
      Senior Note”
and
      collectively, the “2003
      Senior Notes”)
      and
      has issued to each 2005 Holder a promissory note due June 30, 2006, as such
      date
      may be extended at the Company’s election in accordance with the terms of such
      promissory note, the form of which attached hereto as Exhibit C (each such
      note,
      as amended, restated, supplemented or modified from time to time, the form
      of
      which a “2005
      Senior Note,”
      collectively, the “2005
      Senior Notes”
and,
      collectively with the 2003 Senior Notes, the “Senior
      Notes”).

     

    B. The
      Company and the Collateral Agent, in its capacity as collateral agent and
      representative for the 2003 Holders and in its capacity as collateral agent
      and
      representative for the 2005 Holders, have entered into that certain Amended
      and
      Restated Security Agreement dated as of December 30, 2005 (as the same may
      be
      amended, restated, supplemented or otherwise modified from time to time, the
      “Security
      Agreement”)
      pursuant to which the Company has secured the obligations of the Company to
      the
      Holders under the Senior Notes (the “Obligations”).

     

    C. The
      Security Agreement, among other things, grants to the Collateral Agent, on
      behalf of the Holders, security interests in, and liens on, certain property
      of
      the Company and proceeds thereof as set forth in such agreement and may in
      the
      future grant to the Collateral Agent security interests in, and/or liens on,
      additional property of the Company (hereinafter all of such collateral shall
      be
      referred to collectively as the “Collateral”).

     

    D. The
      Collateral Agent and the Holders wish to enter into this Agreement to, among
      other things, set forth their understandings and agreements regarding the
      Holders’ and the Collateral Agent’s respective rights, obligations and
      priorities with respect to the Collateral and all proceeds thereof.

     

    NOW,
      THEREFORE,
      for
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged and the mutual covenants and promises set forth herein, each of
      the
      parties to this Agreement agrees as follows: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
      I. DEFINITIONS;
      INTERPRETATION.

     

    1.01 Definitions.
      Unless
      otherwise indicated in this Agreement each term set forth in Exhibit
      A
      when
      used in this Agreement shall have the respective meaning given to that term
      in
Exhibit
      A.
      Initially capitalized terms used in this Agreement without definition are
      defined in the Security Agreement or the Senior Notes unless the context
      requires otherwise.

     

    1.02 Headings.
      Headings
      in this Agreement are for convenience of reference only and are not part of
      the
      substance hereof or thereof.

     

    1.03 Plural
      Terms.
      All
      terms defined in this Agreement in the singular form shall have comparable
      meanings when used in the plural form and vice versa.

     

    1.04 Time.
      All
      references in this Agreement to a time of day mean New York time, unless
      otherwise indicated.

     

    1.05 Construction.
      This
      Agreement is the result of negotiations among, and has been reviewed by the
      Holders, the Collateral Agent and their respective counsel. Accordingly, this
      Agreement shall be deemed to be the product of all parties hereto and no
      ambiguity shall be construed in favor of or against any Holder or the Collateral
      Agent.

     

    1.06 Conflicts.
      In the
      event of a conflict between the terms of this Agreement and the terms of the
      Security Agreement or any of the Senior Notes with respect to the matters
      related to the Collateral contained herein, as among the Collateral Agent and
      the Holders the terms of this Agreement shall control.

     

    1.07 Other
      Interpretive Provisions.
      References in this Agreement to “Recitals,” “Sections,” “Exhibits” and
“Schedules” are to recitals, sections, exhibits and schedules herein and hereto
      unless otherwise indicated. References in this Agreement to any document,
      instrument or agreement shall (a) include all exhibits, schedules and other
      attachments thereto, (b) include all documents, instruments or agreements issued
      or executed in replacement thereof, and (c) mean such document, instrument
      or
      agreement, or replacement or predecessor thereto, as amended, modified and
      supplemented from time to time and in effect at any given time. The words
“hereof,” “herein” and “hereunder” and words of similar import when used in this
      Agreement shall refer to this Agreement as a whole and not to any particular
      provision of this Agreement. The words “include” and “including” and words of
      similar import when used in this Agreement shall not be construed to be limiting
      or exclusive.

     

    SECTION
      II. COLLATERAL
      AND REMEDIES.
      

