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                                                                   EXHIBIT 10.42

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                      ISV-403 TECHNOLOGY LICENSE AGREEMENT

NOTE: THE LICENSE GRANTED HEREIN INCLUDES A SUBLICENSE BY INSITE VISION
INCORPORATED OF RIGHTS UNDER THE JOINT SS732/SS734 PRODUCT DEVELOPMENT AND
CROSS-LICENSE AGREEMENT, DATED APRIL 15, 2001 (AS AMENDED), ENTERED INTO BETWEEN
INSITE VISION INCORPORATED AND SSP CO. LTD., AND MUST BE READ IN CONJUNCTION
WITH SUCH AGREEMENT.

THIS LICENSE AGREEMENT ("Agreement") is made as of the 7th day of August, 2002
("Effective Date") by and between INSITE VISION INCORPORATED, a Delaware
corporation with an office at 965 Atlantic Avenue, Alameda, CA 94501
("Licensor") and BAUSCH & LOMB INCORPORATED, a New York corporation with an
office at One Bausch and Lomb Place, Rochester, NY 14604 ("B&L").

WHEREAS, Licensor owns, alone and jointly with others, and has rights under
licenses from third parties certain patent rights and other intellectual
property and know-how relating to ISV-403, a fluoroquinolone in DuraSite
formulation which is stable without refrigeration (defined below as
"Technology");

WHEREAS, B&L desires to acquire, and Licensor is willing to grant to B&L, a
license under such proprietary rights and related know-how under the terms and
conditions set forth herein.

THEREFORE, in consideration of these premises and the promises in this
Agreement, the parties agree as follows:

1.0     DEFINITIONS

        The following defined terms are used in this Agreement.

        1.1    "Affiliate" of either party means all Persons that directly or
               indirectly are controlled by, control or are under common control
               with B&L or Licensor as the case may be.

        1.2    "Control" means the possession, directly or indirectly, of the
               power to direct or cause the direction of management of a Person,
               whether through ownership of voting securities, by contract or
               otherwise.

        1.3    "Clinical Intellectual Property" or "Clinical IP" means (i)
               pre-clinical or clinical protocols and data resulting from or
               relating to pre-clinical or clinical trials incorporating the
               Technology and that were performed before the Effective Date or
               are performed or developed during the term of this Agreement and
               (ii) all Investigational New Drug Applications ("INDs"), New Drug
               Applications ("NDAs") and other regulatory applications and
               approvals.

        1.4    "Development Activities" means work carried out by Licensor or
               B&L or their agents, consultants or contractors, to implement or
               support the Development Plan.

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        1.5    "Development Plan" means a proposed program to establish the
               efficacy and scope of the Technology (as the Parties may agree)
               and to obtain regulatory approval for the Technology. Exhibit 1.5
               provides the schedule of major Development Activities, from which
               the Joint Committee will prepare the Development Plan.

        1.6    "FDA" means the United States Food and Drug Administration or any
               successor entity thereto.

        1.7    "First Commercial Sale" means with respect to any Product, the
               first sale or other commercial disposition for value (including
               goodwill generated by distribution of free or discounted trade
               size product in conjunction with the sale or promotion of other
               products or services offered by B&L or a Sublicensee) generating
               "Net Sales" by B&L or a Sublicensee for use or consumption by the
               general public in any country.

        1.8    "Field" means [***].

        1.9    "Intellectual Property" means the Patent Rights and Know-How, but
               it shall not include any intellectual property right invented,
               discovered, authored, or otherwise wholly-owned by B&L or any
               other intellectual property right of Licensor.

        1.10   "Joint Review Committee" means a team consisting of [***]
               appointed by Licensor and [***] appointed by B&L to review
               periodically the progress of the Development Plan. The Joint
               Review Committee shall include the Project Coordinators.

        1.11   "Know-How" means all technology, engineering data, trade secrets,
               technical data, manufacturing information, pre-clinical and
               clinical data and any other information or experience (other than
               as disclosed in the Patent Rights) that Licensor owns or has the
               right to license that is used in or is directly related to the
               Technology, as well as any direct improvements or modifications
               thereto (other than that disclosed in Patent Rights) developed by
               Licensor in the Field during the Term.

        1.12   "Net Sales" means, in any case where a Product is sold or
               commercially disposed of for value by B&L or any Sublicensee in
               an arm's length transaction with a third party (other than an
               Affiliate of, respectively, B&L or Sublicensee, it being intended
               that royalties accrue only once on the same unit of Product), the
               gross invoice price for such Product, less the following:

               (a)    discounts, charge-backs, [***] actually taken or allowed;

               (b)    credits or allowances given or made for rejections or
                      return of any previously sold Products actually taken or
                      allowed; and

               (c)    to the extent included in such gross invoice price, any
                      tax or government charge imposed on the production,
                      import, export, sale, delivery or use of such Products,
                      including, without limitation, any value added or similar
                      tax or government charge, but not including any tax levied
                      with respect to income.

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        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

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               (d)    to the extent included as a specific line item in such
                      gross invoice price any reasonable and documented [***].

               For the purposes of determining Net Sales, a sale shall be deemed
               to have occurred as determined by B&L in accordance with the
               published revenue recognition policies of its Corporate
               Accounting Department.

               Notwithstanding any other provision of this Section 1.12, Net
               Sales shall not include the transfer without consideration of any
               Product by B&L or a Sublicensee:

                      (i)    for use in any clinical trial or in any
                             pre-clinical or other research;

                      (ii)   [***]; or

                      (iii)  [***],

               provided; however, that [***]

               In the event of any free or discounted distribution of Product
               expressly as part of a transaction involving the sale or
               promotion of other products or services offered by B&L or a
               Sublicensee, the value of Net Sales shall be [***].

        1.13   "Patent Rights" means any patents or patent applications relating
               to the Technology (as defined below in Section 1.23) that
               Licensor owns or has the right to license that claim or relate to
               the Technology, but only to the extent of Licensor's rights under
               the SSP License with respect to rights licensed under the SSP
               License. The term "Patent Rights" includes any continuations,
               continuations in part, divisions, re-examinations, re-issues,
               extensions, and improvement patents of any of the patents or
               patent applications listed in Exhibit 1.13 and any foreign
               equivalents thereof, but only to the extent of Licensor's rights
               under the SSP License with respect to rights licensed under the
               SSP License. Patent Rights shall include any patent or patent
               application that claims any improvement or enhancement related to
               the Technology made or discovered by Licensor, its agents,
               consultants or contractors in the course of the Development
               Activities during the Term, but only to the extent of Licensor's
               rights under to the SSP License with respect to rights licensed
               under the SSP License.

        1.14   "Person" means any natural person, corporation, partnership,
               firm, organization, limited liability company, trust, business
               trust, association, joint stock company, joint venture, pool,
               syndicate, sole proprietorship, unincorporated organization, any
               government or agency or political subdivision thereof, or any
               other entity.

        1.15   "Product" means an item offered for sale that embodies the
               Technology or is covered by the Patent Rights.

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        PORTIONS.

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        1.16   "Project Coordinators" mean those individuals designated in
               writing by each party from time to time to coordinate Development
               Activities set forth in Section 3.

        1.17   "Quarter" means B&L fiscal quarters, currently based on the fifty
               two or fifty three week period ending on the last Saturday in
               December, as published by the B&L Finance Department annually.

        1.18   "Regional Regulatory Authority(ies)" means the competent
               authority for each country of the world, or for any relevant
               grouping of countries, legally responsible for authorizing the
               sale, supply or distribution of Products in that country or
               group.

        1.19   "Royalty Period" means the period beginning on the date of the
               First Commercial Sale in a particular country and terminating
               upon the later of (i) the last to expire of any issued and
               enforceable patent within the Patent Rights which covers the
               actual manufacture, use, sale or importing of such Product in
               such country, and (ii) [***] from the First Commercial
               Sale of such Product in the applicable country.

        1.20   "SSP License" shall mean the Joint SS732/SS734 Product
               Development and Cross-License Agreement, dated April 15, 2001,
               (as amended) entered into between InSite Vision Incorporated and
               SSP Co., Ltd. ("SSP"), a full and complete copy of which is
               attached as Exhibit 1.20 hereto.

        1.21   "Sublicense" means any sublicense of, or other agreement
               permitting the commercial exploitation of some or all of the
               rights granted to B&L under this Agreement, except that no
               agreement in the nature of a "Distributor Agreement" (i.e., the
               other party to the agreement takes title to Product from B&L for
               resale to a third party), or a "Sales Agency Agreement" (i.e.,
               the other party to the agreement secures orders for Product to be
               sold by B&L, and receives a commission in exchange therefore)
               shall be deemed a Sublicense.

        1.22   "Sublicensee" means any Person with whom B&L enters into a
               Sublicense.

        1.23   "Technology" means technology developed, acquired or licensed by
               Licensor for Licensor's ISV-403 fluoroquinolone product
               containing SS734 in development, in DuraSite platform which is
               stable without refrigeration, as well as any improvements or
               modifications to the inventions disclosed in the patents or
               patent applications listed in Exhibit 1.13 as developed by
               Licensor, its agents, consultants or contractors during the Term,
               but, with respect to Technology which is subject to the SSP
               License, only to the extent of Licensor's rights under the SSP
               License.

        1.24   "Term" means the period commencing upon the Effective Date and
               extending until the termination of this Agreement pursuant to
               Article 19.

        1.25   "Territory" means anywhere in the world except Japan.

        Where words and phrases are used herein in the singular, such usage is
        intended to include the plural forms where appropriate to the context,
        and vice versa. The words "including" and "includes" are used in their
        non-limiting sense and have the same meaning as "including without
        limitation" and "including but not limited to." References to Articles,
        Sections, and clauses are to the same with all their subparts as they
        appear in this Agreement. "Herein" means anywhere in this Agreement.
        "Hereunder" and "hereto"

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        PORTIONS.

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        mean under or pursuant to any provision of this Agreement. Other
        initially capitalized terms used in this Agreement, including all
        Exhibits attached hereto, which are incorporated fully by this reference
        as if set forth herein, shall have the meanings described within the
        text of this Agreement.

2.0     LICENSE GRANTS

        2.1    Subject to the terms and conditions of this Agreement and the
               reservations set forth in Section 2.4, Licensor grants to B&L,
               and B&L accepts, an exclusive, royalty bearing license, with the
               right to Sublicense, under Licensor's interest in (i.e., subject
               to the SSP License) the Patent Rights and Know-How, to make, have
               made, use, market, promote, sell, offer to sell, import, and
               distribute Products in the Field throughout the Territory. B&L
               acknowledges and agrees that the grant of rights set forth herein
               are subject to the applicable terms of the SSP License, and that
               B&L takes such grant of rights subject to all of the applicable
               terms of the SSP License. Without limiting the generality of the
               preceding sentence, B&L acknowledges the co-exclusive rights of
               SSP under the SSP License in respect of all countries,
               territories and protectorates in Asia (including the South East
               Asian countries such as Korea, China, Hong Kong, Singapore,
               Malaysia, Thailand, Indonesia, Taiwan and their neighborhoods,
               but not including the Middle Eastern countries such as Turkey and
               Saudi Arabia, Russia and ex-USSR countries, South Asia such as
               India).

        2.2    B&L shall have the right to Sublicense, in whole or in part, the
               license granted in Section 2.1, except that Licensor shall have
               the right to approve in advance and in writing any Sublicensee
               who will be Sublicensed the right to manufacture the Product, as
               reasonably necessary to protect Licensor's rights in the
               Know-How, which approval shall not be unreasonably withheld.

        2.3    Except as expressly set forth herein, this Agreement shall not be
               construed as granting by implication, estoppel or otherwise, any
               right in or license under any present or future inventions,
               know-how, trade secrets, trademarks, service marks, trade names,
               trade dress, copyrights, or patents owned or controlled by B&L or
               by Licensor.

        2.4    Licensor reserves all such rights under its interest in the
               Patent Rights and the Know-How to use same and to administer the
               Products, and sublicense third parties to do same, for the
               purpose of conducting the Development Activities hereunder,
               provided that Licensor shall notify B&L in writing promptly upon
               the grant of any such sublicense.

3.0     PRODUCT DEVELOPMENT

        3.1    Licensor shall, at its sole expense and in consultation with B&L
               through the Joint Review Committee, develop the Product in
               accordance with the Development Plan, except in the event that
               B&L's option under Section 3.9 shall have come into existence and
               have been duly exercised.

        3.2    The Joint Review Committee shall meet either telephonically or in
               person at least [***] to review strategies, projects and
               timelines in view of the Development Plan. Minutes shall be
               maintained of the proceedings of the Joint Review Committee. All
               decisions of the Joint Review Committee shall be made by an
               affirmative vote of [***]. The Joint Review Committee may not
               enter into any contract or other arrangement imposing any binding

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               obligation upon a Party. The Joint Review Committee may take such
               other actions as it may reasonably decide to facilitate the
               approval and commercial success of the Products.

        3.3    It is understood that Development Activities are by their nature
               difficult to specify and, accordingly, the parties acknowledge
               that it may be necessary to modify the Development Activities or
               the Development Plan from time to time. [***]

        3.4    At each meeting of the Joint Review Committee, Licensor shall
               present a project development summary (including timelines) that
               outlines the expected Development Activities for the subsequent
               Twelve (12) month period. Licensor shall issue written Quarterly
               reports during Development Activities and a final report within
               thirty (30) days of completion of the Development Activities. The
               final report will contain a summary of all development progress,
               test methods and results, drawings and specifications.

        3.5    In the event the Joint Review Committee, after using reasonable
               efforts to resolve any dispute amicably based on the achievement
               of the objectives of the development efforts, is unable to
               resolve any disagreement, the dispute resolution mechanisms in
               Section 21.4 shall apply.

        3.6    An expected timing of Development Activities is contained as part
               of the Development Plan. Both Licensor and B&L agree to make all
               reasonable efforts to keep the Development Activities on
               schedule. The Development Plan is designed, and any future
               modifications to the Development Plan will be designed, to
               achieve regulatory approvals in the shortest time practicable,
               consistent with clinical and regulatory end-points and to provide
               for the successful commercialization of the Products described in
               the Development Plan, all of which will be reviewed and approved
               by the Joint Review Committee but which shall at a minimum,
               include the characteristics identified on Exhibit 4.1 hereto.

        3.7    Licensor shall maintain good engineering and scientific records
               of the methods, experiments, tests, procedures, results and
               conclusions prepared in the process of conducting the Development
               Activities. B&L shall have reasonable access to these records.

        3.8    Except as stated otherwise specifically herein, or in the
               Development Plan, Licensor shall be responsible for all costs of
               Development Activities. Attached as part of the Development Plan
               is the Project Budget Estimate for Development Activities, as
               estimated by Licensor as of the date hereof, including agreed
               upon labor costs for key individuals expected to be involved in
               such activities.

        3.9    [***]

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4.0     LICENSOR OBLIGATIONS

        4.1    Licensor Development Obligations. Licensor shall use commercially
               reasonable efforts (which shall, in the absence of further
               definition, equal or exceed the efforts expended by Licensor on
               its own proprietary research and development projects) to develop
               the Products and to perform on its own or through third parties,
               all Development Activities for which Licensor is responsible as
               set forth in the Development Plan. It is expected that the
               Development Activities will result in a Product meeting the
               characteristics identified on Exhibit 4.1.

        4.2    Regulatory Filings.

               (a)    Licensor will be responsible for completing all regulatory
                      filings to the FDA or a central Regulatory Authority in
                      Europe with respect to the Products. All such filings
                      shall be submitted in Common Technical Document (CTD)
                      format. Licensor will provide to B&L copies of records
                      summarizing any clinical trial data and other
                      correspondence that Licensor collects or is required to
                      submit to the FDA or Regulatory Authority to secure market
                      approval for the Products as such records or
                      correspondence becomes available to Licensor. Licensor
                      shall also provide to B&L copies of records comprising raw
                      clinical trial data or patient data as requested by B&L to
                      the fullest extent permissible under the Health Insurance
                      Portability and Accountability Act of 1996 ("HIPAA") or
                      any other applicable statute or regulation, and shall take
                      such action in the design of clinical trials and patient
                      consent forms as is reasonable to allow for the provision
                      of such records under HIPAA or other applicable statute or
                      regulation.

               (b)    Upon approval of the Product by the Regulatory Authority
                      in a particular country or upon abandonment of same by
                      Licensor, Licensor shall, at Licensor's cost and expense,
                      transfer such approval to B&L, and shall, within fifteen
                      (15) days of B&L's written request, execute and file with
                      such Regulatory Authority all such documents and
                      materials, and pay any applicable fees as are required to
                      effect such transfer. After transfer to B&L of any such
                      approval, B&L shall make no material modification to the
                      Product without the express written approval of Licensor,
                      which approval shall not be unreasonably withheld. Upon
                      termination of this Agreement by Licensor pursuant to
                      Section 19.3 or termination by B&L pursuant to Section
                      19.4, B&L shall at its expense transfer to Licensor all
                      Regulatory Authority approvals of the Product and execute
                      and file all such documents and do all such other things
                      as may be required to effect all such transfers. This
                      provisions shall survive any termination of this Agreement
                      pursuant to the provisions noted in the foregoing
                      sentence.

        4.3    Other Regulatory Obligations. Licensor shall receive and
               coordinate reports from B&L and other sources and promptly report
               to the FDA and/or Regional Regulatory Authority any and all of
               the following events or experiences: adverse events; "serious
               adverse drug experience", "unexpected adverse drug

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               experience", "life-threatening adverse drug experience", or fatal
               events that may be experienced by any subject in a clinical study
               designated to support regulatory approval of the Products or
               components thereof, where any such event or experience is
               "associated with the use" of the Products as those terms are
               defined in 21 C.F.R. 314.80, 314.81, and 803, or as otherwise
               required by any other applicable FDA regulations or the similar
               regulations and requirements in jurisdictions outside the United
               States. Licensor will comply with other requirements for the
               submission of reports and notices to the FDA or Regional
               Regulatory Authority, including reports and notices to the FDA as
               required under 21 CFR Sections 202, 203 and 207 and the similar
               regulations and requirements in jurisdictions outside the United
               States. Within the one (1)-year period before the reasonably
               anticipated First Commercial Sale, and from time to time
               thereafter at either party's request, the parties will discuss
               and seek to establish standard operating procedures for the
               collection, monitoring and reporting of all product complaints,
               and the prompt exchange of information as contemplated by this
               paragraph and Section 5.5, and Licensor shall also thereafter
               comply with all such mutually agreed standard operating
               procedures.

