EXHIBIT
      10.1

     

    INSITE
      VISION INCORPORATED

    ANNUAL
      BONUS PLAN

     

    This
      document sets forth the terms of the Annual Bonus Plan (the “Bonus Plan”) of
      InSite Vision Incorporated (the “Company”). 

     

    Purpose
      of the Plan

     

    The
      objectives of the Bonus Plan are to attract, motivate and retain highly
      qualified individuals to enable the Company to meet its objectives, reward
      individual contributions to the Company’s success, encourage employees to focus
      on the achievement of corporate and individual goals and emphasize the
      importance of cross functional collaboration, and motivate employees to create
      long-term sustainable value for the Company’s stockholders by aligning
      individual incentives with stockholder value creation.

     

    Operation
      of the Plan

     

    For
      each
      fiscal year of the Company that the Bonus Plan is in effect (each, a “bonus
      year”), the Bonus Plan will operate as follows:

     

    
      	 	
              ·

            	
              The
                Company’s attainment of the corporate objectives as approved by the
                Compensation Committee of the Company’s Board of Directors (the
                “Committee”) for the bonus year determines the funding for the annual
                bonus pool. 

            


    

     

    
      	 	
              ·

            	
              Each
                corporate objective is valued at a specific level of funding points
                based
                on achievement of the objective. The actual number of funding points
                awarded for each objective can vary from 0% to 150% of the points
                allocated to that objective based on whether the objective is achieved
                and, if so, the level of
                achievement.

            


    

     

    
      	 	
              ·

            	
              Each
                individual employee has a set annual target bonus as approved by
                the
                Committee that is a percentage of his or her annualized rate of base
                salary in effect as of December 31 of the bonus year. The target
                bonus
                percentages for all participants in the Bonus Plan are aggregated
                to
                determine the on-target bonus pool for that bonus year (the “Target
                Pool”).

            


    

     

    
      	 	
              ·

            	
              The
                total number of funding points awarded based on the Company’s performance
                for the bonus year multiplied by the Target Pool determines the actual
                level of funding for the bonus pool (the “Actual Pool”) for that bonus
                year.

            


    

     

    
      	 	
              ·

            	
              The
                Committee has discretion to provide that the aggregate bonuses awarded
                under the Bonus Plan may be up to 20 percent greater or less than
                the
                Actual Pool level. The Committee will determine the actual bonus
                amount
                for each of the Company’s executive officers that participates in the
                Bonus Plan. For participants that are not executive officers, the
                Committee may delegate to one or more officers of the Company authority
                to
                determine the actual bonus
                amount.

            


    


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    
      	 	
              ·

            	
              The
                bonus that a participant receives under the Bonus Plan is based on
                the
                amount of the Actual Pool and the participant’s performance rating against
                his or her personal objectives for the bonus year (as determined
                by the
                Committee or its delegate in its discretion). For purposes of clarity,
                each participant’s bonus will be determined on an individual basis, and
                the Committee (or its delegate) may determine in each case that an
                individual participant will receive a bonus that is greater or less
                than
                the Actual Pool level based on that participant’s individual
                performance.

            


    

     

    
      	 	
              ·

            	
              Individuals
                who commence employment with the Company after the last day of the
                third
                calendar quarter of the bonus year will not be eligible for an annual
                bonus under the Bonus Plan until the following bonus year. Individuals
                who
                commence employment with the Company during the bonus year and on
                or
                before the last day of the third calendar quarter of the bonus year
                will
                be eligible to receive a pro-rata bonus under the Bonus Plan based
                on the
                number of days they were employed with the Company divided by
                365.

            


    

     

    
      	 	
              ·

            	
              If
                an annual bonus becomes payable to a participant pursuant to the
                Bonus
                Plan, the bonus will be paid to the participant in cash no later
                than
                March 31 of the year that follows the bonus
                year.

            


    

     

    
      	 	
              ·

            	
              A
                participant must be employed with the Company (or one of its affiliates
                or
                subsidiaries) on the date that bonus payments are actually made under
                the
                Bonus Plan in order to be eligible to receive a bonus under the Bonus
                Plan
                (subject to the achievement of the applicable performance measures).
                A
                participant will have no right to a bonus (or any partial bonus)
                under the
                Bonus Plan if the participant’s employment terminates or is terminated
                (regardless of the reason, whether with or without cause) prior to
                the
                time that bonuses are paid under the Bonus
                Plan.