     

    2.01 Priority
      of Liens.
      The
      Collateral Agent, the 2003 Holders and the 2005 Holders hereby agree that the
      security interests and liens granted to the Collateral Agent under the Security
      Agreement shall be treated, as among the 2003 Holders and the 2005 Holders,
      as
      having equal priority and shall, except to the extent otherwise provided in
      Section 3.02,
      at all
      times be shared by the 2003 Holders and the 2005 Holders as provided herein
      regardless of any claim or defense (including any claims under the fraudulent
      transfer, preference or similar avoidance provisions of applicable bankruptcy,
      insolvency or other applicable Governmental Rules affecting the rights of
      creditors generally) to which the Collateral Agent or any Holder may be entitled
      or subject, and notwithstanding the relative timing of the filing of any
      financing statements by any party hereto with respect to the Collateral.


     

    
      
        
        

      

      
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    2.02 Custody
      of Collateral.
      From
      and after the occurrence and during the continuance of an Event of Default,
      if
      any Holder acquires custody, control or possession of any Collateral other
      than
      any proceeds thereof distributed to such Holder pursuant to the terms of the
      Security Agreement or this Agreement, then such Holder shall promptly cause
      such
      Collateral to be delivered to, or put in the custody, possession or control
      of,
      the Collateral Agent for disposition or distribution in accordance with the
      provisions of this Agreement. From and after the occurrence and during the
      continuance of an Event of Default and until such time as the provisions of
      the
      immediately preceding sentence have been complied with, such Holder shall be
      deemed to hold such Collateral in trust for the parties entitled thereto under
      this Agreement. 

     

    2.03 Additional
      Collateral or Guaranties.
      None of
      the Holders shall accept a security interest in, or a Lien on, any collateral
      for the Obligations other than such Holder’s beneficial interest in the security
      interest in, and Lien on, the Collateral granted to the Collateral Agent under
      the Security Agreement; provided, however, that nothing contained in the
      foregoing shall be construed as prohibiting the opening and maintenance of
      deposit accounts for the account of the Company or its subsidiaries in the
      ordinary course of business. No Holder shall accept any guaranty of its
      Obligations from any Person unless such Person has previously or simultaneously
      guaranteed the Obligations held by each of the other Holders.

     

    2.04 Enforcement
      of Remedies.
      Upon the
      occurrence and during the continuance of any Event of Default, the Collateral
      Agent shall, subject to the other provisions of this Agreement, take such action
      with respect to such Event of Default as shall be reasonably directed by the
      Required Holders (a “Direction
      Notice”);
      provided,
      however,
      that,
      in the absence of a Direction Notice, the Collateral Agent may (but shall not
      be
      obligated to) take such action, or refrain from taking such action, with respect
      to such Event of Default as it shall deem advisable in the best interests of
      the
      Holders (other than the exercise of foreclosure remedies). Upon receipt by
      the
      Collateral Agent of a Direction Notice, the Collateral Agent shall seek to
      enforce the Security Agreement and to realize upon the Collateral in accordance
      with such Direction Notice; provided,
      however,
      that
      the Collateral Agent shall not be obligated to follow any Direction Notice
      if
      the Collateral Agent reasonably determines that such Direction Notice is in
      conflict with any provisions of any applicable Governmental Rule, this Agreement
      or the Security Agreement, or would in its reasonable determination otherwise
      subject it to liability and the Collateral Agent shall not, under any
      circumstances, be liable to any Holder, the Company or any other Person for
      following a Direction Notice. 

     

    2.05 Remedies
      of the Holders.
      Unless
      otherwise consented to in writing by the Required Holders,
      no
      Holder, individually or together with any other Holder, shall have the right
      to,
      nor shall it, exercise or enforce any of the rights, powers or remedies which
      the Collateral Agent is authorized to exercise or enforce under this Agreement
      or the Security Agreement.

     

    
      
        
        

      

      
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    2.06 Holder
      Information.
      If
      the
      Collateral Agent proceeds to foreclose upon, collect, sell or otherwise dispose
      of or take any other action with respect to any or all of the Collateral or
      to
      enforce any provisions of the Security Agreement or takes any other action
      pursuant to this Agreement or any provision of the Security Agreement or
      requests directions from the Holders as provided herein, upon the request of
      the
      Collateral Agent, each of the Holders (or any agent of or representative for
      such Holder) shall promptly deliver a written notice to the Collateral Agent
      and
      each of the other Holders setting forth (a) the aggregate amount of principal,
      interest, fees, and other Obligations owing to such Holder under the applicable
      Senior Notes as of the date specified by the Collateral Agent in such request
      and (b) such other information as the Collateral Agent may reasonably
      request.