        4.4    As between B&L and Licensor, Licensor shall be responsible for
               conducting and managing Product recalls where Licensor is the
               holder of the NDA or other relevant governmental approval
               required to market the Product in the country as to which such
               recall pertains. In all other cases, B&L shall be responsible for
               conducting and managing Product recalls with respect to Product
               sold by B&L and its distributors and Sublisensees in accordance
               with Section 5.6.

        4.5    Technical Support. Licensor shall provide technical support to
               B&L at the reasonable request of B&L in those instances where
               such support requires the unique expertise pertaining to the
               Products.

        4.6    SSP Licenses. Licensor shall maintain the SSP Licenses in full
               force and effect, including (without limitation) making all
               royalty payments, and shall not amend or modify the SSP Licenses
               without B&L's prior written consent, which consent shall not be
               unreasonably withheld. [***]

5.0     B&L OBLIGATIONS

        5.1    Preferred Equity Investment.

               (a)    In conjunction with the arrangements contemplated by this
                      Agreement,

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                      B&L shall invest up to [***] ([***] United States Dollars)
                      in successive purchases of Licensor's preferred equity
                      capital, [***] (the "Preferred Stock") all pursuant to the
                      Preferred Stock Purchase Agreement, dated of even date
                      herewith, and attached as Exhibit 5.1 hereto.

               (b)    Upon First Commercial Sale, assuming B&L exercises
                      reasonable efforts to commercialize the Product following
                      NDA approval, but in no event later than six (6) months
                      after NDA approval, two-thirds, or 66.667%, of the total
                      shares of Preferred Stock purchased by B&L shall be
                      redeemed by Licensor for one dollar, paid to B&L. Such
                      redemption shall occur upon thirty (30) days written
                      notice from Licensor to B&L following satisfaction of the
                      above condition, and shall include, with respect to each
                      share of Preferred Stock so redeemed, all accumulated and
                      unpaid dividends thereon.

               (c)    The remaining one-third, or 33.333%, of the total shares
                      of Preferred Stock purchased by B&L shall be redeemed and
                      converted, simultaneously with the redemption identified
                      in Section 5.1(b) above, into pre-paid royalties, which
                      may be credited against B&L's obligation to pay the
                      Running Royalty in accordance with Article 7 hereof. The
                      total value of such pre-paid royalty (the "Prepaid Royalty
                      Value") shall equal the purchase price of the shares of
                      Preferred Stock so converted, plus all accumulated and
                      unpaid dividends thereon.

        5.2    Manufacture of Clinical Trial Materials and Stability Batches.
               B&L shall manufacture (or contract for the manufacture of) all
               Products required for Phase III clinical trials, and all Products
               as may be required for any stability testing or verification
               (stability batches) in connection with submissions to regulatory
               authorities for purpose of obtaining approvals or registrations
               of the Product. Prior to manufacture, B&L shall submit to the
               Joint Review Committee for its approval a budget for the
               manufacturing costs. Licensor shall reimburse B&L upon
               presentation of quarterly invoices for [***] incurred by B&L in
               the manufacture and supply of such Product and material to
               Licensor.

        5.3    European Clinical Trials and Regulatory Filing Support. B&L shall
               provide support for the conduct of pivotal clinical trials in
               Europe necessary to support the registration of the product in
               Europe and which will be structured as necessary to support use
               in the regulatory filing in the U.S. The variable costs of such
               clinical trials incurred by B&L (including, for example, [***]
               incremental headcount) shall be reimbursed by the Licensor, and
               B&L shall submit to the Joint Review Committee for its approval
               its budget for such variable costs in advance of commencement of
               such trials. B&L shall also provide the Licensor guidance in the
               preparation and submission of regulatory filings to the central
               regulatory authority in Europe.

        5.4    Market Development and Commercialization. B&L shall use
               commercially reasonable efforts (which shall not be less than the
               efforts expended by B&L on its own proprietary commercialization
               projects) to (1) make, have made, market, promote, sell,
               distribute and support the Products for use in all such markets,
               as soon as practical and consistent with reasonable business
               practices, after

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               Licensor has obtained all required regulatory approvals in such
               markets and notified B&L in writing that such approvals have been
               obtained and (2) keep Licensor informed of any material
               developments in the markets where Products are being sold. All
               such development and commercialization efforts shall be
               undertaken by B&L at its own cost and expense.

        5.5    Regulatory Obligations. B&L will, as soon as practicable, contact
               Licensor's Regulatory Affairs Department by telephone and will
               also provide a written report of any and all of the following
               events or experiences of which B&L has knowledge: "adverse
               events", "serious adverse drug experience", "unexpected adverse
               drug experience", "life-threatening adverse drug experience", or
               fatal events that may be experienced by any subject in a clinical
               study designated to support regulatory approval of the Products,
               or components thereof, where any such event or experience is
               "associated with the use" of the Approved Products as those terms
               are defined in 21 C.F.R. Sections 314.80, 314.81, and 803, and as
               required by any other applicable FDA regulations or the
               equivalent regulations and requirements in jurisdictions outside
               the United States. B&L will cooperate and respond to all
               reasonable requests for follow-up information from Licensor to
               enable Licensor to carry out its obligations under this
               Agreement. Within the one (1) year period before the reasonably
               anticipated First Commercial Sale, and from time to time
               thereafter at either party's request, the parties will discuss
               and seek to establish standard operating procedures for the
               collection, monitoring and reporting of all product complaints,
               and the prompt exchange of information as contemplated by this
               paragraph and Section 4.3, and B&L shall also thereafter comply
               with all such mutually agreed standard operating procedures.

        5.6    Recalls. Except as provided in Section 4.4, B&L shall respond to
               inquiries from and report to the FDA and/or Regional Regulatory
               Authority concerning the recall of any Products that are marketed
               and sold and B&L and /or its Sublicensees will promptly notify
               Licensor if B&L is subject to any such inquiries or reporting
               requirements. B&L will investigate and determine any cause of
               such recall. All costs associated with such recall or field
               corrective action will be borne by B&L. If Licensor retains the
               regulatory filing, B&L will keep Licensor fully apprised of the
               status of any recall or field corrective action.

6.0     ROYALTIES

        6.1    During the Royalty Period in each country, B&L shall pay to
               Licensor a running royalty of [***] of Net Sales (the "Base
               Royalty") plus the lower of (i) [***] of Net Sales and (ii) the
               actual royalty on Net Sales paid by Licensor to SSP, licensor to
               Licensor of technology rights covering the Products (the lower of
               which shall be referred to as the "Extra Royalty"). The aggregate
               of the Base Royalty and the Extra Royalty are referred to herein
               as the "Running Royalty".

               Notwithstanding the foregoing, the Base Royalty shall be reduced
               to [***] of Net Sales for each Quarter to a purchaser or end user
               of the Products which is located in a country where (a) no
               Product sold in such country is covered by a valid claim of the
               Patent Rights, and there is Competing Product (as defined below)
               sold in such country or (b) after consultation with each other,
               Licensor and B&L elect not to pursue individually or jointly
               action seeking to stop the sale of Competing Product in such
               country, or (c) B&L is not entitled to bring or able to initiate
               an action to or otherwise able to, stop any Person from selling
               Competing Product in such country.

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        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

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               For purposes of this provision, "Competing Product" shall mean
               any product that incorporates the Technology, if the aggregate
               sales of such product in the country in question exceed [***] of
               the total market for sales of products in the same therapeutic
               class and of the same type (fluoroquinolones) in such country, as
               reasonably demonstrated by B&L.

        6.2    Royalties based upon Net Sales shall begin to accrue on the date
               of the First Commercial Sale.

        6.3    Internal Sales. Sales of Products between or among B&L, its
               Affiliates and sublicensees shall not be subject to any royalty
               hereunder, and in such cases royalties shall be calculated upon
               B&L or its Affiliates' or sublicensees' Net Sales to an
               independent third party. B&L shall be responsible for payment of
               any royalty accrued on Net Sales of Products to such independent
               third party through B&L's Affiliates or sublicenses. Royalties
               shall accrue hereunder only once in respect of the same unit of
               the Products.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

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        6.4    Following the end of the Royalty Period in a particular country,
               the licenses granted by Licensor to B&L in Section 2.1 then in
               effect, shall continue in such country on a non-exclusive basis
               in perpetuity on a fully paid up basis.

7.0     TIMING OF ROYALTY PAYMENTS; RECORDS

        7.1    Timing of Payments. Within forty-five (45) days after the end of
               each Quarter, B&L shall pay to Licensor the royalty payment due
               for each Quarter in readily available U.S. dollars or, at B&L's
               option, by the application of credits as set forth below in
               Section 7.3.

        7.2    Currency Conversion. Any royalty due shall be converted, where
               applicable, from the currency of the country in which the sale
               was made into U.S. dollars at the month-end exchange rates for
               such Quarter as calculated based on the daily exchange rate
               published in The Wall Street Journal.

        7.3    (a)    B&L shall be entitled to credit the Pre-paid Royalty Value
                      established pursuant to Section 5.1(c) hereof against its
                      obligation to pay Running Royalties, provided that the
                      application of such Pre-paid Royalty Value shall not
                      exceed [***] of any single periodic royalty payment.

               (b)    In the event B&L exercises its rights pursuant to Section
                      3.9 hereof to complete the Development Activities for
                      which Licensor is responsible, [***].

        7.4    Record Keeping. During the period beginning on the date of the
               First Commercial Sale and for two years after the last
               royalty-bearing sale in any country, B&L shall keep full and
               accurate records relating to its payment obligations hereunder
               including, without limitation, data used in arriving at the
               payments of Section 7.1 ("Royalty Records").

        7.5    Examination of Records. B&L shall permit Licensor to have B&L's
               Royalty Records examined no more often than once per calendar
               year by an independent certified public accountant, retained and
               paid by Licensor and reasonably acceptable to B&L, during regular
               business hours and upon Fifteen (15) days' advance written
               notice. Such independent accountant shall keep confidential
               (under a written confidentiality agreement reasonably acceptable
               to B&L) any information obtained during such examination, and
               shall report to Licensor only the amounts of payments which the
               independent accountant believes to be due and payable hereunder
               and the data from which such determination is made. A copy of the
               report of such independent accountant shall be made available to
               B&L upon request.

        7.6    Audit Results. If an audit of Royalty Records conducted under the
               terms of Section 7.5, above, shows that B&L has underpaid
               royalties by more than Ten Percent (10%) for any calendar year,
               B&L shall pay the amount due to Licensor within Forty-five (45)
               Days and shall reimburse Licensor for the reasonable costs of
               such audit.

8.0     WARRANTIES

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

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        8.1    Each party represents and warrants to the other that it:

               (a)    is a corporation duly organized, validly existing and in
                      good standing under the laws of the state in which it is
                      incorporated; and

               (b)    is and shall remain in compliance with all requirements of
                      applicable laws, rules and regulations including, without
                      limitation, federal import and export requirements, rules
                      and regulations of the FDA and counterpart agencies in
                      other countries, except to the extent that noncompliance
                      does not materially adversely affect such party's ability
                      to perform its obligations and exercise its rights under
                      this Agreement.

        8.2    Each party represents and warrants that it:

               (a)    has all requisite power and authority and the legal right
                      to enter into this Agreement and to perform its
                      obligations hereunder;

               (b)    has taken all necessary corporate action on its part to
                      authorize the execution and delivery of this Agreement and
                      the performance of its obligations hereunder; and

               (c)    has duly executed and delivered this Agreement which, in
                      turn, constitutes a legal, valid, binding obligation,
                      enforceable against such party in accordance with its
                      terms.

        8.3    Licensor represents and warrants that:

               (a)    except as set forth in the SSP License, it owns the entire
                      right, title and interest in and to the Patent Rights free
                      of any lien, contractual commitment; or other encumbrance,
                      that such entire right, title and interest is not
                      encumbered in any manner, and that no licenses have ever
                      been granted by Licensor under the Intellectual Property;

               (b)    it has no knowledge of any intellectual property rights of
                      others that would interfere with the manufacture, use,
                      sale, or import of Products by B&L or any Sublicensee;

               (c)    it has not assigned or conveyed any interest in any
                      Intellectual Property inconsistent with the rights granted
                      under this Agreement;

               (d)    it is not aware that any third party has infringed any of
                      the Intellectual Property as of the Effective Date;

               (e)    to the extent it has prosecuted any patent applications
                      covered by any Intellectual Property rights, it has
                      prosecuted such applications in good faith;

               (f)    it has taken all reasonable precautions to protect the
                      secrecy, confidentiality and value of the Know-How which
                      is within its reasonable control, and is not aware of any
                      failure on the part of SSP Co. Ltd. to take such
                      reasonable precautions with respect to any portion of the
                      Know-How as is the subject of the SSP License;

                                      -13-
<PAGE>

               (g)    except as set forth in the SSP License, it owns, has an
                      absolute right to use the Know-How, and has the
                      unrestricted right to convey such rights to B&L to use the
                      Know-How, and to the best of its knowledge the Know-How is
                      not part of the public knowledge or literature and has not
                      been used, divulged, or appropriated either for the
                      benefit of any Person, and no Know-How is subject to any
                      adverse claim or has been challenged or threatened in any
                      way;

               (h)    all employees and consultants of Licensor who are or have
                      been involved in the design, review, evaluation or
                      development of the Intellectual Property have executed a
                      nondisclosure and assignment of inventions agreement
                      ("Confidentiality Agreement"), and that none of the
                      employees or consultants of Licensor is subject to any
                      contractual or legal restriction that might interfere with
                      the use of his or its best efforts to perform his or its
                      obligations hereunder;

               (i)    to Licensor's knowledge, no employee or consultant of
                      Licensor is, or is currently expected to be, in default
                      under any term of any employment contract, agreement or
                      arrangement relating to the Intellectual Property, any
                      Confidentiality Agreement, or any other contract or any
                      restrictive covenant relating to the Intellectual
                      Property, or the development or exploitation thereof;

               (j)    to its best knowledge, all of the issued Patents are as of
                      the Effective Date in compliance with formal legal
                      requirements (including payment of filing, examination,
                      and maintenance fees);

               (k)    it has the ability to grant to B&L the licenses granted in
                      Section 2.1 and has obtained all consents required to be
                      obtained in connection therewith.

9.0     INDEMNIFICATION; LIMITATION OF LIABILITY

        9.1    Indemnification of B&L. Subject to Section 9.2, Licensor shall
               indemnify, defend and hold B&L and each of its officers,
               directors, employees, agents and consultants (each a "B&L
               Indemnitee") harmless from and against all costs, claims, suits,
               expenses (including reasonable attorneys' fees and expenses,
               whether incurred as a result of a third party claim or a claim to
               enforce this provision), liabilities and damages of any kind
               (collectively, "Losses") to the extent arising out of or
               resulting from (i) any material breach or failure by Licensor in
               the performance or non-performance of its obligations or
               covenants under this Agreement; (ii) any breach by Licensor of
               any representation or warranty hereunder; (iii) the development
               of any Product except to the extent such Losses arise or result
               from any negligence of B&L; and (iv) FDA enforcement actions,
               inspections, product recalls or market withdrawals relating to a
               Product to the extent arising out of or resulting from any acts
               or omissions of Licensor. In each case, the indemnity hereunder
               shall not extend to matters as to which Licensor is entitled to
               be indemnified by B&L hereunder.

        9.2    Indemnification of Licensor. Subject to Section 9.1, B&L shall
               indemnify, defend and hold Licensor and each of its officers,
               directors, employees, agents and consultants (each a "Licensor
               Indemnitee") harmless from and against all Losses to the extent
               arising out of or resulting from (i) any material breach or
               failure by B&L in the performance or non-performance of its
               obligations or covenants under this Agreement; (ii) any breach by
               B&L of any representation or warranty

                                      -14-
<PAGE>

               hereunder; (iii) the manufacturing, marketing, possession, use,
               sale or other disposition of any Product by B&L or any
               Sublicensee except to the extent such Losses arise or result from
               any negligence of Licensor; and (iv) FDA enforcement actions,
               inspections, product recalls or market withdrawals relating to a
               Product to the extent arising out of or resulting from any acts
               or omissions of B&L. In each case, the indemnity hereunder shall
               not extend to matters as to which B&L is entitled to be
               indemnified by Licensor hereunder.

        9.3    Procedure for Indemnification. If an event occurs which a Party
               believes requires indemnification ("Indemnification Event"), the
               Party seeking indemnification ("Indemnified Party") shall give
               prompt written notice to the other Party ("Indemnifying Party")
               providing reasonable details of the nature of the event and the
               basis of the indemnity claim. The Indemnifying Party shall then
               have the right, at its expense and with counsel of its choice, to
               defend, contest, or otherwise protect against any such action.
               The Indemnified Party shall also have the right, but not the
               obligation, to participate at its own expense in the defense with
               counsel of its choice. The Indemnified Party shall cooperate as
               requested by the Indemnifying Party to assist it in defending or
               contesting any such action. If the Indemnified Party fails to
               promptly notify the Indemnified Party of the occurrence of an
               Indemnification Event, to the extent, but only to the extent,
               that such failure results in a material adverse effect on the
               Indemnifying Party, the Indemnified Party shall not be entitled
               to indemnification with respect to such Indemnification Event. If
               the Indemnifying Party fails within thirty (30) days after
               receipt of such notice: (a) to notify the Indemnified Party of
               its intent to defend, or (b) to defend, contest, or otherwise
               protect against such suit, action, investigation, claim or
               proceeding, or fails to diligently continue to provide such
               defense after undertaking to do so, the Indemnified Party shall
               have the right, upon ten (10) days' prior written notice to the
               Indemnifying Party, to defend, settle and satisfy any such suit,
               action, claim, investigation or proceeding and recover the costs
               of the same from the Indemnifying Party.

