**EXHIBIT
      10.1**





**INSITE
      VISION INCORPORATED**


**2007
      PERFORMANCE INCENTIVE PLAN**


**NON-EMPLOYEE
      DIRECTOR OPTION GRANT PROGRAM**





1.1
            ***Establishment;
                Purpose***




This
      Non-Employee Director Option Grant Program (this “ **Program** ”)
      is
      adopted under, and any shares of Common Stock issued with respect to awards
      granted under this Program after the date of its adoption shall be charged
      against the applicable share limits of, the InSite Vision Incorporated 2007
      Performance Incentive Plan (the “ **Plan** ”).
      The
      purpose of this Program is to promote the success of the Corporation and the
      interests of its stockholders by providing members of the Board who are not
      officers or employees of the Corporation or one of its Subsidiaries
      (“ **Non-Employee
      Directors** ”)
      an
      opportunity to acquire an ownership interest in the Corporation and more closely
      aligning the interests of Non-Employee Directors and stockholders. Except as
      otherwise expressly provided herein, the provisions of the Plan shall govern
      all
      awards made pursuant to this Program. Capitalized terms are defined in the
      Plan
      if not defined herein.




1.2
            ***Participation***




Awards
      under this Program shall be made only to Non-Employee Directors, shall be
      evidenced by a Notice of Grant substantially in the form attached hereto and
      shall be further subject to such other terms and conditions set forth
      therein.




1.3
            ***Annual
                Option Grants***




(a)  *Initial
      Option Grant.* Upon
      first being appointed or elected to the Board after the date on which the Board
      approves this Program, each Non-Employee Director who has not previously served
      on the Board and has not previously been employed by the Corporation or one
      of
      its Subsidiaries shall be granted automatically (without any action by the
      Board
      or the Administrator) a nonqualified stock option to purchase 30,000 shares
      of
      Common Stock (the “Initial Option”).




(b)  *Subsequent
      Annual Option Grant* . Each
      year
      during the term of the Plan, commencing in December 2007, on the first to occur
      of (i) the first Board meeting in December of such year, or (ii) December 15
      of
      such year (or, if December 15 of that year is not a trading day, on the
      immediately succeeding trading day), each Non-Employee Director then in office
      shall be granted automatically (without any action by the Board or the
      Administrator) a nonqualified stock option to purchase 30,000 shares of Common
      Stock (the “Annual Option”); provided, however, that a Non-Employee Director who
      received an Initial Option grant within the six-month period preceding the
      grant
      date of the Annual Option shall not be eligible to receive an Annual Option
      on
      such grant date. An
      individual who was previously a member of the Board, who then ceased to be
      a
      member of the Board for any reason, and who then again becomes a Non-Employee
      Director shall thereupon again become eligible to be granted stock options
      under
      this Section 1.3(b).









1.4
            ***Option
                Price***




The
      purchase price per share of the Common Stock covered by each stock option
      granted pursuant to this Program shall be 100% of the fair market value (as
      that
      term is defined in Section 5.6 of the Plan) of the Common Stock on the date
      of
      grant of the option as determined under the applicable provisions of Section
      1.3
      (the “ **Award
      Date** ”).
      The
      exercise price of any stock option granted under this Program shall be paid
      in
      full at the time of each purchase in any of the following methods (or
      combination thereof): (i) cash, check payable to the order of the Corporation,
      or electronic funds transfer; (ii) subject to compliance with all applicable
      laws, rules and regulations, and subject to such procedures as the Administrator
      may adopt, the delivery of previously owned shares of Common Stock or pursuant
      to a “cashless exercise” with a third party who provides financing for the
      purposes of (or who otherwise facilitates) the purchase or exercise of awards;
      or (iii) in any other manner authorized by the Administrator pursuant to Section
      5.5 of the Plan. Shares of Common Stock used to satisfy the exercise price
      of an
      option shall be valued at their fair market value on the date of
      exercise.




1.5
            ***Option
                Period and
                Exercisability***




Each
      nonqualified stock option granted under this Program and all rights or
      obligations thereunder shall commence on the Award Date of the award and expire
      ten (10) years thereafter and shall be subject to earlier termination as
      provided below. Subject to earlier termination as provided below, each
      nonqualified stock option granted under this Program shall become vested as
      to
      one hundred percent (100%) of the total number of shares of Common Stock subject
      thereto on the first anniversary of the Award Date. The vesting schedule
      requires continued service through each applicable vesting date as a condition
      to the vesting of the applicable installment of a stock option grant and the
      rights and benefits under this Program. Service for only a portion of the
      vesting period, even if a substantial portion, will not entitle a Non-Employee
      Director to any proportionate vesting or avoid or mitigate a termination of
      rights and benefits upon or following a termination of services as provided
      in
      Section 1.6 below. Nothing contained in this Program constitutes a continued
      service commitment by the Corporation, confers upon a Non-Employee Director
      any
      right to remain in service to the Corporation, interferes with the right of
      the
      Corporation at any time to terminate such service, or affects the right of
      the
      Corporation to increase or decrease a Non-Employee Director’s other
      compensation.