     

    SECTION
      III. DISTRIBUTION
      OF PROCEEDS.

     

    3.01 Other
      Collateral Proceeds Account.
      

     

    (a) The
      Collateral Agent shall establish a collateral proceeds account subject to the
      Lien created by the Security Agreement in the name of the Collateral Agent
      into
      which the Proceeds (as defined below) shall be deposited and from which only
      the
      Collateral Agent may effect withdrawals (the “Other
      Collateral Proceeds Account”).
      Such
      amounts shall be held by the Collateral Agent in the Other Collateral Proceeds
      Account and shall be distributed from time to time by the Collateral Agent
      in
      accordance with Section 3.02.
      

     

    (b) Following
      the occurrence and during the continuance of an Event of Default, the following
      proceeds, payments and amounts (collectively, the “Proceeds”)
      shall
      be deposited and held by the Collateral Agent in the Other Collateral Proceeds
      Account and shall be distributed from time to time by the Collateral Agent
      to
      the Holders in accordance with Section 3.02:

     

    (i) any
      proceeds of any collection, recovery, receipt, appropriation, realization or
      sale of any or all of the Collateral through the enforcement of the Security
      Agreement received by the Collateral Agent or any Holder (the “Other
      Collateral Proceeds”);
      and

     

    (ii) any
      amounts held in the Other Collateral Proceeds Account at the time an Event
      of
      Default occurs.

     

    Each
      Holder agrees to deliver any Proceeds to the Collateral Agent within three
      (3)
      Business Days after receipt of such Proceeds, or if later (in the case of clause
      (ii)), within three (3) Business Days of being advised of the occurrence of
      an
      Event of Default. Until such time as the provisions of the immediately preceding
      sentence have been complied with, such Holder shall be deemed to hold such
      Proceeds in trust for the parties entitled thereto under this Agreement.


     

    
      
        
        

      

      
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    3.02 Distribution
      of Proceeds.
      The
      Collateral Agent shall immediately and from time-to-time distribute the Proceeds
      which are held in the Other Collateral Proceeds Account in accordance with
      Section 10(c) of the Security Agreement, it being understood, however, that
      the
Collateral
      Agent may deduct from any distribution the amount of all Collateral Agent’s fees
      and expenses that have not been paid by the Company or the Holders pursuant
      to
      Section 4.03 or otherwise. The Collateral Agent shall make such distributions
      as
      promptly as reasonably practicable after the deposit of any Proceeds into the
      Other Collateral Proceeds Account. 

     

    3.03 Distributions
      Recovered.
      Notwithstanding
      anything to the contrary contained in this Agreement, in each case in which
      any
      proceeds (or the value thereof) or payments are recovered as a preferential
      or
      otherwise voidable payment (whether by a trustee in bankruptcy or otherwise)
      from the party which distributed those proceeds to another party or parties
      under this Agreement (the “Distributor”),
      each
      party to whom any of those proceeds were ultimately distributed (a “Distributee”)
      shall,
      upon the Distributor’s notice of the recovery to the Distributee, return to the
      Distributor an amount equal to the Distributee’s ratable share of the amount
      recovered, together with a ratable share of interest thereon to the extent
      the
      Distributor is required to pay interest thereon computed on the amount to be
      returned from the date of the recovery. For purposes of this Agreement,
“proceeds”
      means
      any payment (whether made voluntarily or involuntary) from any source, including
      any offset of any deposit or other indebtedness, any security (including any
      guaranty or any collateral) or otherwise.

     

    SECTION
      IV. THE
      COLLATERAL AGENT AND RELATIONS AMONG SECURED CREDITORS.

     

    4.01 Appointment,
      Powers and Immunities.
      Each
      Holder has appointed and authorized the Collateral Agent to act as its agent
      hereunder and under the Security Agreement with such powers as are expressly
      delegated to the Collateral Agent by the terms of the Security Agreement and
      this Agreement, together with such other powers as are reasonably incidental
      thereto. The Collateral Agent shall not have any duties or responsibilities
      except those expressly set forth in the Security Agreement or this Agreement.
      The Collateral Agent shall not have any fiduciary relationship with the Holders
      or any Holder, and no implied covenants, functions, responsibilities, duties,
      obligations or liabilities shall be read into this Agreement or the Security
      Agreement or otherwise exists against Collateral Agent. Notwithstanding anything
      to the contrary contained herein, the Collateral Agent shall not be required
      to
      take any action which is contrary to this Agreement, the Security Agreement
      or
      any applicable Governmental Rule. The Collateral Agent may employ agents and
      attorneys-in-fact and shall not be responsible to the Holders or any Holder
      for
      the negligence or misconduct of any such agents or attorneys-in-fact selected
      by
      it with reasonable care. 