        9.4    NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE,
               NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER
               OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT
               LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY INDIRECT,
               INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, LOST
               PROFITS OR LOST DATA.

        9.5    Each Party shall obtain and maintain at all times during the term
               of this Agreement and for three (3) years thereafter, commercial
               general liability insurance, including without limitation
               coverage for products liability/completed operations, contractual
               liability and personal injury liability, with a limit per
               occurrence of not less than One Million Dollars ($1,000,000) and
               an aggregate limit in an amount of not less than Five Million
               Dollars ($5,000,000). Each such policy shall be endorsed to
               include Licensor as an additional insured, and shall include a
               provision whereby the insurance company will notify Licensor in
               writing thirty (30) days prior to the effective date of any
               cancellation, termination or material change in any such policy.
               Each Party shall, upon request from the other Party, provide the
               other Party with certificates evidencing the insurance required
               under this Section 9.5.

10.0    CONFIDENTIALITY

        10.1   Licensor and B&L and their respective Affiliates (as applicable,
               each a "receiver")

                                      -15-
<PAGE>

               shall each use all reasonable steps to keep confidential any
               Know-How, and any other proprietary or business information
               provided or made available by the other party or its Affiliates
               (as applicable, each a "discloser") hereunder ("Confidential
               Information"), which steps shall include, without limitation,
               those steps the receiver employs to protect its own Confidential
               Information. Without the prior written consent of discloser,
               receiver shall not use (except as contemplated by this
               Agreement), or disclose to any third party, any Confidential
               Information of discloser; provided, however, that the foregoing
               shall not apply to Confidential Information that receiver can
               establish by written documentation:

               (a)    was publicly known at the time of disclosure by receiver;

               (b)    becomes publicly known, without receiver's breach of this
                      confidentiality restriction subsequent to such disclosure;

               (c)    was otherwise known by receiver from a source (other than
                      discloser) lawfully having the right to possess and
                      disclose such information without restriction;

               (d)    was developed by receiver independently of the disclosure
                      by discloser;

               (e)    was known by receiver without restriction prior to
                      receiving such information from discloser; or

               (f)    was furnished by discloser to a third party without
                      similar restriction on that Party's right of disclosure.

        10.2   The foregoing shall not preclude the disclosure of Confidential
               Information by receiver:

               (a)    to its legal representatives, affiliates, agents,
                      consultants, directors, outside contractors, and
                      prospective investors under like confidentiality
                      obligations on the part of the recipients;

               (b)    to the extent required by law or regulation, provided that
                      to the extent reasonably possible, receiver shall give
                      prompt written notice of the proposed disclosure to
                      discloser so as to allow discloser an opportunity, at its
                      own cost and expense, to object to such requirement and,
                      if applicable, assure that confidential treatment will be
                      accorded to such Confidential Information;

               (c)    to the extent that such Confidential Information is
                      reasonably required to be disclosed for the purpose of
                      securing necessary governmental authorization for the
                      clinical testing or marketing of Products or for the
                      purpose of conducting clinical testing or marketing;

               (d)    to the extent that such Confidential Information is
                      reasonably required to be disclosed for the purpose of
                      prosecuting or defending litigation.

        10.3   Both parties shall treat all information concerning the
               Development Plan and Development Activities (including both
               experimental and clinical activities) as Confidential Information
               as defined in Section 10.1. Notwithstanding any other terms of
               this Article 10 (other than Section 10.2(a), with respect to
               legal representatives only and Section 10.2(b)), neither Licensor
               nor its affiliates,

                                      -16-
<PAGE>

               agents,consultants, directors, outside contractors, directors,
               outside contractors, prospective investors or Licensees shall
               disclose (including publishing or lecturing) the Development
               Activities or any associated results without B&L's prior written
               approval, and such approval shall not be unreasonably withheld.

        10.4   The terms of this Agreement shall not be disclosed by either
               party to any third party (other than as provided in Sections 10.2
               and 10.3) or be published unless both parties expressly agree in
               writing.

11.0    PUBLICITY

        11.1   Neither party shall use the name of the other party or its
               Affiliates in any publication or promotional activity without the
               other party's prior written consent, which consent shall be
               either granted or denied within five (5) business days following
               written request therefore.

        11.2   If a party wishes to disclose information concerning or arising
               out of this Agreement in the form of a press release, the party
               proposing the disclosure shall submit the substance and timing of
               the proposed press release in writing to the other party for
               review. Review and comment on such proposed press release will be
               provided within Five (5) business days of receipt. No press
               release shall be published unless both parties agree in writing
               upon the substance and timing of the press release.

        11.3   If a party wishes to make a disclosure to the Securities and
               Exchange Commission, to a securities exchange or to the National
               Association of Securities Dealers, the party proposing the
               disclosure shall cooperate with the other party to obtain:

               (a)    confidential treatment of the existence and terms of this
                      Agreement under the Securities Act of 1933 or the
                      Securities Exchange Act of 1934 or other applicable law or
                      regulation in substance reasonably satisfactory to the
                      party proposing the disclosure;

               (b)    a protective order or other judicial or quasi-judicial
                      protection for the confidentiality of the existence and
                      terms of this Agreement; and

               (c)    such other protections as the other party may reasonably
                      require.

12.0    PATENTS

        12.1   Ownership. The parties acknowledge and agree that the SSP License
               provides for ownership of patents and other intellectual property
               based on discoveries made during the term of that agreement as
               between SSP and Licensor as set forth therein, and that as a
               sublicensee thereunder, B&L's rights with respect to discoveries
               and inventions made during the term of this Agreement and the SSP
               License shall be subject to the terms of the SSP License. B&L
               agrees to perform any reasonable act necessary to assist Licensor
               in perfecting and enforcing any rights of Licensor or SSP under
               the SSP License. Subject to the foregoing, the following shall
               apply. Ownership of patents based on discoveries made during the
               term of this Agreement shall be based on inventorship.
               Inventorship of all inventions will be determined in accordance
               with United States patent law. Any and all patents and patent
               applications containing claims covering inventions made during
               the term of this Agreement solely by Licensor's employees or any

                                      -17-
<PAGE>

               other Person(s) under the direction and control of Licensor shall
               be the property of and will be solely owned by Licensor and shall
               be licensed to B&L hereunder to the extent same is part of Patent
               Rights hereunder. Any and all patents and patent applications
               containing claims covering inventions made during the term of
               this Agreement solely by B&L's employees or any other Person(s)
               under the direction and control of B&L shall be the property of
               and will be solely owned by B&L. Any and all patents and patent
               applications ("Joint Patent Rights") containing claims covering
               inventions made during the term of this Agreement by one or more
               employees or Person(s) under the direction and control of
               Licensor and by one or more employees or Person(s) under the
               direction and control of B&L will be the property of, and will be
               owned by, Licensor and B&L jointly and subject to this Agreement
               to the extent same is part of Patent Rights hereunder.

        12.2   Prosecution and Maintenance. As between the parties, Licensor
               shall prosecute and maintain Patent Rights at its own expense.
               Notwithstanding the foregoing, Licensor shall fully involve B&L
               in all of Licensor's decisions and/or actions relating to Patent
               Rights, including, but not limited to, drafting, filing,
               prosecuting, enforcing, and licensing patents and patent
               applications. Furthermore, Licensor shall fully involve B&L in
               all of Licensor's decisions and actions relating to legal
               opinions concerning Products, however provided all such actions
               are in accordance with the SSP License. If Licensor elects not to
               pursue patent protection in any country, Licensor shall notify
               B&L and B&L shall have the right, subject to the SSP License,
               where applicable, but not the obligation, to file, in its own
               name, prosecute and maintain such patent(s) in such country at
               its own expense, and Licensor shall take such further action,
               including the execution of documents of assignment, as is
               reasonably necessary to support B&L's actions hereunder. With
               respect to Joint Patent Rights, Licensor and B&L shall, prior to
               filing any patent application, review the invention and determine
               which party should be responsible for coordinating the filing.
               All filings, prosecution and maintenance of Joint Patent Rights
               shall be subject to review and approval of both parties. All
               costs of filing, prosecution and maintenance of Joint Patent
               Rights will be shared equally by the Parties.

        12.3   Reports. Licensor shall provide to B&L a written report on the
               status of Patent Rights each calendar quarter.

13.0    CLINICAL INTELLECTUAL PROPERTY

        13.1   Clinical IP. Licensor shall be the owner of all Clinical IP
               resulting from clinical or pre-clinical trials or studies
               conducted by Licensor. Licensor shall use its best efforts to
               guarantee that B&L has complete access to and use of any Clinical
               IP existing or generated pursuant to any clinical or pre-clinical
               trial arrangement in effect as of the date of this Agreement,
               including without limitation, seeking to obtain from those
               parties having any interest in such Clinical IP agreements in a
               form acceptable to B&L. Except as otherwise determined by the
               Joint Review Committee, all clinical and pre-clinical trials or
               studies relating to the Development Plan shall be conducted by
               Licensor or by Persons contracted with by Licensor to perform
               such trials or studies who have assigned all ownership rights to
               any Clinical IP resulting therefrom to Licensor. Licensor shall
               take all action necessary to insure that B&L shall have complete
               access to and use of any such Clinical IP during the term of this
               Agreement.

        13.2   Clinical IP Upon Termination. If B&L terminates this Agreement
               for any cause as provided in Section 19.3 hereof, B&L shall have
               the option (exercisable at any

                                      -18-
<PAGE>

               time and from time to time within two (2) years of such
               termination) to require Licensor to transfer to B&L, Licensor's
               right, title and interest in any Clinical IP related to this
               Agreement. Upon the exercise of such option, Licensor shall take
               any and all action necessary, including without limitation the
               execution of all documentation deemed necessary or appropriate by
               B&L, to effect the transfer of such Clinical IP to B&L.

14.0    TRADEMARKS

        14.1   All logos, trade names, copyrights, trademarks, service marks,
               trade dress and other commercial symbols ("Marks") developed or
               used in connection with any and all Products shall be determined
               by B&L, in its sole discretion, after consultation with Licensor.
               The Marks shall not include the Licensor Marks (as defined in
               Section 14.6). All such Marks (which do not include the "Licensor
               Marks", as defined in Section 14.6) and the goodwill thereto
               shall be solely and exclusively owned by B&L. B&L, at its sole
               expense, shall exploit and seek registration protection in its
               sole discretion. Licensor acknowledges that it derives no right,
               title or interest in or to the Marks or the goodwill thereto.

        14.2   The designation "Bausch & Lomb" may appear on the Product
               packaging, or elsewhere in connection with the promotion,
               marketing and sale of the Product by or on behalf of B&L.
               However, the use of such designation with the Marks shall not
               create any composite trademark, nor shall Licensor have any
               rights in such designation, or any variation thereof.

        14.3   During and after the term of this Agreement, neither party shall
               directly or indirectly contest the ownership, validity or
               originality of the Marks, the Licensor Marks or any trademark
               applications or registrations covering the Marks or the Licensor
               Marks for the Products, and the goodwill represented by any of
               the foregoing Marks, or take any action in derogation of the
               other's right, title and interest in and to the Marks, the
               Licensor Marks or any other logos, trade names, copyrights,
               trademarks, service marks, trade dress and any other commercial
               symbols of the other party or any Affiliate thereof. During the
               term of this Agreement, Licensor shall promptly inform B&L of any
               unauthorized use of any of the Marks of which Licensor becomes
               aware.

        14.4   Licensor will not use any name or other symbol confusingly
               similar to or, in the reasonable judgement of B&L, suggestive of
               any of the Marks or any other B&L logos, trade names, copyrights,
               trademarks, service marks, trade dress and any other commercial
               symbols of B&L or any Affiliate thereof.

        14.5   Termination Rights. If the agreement is terminated, other than by
               B&L under Section 19.3, Licensor will have the right to use
               packaging developed under this agreement and the royalty free
               right to use any trademarks developed for the Product, including
               without limitation, the Marks, subject to the remainder of this
               Article 14, and subject further, to the fact that Licensor shall
               have no rights whatsoever to use "Bausch & Lomb", and any
               packaging used by Licensor shall be altered to remove same. Under
               such circumstances, B&L shall have the option to transfer to
               Licensor, at Licensor's expense, all or any portion of the Marks
               which are the subject of the foregoing right.

        14.6   B&L shall have a royalty free license to use the names "InSite
               Vision" and "DuraSite" (collectively, the "Licensor Marks") in
               connection with the marketing, promotion, distribution and sale
               of the Product. Licensor represents and

                                      -19-
<PAGE>

               warrants that it has all right, title and interest in and to the
               Licensor Marks and the goodwill thereto, free of any lien,
               contractual commitment or other encumbrance, that such entire
               right, title and interest is not encumbered in any manner, that
               no licenses have ever been granted by Licensor that would limit
               B&L's rights hereunder, and that the Licensor Marks do not
               infringe the rights of any third party. The use of the Licensor
               Marks together with the Marks, or the Bausch & Lomb designation
               shall not create any composite trademark, nor shall B&L have any
               rights in the Licensor Marks other than as set forth herein. B&L
               will use the Licensor Marks only in while this Agreement is in
               effect, only in association with the Product and only in
               accordance with the policies, specifications and standards issued
               by Licensor from time to time. Upon Licensor's reasonable written
               request, B&L will provide Licensor with reasonable access during
               business hours and no more than once per any twelve month period
               during the term of this Agreement to its premises where B&L uses
               the Licensor Marks or stores material bearing the Licensor Marks
               to observe B&L's activities relating to the Licensor Marks for
               the purpose of inspecting material on which the Licensor Marks
               appear. B&L agrees that the benefit and goodwill associated with
               use of the Licensor Marks by B&L will inure entirely to Licensor.
               During the term of this Agreement, B&L shall promptly inform
               Licensor of any unauthorized use of any of the Licensor Marks of
               which B&L becomes aware.

15.0    NONCOMPETITION; FAVORED TREATMENT

        15.1   Except to the extent that the license granted to B&L becomes
               non-exclusive with respect to a Product, Licensor shall not,
               alone or with others for a period of [***] following such
               termination, introduce into any market [***]. In the event of a
               termination by Licensor under Section 19.3, or by B&L under
               Section 19.4, the foregoing restriction on competition shall not
               apply.

        15.2   If B&L's rights under this Agreement with respect to a Product
               become non-exclusive in accordance with the terms and provisions
               of this Agreement, and the Licensor enters into an agreement with
               a person or entity other than B&L ("Subsequent Agreement"),
               granting a license to any of the Patent Rights in the Field
               [***].

        15.3   ISV-401 Rights InSite is currently pursuing an antibiotic program
               named ISV-401, and may enter into the development of other [***]
               products which shall be excluded from the scope of any of the
               provisions of this Article 15. Without limiting the generality of
               the foregoing, the Product noncompetition provisions of Section
               15.1, above shall only apply to [***].

16.0    ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS

        16.1   Infringement Notice. If either party becomes aware of any
               infringement or threatened infringement of any Intellectual
               Property Right, then the party becoming aware of the infringement
               shall give notice to the other party within Ten (10) days of
               becoming aware of such infringement or threat.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -20-
<PAGE>

        16.2   Enforcement Actions. The parties acknowledge and agree that the
               enforcement of certain of the Patent Rights may be subject to the
               SSP License. Subject to the foregoing, Licensor shall have the
               right, but not the obligation, subject to obtaining any consent
               required to be obtained under the SSP License to bring an
               enforcement action and take any other reasonable steps to defend
               the Patent Right against infringement; which steps may include
               the negotiation of appropriate settlements and cross-licenses.
               Licensor shall have the right to approve any settlement,
               cross-license, etc., such approval not to be unreasonably
               withheld or delayed. Licensor hereby agrees, in addition to its
               obligations under the last sentence of this Section 16.2, to be
               joined as a party to any such action. The costs of such
               enforcement action shall be borne by B&L, and any recovery shall
               go first to reimburse the expenses of B&L and the remainder shall
               be treated as Net Sales and allocated accordingly, except as
               otherwise required by the SSP License. If B&L does not initiate a
               response to any infringement within thirty (30) days after it has
               received notice thereof, then Licensor shall have the right to
               undertake such action itself at its own expense. B&L shall have
               the right to approve any settlement, cross-license, etc., such
               approval not to be unreasonably withheld or delayed. Recovery
               from any settlement or judgment from any such action undertaken
               and funded by Licensor shall go first to reimburse the expenses
               of Licensor and the remainder shall be divided equally between
               the parties. Notwithstanding the foregoing, if the monetary
               recovery is less than the out-of-pocket expenses of Licensor and
               B&L, reimbursement shall be on a pro rata basis, based upon costs
               incurred. Licensor and B&L shall assist one another and
               reasonably cooperate in any such litigation at the other's
               request without charge to the requesting party.

17.0    INFRINGEMENT OF THIRD PARTY PATENTS

        17.1   Infringement of Third Party Patents. Each Party shall promptly
               send the other Party a copy of any notice or communication from a
               third party alleging any infringement or other violation of such
               third party's intellectual property rights ("Notice"). Licensor
               shall have the first right, but shall not be obligated, to
               respond to the Notice, and shall take such further action as is
               required under the SSP License. If Licensor does not elect to
               respond, Licensor shall promptly inform B&L and permit it to
               respond to the Notice, subject to compliance with the SSP
               License. B&L shall have the right, but shall not be obligated, to
               take any legal action at its own expense in response to the
               Notice. B&L shall have the right to name Licensor as a party in
               connection with any action in response to the Notice.

               Each Party shall cooperate fully with the other Party in any
               action resulting from or in connection with the Notice. Unless
               the Parties are separately defending themselves, the Party
               defending any such proceedings shall have sole control of such
               proceedings and shall bear the reasonable expenses (excluding all
               legal fees) incurred by the other Party in providing such
               assistance and cooperation as is requested pursuant to this
               paragraph. The Party defending such proceedings shall consult
               with and keep the other Party informed of the progress of such
               proceedings, including, without limitation, furnishing copies of
               communications, pleadings and other documents and keeping the
               other Party informed of settlement efforts and developments, and
               such other Party shall be entitled to participate with counsel in
               such proceedings but at its own expense. If B&L defends such
               proceedings, it may offset its reasonable expenses, including
               reasonable legal expenses, incurred in regard thereto against the
               Base Royalty

                                      -21-
<PAGE>

               owed to Licensor under Article 6 of this Agreement. B&L shall
               continue to perform its reporting obligations under this
               Agreement and otherwise continue to perform its obligations
               hereunder.