1.6
            ***Termination
                of Directorship***




Subject
      to the maximum ten-year term of the option and subject to earlier termination
      pursuant to Section 7.2 of the Plan, if a Non-Employee Director ceases to be
      a
      member of the Board for any reason, the following rules shall apply with respect
      to any option granted to the Non-Employee Director pursuant to this Program
      (the
      last day that the Non-Employee Director is a member of the Board is, except
      as
      otherwise provided below, referred to as the Non-Employee Director’s
“ **Severance
      Date** ”):




·
            other
                than as expressly provided below in this Section 1.6, (a) the Non-Employee
                Director will have until the date that is three (3) months after
                his or
                her Severance Date to exercise such option (or portion thereof) to
                the
                extent that it was vested on the Severance Date, (b) such option,
                to the
                extent not vested on the Severance Date, shall terminate on the Severance
                Date, and (c) such option, to the extent exercisable for the three-month
                period following the Severance Date and not exercised during such
                period,
                shall terminate at the close of business on the last day of the
                three-month period; or




2




·
            if
                the Non-Employee Director’s Severance Date is the result of the death or
                Total Disability (as defined below) of the Non-Employee Director,
                (a) the
                Non-Employee Director will have until the date that is six (6) months
                after his or her Severance Date to exercise such option, (b) such
                option,
                to the extent not vested on the Severance Date, shall terminate on
                the
                Severance Date, and (c) such option, to the extent exercisable for
                the
                six-month period following the Severance Date and not exercised during
                such period, shall terminate at the close of business on the last
                day of
                the six-month period.




For
      purposes of this Program, “ **Total
      Disability** ”
shall
      mean a “permanent and total disability” within the meaning of Section 22(e)(3)
      of the Code and such other disabilities, infirmities, afflictions or conditions
      as the Administrator by rule may include.




Notwithstanding
      any other provision of this Section 1.6, if a Non-Employee Director ceases
      to be
      a member of the Board (regardless of the reason) but, immediately thereafter,
      is
      employed by the Corporation or one of its Subsidiaries, such director’s
      Severance Date shall not be the date the director ceases to be a member of
      the
      Board but instead shall be the last day that the director is either or both
      (1)
      a member of the Board and/or (2) employed by the Corporation or a Subsidiary.




1.7
            ***Adjustments;
                Change in Control
                Events***




Stock
      options granted under this Program shall be subject to adjustment as provided
      in
      Section 7.1 of the Plan, but only to the extent that such adjustment is
      consistent with adjustments to stock options held by persons other than
      executive officers or directors of the Corporation (to the extent that persons
      other than executive officers or directors of the Corporation then hold
      options). The grant levels reflected in Section 1.3 above shall be automatically
      adjusted upon the record date for any stock split, reverse stock split, or
      stock
      dividend to give effect to such change in capitalization unless otherwise
      provided by the Board in the circumstances, and may be adjusted in any other
      circumstances contemplated by Section 7.1 of the Plan. A stock option granted
      under this Program may vest and become exercisable, and is subject to early
      termination, in connection with the occurrence of certain events involving
      the
      Corporation as provided for in Section 7 of the Plan.




1.8
            ***Plan
                Provisions; Maximum Number of Shares;******Amendments;
                Administration***




Each
      option granted under this Program shall otherwise be subject to the terms of
      the
      Plan (including, without limitation, the provisions of Section 7 of the Plan).
      If stock option grants otherwise required pursuant to this Program would
      otherwise exceed any applicable share limit under Section 4.2 of the Plan,
      such
      grants shall be made pro-rata to Non-Employee Directors entitled to such grants.
      The Board may from time to time amend this Program without stockholder approval;
      provided that no such amendment shall materially and adversely affect the rights
      of a Non-Employee Director as to an option granted under this Program before
      the
      adoption of such amendment. This Program does not limit the Board’s authority to
      make other, discretionary award grants to Non-Employee Directors pursuant to
      the
      Plan. The Plan Administrator’s power and authority to construe and interpret the
      Plan and awards thereunder pursuant to Section 3.2 of the Plan shall extend
      to
      this Program and awards granted hereunder. As provided in Section 3.3 of the
      Plan, any action taken by, or inaction of, the Administrator relating or
      pursuant to this Program and within its authority or under applicable law shall
      be within the absolute discretion of that entity or body and shall be conclusive
      and binding upon all persons.





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**Notice
                  of Grant of Director**
                **Stock
                  Option**
              **InSite
                  Vision Incorporated**
                **ID:
                  [____________]**
                965
                  Atlantic Avenue
                Alameda,
                  CA 94501
  
 **Director:**
              **[Name]**
              
              **Option
                  Number:**
              **[_______]****[Address]**
              
              **Plan:**
              **2007****[Address]**
              
              **ID:**
              **[__________]**


Effective **[___________]** (the
“Award Date”), you (the “Director”) have been granted a nonqualified stock
      option (the “Option”) to buy **[________]** shares 1 of
      Common
      Stock of InSite Vision Incorporated (the “Corporation”) at a price of
      $ **[_______]** per
      share 1 (the
“Exercise Price”).





The
      aggregate Exercise Price of the shares subject to the Option is $ **[__________]** . 1




The
      Option will become vested as to 100% of the total number of shares of Common
      Stock subject to the Option on the first anniversary of the Award
      Date. 1, 2





The
      Option will expire on **[_________]** (the
“Expiration Date”). 1,
      2








By
      your
      signature and the Corporation’s signature below, you and the Corporation agree
      that the Option is granted under and governed by the terms and conditions of
      the
      Corporation's 2007 Performance Incentive Plan (the “Plan”) and the Non-Employee
      Director Option Grant Program adopted thereunder (the “Program”), which are
      attached and incorporated herein by this reference. The Option has been granted
      to you in addition to, and not in lieu of, any other form of compensation
      otherwise payable or to be paid to you. Capitalized terms are defined in the
      Plan if not defined herein or in the Program. You acknowledge receipt of a
      copy
      of the Program, the Plan and the Prospectus for the Plan.







InSite
                  Vision Incorporated
              
              Date**[____________]**
              
              Date




1
      Subject to adjustment under Section 1.7 of the Program.


2
          Subject to early termination under Section 1.6 of the Program and Section
          7 of
          the Plan.






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