     

    4.02 Reliance
      by the Collateral Agent. 

     

    The
      Collateral Agent shall be fully justified in failing or refusing to take any
      action under this Agreement or the Security Agreement as it deems appropriate
      or
      it shall first be indemnified to its satisfaction by the Holders against any
      and
      all liability and expense that may be incurred by it by reason of taking or
      continuing to take any such action. The Collateral Agent shall in all cases
      be
      fully protected by the Holders in acting, or in refraining from acting,
      hereunder or under the Security Agreement in accordance with instructions (or
      pending receipt of instructions) of the Required Holders, or any other
      instructing group of holders specified hereunder or under the Security Agreement
      or the Senior Notes, and such instructions of the Required Holders and any
      action taken or failure to act pursuant thereto shall be binding on all of
      the
      Holders and all future holders of the Senior Notes.

     

    
      
        
        

      

      
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    4.03 Collateral
      Agent Fees; Expenses. 

     

    (a) The
      Company, by its execution of the signature page of this Agreement, hereby agrees
      to pay to the Collateral Agent, for its own account, a collateral agent fee
      in
      the amount and on the dates of payment set forth in the Collateral Agent Fee
      Letter (the “Collateral
      Agency Fee”).
      In
      addition, the Company hereby agrees to pay promptly on demand all costs and
      expenses required to be paid by the Company pursuant to the Collateral Agent
      Fee
      Letter. If
      any
      amounts required to be paid by the Company under this Agreement, the Security
      Agreement or the Senior Notes remain unpaid after such amounts are due, the
      Company shall pay interest on the aggregate, outstanding balance of such amounts
      from the date due until those amounts are paid in full at a per annum rate
      in
      accordance with the default interest rate provided therein. Interest shall
      be
      calculated on the basis of a 360-day year of twelve 30-day months.


     

    (b) The
      Collateral Agent shall not be obliged to expend its own funds in performing
      its
      obligations under this Agreement or the Security Agreement. 

    


    4.04 Resignation
      or Removal of the Collateral Agent.
      Subject
      to the appointment and acceptance of a successor Collateral Agent in this
      Section 4.04, the Collateral Agent may resign as collateral agent by delivering
      not less than thirty (30) days prior written notice to the Holders and the
      Collateral Agent may be removed at any time with or without cause by the
      Required Holders. Upon any such resignation or removal, the Required Holders
      shall have the right to appoint a successor Collateral Agent. If no successor
      Collateral Agent shall have been appointed by the Required Holders and shall
      have accepted such appointment within thirty (30) days after the retiring
      Collateral Agent’s giving of notice of resignation or the Required Holders’
removal of the retiring Collateral Agent, then the retiring Collateral Agent’s
      resignation shall nevertheless thereupon become effective and the Holders shall
      assume and perform all of the duties of the Collateral Agent under the Security
      Agreement until such time, if any, as the Required Holders appoint a successor
      agent. Upon the acceptance of any appointment as Collateral Agent hereunder
      by a
      successor Collateral Agent, such successor Collateral Agent shall thereupon
      succeed to and become vested with all the rights, powers, privileges and duties
      of the retiring Collateral Agent, and the retiring Collateral Agent shall be
      discharged from its duties and obligations hereunder. After any retiring
      Collateral Agent’s resignation or removal hereunder as Collateral Agent, the
      provisions of this Section 4 shall continue in effect for its benefit in respect
      of any actions taken or omitted to be taken by it while it was acting as
      Collateral Agent. 

     

    4.05 Appointment
      of Co-Collateral Agent.
      The
      Collateral Agent may and, upon the request of the Required Holders, shall by
      an
      instrument in writing delivered to the Company and Purchasers, appoint a bank
      or
      trust company or an individual to act as separate Collateral Agent or
      co-Collateral Agent in a jurisdiction where the Collateral Agent is disqualified
      from acting or for any other purpose deemed by the Collateral Agent or the
      Required Holders to be advantageous to their respective interests, such separate
      Collateral Agent or co-Collateral Agent to exercise only such rights and to
      have
      only such duties as shall be specified in the instrument of appointment. The
      Company will pay the reasonable compensation and expenses of any such separate
      Collateral Agent or co-Collateral Agent and, if requested by the Collateral
      Agent, such separate Collateral Agent or co-Collateral Agent or the Required
      Holders, the Company will enter into an amendment to this Agreement,
      satisfactory in substance and form to the Collateral Agent, the Required
      Holders, such separate Collateral Agent or co-Collateral Agent and the Company,
      confirming the rights and duties of such separate Collateral Agent or
      co-Collateral Agent.