               Neither Party shall settle any infringement, misappropriation, or
               other claim subject to this Article 17 without the consent of the
               other Party, which consent shall not be unreasonably withheld, if
               it would adversely affect B&L's rights hereunder.

               If any Invention claimed in a Patent Right or any Know-how is
               covered by an issued patent or other intellectual property right
               held by one or more third parties and it becomes necessary for
               B&L to obtain a license from such third party or parties under
               such patent, and/or other intellectual property right and
               accordingly to pay royalties, upfront payments or damages to such
               third party(ies), then B&L may reduce the Base Royalty or other
               payments otherwise due Licensor, other than the Extra Royalty, by
               the amount of royalty payment, upfront payments or damages due to
               such third party.

                                      -22-
<PAGE>

18.0    NOTICES

        18.1   All notices required or permitted hereunder shall by given in
               writing and mailed postage prepaid by first class certified or
               registered mail, or sent by a nationally recognized express
               courier service, or hand delivered at the following addresses, or
               faxed to the fax numbers set forth below:

                      To B&L:

                      Bausch & Lomb Incorporated
                      One Bausch & Lomb Place
                      Rochester, New York  14604
                      Attn:  Vice President -- Business Development
                      Fax No.:  (585) 338-5043

                      With a copy to:

                      Bausch & Lomb Incorporated
                      One Bausch & Lomb Place
                      Rochester, New York  14604
                      Attn:  Senior Vice President & General Counsel
                      Fax No.:  (585) 338-8706

                      To Licensor:

                      InSite Vision Incorporated
                      965 Atlantic Ave.
                      Alameda, CA  94501
                      Attn:  CEO
                      Fax No.:  (51) 865-5700

                      With a copy to:

                      Brobeck, Phleger & Harrison
                      2000 University Ave.
                      Palo Alto, CA  94303
                      Attn:  Timothy Curry, Esq.
                      Fax. No.:  (650) 331-8111

        18.2   Any notice shall be deemed given, if mailed properly addressed,
               postage prepaid, three days after the date of mailing as
               indicated on the certified or registered mail receipt, or on the
               next business day if sent by express courier service, or on the
               date of receipt if hand delivered, or on the next business day
               following the date of error-free fax transmission by sender.

                                      -23-
<PAGE>

19.0    TERM AND TERMINATION

        19.1   Expiration of Royalty Obligations. Subject to Section 6.1 hereof,
               B&L's obligation to pay a Running Royalty under this Agreement
               shall terminate on a Product-by-Product and country-by-country
               basis at the end of the Royalty Period. At the end of each such
               term, and on a country-by-country basis, B&L shall have an
               irrevocable, fully paid up license under the Patent Rights and
               Know-How in the applicable Field to make, have made, use, sell,
               offer to sell, import and distribute such Product in such
               country.

        19.2   Term. The term of this Agreement shall begin on the Effective
               Date and shall remain in effect until the expiration of the last
               to expire Patent Right, unless earlier terminated as provided for
               hereunder ("Term").

        19.3   Termination. Either Party may terminate this Agreement upon
               written notice to the other Party upon the happening of any of
               the following events:

               (a)    if the other Party fails to pay or cause to be paid any
                      amount which has become due under this Agreement, within
                      thirty (30) days after written notice from the
                      non-breaching Party of such failure,

               (b)    if the other Party has materially breached or defaulted
                      under any other provision of this Agreement and has not
                      cured such breach or default within sixty (60) days after
                      written notice from the non-breaching Party specifying the
                      nature of the breach or default in reasonable detail,
                      except as provided in Section 19.5 below, or

               (c)    if the other Party files a petition under any foreign,
                      State or United States bankruptcy act, receivership
                      statute or the like, as they now exist or as they may be
                      amended, or any such petition is filed against the other
                      Party by a third Party, or the other Party enters into an
                      assignment for the benefit of its creditors or
                      participates in any similar proceeding, or a receiver is
                      appointed for substantially all of the assets of such
                      other Party that is not dismissed within sixty (60) days,
                      or such other Party becomes insolvent or admits in writing
                      its inability to pay its debt as they become due. In the
                      event, however, that the alleged breaching or defaulting
                      Party has invoked the dispute resolution provisions set
                      forth in Article 21 hereof, this Agreement may not be
                      terminated until such dispute resolution procedure has
                      been completed.

        19.4   Termination by B&L Without Cause. B&L may terminate this
               Agreement at any time without cause on ninety (90) days' written
               notice to Licensor.

        19.5   Effect of Termination.

               (a)    All rights and obligations under this Agreement (including
                      without limitation any licenses granted hereunder) shall
                      immediately end upon termination of this Agreement for any
                      reason; provided however, that termination of this
                      Agreement shall not release either party from any payment
                      obligation that has accrued as of the effective date of
                      the termination. Neither Party shall be liable to the
                      other for damages of any sort resulting solely from
                      termination of this Agreement in accordance with its
                      terms.

                                      -24-
<PAGE>

               (b)    If Licensor terminates this Agreement pursuant to Section
                      19.3 at any time, or B&L terminates this Agreement
                      pursuant to Section 19.4 and notice of such termination is
                      given after the later to occur of (i) ----- commencement
                      of enrollment of Phase III clinical trials for ISV-403 and
                      (ii) January 1, 2004, in addition to any other rights
                      available to Licensor hereunder, B&L shall be required to
                      forfeit in favor of Licensor, all equity capital of
                      Licensor which has been purchased by B&L prior to such
                      date pursuant to the Preferred Stock Purchase Agreement.
                      In all other circumstances, B&L shall be entitled to
                      retain all equity investments in Licensor.

               (c)    If B&L terminates this Agreement pursuant to Section 19.3
                      at anytime, or pursuant to Section 19.4, on or before the
                      later to occur of (i) commencement of enrollment of Phase
                      II/III clinical trials for ISV-403 and (ii) January 1,
                      2004, in addition to any other rights available to B&L
                      hereunder, B&L shall be entitled to exercise its right to
                      convert each share of Preferred Stock plus all accumulated
                      and unpaid dividends, into such number of shares of the
                      common stock of Licensor and into other securities of
                      Licensor, as is determined in accordance with the
                      Certificate of Designation of the Series A-1 Preferred
                      Stock of Licensor and the Preferred Stock Purchase
                      Agreement.

        19.6   Sell-Off Period. Notwithstanding anything to the contrary
               contained herein, in the event of termination after First
               Commercial Sale, B&L, its Affiliates and its Sublicensees shall
               have [***] from the effective date of termination to complete the
               manufacture of any work-in-progress and to sell any Product in
               inventory, subject to royalty and other obligations to Licensor
               under this Agreement.

        19.7   Remedies Not Exclusive. The rights and remedies provided in
               Sections 19.3, 19.5 and 19.6 shall not be exclusive and are in
               addition to any other rights and remedies provided by law or this
               Agreement.

20.0    FORCE MAJEURE

        20.1   Neither party shall be responsible or liable to the other
               hereunder for failure or delay in performance of this Agreement
               due to any war, fire, accident or other casualty, or any labor
               disturbance or act of God or the public enemy, or any other
               contingency beyond such party's reasonable control. In addition,
               the party affected by such force Majeure shall use reasonable
               efforts, consistent with good business judgment, to eliminate,
               cure and overcome any of such causes and resume performance of
               its obligations and to keep the other party informed of such
               efforts. In no event will this provision apply to excuse a party
               from any payment obligation under this Agreement.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -25-
<PAGE>

21.0    MISCELLANEOUS

        21.1   Assignment. This Agreement and all rights and obligation
               hereunder are personal to the parties hereto, and may not be
               assigned without the express prior written consent of the other
               (which consent shall not be unreasonably withheld). Any
               assignment or attempt at same not in accordance with the
               foregoing shall be void and without effect. Notwithstanding the
               foregoing, B&L or InSite Vision shall be entitled to assign this
               Agreement to a purchaser of substantially all of the assets of
               the business to which this Agreement applies without consent of
               the other party.

        21.2   Severability. If any provision of this Agreement is held to be
               invalid, illegal or unenforceable, the validity, legality or
               enforceability of the remaining provisions shall not in any way
               be affected or impaired thereby and the parties shall use their
               best efforts to substitute a valid, legal and enforceable
               provision which, insofar as possible, implements the purposes
               hereof. Furthermore, the court may, to the fullest extent
               permitted by law, substitute a provision that most closely
               conforms to the parties' intent as determined by such court.

        21.3   No Waiver. The failure of any party at any time to require
               performance of any provision shall in no manner affect its rights
               to enforce such provision at a later time.

        21.4   Dispute Resolution. If any dispute arises between Licensor and
               B&L with respect to the interpretation or breach of this
               Agreement (including disputes concerning decisions or failure to
               decide by the Joint Review Committee), either party may notify
               the other of the dispute in writing and the parties shall attempt
               to resolve the dispute through discussions between Licensor's
               Chief Executive Officer and B&L's Vice President -- Business
               Development. If such officers are unable to resolve the dispute
               within Thirty (30) days after the date written notice of the
               dispute is delivered, either party may seek such other remedy, at
               law or in equity, as it may deem necessary or appropriate.

        21.5   Governing Law. This Agreement shall be governed by New York law,
               without regard to its principles governing conflicts of laws.

        21.6   Survival. Articles 1, 7-15, 19 and 21 shall survive termination
               of this Agreement.

        21.7   Bankruptcy. All licenses granted under this Agreement by Licensor
               to B&L, for all purposes of Section 365(n) of Title XI of the
               United States Code ("Title XI"), are licenses of rights to
               "intellectual property" as defined in Title XI. During the Term,
               Licensor shall create and maintain current copies to the extent
               practicable of all such intellectual property. If a bankruptcy
               proceeding is commenced by or against Licensor under Title XI,
               B&L shall be entitled to a copy of any and all such intellectual
               property, and the same, if not in the possession of B&L, shall be
               promptly delivered to it (a) upon B&L's written request following
               the commencement of such bankruptcy proceeding, unless Licensor,
               or its trustee or receiver, elects within Thirty (30) days to
               continue to perform all of its obligations under this Agreement,
               or (b) if not delivered as provided under clause (a) above, upon
               B&L's request following the rejection of this Agreement by or on
               behalf of Licensor. If B&L has taken possession of all applicable
               embodiments of the intellectual property of Licensor pursuant to
               this Section and the trustee in bankruptcy of Licensor does not
               reject this Agreement, B&L shall return such embodiments upon
               request. If Licensor seeks or involuntarily is placed under

                                      -26-
<PAGE>

               Title XI and the trustee rejects this Agreement as contemplated
               under 11 U.S.C. 365(n)(1), B&L hereby elects pursuant to Section
               365(n) to retain all rights granted to B&L under this Agreement
               to the extent permitted by law.

        21.8   Merger. This Agreement (a) sets forth the entire agreement
               between the parties hereto and any parties who have in the past
               or who are now representing either the parties hereto and merges
               all discussions between them; (b) annuls and replaces every other
               agreement which may have existed between Licensor and B&L; and
               (c) is separate and distinct from any other agreement which may
               have existed in the past or may now exist.

        21.9   Integration. This Agreement contains the entire understanding
               between the parties and no other understandings, representations
               or warranties are in force or in effect.

        21.10  Conformity with SSP License. The parties acknowledge and agree
               that the license granted herein includes a sublicense by Licensor
               to B&L of rights under the SSP License. Accordingly, the parties
               acknowledge and agree that Licensor cannot under Article 2
               (License Grants) of this Agreement grant to B&L any right which
               Licensor is not legally entitled to grant to the extent of
               limitations on Licensor's rights as are set forth in the SSP
               License. Further, the parties acknowledge and agree that the
               rights and obligations of the parties under Articles 12
               (Patents), Article 16 (Enforcement of Intellectual Property
               Rights) and Article 17 (Infringement of Third Party Patents) of
               this Agreement are, with respect to such portions of the
               Technology as are subject to the SSP License, specifically
               subject to the rights of SSP as set forth in the SSP License.
               Neither party shall be held to be in breach or default of this
               Agreement to the extent that any such purported breach or default
               is a result of conflict or inconsistency between this Agreement
               and that party's obligations under the SSP License as noted in
               this Section 21.10. Beyond the scope of its subject matter, the
               SSP License shall not be construed to affect the rights or
               obligations of B&L and Licensor, either under this Agreement or
               otherwise.

        21.11  Condition Precedent. All obligations of the parties hereunder
               shall be subject to the receipt by B&L of (i) the written consent
               of SSP Co. Ltd., copied to B&L, to the sublicense by Licensor to
               B&L of Licensor's rights under the SSP License (as contained
               herein) and (ii) a copy of an amendment to the SSP License that
               requires [***]. In each case, the form and substance of the
               documents referred to in (i) and (ii) above shall be acceptable
               to B&L, which shall be evidenced by B&L's written acknowledgment
               to Licensor. If the conditions set forth herein are not achieved
               on or before

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -27-
<PAGE>

         August 11, 2002, this Agreement shall be of no further effect.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.*

BAUSCH & LOMB INCORPORATED          INSITE VISION INCORPORATED

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

Name:                                         Name:
     --------------------------------              -----------------------------

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

*  See Section 21.11, Condition Precedent.

                                      -28-
<PAGE>

                                   EXHIBIT 1.5

                                DEVELOPMENT PLAN

<TABLE>
<CAPTION>
Milestones:                                                              Estimated Timing:
----------                                                               -----------------
<S>     <C>                                                              <C>
(a)     [***]                                                                 Q1 2003

(b)     [***]                                                                 Q4 2003

(c)     [***]                                                                 Q3 2004

(d)     [***]                                                                 Q2 2004

(e)     [***]                                                                 Q1 2005

(f)     [***]                                                                 Q3 2005

(g)     [***]                                                                 Q3 2005

(h)     [***]                                                                 Q2 2006
</TABLE>

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -29-
<PAGE>

                                  EXHIBIT 1.13

                            PATENTS AND APPLICATIONS

DuraSite is a polymer formulation composed of Polycarbophil, a lightly
cross-linked acrylic acid polymer, and salts adjusted to make a formulation that
has a pH and osmolality compatible in the eye. When DuraSite formulations are
instilled into the cul-de-sac of the eye, the residence time is increased which
enhances transport and bioavailability of the drug substance into the eye
tissues. The ophthalmic drug delivery technology described here is described in
the following U.S. patents along with their foreign counterparts:

U.S. Patent Number:

4,615,697
4,983,392
5,225,196
5,192,535
5,814,655
6,159,458

                            SSP TECHNICAL INFORMATION

The technical information on SS734 is described in the following US Patent and
foreign counterparts:

5,447,926

                               JOINT PATENT RIGHTS

A patent application has been filed on the SS734-DuraSite combination and is
described in the following United States Application and foreign counterparts:

US Patent Application No.  [***] (application in progress)

US Patent Application [***], continuation-in-part of US Application No.
[***] (application in progress)

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -30-
<PAGE>

                                  EXHIBIT 1.20

                                   SSP LICENSE

                           INSITE VISION INCORPORATED

                                       and

                                  SSP CO., LTD.

                      JOINT SS732/SS734 PRODUCT DEVELOPMENT

                                    AGREEMENT

                                      -1-
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                               Page
<S>     <C>                                                                    <C>
1.      DEFINITIONS
        1.1    Affiliate........................................................5
        1.2    Confidential Information.........................................5
        1.3    Delivery System..................................................6
        1.4    Drug Substance...................................................5
        1.5    Drug Product.....................................................6
        1.6    First Commercial Sale............................................6
        1.7    Field............................................................6
        1.8    Know-How.........................................................6
        1.9    INSITE Technology................................................6
        1.10   INSITE Territory.................................................6
        1.11   Joint Patent Rights..............................................6
        1.12   Joint Territory..................................................6
        1.13   Net Sales........................................................6
        1.14   Patent Rights....................................................7
        1.15   SSP Technology...................................................7
        1.16   SSP Territory....................................................8
        1.17   Technology.......................................................8
        1.18   Technology Disclosure............................................8
        1.19   Valid Claim......................................................8
        1.20   Derivative.......................................................8

2.      DEVELOPMENT AND TECHNOLOGY EXCHANGE
        2.1    Research and Development.........................................8
        2.2    Clinical Trials..................................................8
        2.3    Manufacture and Supply...........................................8

3.      LICENSE
        3.1    License to INSITE................................................8
        3.2    License to SSP...................................................8
        3.3    Joint Territory..................................................8
        3.4    Sublicense.......................................................8

4.      CONSIDERATION
        4.1    Royalties........................................................9
        4.2    Combination Products.............................................9
        4.3    Payments.........................................................9
        4.4    Foreign Sales....................................................9
        4.5    Foreign Taxes....................................................9
        4.6    Royalty Period...................................................9

5.      RECORDS AND REPORTS
        5.1    Reports..........................................................9
        5.2    Records.........................................................10
        5.3    Audit Rights....................................................10
</TABLE>

                                      -2-
<PAGE>

<TABLE>
<CAPTION>
                                                                               Page
<S>     <C>                                                                    <C>
6.      PATENT PROSECUTION AND MAINTENANCE
        6.1    Separate Patent Rights..........................................10
        6.2    Joint Patent Rights.............................................10

7.      PATENT ENFORCEMENT AND DEFENSE
        7.1    Infringement Notice.............................................11
        7.2    Infringement of Separate Patent Rights..........................11
        7.3    Infringement of Joint Patent Rights.............................11
        7.4    Expenses and Recovery...........................................11

8.      THIRD PARTY CLAIMS OF INFRINGEMENT
        8.1    SSP Patent Rights...............................................11
        8.2    INSITE Patent Rights............................................12

9.      COMMERCIALIZATION
        9.1    Governmental Approvals and Marketing........................... 12
        9.2    U.S. Manufacture................................................12
        9.3    Foreign Registration............................................12
        9.4    Trademark and Trade Name Usage..................................12