            


    

     

    Other
      Rules

     

    Change
      in Control Event.
      Notwithstanding anything to the contrary in the Bonus Plan, in the event that
      a
      merger, reorganization, asset sale or any other event in which the Company
      does
      not survive (or does not survive as a public company in respect of its common
      stock) (a “Change in Control Event”) occurs during the bonus year, the Committee
      may, in its discretion, terminate the Bonus Plan upon the event. If the Bonus
      Plan is so terminated, the Committee will determine in good faith, based on
      the
      Company’s level of performance through the date of the Change in Control Event,
      the extent to which the corporate objectives for the Bonus Plan would have
      been
      met had such level of performance continued through the last day of the bonus
      year and, based on such determination and the individual performance of each
      participant (as determined by the Committee or its delegate), calculate a
      tentative bonus amount for each participant who is employed by the Company
      or
      one of its affiliates immediately prior to such event. Each such participant
      will be entitled to a prorated bonus based on the number of calendar days in
      the
      bonus year that occurred prior to the Change in Control Event, such prorated
      bonus to be paid on the effective date of the Change in Control
      Event.

     

    No
      Assignment.
      The
      rights, if any, of a participant or any other person to any payment or other
      benefits under the Bonus Plan may not be assigned, transferred, pledged, or
      encumbered except by will or the laws of descent or
      distribution.


    
      
         

      

      
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    Tax
      Withholding.
      The
      Company has the right to deduct from any bonus amount otherwise payable the
      amount of any and all required income, employment and other tax withholding
      required with respect to such payment.

     

    Amendment. The
      Committee reserves the right to amend and/or terminate the Bonus Plan at any
      time and in any manner.

     

    No
      Fiduciary Relationship.
      Nothing
      contained in the Bonus Plan and no action taken pursuant to the provisions
      of
      the Bonus Plan shall create or be construed as creating a trust or any kind
      of
      fiduciary relationship between the Company and any of its affiliates, or the
      Committee, on one hand, and any participant or any other person on the other
      hand.

     

    No
      Right to Bonus or Continued Employment.
      Nothing
      contained in the Bonus Plan or any related document constitutes an employment
      or
      service commitment by the Company (or any affiliate), affects an employee’s
      status as an employee at will who is subject to termination without cause,
      confers upon any participant any right to remain employed by or in service
      to
      the Company (or any affiliate), or interferes in any way with the right of
      the
      Company (or any affiliate) to terminate a participant’s employment or to change
      the participant’s compensation or other terms of employment at any time. The
      Bonus Plan does not constitute a contract and does not confer upon any person
      any right to receive a bonus or any other payment or benefit. There is no
      commitment or obligation on the part of the Company (or any affiliate) to
      continue any bonus plan (similar to the Bonus Plan or otherwise) in any future
      fiscal year.

     

    Administration. The
      Committee shall administer the Bonus Plan, select participants for the Bonus
      Plan, determine the applicable performance measures, relative weights of those
      measures, specific performance goals, and bonus opportunities, determine
      performance and the extent to which any applicable goals have been satisfied,
      determine whether any bonus is actually payable under the Bonus Plan and,
      subject to the express limitations of the Bonus Plan, the amount of each bonus,
      and determine the time or times at which and the form and manner in which
      bonuses will be paid. The Committee shall have the authority to construe and
      interpret the Bonus Plan and any agreement or other document relating to the
      Bonus Plan. All actions taken and all interpretations and determinations made
      by
      the Company in respect of the Bonus Plan shall be conclusive and binding on
      all
      persons and shall be given the maximum deference permitted by law.

     

    Adjustments.
      The
      Committee may, in its sole discretion, adjust performance measures, performance
      goals, relative weights of the measures, and other provisions of the Bonus
      Plan
      to the extent (if any) it determines that the adjustment is necessary or
      advisable to preserve the intended incentives and benefits to reflect (1) any
      material change in corporate capitalization, any material corporate transaction
      (such as a reorganization, combination, separation, merger, acquisition, or
      any
      combination of the foregoing), or any complete or partial liquidation of the
      Company, (2) any change in accounting policies or practices, or (3) the effects
      of any special charges to the Company’s earnings, or (4) any other similar
      special circumstances.


    
      
         

      

      
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