     

    
      
        
        

      

      
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    4.06 Authorization;
      Liability of Collateral Agent and Reliance. 

     

    (a) Each
      Holder hereby authorizes the Collateral Agent to (i) execute, deliver and
      perform the Security Agreement to which the Collateral Agent is or is intended
      to be a party, (ii) subject to the other terms and provisions hereof, exercise
      and enforce any or all rights, powers and remedies provided to the Collateral
      Agent by the Security Agreement, this Agreement, any applicable Governmental
      Rule or any other document, instrument or agreement, whether before or after
      the
      occurrence of an Event of Default, and (iii) subject to the other terms and
      provisions hereof, take any other action under the Security Agreement which
      it
      shall deem advisable in the best interests of the Holders. Each Holder shall
      be
      bound by all of the agreements of the Collateral Agent contained in this
      Agreement and the Security Agreement and by all other actions taken by the
      Collateral Agent pursuant to this Agreement and the Security
      Agreement.

     

    (b) Collateral
      Agent shall not (i) be liable for any action taken or omitted to be taken by
      it
      under or in connection with the Security Agreement or the transactions
      contemplated hereby, except to the extent that any of the damages or losses
      resulting from the foregoing are found by a final and nonappealable decision
      of
      a court of competent jurisdiction to have directly and primarily resulted from
      its or such person’s own gross negligence or willful misconduct in connection
      with its duties expressly set forth herein, (ii) be liable for any apportionment
      or distribution of payments made by it in good faith and if any such
      apportionment or distribution is subsequently determined to have been made
      in
      error, other than an error resulting from its own gross negligence or willful
      misconduct, the sole recourse of any Holder to whom payment was due but not
      made
      shall be to recover from other Holders any payment in excess of the amount
      to
      which they are determined to be entitled (and such other Holders hereby agree
      to
      return to such Holder any such erroneous payments received by them) , or (iii)
      be responsible in any manner to any Holder or its transferees for any recital,
      statement, representation or warranty made by the Company or any officer
      thereof, contained herein, in the Senior Notes or in the Security Agreement,
      or
      in any certificate, report, statement or other document referred to or provided
      for in, or received by the Collateral Agent under or in connection with, the
      Security Agreement or the Senior Notes, or the validity, effectiveness,
      genuineness, enforceability or sufficiency of the Security Agreement or the
      Senior Notes (including the attachment or perfection of liens by reason of
      the
      Security Agreement or otherwise), or for any failure of the Company or any
      other
      party to any Senior Note to perform its obligations hereunder or thereunder.
      In
      no event shall the Collateral Agent be liable for punitive, special,
      consequential, incidental, exemplary or other similar damages. The Collateral
      Agent shall be under no obligation to any Holder or transferee to ascertain
      or
      to inquire as to the observance or performance of any of the agreements
      contained in, or conditions of, the Security Agreement or the Senior Notes
      or
      the existence or possible existence of any Default or Event of Default, or
      to
      inspect the properties, books or records of the Company or any Affiliate
      thereof. The Collateral Agent shall not be deemed to have knowledge or notice
      of
      the occurrence of any Event of Default unless it has received notice from a
      Holder or the Company referring to this Agreement, describing such Event of
      Default and stating that such notice is a “notice of default.”

     

    
      
        
        

      

      
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    (c) The
      Collateral Agent shall be entitled to rely, and shall be fully protected in
      relying, upon any writing, communication, signature, resolution, representation,
      notice, consent, certificate, affidavit, letter, telegram, facsimile, telex
      or
      telephone message, statement or other document or conversation believed by
      it in
      good faith to be genuine and correct and to have been signed, sent or made
      by
      the proper Person or Persons, and upon advice and statements of legal counsel,
      independent accountants and other experts selected by the Collateral Agent.
      The
      Collateral Agent shall be entitled to rely upon the advice of legal counsel,
      independent accountants, and other experts selected by such Person in its sole
      discretion. The Collateral Agent shall have no obligation to take any action
      if
      it believes, in good faith, that such action is deemed to be illegal or exposes
      the Collateral Agent to any liability for which the Collateral Agent has not
      received satisfactory indemnification.