10.     WARRANTIES AND DISCLAIMER
        10.1   Mutual Warranties...............................................12
        10.2   Disclaimer......................................................13

11.     LIMITATION OF LIABILITY
        11.1   Direct Damages..................................................13
        11.2   Indirect Damages................................................13
        11.3   Qualification...................................................13

12.     INDEMNIFICATION
        12.1   SSP Indemnification.............................................13
        12.2   INSITE Indemnification..........................................13
        12.3   Notice..........................................................13
        12.4   Joint Defense...................................................14

13.     CONFIDENTIALITY
        13.1   Treatment of Confidential Information...........................14
        13.2   Publications....................................................14
        13.3   Publicity.......................................................14

14.     TERM AND TERMINATION
        14.1   Term............................................................14
        14.2   Termination Upon Default........................................14
        14.3   Termination Upon Bankruptcy or Insolvency.......................15
        14.4   Rights Upon Termination or Expiration...........................15
        14.5   Not Sole Remedy.................................................15
</TABLE>

                                      -3-
<PAGE>

<TABLE>
<CAPTION>
                                                                               Page
<S>     <C>                                                                    <C>
15.     ASSIGNMENT/SUCCESSORS
        15.1   Assignment......................................................16
        15.2   Binding Upon Successors and Assigns.............................16

16.     DISPUTE RESOLUTION
        16.1   Executive Mediation.............................................16
        16.2   Arbitration.....................................................16
        16.3   Exceptions......................................................16

17.     GENERAL PROVISIONS
        17.1   Independent Contractors.........................................16
        17.2   Entire Agreement: Modification..................................16
        17.3   California Law..................................................16
        17.4   Headings........................................................16
        17.5   Severability....................................................17
        17.6   No Waiver.......................................................17
        17.7   Notices.........................................................17
        17.8   Compliance to U.S. Laws.........................................17
        17.9   Force Majeure...................................................17
        17.10  Counterparts....................................................17

EXHIBIT A......................................................................19

EXHIBIT B......................................................................21

EXHIBIT C......................................................................23

EXHIBIT D......................................................................24
</TABLE>

                                      -4-
<PAGE>

                               PRODUCT DEVELOPMENT

                                        &

                            CROSS - LICENSE AGREEMENT

        THIS PRODUCT DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") is
entered into and made effective as of this 15th day of April, 2001 (the
"Effective Date"), by and between INSITE Vision Incorporated ("INSITE") with an
office at 965 Atlantic Avenue, Alameda, California 94501 and SSP CO., LTD.
("SSP") with an office at 12-4, 2-Chome, Hama-Cho, Nihonbashi, Chuo-Ku, Tokyo
103-8481 JAPAN (INSITE and SSP individually, a "Party", together, the
"Parties".)

               RECITALS

        A. WHEREAS, INSITE has developed a drug delivery system for various
ophthalmic applications and owns certain intellectual property rights with
respect thereto.

        B. WHEREAS, SSP has developed certain drug substances for the prevention
and treatment of diseases of the eye and owns certain intellectual property
rights with respect thereto;

        C. WHEREAS, the Parties desire that INSITE develop a formulation of its
delivery system for use in connection with SSP's drug substances and that each
Party should have the right to make, distribute, and sell the combined Drug
Product as defined below, and to conduct certain activities related thereto, on
the terms and conditions set forth herein.

        NOW THEREFORE, based on the foregoing, and in consideration of the
mutual promises and covenants set forth herein, and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:

                                    AGREEMENT

1.      Definitions. Capitalized terms not otherwise defined herein shall have
        the meaning set forth below.

        1.1. "Affiliate" means any entity which is directly or indirectly
        controlled by or is under common control by Licensee. The term "control"
        as used herein means the possession of the power to direct or cause the
        direction of the management and the policies of an entity, whether
        through the ownership of a majority of the outstanding voting securities
        or by contract or otherwise. The parties agree that as of the effective
        date Dojin Pharmaceutical Products Inc. shall be deemed and treated as
        an Affiliate of SSP.

        1.2. "Confidential Information" means any and all proprietary or
        confidential information of either Party which may be exchanged between
        the Parties at any time and from time to time during the term of this
        Agreement or pursuant to the Letter of Intent dated December 7, 2000 or
        the Bilateral Confidential Disclosure Agreement dated, March 17, 2000.
        Information shall not be considered confidential to the extent that it:
        (a) is publicly disclosed through no breach of fault of any
        confidentiality obligation by either Party, either before or after it
        becomes known to the receiving Party; (b) was known to the receiving
        Party prior to the date of this Agreement, which knowledge was acquired
        independently and not from another Party or such Party's employees,
        consultants or other agents; (c) is subsequently disclosed to the
        receiving Party in good faith by a third party without breach of an
        obligation of confidentially with respect thereto; or (d) has been
        published by a third party as a matter of right.

                                      -5-
<PAGE>

        1.3. "Delivery System" means INSITE's proprietary polycarbophil drug
        delivery vehicle.

        1.4. "Drug Substance" means SSP's drug substances identified as SS732
        [***] and/or SS734 [***].

        1.5. "Drug Product" means a product combining the Drug Substance
        together with a formulation of Delivery System which formulation is
        developed by INSITE hereunder for use with the Drug Substance.

        1.6. "First Commercial Sale" means, with respect to the Drug Product in
        any country the first sale for use or consumption by the general public
        of such Drug Product in such country after all applicable regulatory
        approvals have been obtained in such country.

        1.7.   "Field" means [***].

        1.8. "Know-How" means all technology, engineering data, trade secrets,
        technical data, manufacturing information, pre-clinical and clinical
        data and any other information, experience or intellectual property that
        a Party owns or has the right to sublicense that is used in or relates
        to the use or sale of its Technology, as well as any improvements or
        modifications thereto developed by such Party with respect thereto
        during the Term, other than as covered by Valid Claims within such
        Party's Patent Rights.

        1.9. "INSITE Technology" means the (a) Delivery System and other INSITE,
        information, data, materials technology as set forth in the Technology
        Disclosure; and (b) all modifications, improvements and derivatives
        thereof whether or not the same are made pursuant to or during the term
        of this Agreement.

        1.10. "INSITE Territory" means anywhere in the world excluding the Joint
        Territory and SSP Territory.

        1.11. "Joint Patent Rights" means solely those Patent Rights covering
        the Drug Product as a combination of the Drug Substance and Delivery
        System and excluding any Patent Rights covering the INSITE Technology or
        SSP Technology.

        1.12. "Joint Territory" means all countries, territories and
        protectorates in Asia which, for purposes of this Section 1.12 includes
        the South East Asian countries such area as Korea, China, Hong Kong,
        Singapore, Malaysia, Thailand, Indonesia, Taiwan, and their
        neighborhoods, but does not include the Middle Eastern countries, Russia
        and ex-USSR countries, South Asia such as India, and Middle East such as
        Turkey, Saudi Arabia.

        1.13. "Net Sales" means the gross amount invoiced by either Party, or
        its Affiliates and sublicensees, or any of them, on all sales of Drug
        Products, less: (a) all trade, cash and quantity credits, discounts,
        refunds or rebates or retroactive price reductions, (b) credits for
        claims, allowances for returned or rejected products, (b) handling fees
        and restocking expenses for returned or rejected products, (c) freight
        handling and transportation as well as freight insurance paid by the
        selling Party, (d) sales taxes, tariffs, duties and other governmental
        charges actually paid in connection with sales of Drug Products (but
        excluding what is commonly known as income or franchise taxes), and (e)
        uncollectible amounts determined in accordance with reasonable
        accounting practices, consistently applied to all products of the
        selling Party. For purposes of determining Net Sales, a sale shall be
        deemed to have occurred when an invoice therefore shall be generated or
        the Drug Product shipped for delivery. Sales of Drug Products by either
        Party, or an Affiliate or sublicensee of either Party to any Affiliate
        or sublicensee which is a reseller thereof shall be excluded, and only
        the subsequent sale of such Drug Products by Affiliates or sublicensees
        of either Party to unrelated Parties shall be deemed Net Sales
        hereunder. In addition "sale" will not include transfers or dispositions
        for [***]

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -6-
<PAGE>

        or for preclinical, clinical, regulatory or governmental purposes prior
        to receiving marketing approval.

        1.14. "Patent Rights" means rights arising out of or resulting from (i)
        any and all U.S. and foreign patent applications claiming Technology;
        (ii) the patents issuing from such applications, including provisionals,
        divisionals, continuations and continuations-in-part (to the extent the
        claims of such continuations-in-part are directed solely toward
        Technology); and (iii) reissues, reexaminations, and extensions of any
        patent set forth in (i)-(ii) or other government action which provides
        exclusive rights to an Invention beyond the original patent expiration
        date.

        1.15. "SSP Technology" means the (a) the Drug Substance and other SSP,
        information, data, materials technology as set forth in the Technology
        Disclosure; and (b) all modifications, improvements and Derivatives
        thereof whether or not the same are made pursuant to or during the term
        of this Agreement.

        1.16. "SSP Territory" means the country of Japan.

        1.17. "Technology" means the SSP Technology or INSITE Technology, as
        applicable.

        1.18. "Technology Disclosure" means the document describing the Parties
        respective Technology attached hereto as Exhibit A.

        1.19. "Valid Claim" means a claim of an issued and unexpired patent
        which patent has not lapsed, been abandoned and which claim has not been
        canceled or declared invalid by an unreversed and unappealable decision
        or judgment of a court or other appropriate body of competent
        jurisdiction, and which has not been admitted to be invalid or
        unenforceable through reissue or disclaimer.

        1.20 "Derivative" shall mean any and all compounds covered by SSP's
        current patents listed in Exhibit A.

2.      DEVELOPMENT AND TECHNOLOGY EXCHANGE

        2.1. Research and Development. Each Party's rights and responsibilities
        with respect to research and development related to the Drug Product
        shall be as set forth in Exhibit B hereto.

        2.2. Clinical Trials. Each Party's rights and responsibilities with
        respect to clinical trial activity related to the Drug Product shall be
        as set forth in Exhibit B hereto.

        2.3. Manufacture and Supply. Each Party's rights and responsibilities
        with respect to the manufacture and supply of Drug Product shall be as
        set forth in Exhibit C hereto.

3.      LICENSE.

        3.1. License to INSITE. Subject to the terms and conditions of this
        Agreement, SSP hereby grants to INSITE under the SSP Patent Rights and
        SSP Know-How, for the Term of this Agreement, a license to: (a) develop
        the Drug Product for use in the Field as contemplated in Section 2.1,
        (b) conduct its clinical trial activities with respect to the Drug
        Product as contemplated in Section 2.2; (c) make, have made, use, sell,
        offer for sale and import the Drug Product for use in the Field as
        contemplated in Section 2.3; and (d) sublicense any or all of the
        foregoing through multiple tiers of sublicensees. The foregoing license
        shall be exclusive including as to SSP in the INSITE Territory and, to
        the extent set forth in Section 3.3 , shall be non-exclusive in the
        Joint Territory.

        3.2. License to SSP. Subject to the terms and conditions of this
        Agreement, INSITE hereby grants to SSP under the INSITE Patent Rights
        and INSITE Know-How, for the Term of this Agreement, a license to: (a)
        conduct its clinical trial activities with respect to the Drug Product
        as contemplated in Section 2.2; (b) make, have made, use, sell, offer
        for sale and import the Drug Product for use in the Field as
        contemplated in Section 2.3; and (c) sublicense any or all of the

                                      -7-
<PAGE>

        foregoing through multiple tiers of sublicensees. The foregoing license
        shall be exclusive including as to INSITE in the SSP Territory and, to
        the extent set forth in Section 3.3 shall be non-exclusive in the Joint
        Territory.

        3.3. Joint Territory. Each Party may, with respect to the rights granted
        to it in the Joint Territory under Section 3.1 (License to INSITE) or
        Section 3.2 (License to SSP), grant a sublicense to some or all such
        rights. Notwithstanding the foregoing, a Party may only sublicense all
        such rights to a single third party: (a) with the prior written consent
        of the other Party, which consent shall not be unreasonably withheld or
        delayed; (b) if such Party does not reserve for itself right to exercise
        such rights in the Joint Territory during the term of the sublicense.

        3.4. Sublicense. A Party may only grant a sublicense as permitted under
        this Section 3 pursuant to a written agreement that: (a) is at least as
        protective of the Party owning the rights and technology licensed as the
        provisions of this Agreement (b) provide for such reports and other
        documentation as may be necessary for the Party granting such sublicense
        to fulfill its obligations hereunder with respect to the activities of
        such sublicensee including without limitation such Party's record
        keeping and Royalty payment obligations.

4.      CONSIDERATION.

        4.1. Royalties. As consideration for rights and licenses granted
        hereunder, each Party (the "Selling Party") shall pay to the other Party
        (the "Non-Selling Party") a royalty, calculated on a country-by-country
        basis, in the amount of: (a) [***] of Net Sales for Drug Products sold
        by the Selling Party in a country which could not at the time be made,
        used, sold, offered for sale or imported in such country without
        infringing one or more Valid Claims under the Joint Patent Rights; and
        (b) [***] of Net Sales for all other Drug Products sold by the Selling
        Party. The Net Sales of a Party shall be aggregated with the Net Sales
        of its Affiliates and sublicensees for purposes of determining the Net
        Sales upon which Royalties are to be paid to the other Party.

        4.2. Combination Products. In the event a Drug Product is sold in the
        form of a combination product containing one or more active ingredients
        which are themselves not Drug Products, the Net Sales will be calculated
        by multiplying the sales price of such combination product by the
        fraction A/(A+B) where A is the invoice price or Fair Market Value,
        whichever is greater, of the Drug Product and B is the total invoice
        price or Fair Market Value, whichever is greater, of the other
        product(s). In the event the Parties cannot agree on any such valuation
        issues, the Parties shall resolve their dispute pursuant to Section 16 .

        4.3. Payments. Except as set forth in Section 14.3 each Party shall pay
        Royalties: (a) with regard to Net Sales of such Party or its Affiliates,
        within [***] after the end of each calendar quarter during the Term for
        the Net Sales of Drug Products during such quarter; and (b) with regard
        to Net Sales made by sublicensees of a Party or its Affiliates, within
        [***] after the end of each calendar quarter during the Term, for Net
        Sales of Drug Products by such sublicensee during such quarter.

        4.4. Foreign Sales. The remittance of Royalties payable to INSITE on
        sales of Drug Product(s) outside the United States shall be payable in
        United States Dollar equivalents at the official rate of exchange of the
        currency of the country from which the royalties are payable as quoted
        in the Wall Street Journal for the last business day of the calendar
        quarter in which the royalties are payable. If the transfer of or the
        conversion into the United Sates Dollar equivalents of any such
        remittance in any such instance is not lawful or possible, the payment
        of such part of the Royalties as is necessary shall be made by the
        deposit thereof, in the currency of the county where the sale was made
        on which the royalty was based to the credit and account of INSITE or
        its nominee in any commercial bank or trust company of its choice
        located in that country, prompt written notice of which shall be given
        by SSP to INSITE.

        4.5. Foreign Taxes. Any tax required to be withheld by either Party
        under the laws of any foreign country for the accounts of the other
        shall be promptly paid by the first Party for and on behalf of the other
        to the appropriate governmental authority, and each Party shall use its
        best efforts to

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -8-
<PAGE>

        furnish the other with proof of payment of such tax together with
        official or other appropriate evidence issued by the applicable
        government authority. Any such tax actually paid on behalf of the other
        Party shall be deducted from royalty payments due the other Party.

        4.6. Royalty Period. The Royalty obligations of either Party as to each
        Drug Product shall expire on a country-by-country basis: (a)
        concurrently with the expiration of the last to expire of Valid Claims
        within the Joint Patent Rights excluding any joint patent rights
        covering Drug Products sold in such country; or (b) with respect to Drug
        Products never covered in such country by a Valid Claim within the Joint
        Patent Rights, [***] after the date of the First Commercial Sale of such
        Drug Product in such country

5.      RECORDS AND REPORTS.

        5.1. Reports. Each Party shall furnish to the other Party at the same
        time as each royalty payment is made, a detailed written report of Net
        Sales of the Drug Products sold by such Party and its Affiliates and
        sublicensees as applicable and the Royalty due and payable thereon,
        including a description of any offsets or credits deducted therefrom, on
        a product-by-product and country-by-country basis, for the calendar
        quarter upon which the royalty payment is based.

        5.2. Records. Each Party shall keep, and cause its Affiliates and
        sublicensees to keep, full complete and proper records and accounts of
        all sales of Drug Products in sufficient detail to enable the royalties
        payable on Net Sales of each Drug Product to be determined by examining
        the records and accounts of such Party. Each Party, its Affiliates and
        sublicensees shall preserve and maintain all such records for a period
        of three (3) years after the calendar quarter to which the record
        applies.

        5.3. Audit Rights. Each Party shall have the right to appoint an
        independent certified public accounting firm approved by the other
        Party, which approval shall not be unreasonably withheld or delayed, to
        audit the records and reports of the other Party previously unaudited
        hereunder, solely as necessary to verify the royalties payable pursuant
        to this Agreement. Such Party, its affiliates and sublicensees shall pay
        to the other Party an amount equal to any additional royalties to the
        other Party is entitled as disclosed by the audit, plus interest thereon
        at the rate of one and one-half percent (1.5%) per month. Such audit
        shall be at initiating Party's expense; provided, however, that if the
        audit discloses that was underpaid royalties with respect to any Drug
        Product by at least ten percent (10%) for any calendar quarter, then the
        other Party, its Affiliates or sublicensee, as the case may be shall
        reimburse the initiating Party for any such audit costs. The Parties may
        exercise its right of audit as to each of the other, its Affiliates or
        sublicensees no more frequently than once in any calendar year during
        the Term. The accounting firm shall disclose to the other Party only
        information relating to the accuracy of the royalty payments.