     

    4.07 Free
      Exercise of Rights.
      Except
      as specifically provided herein and in the Security Agreement, (a) each Holder
      may exercise its rights and remedies under this Agreement, the Security
      Agreement, its Senior Note(s) and all related documents, instruments and
      agreements for its sole benefit and (b) no Holder shall have any obligation
      or
      duty to exercise any such rights or duties for the benefit of any other
      Holder.

     

    4.08 Indemnification
      by the Holders With Respect to Section 2.05.
      Without
      limiting the obligations of the Company hereunder, each Holder hereby agrees
      to
      indemnify each other Holder (any such Holder, a “Harmed
      Holder”)
      for
      any and all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, expenses or disbursements of any kind or nature
      whatsoever which may at any time be imposed on, incurred by or asserted against
      any Harmed Holder in any way relating to or arising out of an action that would
      cause a breach by such Holder of Section 2.05 of this Agreement. The provisions
      of this Section 4.08 shall survive the payment in full of all the Obligations
      and the termination of this Agreement, the Security Agreement and the Senior
      Notes, and shall continue to apply to any Holder which ceases to be a Holder
      hereunder.

     

    
      
        
        

      

      
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    4.09 Indemnification
      of Collateral Agent by the Holders.
      Each
      Holder hereby agrees to indemnify the Collateral Agent in its capacity as such
      (in each case to the extent not reimbursed by the Company and without limiting
      the obligation of the Company to do so), ratably according to the respective
      percentage that the principal amount of its Senior Note or Senior Notes bear
      to
      the principal of all outstanding Senior Notes in effect on the date on which
      indemnification is sought under this Section (or, if indemnification is sought
      after the date upon which the Senior Notes shall have been paid in full, ratably
      in accordance with such percentages immediately prior to such date) from and
      against any and all liabilities, obligations, losses, damages, penalties,
      actions judgments, suits, costs, expenses or disbursements of any kind
      whatsoever that may at any time (whether before or after the payment of the
      Senior Notes) be imposed on, incurred by or asserted against Collateral Agent
      in
      any way relating to or arising out of, this Agreement, the Security Agreement
      or
      the Senior Notes or any documents contemplated by or referred to herein or
      therein or the transactions contemplated hereby or thereby or any action taken
      or omitted by such Collateral Agent under or in connection with any of the
      foregoing (including any indemnities, expenses or other amounts paid or payable
      by the Collateral Agent pursuant to indemnification or reimbursement provisions
      contained in the Security Agreement); provided that no Holder shall be liable
      for the payment of any portion of such liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      that are found by a final and nonappealable decision of a court of competent
      jurisdiction to have resulted from the Collateral Agent’s gross negligence or
      willful misconduct. The agreements in this Section shall survive the payment
      of
      the Senior Notes and all other amounts payable under the Security Agreement
      and
      the Senior Notes. 

     

    SECTION
      V. MISCELLANEOUS.

     

    5.01 Third
      Party Beneficiaries.
      Nothing
      expressed in or to be implied from this Agreement is intended to give, or shall
      be construed to give, any Person (including the Company and its Subsidiaries),
      other than the Holders and the Collateral Agent, their permitted successors
      and
      assigns hereunder any benefit or legal or equitable right, remedy or claim
      under
      or by virtue of this Agreement or under or by virtue of any provision herein.
      

     

    5.02 Notices.
      All
      notices and other communications provided for herein, (including any
      modifications of, or waivers or consents under this Agreement) shall be sent
      in
      accordance with Section 13 of the Security Agreement or if to the Collateral
      Agent, to the address provided below,
      or to
      such other address specified in writing by the Collateral Agent and provided
      to
      the Company and Holders:

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    THE
      BANK
      OF NEW YORK

    600
      E.
      Las Colinas Blvd. Ste. #1300

    Irving,
      Texas 75039

    
      Attention:
        Stephen Jerard 

      Telecopy:
        (972) 401-8557 

      Telephone:
        (972) 401-8600




    


    5.03 Amendments;
      Waivers.
      Any
      term, covenant, agreement or condition of this Agreement or the Security
      Agreement may be amended or waived if such amendment or waiver is in writing
      and
      is signed by Required Holders; provided,
      however
      that: 

     

    (a) Any
      amendment or waiver which affects the rights, duties, exculpations or
      indemnities of, or to, the Collateral Agent must be in writing and be signed
      also by the Collateral Agent; 

     

    (b) Any
      amendment or waiver which waives or amends this Section 5.03 must be in writing
      and signed by all Holders; 

     

    (c) Any
      amendment to (i) the Security Agreement, or (ii) to Section 4.03 or Section
      5.03
      of this Agreement which with respect to this subpart (ii) by its terms increases
      the obligations of the Company hereunder, must be in writing and acknowledged
      and agreed to by the Company;
      and

     

    (d) 
      Any
      amendment which affects the holders of the 2003 Senior Notes or the 2005 Senior
      Notes in a manner that is different from the holders of the 2005 Senior Notes
      or
      the holders of the 2003 Senior Notes, respectively, must be in writing and
      signed by the holders of greater than 50% in principal amount, at the time
      outstanding, of the 2003 Senior Notes or the 2005 Senior Notes, as the case
      may
      be, subject to such amendment.

     

    No
      failure or delay by the Collateral Agent or the Holders in exercising any right
      hereunder shall operate as a waiver thereof or of any other right nor shall
      any
      single or partial exercise of any such right preclude any other further exercise
      thereof or of any other right. Unless otherwise specified in such waiver or
      consent, a waiver or consent given hereunder shall be effective only in the
      specific instance and for the specific purpose for which given. Except as set
      forth in clause (c) above, the Company’s consent is not required to amend any
      provision of this Agreement.

     

    5.04 Releases
      of Collateral.
      The
      parties hereto agree that the Collateral Agent shall release (and hereby
      authorize the Collateral Agent to release) all or any portion of the Collateral
      (other than in connection with the exercise of its rights and remedies pursuant
      to Section 2.04) upon the receipt by the Collateral Agent of a written notice
      from the Required Holders stating that the Required Holders have approved the
      release of all of the Collateral or such portion of the Collateral specified
      in
      such notice. Upon receipt of such written notice, the Collateral Agent shall,
      at
      the Company’s expense, execute and deliver such releases of its security
      interest in, or Lien on, such Collateral to be released, and provide a copy
      of
      such releases to the Holders.
      Notwithstanding the foregoing, the parties hereto agree that the Collateral
      Agent shall release all of the Collateral without the written approval of the
      Required Holders in accordance with Sections 20 and 21 of the Security
      Agreement.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    5.05 Successors
      and Assigns.
      This
      Agreement and the Security Agreement shall be binding upon and inure to the
      benefit of the Holders and the Collateral Agent and their respective successors
      and permitted assigns, except that no Person other than a Holder (including
      any
      Person which becomes a holder of Senior Notes after the date hereof) and the
      Collateral Agent (including any Person which becomes a successor Collateral
      Agent pursuant to Section 4.04) shall have any rights and remedies under this
      Agreement or the Security Agreement. Any purported assignment that does not
      comply with the Security Agreement shall be null and void. Subject to the
      foregoing limitations, all references in this Agreement to any Person shall
      be
      deemed to include all successors and permitted assigns of such
      Person.

     

    5.06 Counterparts.
      This
      Agreement may be executed in any number of counterparts, all of which taken
      together will constitute one and the same instrument and any of the parties
      hereto may execute this Agreement by signing any such counterpart.

     

    5.07 GOVERNING
      LAW.
      THIS
      AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
      THE
      STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF
      NEW
      YORK.

     

    5.08 Merger.
      This
      Agreement, the Security Agreement and the Senior Notes supersede all prior
      agreements, written or oral, among the parties with respect to the subject
      matter of such agreements.

     

    5.09 Partial
      Invalidity.
      If at
      any time any provision of this Agreement is or becomes illegal, invalid or
      unenforceable in any respect under any applicable Governmental Rule of any
      jurisdiction, neither the legality, validity or enforceability of the remaining
      provisions of this Agreement nor the legality, validity or enforceability of
      such provision under the Governmental Rules of any other jurisdiction shall
      in
      any way be affected or impaired thereby.

     

    5.10 Jury
      Trial.
      EACH OF
      THE COLLATERAL AGENT AND THE HOLDERS TO THE FULLEST EXTENT PERMITTED BY
      APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY OF ANY
      CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY THIS AGREEMENT OR
      IN
      ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
      HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS
      RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
      WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH OF THE COLLATERAL
      AGENT AND THE HOLDERS HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
      ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
      THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
      OF
      THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE COLLATERAL
      AGENT AND THE HOLDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
      JURY.