6.      PATENT PROSECUTION AND MAINTENANCE.

        6.1. Separate Patent Rights. INSITE and SSP shall have the exclusive,
        worldwide right, but not the obligation to pursue and control the
        filing, prosecution and maintenance of any Patent Rights that have been
        or may be obtained with respect to the INSITE Technology and SSP
        Technology, respectively. Each Party shall pay its own expenses with
        respect to such filing, prosecution and maintenance of its patents and
        confidential information relating to the Drug Product and Drug
        Substances, respectively. Each Party agrees to keep the other reasonably
        informed with respect to the issuance of patents covering such Party's
        Technology and any changes with respect to the status of such patents.

        6.2.   Joint Patent Rights.

               (a) With respect to any Patent Rights that may be obtained for
               the Joint Technology: (i) INSITE shall have the exclusive right
               but not the obligation to pursue and control the filing,
               prosecution and maintenance of such Patent Rights in the INSITE
               Territory and the Joint Territory; and (ii) SSP shall have the
               exclusive right but not the obligation to pursue and control the
               filing, prosecution and maintenance of such Patent Rights in the
               SSP Territory.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -9-
<PAGE>

               (b) With respect to the filing, prosecution and maintenance
               efforts set forth above, the non-filing Party shall (i) provide
               all reasonable assistance, information, data and records
               reasonably requested by the filing Party to support such efforts,
               and (ii) have the right to consult with the filing Party with
               respect to such efforts.

               (c) With respect to the filing, prosecution and maintenance
               efforts set forth above, the filing Party shall keep the
               non-filing Party reasonably informed with respect to such efforts
               and shall use reasonable efforts to provide copies of all patent
               applications, amendments and other significant filings in advance
               of the applicable filing deadlines.

               (d) If a Party is entitled to file for, prosecute and maintain a
               Joint Patent Right elects not to file for such right or to
               continue the prosecution and maintenance thereof then the other
               party shall the right to do so.

7.      PATENT ENFORCEMENT AND DEFENSE.

        7.1. Infringement Notice. Each Party shall promptly notify the other
        Party if: (a) such Party reasonably believes that any Patent Rights
        subject to this Agreement may be infringed by a third party in a
        particular country or jurisdiction, or (b) any Patent Rights subject to
        this Agreement has become subject to a declaratory judgment action
        seeking invalidity of such Patent Right.

        7.2 Infringement of Separate Patent Rights. Each Party shall have the
        worldwide right but not the obligation to attempt to abate any suspected
        infringement of Patent Rights covering its Technology by commercially
        appropriate means including, without limitation, the initiation of an
        infringement suit or other preceding, and may enter into settlements,
        stipulated judgments or other arrangements respecting such infringement,
        at its own expense. If required to effectively prosecute such suit or
        action, the other Party shall join such suit or action as a party
        thereto.

        7.3    Infringement of Joint Patent Rights.

               (a) SSP shall have the right but not the obligation to attempt to
               abate any suspected infringement of the Joint Patent Rights in
               the SSP Territory by commercially appropriate means including,
               without limitation, the initiation of an infringement suit or
               other proceeding, and may enter into settlements, stipulated
               judgments or other arrangements respecting such infringement.

               (b) INSITE shall have the right but not the obligation to attempt
               to abate any suspected infringement of the Joint Patent Rights in
               the INSITE Territory and Joint Territory by commercially
               appropriate means including, without limitation, the initiation
               of an infringement suit or other proceeding, and may enter into
               settlements, stipulated judgments or other arrangements
               respecting such infringement.

               (c) If required to effectively prosecute such suit or action, the
               non initiating Party shall join such suit or action as a party
               thereto.

        7.4.   Expenses and Recovery. With respect to any infringement action
               undertaken pursuant to Section 7.2 and 7.3:

               (d) the non-initiating party shall reimburse the initiating party
               on a quarterly basis for expenses incurred in or in connection
               therewith in accordance with the following allocation of such
               expenses: (i) [***] to the initiating Party, and (ii) [***] to
               the non-initiating Party.; and

               (e) any damages or other recovery received in connection
               therewith shall first be used to reimburse the Parties for the
               costs and expenses incurred in or in connection with such action,
               and shall thereafter be allocated between the Parties as follows;
               (i) [***] to the initiating Party, and (ii) [***] to the
               non-initiating Party.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -10-
<PAGE>

8.      THIRD PARTY CLAIMS OF INFRINGEMENT

        8.1. SSP Patent Rights. If a claim if infringement is brought against
        INSITE, an Affiliate or any sublicensee in any country in the INSITE
        Territory or Joint Territory alleging infringement of any patent in such
        country owned by a third party by reason of the manufacture use or sale
        of the Drug Product except to the extent that alleged infringes arises
        solely with respect to the Delivery System included with such Drug
        Product, INSITE shall promptly give notice thereof to SSP and make
        reasonable efforts to provide SSP with all information in INSITE's
        possession regarding such claim. SSP shall indemnify, defend and hold
        INSITE harmless against any damages, costs, expenses and liabilities
        including reasonable attorneys' fees and expenses, but not lost profits
        or other consequential damages arising out of such claim. SSP shall
        conduct the defense of any suite for infringement at its expense
        provided that INSITE may participate in such defense at its option and
        expense. INSITE shall furnish to SSP such assistance as SSP may
        reasonably need and request in connection with the defense of such
        claim. SSP shall not dispose of or settle any such claim in any manner
        which may adversely affect INSITE's rights or interests without INSITE's
        prior written consent, which consent shall not be unreasonably withheld
        or delayed. Without limiting any obligation of SSP hereunder or any
        remedies otherwise available to INSITE, if SSP fails to so defend such
        claim or suit, INSITE shall have the right to do so and SSP hereby
        agrees to reimburse INSITE for all reasonable costs and expenses,
        including attorneys' fees incurred by INSITE in connection with such
        defense.

        8.2 INSITE Patent Rights. If a claim if infringement is brought against
        SSP, an Affiliate or any sublicensee in any country in the SSP Territory
        or Joint Territory alleging infringement of any patent in such country
        owned by a third party by reason of the manufacture use or sale of the
        Drug Product except to the extent that alleged infringes arises solely
        with respect to the Drug Substance included with such Drug Product, SSP
        shall promptly give notice thereof to INSITE and make reasonable efforts
        to provide INSITE with all information in SSP's possession regarding
        such claim. INSITE shall indemnify, defend and hold SSP harmless against
        any damages, costs, expenses and liabilities including reasonable
        attorneys' fees and expenses, but not lost profits or other
        consequential damages arising out of such claim. INSITE shall conduct
        the defense of any suite for infringement at its expense provided that
        SSP may participate in such defense at its option and expense. SSP shall
        furnish to INSITE such assistance as INSITE may reasonably need and
        request in connection with the defense of such claim. INSITE shall not
        dispose of or settle any such claim in any manner which may adversely
        affect SSP's rights or interests without SSP's prior written consent,
        which consent shall not be unreasonably withheld or delayed. Without
        limiting any obligation of INSITE hereunder or any remedies otherwise
        available to SSP, if INSITE fails to so defend such claim or suit, SSP
        shall have the right to do so and INSITE hereby agrees to reimburse SSP
        for all reasonable costs and expenses, including attorneys' fees
        incurred by SSP in connection with such defense

9.      COMMERCIALIZATION

        9.1. Commercial Development Obligations. INSITE shall be responsible for
        obtaining all necessary approvals for the development, production,
        distribution, sale, and use of any Drug Product, at its expense,
        including all safety and efficacy studies in INSITE Territory and the
        Joint Territory. SSP shall be responsible for obtaining all necessary
        approvals for the development, production, distribution, sale, and use
        of any Drug Product, at its expense, including all safety and efficacy
        studies in SSP Territory. Notwithstanding the foregoing, SSP shall be
        solely responsible for the pre-clinical systemic toxicology for the Drug
        Substance and the establishment of the Drug Master File (DMF) for the
        Drug Substance which shall be referenced by INSITE.

        9.2. U.S. Manufacture. To the extent required by applicable United
        States laws, if at all, the Parties agree that Drug Products will be
        manufactured in the United States, or its territories, subject to such
        waivers as may be required, or obtained, if at all, from the United
        States Department of Health and Human Services, or its designee.

        9.3. Foreign Registration. Each Party agrees to register this Agreement
        with any foreign governmental agency in it respective territory, which
        requires such registration, and shall pay all

                                      -11-
<PAGE>

        costs and legal fees in connection therewith. In addition, each Party
        shall assure that all foreign laws affecting this Agreement or the sale
        of Drug Products are fully satisfied, within its territory.

        9.4. Trademark and Trade Name Usage. The use of the Trademarks in the
        territory shall be determined between the parties before the first
        commercial sale.

10.     WARRANTY AND DISCLAIMER

        10.1. Mutual Warranties. Each party hereby represents and warrants as
        follows:

               (a) the execution, delivery and performance of this Agreement by
               such Party has been duly authorized by all requisite corporate
               action;

               (b) it has the full right, power and authority to execute and
               deliver this Agreement and to perform its obligations hereunder.

        10.2. DISCLAIMER. EXCEPT TO THE EXTENT EXPRESSLY SET FORTH ABOVE EACH
        PARTY MAKES NO OTHER WARRANTIES CONCERNING PATENT RIGHTS, TECHNOLOGY OR
        CONFIDENTIAL INFORMATION COVERED BY THIS AGREEMENT, INCLUDING WITHOUT
        LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR
        FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

11.     LIMITATION OF LIABILITY

        11.1. DIRECT DAMAGES. EXCEPT AS SET FORTH IN SECTION 11.3 THE TOTAL,
        CUMULATIVE LIABILITY OF THIS AGREEMENT OF EACH PARTY ARISING OUT OF OR
        RELATED TO, THIS AGREEMENT, ITS INTERPRETATION, AND SERVICES PERFORMED
        HEREUNDER, SHALL NOT EXCEED THE ROYALTY DUE THE PARTY FOR THE PREVIOUS
        TWELVE MONTHS PRIOR TO THE DATE SUCH CLAIM AROSE.

        11.2. INDIRECT DAMAGES. EXCEPT AS SET FORTH IN SECTION 11.3, IN NO EVENT
        WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL,
        INCIDENTAL, OR PUNITIVE DAMAGES INCURRED BY SUCH PARTY ARISING UNDER OR
        AS A RESULT OF THIS AGREEMENT OR THE TERMINATION HEREOF INCLUDING, BUT
        NOT LIMITED TO, THE LOSS OF PROSPECTIVE PROFITS OR ANTICIPATED SALES, OR
        ON ACCOUNT OF EXPENSES, INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH
        THE BUSINESS OR GOODWILL OR OTHERWISE.

        11.3. QUALIFICATION. THE FOREGOING LIMITATION OF LIABILITY SHALL (A)
        APPLY REGARDLESS OF WHETHER THE LIABLE PARTY HAS BEEN APPRISED OF THE
        POSSIBILITY OF SUCH DAMAGES AND NOT WITHSTANDING THE FAILURE OF ANY
        OTHER REMEDY HEREUNDER TO SERVE ITS ESSENTIAL PURPOSE; AND (B) NOT APPLY
        WITH EXCEPT WITH RESPECT TO A BREACH OF SECTION 3, OR SECTION 13, TO THE
        PARTIES OBLIGATIONS UNDER SECTION 12 OR TO THE EXTENT PROHIBITED BY LAW.

12.     INDEMNIFICATION

        12.1. SSP Indemnification. SSP shall indemnify and hold INSITE, its
        directors, officers, employees, agents, Affiliates and sublicensees
        harmless against all claims, damages, liabilities, losses, costs and
        expenses arising from: (a) any negligent or willful acts or omissions of
        SSP, its contractors or permitted licensees, in connection with the
        manufacture of any Drug Product, or the exercise or performance by SSP
        of any right or obligations under this Agreement; (b) the failure of any
        Drug Product or any component thereof supplied by SSP to comply with all
        agreed upon specifications and with all applicable laws, regulations and
        government orders; or (c) otherwise arising from any acts or omissions
        of SSP, its contractors or licensees in connection with the sale or
        provision of any Drug Product to any third party; in each case except to
        the e extent subject to indemnification of INSITE under Section 12.2

        12.2. INSITE Indemnification. INSITE shall indemnify and hold SSP, its
        directors, officers,

                                      -12-
<PAGE>

        employees, agents, Affiliates and sublicensees harmless against all
        Claims arising from: (a) any negligent or willful acts or omissions of
        INSITE, its contractors or permitted licensees, in connection with the
        manufacture of any Drug Product, or the exercise or performance by
        INSITE of any right or obligations under this Agreement; (a) the failure
        of any Drug Product or any component thereof supplied by INSITE to
        comply with all agreed upon specifications and with all applicable laws,
        regulations and government orders; or (c) otherwise arising from any
        acts or omissions of INSITE, its contractors or licensees in connection
        with the sale or provision of any Drug Product to any third party; in
        each case except to the e extent subject to indemnification of SSP under
        Section 12.1.

        12.3. Notice. As a condition to the indemnified Parties right to
        indemnification under this Section, the indemnified Party must give
        prompt written notice to the indemnifying Party of any suits, claims or
        demands by third parties to the indemnified Party which my give rise to
        any Claim the indemnifying Party shall be entitled to assume the defense
        and control of any Claim at its own cost and expense provided, however,
        that the other Party shall have the right to be represented by its own
        counsel at its own cost in such matters. In the event that the
        indemnifying Party declines to assume control of the defense of any
        Claim, the other Party shall be entitled to assume such control, conduct
        the defense of a and settle such Claim all at the sole cost and expense
        of the indemnifying Party. The indemnifying Party shall not settle or
        dispose of any Claim in any manner that would adversely impact the their
        rights or interests of the indemnified Party without the prior written
        consent of the indemnified Party, which shall not be unreasonably
        withheld or delayed.

        12.4 Joint Defense. In the event that a claim is made by a third party
        against both e Parties, an it cannot be ascertained with certainty which
        Party bears the ultimate liability for such claim pursuant to this
        Agreement, each Party may proceed to conduct its own defense of such
        Claim. The ultimate allocation of responsibility for defense and other
        damages arising out of such claim shall be determined on the basis of
        the other provisions of this Section 12.

13.     CONFIDENTIALITY

        13.1. Treatment of Confidential Information. The Parties agree that
        during the term of this Agreement, and for a period of five (5) years
        after this Agreement terminates, a Party receiving Confidential
        Information of the other Party will: (a) maintain in confidence such
        Confidential Information to the same extent such Party maintains its own
        proprietary industrial information; (b) not disclose such Confidential
        Information to any third party without prior written consent of the
        other Party; and (c) not use such Confidential Information for any
        purpose except those permitted by this Agreement. Notwithstanding the
        foregoing, a Party receiving Confidential Information of the other Party
        may disclose such information (i) pursuant to any court order or
        requirement under law or regulation, provided that the Party disclosing
        such information uses its reasonable efforts to obtain confidential
        treatment of such information, or (ii) to its advisors in evaluating a
        merger, acquisition, strategic alliance or securities offering, provided
        that the Party disclosing such information enters into nondisclosure
        agreements with such advisors.

        13.2. Publications. Each Party agrees that it shall have a right to
        publish in accordance with its general policies, and the consent of the
        other Party. In the event of a possible patentable invention, the Party
        wishing to publish shall wait 90 days for patent counsel to review the
        publication for inventions.

        13.3. Publicity. Except as otherwise provided herein or required by law,
        no Party shall originate any publication, news release or other public
        announcement, written or oral, whether in the public press,
        stockholders' reports, or otherwise, relating to this Agreement or to
        any sublicense hereunder, or to the performance hereunder, any such
        agreements, without the prior written approval of the other Party, which
        approval shall not be unreasonably withheld. Scientific publications
        published in accordance with Section 13.2 of this Agreement shall not be
        construed as publicity governed by this Section 13.3.

14.     TERM AND TERMINATION

                                      -13-
<PAGE>

        14.1. Term. Unless terminated sooner in accordance with the terms set
        forth herein, this Agreement, and the license granted hereunder, shall
        on a country-by-country basis concurrently with the expiration of the
        Royalty obligations in such country as set forth in Section 4.6.

        14.2. Termination Upon Default. Any one or more of the following events
        shall constitute an event of default hereunder: (a) the failure of a
        Party to pay any amounts past due within thirty (30) days after receipt
        of a written notice requesting the payment of such amount; (ii) the
        failure of a Party cure any other breach of its obligation hereunder
        within sixty (60) days after receipt of notice from the other Party
        specifying in reasonable detail the nature of such default. Upon the
        occurrence of any event of default, the non-defaulting Party may deliver
        to the defaulting Party written notice of intent to terminate, such
        termination to be effective upon the date set forth in such notice.

        14.3. Termination Upon Bankruptcy or Insolvency. In the event that SSP
        or INSITE (i) becomes insolvent; (ii) files a petition in bankruptcy or
        has such a petition filed against it under the United States Bankruptcy
        Code or foreign equivalent thereof and fails to lift any stay imposed
        thereby within sixty (60) days after such stay becomes effective; (iii)
        has a receiver appointed with respect to all or substantially all of its
        assets; (iv) makes an assignment for the benefit of creditors or (v)
        ceases to do business in the ordinary course, the other Party may
        terminate this Agreement immediately by notifying the other thereof.

        14.4. Rights Upon Termination or Expiration. Upon the expiration or
        termination of this Agreement all rights, obligations and licenses
        granted hereunder and all sublicenses grander pursuant to this Agreement
        shall also terminate. Each Party shall, (a) within sixty (60) days of
        the termination date, (i) pay all undisputed amounts due and payable to
        the other Party as of the termination date, and (ii) make any reports
        required pursuant to Section 5.1, with respect to the period between the
        report immediately preceding the termination date and the termination
        date; and (b) promptly return all Confidential Information of the other
        Party then in such Party's possession, custody or control, Any such
        termination shall not relieve either Party from any obligations accrued
        to the date of such termination.

        14.5. Not Sole Remedy. The termination rights set forth herein, shall be
        in addition to and not in substitution for any other remedies that may
        be available to the non-defaulting Party. Such termination shall not
        relieve the defaulting Party from liability and damages to the other
        Party for breach of this Agreement. Waiver by either Party of a single
        default or a succession of defaults shall not deprive such Party of any
        right to terminate this Agreement arising by reason of any subsequent
        default.