     

    
      5.11 Final
        Agreement.
        The written documents, agreements and instruments referred to above represent
        the final agreements between the parties and may not be contradicted by evidence
        of prior, contemporaneous, or subsequent oral agreements of the parties.
        There
        are no unwritten oral agreements between the parties.

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        



    

    [Remainder
      of page intentionally left blank]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Agreement as of the date first set forth
      above.

     

    
      	 	 	THE
              BANK
              OF NEW YORK,
              as the Collateral Agent
	 	 	 
	 	 	By:	 
	
            	 	Name:
	
            
	 	 	
              Title: 

            	 


    

    
       

      
        	 	 	COMPANY:
	 	 	 
	 	 	INSITE
                VISION INCORPORATED
	 	 	 
	 	 	By:	 
	
              	 	Name:
	
              
	 	 	
                Title: 

              	 


      

       

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    


    THE
      UNDERSIGNED HEREBY ACKNOWLEDGE AND CONSENT TO THE FOREGOING AND EXPRESSLY
      ACKNOWLEDGE AND AGREE THAT PAYMENTS MADE TO ANY SECURED PARTY THAT CONSTITUTE
      COLLATERAL PROCEEDS OR SETOFF PROCEEDS SHALL BE DEEMED TO SATISFY OBLIGATIONS
      OWED TO SUCH SECURED PARTY ONLY TO THE EXTENT APPLIED TO SATISFY SUCH
      OBLIGATIONS IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT:

     

    [HOLDER
      NAME]

     

    By:
      [Holder Name]

     

    


    By:
      ____________________________

    Name:
      [_____________________]

    Title:
      [_____________________]

    


    Notice
      Address:

    


    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    


    


    Exhibit
      A

    


    Glossary

    


    


    “Collateral”
has
      the
      meaning given to that term in Recital E of this Agreement.

     

    “Collateral
      Agent”
has
      the
      meaning given to that term in the introductory paragraph of this
      Agreement.

     

    “Collateral
      Agent Fee Letter”
means
      the Fee Schedule dated December 29, 2005 from the Collateral Agent addressed
      to
      the Company with respect to the collateral agent fee to be paid from the Company
      to the Collateral Agent.

     

    “Company”
has
      the
      meaning given to that term in Recital A to this Agreement.

     

    “Direction
      Notice”
has
      the
      meaning given to that term in Section 2.04 of this Agreement.

     

    “Distributee”
has
      the
      meaning given to that term in Section 3.03 of this Agreement.

     

    “Distributor”
has
      the
      meaning given to that term in Section 3.03 of this Agreement.

     

    “Event
      of Default”
means
      any event of default, event of acceleration or other event which upon the
      occurrence thereof the obligations thereunder may be accelerated or become
      payable upon demand, pursuant to the 2003 Senior Notes or the 2005 Senior
      Notes.

     

    “Governmental
      Authorization”
means
      any permit, license, registration, approval, finding of suitability,
      authorization, plan, directive, order, consent, exemption, waiver, consent
      order
      or consent decree of or from, or notice to, action by or filing with, any
      Governmental Authority.

     

    “Governmental
      Rule”
means
      any law, rule, regulation, ordinance, order, code interpretation, judgment,
      decree, directive, Governmental Authorization guidelines, policy or similar
      form
      of decision of any Governmental Authority.

     

    “Holders”
has
      the
      meaning given to that term in the introductory paragraph of this
      Agreement.

     

    “Required
      Holders”
means,
      at any time, the holders of greater than 50% in principal amount of the 2003
      Senior Notes at the time outstanding and the 2005 Senior Notes at the time
      outstanding, collectively.

     

    “Security
      Agreement”
has
      the
      meaning given to that term in Recital A of this Agreement.

     

    “Obligations”
has
      the
      meaning given to that term in Recital B to this Agreement.

     

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

     

    “Other
      Collateral Proceeds”
has
      the
      meaning given to that term in Section 3.01(b)(i) of this Agreement.

     

    “Other
      Collateral Proceeds Account”
has
      the
      meaning given to that term in Section 3.01(a) of this Agreement.

     

    “Proceeds”
has
      the
      meaning given to that term in Section 3.01(b) of this Agreement.

     

    “Senior
      Notes”
has
      the
      meaning given to that term in Recital A to this Agreement.

     

    


    
      
        
        

      

      
        -iv-