                                      -14-
<PAGE>

15.     ASSIGNMENT/SUCCESSORS

        15.1. Assignment. Neither this Agreement nor any rights granted
        hereunder may be assigned by either Party with out the prior written
        consent of the other Party except: (a) to an Affiliate of such Party,
        (b) to a successor in interest to all or substantially all of its
        business assets, whether by merger, consolidation, sale of all or
        substantially all of such Party's assets, change of control or a similar
        transaction, (c) to a successor in interest of all or substantially all
        of the assigning Party's line of business associated with this
        Agreement, or (d) as expressly permitted hereunder. Any assignment in
        violation of the foregoing shall be void and without effect.

        15.2. Binding Upon Successors and Assigns. Subject to the limitations on
        assignment herein, this Agreement shall be binding upon and inure to the
        benefit of any successors in interest and assigns of both Parties. Any
        such successor or assignee of any interest shall expressly assume in
        writing the performance of all the terms and conditions of this
        Agreement to be performed.

16.     DISPUTE RESOLUTION

        16.1. Executive Mediation. The Parties recognize that a bona fide
        dispute as to certain matters may from time to time arise during the
        Term of this Agreement that relates to either Party's rights o
        obligations hereunder. In the event of such dispute, either Party may,
        by written notice to the other have such dispute referred to their
        respective officer designated below or their successors, for attempted
        resolution by goods faith negotiations within sixty (60) days (the
        "Negotiation Period") after such notice is received. The designated
        officers for are: (a) for INSITE, the CEO, and (b) for SSP, the CEO;
        each party may replace their respective designated officers from time to
        time on written notice to the other Party. Subject to Section 16.3, in
        the event the designated officers are not able to resolve such dispute
        within the Negotiation Period, either Party may invoke their rights
        under Section 16.2.

        16.2. Arbitration. All disputes, controversies, or differences which may
        arise between the parties, out of or in relation to or in connection
        with this Agreement, or for the breach thereof, shall be finally settled
        by arbitration pursuant to the Japan-American Trade Arbitration
        Agreement by which each party hereto is bound. The place of arbitration
        shall be in Tokyo, Japan, if such arbitration proceeding is first
        instituted by INSITE against SSP and California, U.S.A., if such
        arbitration proceeding is first instituted by SSP against INSITE.

        16.3. Exceptions. Not withstanding the foregoing, either party will have
        the right to apply at any time to a judicial or other applicable
        authority: (a) with respect to any question, dispute related to (i) the
        intellectual property rights of a Party, or (ii) a breach of Section 3
        or Section 13; (b) for appropriate injunctive or other interim or
        provisional relief, or (c) for any other relief as may be necessary to
        avoid any applicable limitations period.

17.     GENERAL PROVISIONS

        17.1. Independent Contractors. The relationship between INSITE and SSP
        is that of independent contractors. The Parties are not joint venturers,
        partners, principal and agent, master and servant, employer or employee,
        and have no other relationship other than independent contracting
        Parties. No Party shall have the power to bind or obligate each other in
        any manner other than as is expressly set forth in this Agreement.

        17.2. Entire Agreement: Modification. This Agreement sets forth the
        entire agreement and understanding between the Parties as to the subject
        matter hereof. There shall be no amendments or modifications to this
        Agreement, except by a written document which is signed by both Parties.

        17.3. California Law. This Agreement shall be construed and enforced in
        accordance with the laws of the State of California.

        17.4. Headings. The headings for each article and section in this
        Agreement have been

                                      -15-
<PAGE>

        inserted for convenience of reference only and are not intended to limit
        or expand on the meaning of the language contained in the particular
        article or section.

        17.5. Severability. Should any one or more of the provisions of this
        Agreement be held invalid or unenforceable by a court of competent
        jurisdiction, it shall be considered severed from this Agreement and
        shall not serve to invalidate the remaining provisions thereof. The
        Parties shall make a good faith effort to agree upon an acceptable
        replacement for any invalid or unenforceable provision with a valid and
        enforceable one such that the objectives contemplated by them when
        entering this Agreement may be realized.

        17.6. No Waiver. Any delay in enforcing a Party's rights under this
        Agreement or any waiver as to a particular default or other matter shall
        not constitute a waiver of such Party's rights to the future enforcement
        of its rights under this Agreement, excepting only as to an express
        written and signed waiver as to a particular matter for a particular
        period of time.

        17.7. Notices. Any notices required by this Agreement shall be in
        writing, shall specifically refer to this Agreement and shall be sent by
        registered or certified airmail, postage prepaid, or by telefax (receipt
        confirmed), telex or cable, charges prepaid, or by overnight courier,
        postage prepaid and shall be forwarded to the respective addresses set
        forth below unless subsequently changed by written notice to the other
        Party:

        To SSP:
        Attention:  CEO
        SSP CO., LTD
        12-4, 2-Chome
        Hama-Cho, Nihonbashi
        Chuo-Ku, Tokyo 103-8481
        Japan
        Fax Number: 81-03-3865-9917

        To InSite:
        Attention: CEO
        Insite Vision Incorporated
        965 Atlantic Avenue
        Alameda, CA 94501
        USA
        Fax Number: 510-865-5700

Notice shall be deemed delivered upon the earlier of: (a) when received; (b) the
date notice is sent via telefax, telex or cable; or (c) the day immediately
following delivery to overnight courier except Sunday and holidays.

        17.8. Compliance with U.S. laws. Nothing contained in this Agreement
shall require or permit either Party or any Licensee to do any act inconsistent
with the requirements of any United States or Japan law, regulations or
executive order as the same may be in effect from time to time.

        17.9. Force Majeure. Neither Party shall be deemed in default of this
Agreement to the extent that performance of its obligations or attempts to cure
any breach are delayed, restricted or prevented by reason of any act of God,
fire, natural disaster, act of government, strikes or labor disputes, inability
to provide power or supplies, or any other act or condition beyond reasonable
control of the parties provided that such Party gives the other Party written
notice thereof promptly.

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

IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly
        authorized representatives as of the date set forth above.

INSITE VISION INCORPORATED                  SSP CO., LTD.

--------------------------------
Signature

S. Kumar Chandrasekaran, Ph.D
--------------------------------            --------------------------------
Printed Name                                Printed Name

                                      -16-
<PAGE>

Chairman/Chief Executive Officer
---------------------------------
Title

March 23, 2001
---------------------------------           ---------------------------------
Date                                        Date

                                      -18-
<PAGE>

                 PRODUCT DEVELOPMENT & CROSS - LICENSE AGREEMENT

                                    EXHIBIT A

                              TECHNICAL DISCLOSURE

                      DURASITE DELIVERY SYSTEM DESCRIPTION

DuraSite is a polymer formulation composed of polycarbophil, lightly
cross-linked acrylic acid polymer, and salts adjusted to a make a formulation
that has a pH and osmolality compatible in the eye. When DuraSite formulations
are instilled into the cul-de-sac of the eye, the residence time is increased
which enhances transport and bioavailability of the drug substance into the eye
tissues. The drug delivery technology described here is covered by the following
U.S. patents and applications along with their foreign counterparts:

U.S. Patent Number/Application:
4,615,697
4,983,392
5,225,196
5,192,535
6,159,458.

                            SSP TECHNICAL INFORMATION

The technical information on SS732/ and SS734 is included in the following US
Patents and their foreign equivalents:

5,385,900

5,447,926

                               JOINT PATENT RIGHTS

SS732-DuraSite and SS734-DuraSite (Application in Progress)

                                      -19-
<PAGE>

                 PRODUCT DEVELOPMENT & CROSS - LICENSE AGREEMENT

                                    EXHIBIT B

                   RESEARCH AND CLINICAL DEVELOPMENT AGREEMENT

The Parties hereby agree to continue to negotiate in good faith and enter into a
Research and Clinical Development Agreement as necessary to effectuate the
rights and obligations of this Development Agreement. Such agreement shall
contain reasonable and customary provisions consistent with this Exhibit A and
shall establish such other provisions as reasonable and customary for such
research and clinical development agreements including but not limited to:

I.      DEVELOPMENT COMMITTEE

        SSP and INSITE agree to form a development committee to oversee the
        development plan for the SS734/DuraSite ophthalmic formulation. This
        committee will be composed of [***] and will meet every [***] to monitor
        to progress on the development plan and to address technical issues from
        drug substance to clinical trials.

II.     DEVELOPMENT PLAN

        The development plan for the SS734/DuraSite formulation for use in [***]
        attached as Exhibit D.

III.    CLINICAL TRIALS

        INSITE AND SSP will work together on the clinical trial designs to
        ensure as is reasonable possible that studies conducted in the United
        States may be used to support regulatory filing in Japan.

IV.     RESPONSIBILITIES

        1.     SSP will be responsible for manufacturing the Drug Substance,
               which meets cGMP compliance and for filing a DMF with the U.S.
               FDA.

        2.     INSITE may reference the Drug Substance on its Master Drug File.

        3.     SSP shall supply to INSITE all necessary Drug Substance for
               clinical trials in the USA and the manufacture of the Drug
               Substance for this purpose. INSITE shall supply SSP with the Drug
               Product, which has the same specifications to those used in the
               USA clinical studies for clinical trial supplies in Japan.

        4.     SSP shall be responsible for all non-clinical systemic
               toxicology/pharmacology costs for the Drug Substance as provided
               in EXHIBIT D. However, the both parties shall amicably discuss to
               decide how to share of the costs for the non-clinical tests and
               studies which are not required but will in case be required by
               the US health authorities such as carcinogenicity studies and
               longer-term toxicity studies.

        5.     INSITE shall be responsible for all Drug Product development
               costs through in its Territory and Joint Territory including,
               without limitation, performance of clinical trials on the Drug
               Product in Insite Territory and Joint Territory. SSP may
               reference the development data for its Territory.

        6.     INSITE and SSP shall provide the support requested by the other
               Party in response to

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -20-
<PAGE>

               questions from regulatory agencies. INSITE shall provide to SSP
               the support, including without limitation, by collection of,
               searching, and obtaining any data on the "additive" materials
               which are used in the DuraSite formulation and which have not
               been approved as "additive" within Japan in order to send them to
               SSP upon request by SSP only for the purpose of obtaining
               approval of the said "additive" within Japan.

        7.     INSITE AND SSP agree to jointly publish the results of
               pre-clinical and clinical development on the Drug Product.

        8.     INSITE will develop the SS734/DuraSite product. In the event that
               problems occur with this combination, a SS732/DuraSite product
               will be pursued.

        9.     INSITE shall supply to SSP copies of all regulatory documents
               filed including IND's and NDA filed in the United State on the
               Drug Product and, in case, other information on the Drug Product,
               which will be required for drug approval in Japan.

                                      -21-
<PAGE>

                 PRODUCT DEVELOPMENT & CROSS - LICENSE AGREEMENT

                                    EXHIBIT C

                       MANUFACTURING AND SUPPLY AGREEMENT

The Parties hereby agree to continue to negotiate in good faith and enter into a
Manufacture and Supply Agreement as necessary to effectuate the rights and
obligations of this Development Agreement. Such agreement shall contain
reasonable and customary provisions consistent with this Exhibit B and shall
establish such other provisions as reasonable and customary for such supply and
manufacture agreements including but not limited to:

1.  SSP shall have the right to manufacture the Drug Product or have it
    manufactured in SSP Territory, using polycarbophil supplied by INSITE
    supplied by INSITE.

2.  INSITE shall have the right to manufacture the Drug Product or have it
    manufactured in INSITE TERRITORY using Drug Substance supplied by either SSP
    or Dojin.

3.  INSITE and SSP shall negotiate in good faith a cost of the Drug Substance in
    the INSITE Territory and for polycarbophil in the SSP Territory. Both
    Parties hereto shall agree that the said supply costs of the Drug Substance
    and polycarbophil to be supplied to either party in accordance with this
    Section, shall be [***].

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -22-
<PAGE>

                 PRODUCT DEVELOPMENT & CROSS - LICENSE AGREEMENT

                                    EXHIBIT D

                         SS734/DURASITE DEVELOPMENT PLAN

  (THE PLAN TO BE INCLUDED HERE AT SIGNING WILL BE THE STATE OF THE PROJECT AT
 THAT TIME AND WILL BE CONSTANTLY UPDATED BY THE DEVELOPMENT COMMITTEE AS MORE
  INFORMATION IS RECEIVED.). A BASIC UNDERSTANDINGS UPON START OF THE DURASITE
                          DEVELOPMENT IS SHOWN BELOW:

<TABLE>
<CAPTION>
<S>                                   <C>
                                      [***]
</TABLE>

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       -23-
<PAGE>

                                                                EXECUTED VERSION

                                 AMENDMENT NO. 1

        THIS AMENDMENT NO. 1 (this "AMENDMENT") to the Product Development and
Cross-License Agreement dated April 15, 2001 (the "AGREEMENT") is made effective
as of August 6, 2002 (the "EFFECTIVE DATE") by and between INSITE Vision
Incorporated ("INSITE") with an office at 965 Atlantic Avenue, Alameda,
California 94501, U.S.A. AND SSP CO., LTD ("SSP") with an office at 12-4,
2-Chome, Hama-Cho, Nihonbashi, Chuo-Ku, Tokyo 103-8481 JAPAN, (INSITE and SSP
individually, a "PARTY", together, the "PARTIES").

                                    RECITALS

        A. WHEREAS, SSP and INSITE previously entered into the Agreement
  pursuant to which INSITE developed a formulation of its delivery system for
  use with SSP's drug substances, and each party acquired the right to make,
  distribute and sell the combined product in certain territories throughout the
  world;

        B. WHEREAS, INSITE wishes to sublicense its rights under the Agreement
  to Bausch & Lomb Incorporated ("B&L") pursuant to a Technology License
  Agreement;

        C. WHEREAS, SSP and INSITE desire that [***] under the Agreement.

        NOW THEREFORE, for and in consideration of the mutual promises of the
Parties set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, SSP and INSITE agree as
follows:

                                    Amendment

1. Defined Terms. All capitalized terms used in this Amendment and not otherwise
defined shall have the meanings set forth in the Agreement.

2. [***]. To the end Section 14.2 of the Agreement is added the following:

        [***]

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -1-
<PAGE>
[***]

        IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
        to be executed and delivered by their duly authorized representatives as
        of the Effective Date.

        SSP CO., LTD
        By:
           ---------------------------------------
        Name:
             -------------------------------------
        Title:
              ------------------------------------

        INSITE VISION INCORPORATED
        By:
           ---------------------------------------
        Name: Kumar Chandrasekaran, Ph.D.
             -------------------------------------
        Title: Chairman / Chief Executive Officer
              ------------------------------------

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       -2-
<PAGE>
                                                                EXECUTED VERSION

                     AMENDMENT NO. 2 TO PRODUCT DEVELOPMENT

                                        &

                             CROSS-LICENSE AGREEMENT

        THIS AMENDMENT NO. 2 TO PRODUCT DEVELOPMENT AND CROSS-LICENSE AGREEMENT
(this "Amendment") is entered into and made effective as of this 8th day of
August 2002, by and between INSITE VISION INCORPORATED ("INSITE") with an office
at 965 Atlantic Avenue, Alameda, California 94501 and SSP CO., LTD. ("SSP") with
an office at 12-4, 2-Chome, Hama-Cho, Nihonbashi, Chuo-Ku, Tokyo 103-8481 Japan
(INSITE and SSP individually, a "Party," and together, the "Parties").

                                    RECITALS

        A. WHEREAS, the Parties entered into a Product Development and
Cross-License Agreement as of April 15, 2001, as amended in Amendment No. 1
effective as of August 6, 2002 (the "Agreement"), which set forth the Parties'
respective rights and obligations relating to the development of Drug Products
that combine INSITE's proprietary Delivery System with SSP's proprietary Drug
Substances; and

        B. WHEREAS, the Parties desire to amend the Agreement as set forth in
this Amendment to reflect more accurately the intent of the Parties with respect
to certain matters.

        NOW THEREFORE, based on the foregoing, and in consideration of the
mutual promises and covenants set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree to amend the Agreement as set forth below.

1.  Definitions Generally.  Capitalized terms used and not defined in this
Amendment have the meanings given to them in the Agreement.

2.  Definition of Affiliate. Section 1.1 of the Agreement is deleted in its
    entirety and replaced with the following:

        1.1 "Affiliate" means any entity which is directly or indirectly
        controlled by or is under common control with a Party. The term
        "control" as used herein means the possession of the power to direct or
        cause the direction of the management and the policies of an entity,
        whether through the ownership of a majority of the outstanding voting
        securities or by contract or otherwise. The parties agree that as of the
        Effective Date Dojin Pharmaceutical Products Inc. shall be deemed and
        treated as an Affiliate of SSP.

                                       -1-
<PAGE>

3.  Definition of Drug Substance. Section 1.4 of the Agreement is deleted in its
    entirety and replaced with the following:

        1.4 "Drug Substance" means any of (a) the drug substance identified as
        SS732 [***], (b) the drug substance identified as SS734 [***] or (c) the
        [***] in addition to those specified in (a) and (b) that are set forth
        in the SSP patents identified in Exhibit A, and any combinations of any
        of the foregoing (a), (b) and (c).

4.  Definition of Drug Product. Section 1.5 of the Agreement is deleted in its
    entirety and replaced with the following:

        1.5 "Drug Product" means a product combining a Drug Substance together
        with a formulation of the Delivery System for use with the Drug
        Substance.

5.  License to Insite. Section 3.1 of the Agreement is deleted in its entirety
    and replaced with the following:

        3.1 License to INSITE. Subject to the terms and conditions of this
        Agreement, SSP hereby grants to INSITE under the SSP Patent Rights and
        SSP Know-How, for the term of this Agreement, a license to: (a) develop
        the Drug Product for use in the Field; (b) conduct its clinical trial
        activities with respect to the Drug Product; (c) make, have made, use,
        sell, offer for sale and import the Drug Product for use in the Field;
        and (d) sublicense any or all of the foregoing through multiple tiers of
        sublicensees. The foregoing license shall be exclusive including as to
        SSP in the INSITE Territory and, to the extent set forth in Section 3.3,
        shall be non-exclusive in the Joint Territory.

6.  License to SSP. Section 3.2 of the Agreement is deleted in its entirety and
    replaced with the following:

        3.2 License to SSP. Subject to the terms and conditions of this
        Agreement, INSITE hereby grants to SSP under the INSITE Patent Rights
        and INSITE Know-How, for the term of this Agreement, a license to: (a)
        conduct its clinical trial activities with respect to the Drug Product;
        (b) make, have made, use, sell, offer for sale and import the Drug
        Product for use in the Field; and (c) sublicense any or all of the
        foregoing through multiple tiers of sublicensees. The foregoing license
        shall be exclusive including as to INSITE in the SSP Territory and, to
        the extent set forth in Section 3.3 shall be non-exclusive in the Joint
        Territory.

7.  Royalty Period. Section 4.6 of the Agreement is deleted in its entirety and
    replaced with the following:

        4.6 Royalty Period. The Royalty obligations of either Party as to each
        Drug Product shall expire on a country-by-country basis: (a)
        concurrently with the

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       -2-
<PAGE>

        expiration of the last to expire of Valid Claims within the Joint Patent
        Rights (i.e., excluding any Patent Rights covering only INSITE
        Technology when INSITE is the Party from whom royalties would otherwise
        be due, and excluding any Patent Rights covering only SSP Technology
        when SSP is the Party from whom royalties would otherwise be due)
        covering Drug Products sold in such country; or (b) with respect to Drug
        Products never covered in such country by a Valid Claim within the Joint
        Patent Rights, [***] after the date of the First Commercial Sale of such
        Drug Product in such country.

8.  Separate Patent Rights. Section 6.1 of the Agreement is deleted in its
    entirety and replaced with the following:

        6.1 Separate Patent Rights. INSITE and SSP shall have the exclusive,
        worldwide right, but not the obligation, to pursue and control the
        filing, prosecution and maintenance of any Patent Rights that have been
        or may be obtained with respect to the INSITE Technology and SSP
        Technology, respectively. Each Party shall pay its own expenses with
        respect to such filing, prosecution and maintenance of its patents and
        confidential information relating to the Delivery System and Drug
        Substances, respectively. Each Party agrees to keep the other reasonably
        informed with respect to the issuance of patents covering such Party's
        Technology and any changes with respect to the status of such patents.

9.  Joint Patent Rights. Section 6.2(a) of the Agreement is deleted in its
    entirety and replaced with the following:

        6.2    Joint Patent Rights.

               (a) With respect to any Joint Patent Rights that may be sought or
        obtained for the Drug Product: (i) INSITE shall have the exclusive right
        but not the obligation to pursue and control the filing, prosecution and
        maintenance of such Patent Rights in the INSITE Territory and the Joint
        Territory; and (ii) SSP shall have the exclusive right but not the
        obligation to pursue and control the filing, prosecution and maintenance
        of such Patent Rights in the SSP Territory.

10. No Further Amendment. Except as expressly set forth in this Amendment, no
    other terms or conditions of the Agreement are modified, and the Agreement
    remains in full force and effect as modified herein.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       -3-
<PAGE>

        IN WITNESS WHEREOF, the Parties have executed this Amendment by their
respective duly authorized representatives as of the date set forth above.

INSITE VISION INCORPORATED              SSP CO., LTD.

------------------------------------    ----------------------------------------
Signature                               Signature

------------------------------------    ----------------------------------------
Printed Name                            Printed Name

------------------------------------    ----------------------------------------
Title                                   Title

                                       -4-
<PAGE>
                                                                EXECUTED VERSION
                                   EXHIBIT 4.1

                             PRODUCT CHARACTERISTICS

                                     [***]

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                      -31-
<PAGE>

                                   EXHIBIT 5.1

                       PREFERRED STOCK PURCHASE AGREEMENT

                                      -32-<PAGE>
                                                                  EXHIBIT 10.43

                                                               EXECUTED VERSION

        CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.

                       PREFERRED STOCK PURCHASE AGREEMENT

        THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made on
the 7th day of August, 2002, by and among INSITE VISION INCORPORATED, a Delaware
corporation (the "Company"), and BAUSCH & LOMB INCORPORATED, a New York
corporation (the "Investor").

        WHEREAS, the Company and Investor have entered into the ISV-403
Technology License Agreement of even date herewith (the "License Agreement"),
and as a condition to such License Agreement, the Company and Investor have
agreed to enter into this Agreement;

        THE PARTIES HEREBY AGREE AS FOLLOWS:

1.      Purchase and Sale of Stock.

        1.1. Sale and Issuance of Series A-1 Preferred Stock.

                (a) The Company shall adopt and file with the Secretary of State
        of Delaware on or before the Initial Closing (as defined below) the
        Certificate of Designations, Preferences and Rights in the form attached
        hereto as Exhibit 1.1 (the "Certificate of Designations").

                (b) Subject to the terms and conditions of this Agreement,
        Investor agrees to purchase and the Company agrees to sell and issue to
        Investor up to Fifteen Thousand (15,000) shares of the Company's
        non-voting Series A-1 Preferred Stock with limited convertibility for
        the purchase price of One Thousand and 00/100 Dollars ($1,000) per
        share, to be purchased at up to nine separate closings, as set forth
        herein.

        1.2. Closing. The initial purchase and sale of Two Thousand (2,000)
shares of the non-voting Series A-1 Preferred Stock for consideration totaling
Two Million and 00/100 Dollars ($2,000,000) (the "Initial Closing") shall take
place at the offices of the Company at such time following the satisfaction of
the conditions set forth in Section 8.11 hereof as the Company and Investor
mutually agree. Subsequent purchases and sales of the non-voting Series A-1
Preferred Stock (the "Subsequent Closings") shall take place at such time and
place as shall be agreed to by the parties, within thirty (30) days after
satisfaction of the conditions for each respective Subsequent Closing identified
on Exhibit 1.2 hereto and assuming satisfaction of all other conditions to each
such Subsequent Closing, as set forth herein. The Initial Closing and each of
the Subsequent Closings are referred to herein as a "Closing". At each Closing
the Company shall deliver to Investor a certificate representing the non-voting
Series A-1 Preferred Stock that Investor is purchasing against payment of the
purchase price therefor as such number of shares and purchase price is stated on
Exhibit 1.2 hereto, by check or wire transfer.

<PAGE>

2. Representations and Warranties of the Company. The Company hereby represents,
warrants and covenants to Investor that as of the Initial Closing, except as set
forth on the Schedule of Exceptions (the "Schedule of Exceptions") furnished to
Investor prior to execution hereof and attached hereto as Exhibit 2 and except
as disclosed in the Filings (as defined in Section 2.21 herein), which
exceptions shall be deemed to be representations and warranties as if made
hereunder:

        2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify
could materially or adversely effect the operations or condition, financial or
otherwise, of the Company.

        2.2. Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:

                (a) Preferred Stock. Five Million (5,000,000) shares of
        Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
        Fifteen Thousand (15,000) shares of which are designated Series A-1
        Preferred Stock (the "Series A-1 Preferred"), none of which are issued
        and outstanding and up to all of such Fifteen Thousand (15,000) shares
        of which may be sold pursuant to this Agreement and Seven Thousand
        Seventy (7,070) shares of which are designated Series A Convertible
        Preferred Stock none of which are issued and outstanding. The rights,
        privileges and preferences of the Series A-1 Preferred will be as stated
        in the Certificate of Designations.

                (b) Common Stock. Sixty Million (60,000,000) shares of common
        stock, par value $0.01 per share ("Common Stock"), of which Twenty Four
        Million Nine Hundred Fifty Eight Thousand Twenty Eight (24,958,028) are
        issued and outstanding.

        2.3. Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the License Agreement, the performance of all
obligations of the Company hereunder and under the License Agreement, and the
authorization (or reservation for issuance), sale and issuance of the Series A-1
Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion of the Series A-1 Preferred Stock has been taken or will be taken
prior to the Closing. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its respective terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.

        2.4. Valid Issuance of Preferred and Common Stock. The Series A-1
Preferred Stock that is being purchased by the Investor hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed

                                       2
<PAGE>

herein, will be duly and validly issued, fully paid and nonassessable and will
be free of restrictions on transfer, other than restrictions on transfer under
this Agreement, the Certificate of Designations and under applicable state and
federal securities laws. The Common Stock issuable upon the limited conversion
rights of the Series A-1 Preferred Stock purchased under this Agreement (the
"Conversion Shares") has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Company's Amended and Restated
Certificate of Incorporation, as amended, (the "Certificate of Incorporation)
and the Certificate of Designations, will be duly and validly issued, fully paid
and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.

        2.5. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for such filings as are required pursuant to applicable
federal and state securities laws and blue sky laws, which filings will be
effected within the statutory period.

        2.6. Offering. Subject in part to the truth and accuracy of the
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series A-1 Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), and the qualification or registration requirements
of the Law or other applicable blue sky laws.

        2.7. Litigation. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement or the right of the Company to
enter into such agreement or to consummate the transactions contemplated hereby,
or that might result, either individually or in the aggregate, in any material
adverse changes on the operations or condition, financially or otherwise, or any
change in the current equity ownership, of the Company. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company intends to initiate.

        2.8. Compliance with Other Instruments. The Company is not in violation
of any provision of its Certificate of Incorporation, as amended, or Bylaws nor,
to its knowledge, in any material respect, of any instrument, judgment, order,
writ, decree or contract, statute, rule or regulation to which the Company is
subject and a violation of which would have a material adverse effect on the
condition, financial or otherwise, or operations of the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation, or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision or an event that results in
the creation of any lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit,

                                       3
<PAGE>

license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.

        2.9. Financial Statements. The Company has delivered to the Investor its
audited financial statements at December 31, 2001 and for the fiscal year then
ended (the "Financial Statements"). The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the period indicated. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the date, and for the period, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 2001 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results, of the Company. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

        2.10. Changes. Since December 31, 2001, there has not been:

                (a) any damage, destruction or loss, whether or not covered by
        insurance, materially and adversely affecting the financial condition or
        operating results, of the Company;

                (b) any waiver by the Company of a valuable right or of a
        material debt owed to it; or

                (c) any satisfaction or discharge of any lien, claim or
        encumbrance or payment of any obligation by the Company, except in the
        ordinary course of business and that is not material to the assets,
        properties, financial condition, operating results or business of the
        Company.

        2.11. Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business, the lack of which
could materially and adversely affect the financial condition and operations of
the Company. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.

        2.12. Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and, to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.

        2.13. Disclosure. The Company has fully provided Investor with all the
information that such Investor has requested for deciding whether to purchase
the Series A-1 Preferred Stock. To its knowledge, neither this Agreement
(including all the exhibits and schedules hereto) nor any other statements or
certificates made or delivered in

                                       4
<PAGE>

connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading in light of the circumstances under which they were made.

        2.14. Title to Property and Assets. The property and assets the Company
owns are owned by the Company free and clear of all mortgages, liens, loans and
encumbrances, except (i) as reflected in the Financial Statements, (ii) for
statutory liens for the payment of current taxes that are not yet delinquent,
and (iii) for liens, encumbrances and security interests that arise in the
ordinary course of business and minor defects in title, none of which,
individually or in the aggregate, materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company is in material compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).

        2.15. Filings. The Company has timely filed all reports, registration
statements and other documents (the "Filings") required to be filed by it with
the SEC under the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, without limitation, the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2002, Annual Report on Form
10-K for the fiscal year ended December 31, 2001 and Annual Report to
Stockholders for the fiscal year ended December 31, 2001. As of its filing date
and as of the date hereof, no such report or statement contained or contains any
untrue statement of material fact or omitted or omits to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

3. Representations and Warranties of the Investors. Investor hereby represents,
warrants and covenants that:

        3.1. Authorization. Investor has full power and authority to enter into
this Agreement and the License Agreement, and each such agreement constitutes
its valid and legally binding obligation, enforceable in accordance with its
terms.

        3.2. Purchase Entirely for Own Account. This Agreement is made with
Investor in reliance upon Investor's representation to the Company, which by
Investor's execution of this Agreement Investor hereby confirms, that the Series
A-1 Preferred Stock to be received by Investor and the Common Stock issuable
upon conversion thereof (collectively, the "Securities") will be acquired for
investment for Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Investor has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities.

        3.3. Disclosure of Information. Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the

                                       5
<PAGE>

Series A-1 Preferred Stock. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Series A-1 Preferred Stock and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investor to
rely thereon.

        3.4. Investment Experience. Investor acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Series A-1 Preferred
Stock. If other than an individual, such Investor also represents it has not
been organized for the purpose of acquiring the Series A-1 Preferred Stock.

        3.5. Accredited Investor. Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation
D, as presently in effect.

        3.6. Restricted Securities. Investor understands that the Securities it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may not be resold without registration
under the Act. In the absence of an effective registration statement covering
the Securities or an available exemption from registration under the Act, the
Securities must be held indefinitely. In this connection, such Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act, including
without limitation the Rule 144 condition that current information about the
Company be available to the public. In addition, except to the extent described
in Section 3.9 below, the Series A-1 Preferred is not transferable.

        3.7. Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends, provided that paragraph
(b) below shall apply only to the certificates evidencing the Series A-1
Preferred Stock:

                (a) "These securities have not been registered under the
        Securities Act of 1933, as amended. They may not be sold, offered for
        sale, pledged or hypothecated in the absence of a registration statement
        in effect with respect to the securities under such Act or an opinion of
        counsel satisfactory to the Company that such registration is not
        required or unless sold pursuant to Rule 144 of such Act."

                (b) "These securities may not be sold, offered for sale, pledged
        or hypothecated except to an affiliate of Bausch & Lomb Incorporated."

                (c) Any legend required by any applicable state securities laws.

                                       6
<PAGE>

        3.8. Tax Advisors. Investor has reviewed with Investor's own tax
advisors the federal, state and local tax consequences of this investment, where
applicable, and the transactions contemplated by this Agreement. Investor is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents and understands that Investor (and not the
Company) shall be responsible for Investor's own tax liability that may arise as
a result of this investment or the transactions contemplated by this Agreement.

        3.9. Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3, and:

                (a) The Series A-1 Preferred shall not be transferable by
        Investor except to an affiliate;

                (b) The Conversion Shares shall not be transferable by Investor,
        unless:

                        (i) There is then in effect a registration statement
                under the Act covering such proposed disposition and such
                disposition is made in accordance with such registration
                statement; or

                        (ii) If requested by the Company, Investor shall have
                furnished the Company with an opinion of counsel, reasonably
                satisfactory to the Company that such disposition will not
                require registration of such shares under the Act. It is agreed
                that the Company will not require opinions of counsel for
                transactions made pursuant to Rule 144 except in unusual
                circumstances.

        3.10. Organization. Investor is a corporation duly organized and validly
existing and in good standing under the laws of New York, with all requisite
power and authority to own its properties and conduct its business as now being
conducted.

        3.11. Compliance with Law. Investor is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction or, to its
actual knowledge, any judgment, order, decree, law, ordinance, regulation or
other governmental restriction which would prevent or impede, or be breached or
violated by, the transactions contemplated in this Agreement.

4. Conditions of Investor's Obligations at Closing. The obligations of Investor
under subsection 1.1(b) of this Agreement are subject to the fulfillment on or
before the Initial Closing and each Subsequent Closing of each of the following
conditions, the waiver of which shall not be effective against Investor if
Investor does not consent thereto:

                                       7
<PAGE>

        4.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.

        4.2. Satisfaction of Triggering Condition. The condition set forth in
Exhibit 1.2 with respect to the purchase at each Closing shall have been met,
provided that if all actions otherwise necessary to meet such condition have
been taken, and the achievement of such condition is delayed for a period in
excess of three months as a result of a documented decision of the Joint Review
Committee (as defined in the License Agreement), then the condition shall be
deemed to have been satisfied at the time of such decision of the Joint Review
Committee.

        4.3. Performance. The License Agreement shall not have been terminated
(for any reason), and the Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing, and
shall have complied in all material respects with the License Agreement.

        4.4. Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.

        4.5. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.

        4.6. Opinion of Counsel. On the Initial Closing, Investor shall have
received an opinion of Brobeck, Phleger & Harrison LLP, counsel for the Company
in a form reasonably acceptable to Investor.

5. Conditions of the Company's Obligations at Closing. The obligations of the
Company to Investor under this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions by that Investor:

        5.1. Representations and Warranties. The representations and warranties
of Investor contained in Section 3 shall be true on and as of the Initial
Closing and each Subsequent Closing with the same effect as though such
representations and warranties had been made on and as of the date of each
Closing.

        5.2. Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Exhibit 1.2 with respect to each such Closing.

        5.3. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.

                                       8
<PAGE>

        5.4. Satisfaction of Triggering Condition. The condition set forth in
Exhibit 1.2 with respect to the purchase at each Closing shall have been meet,
provided that if all actions otherwise necessary to meet such condition have
been taken, and the achievement of such condition is delayed for a period in
excess of three months as a result of a documented decision of the Joint Review
Committee (as defined in the License Agreement), then the condition shall be
deemed to have been satisfied at the time of such decision of the Joint Review
Committee.

        5.5. Performance. The License Agreement shall not have been terminated
(for any reason), and the Investor shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing, and
shall have complied in all material respects with the License Agreement.

        5.6. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.

6. Conversion Rights. Upon termination of the License Agreement by Investor (a)
at any time in accordance with Section 19.3 thereof or (b) in accordance with
Section 19.4 thereof prior to the later to occur of January 1, 2004 or
completion of the Milestone/Investment Condition identified by letter (b) in
Exhibit 1.2 hereto (an "Investor Termination"), Investor, at Investor's sole
option, may convert shares of Series A-1 Preferred Stock into (y) shares of
Common Stock and (z), if necessary, exchange shares of Series A-1 Preferred
Stock for a promissory note in accordance with Article 7 hereof, in each case
upon two (2) business days' written notice (the "Notice") within sixty (60) days
following such termination in accordance with the following provisions:

               (i) if Investor elects to convert the Series A-1 Preferred Stock
into Common Stock and, if necessary, exchange for a promissory note, all shares
of Series A-1 Preferred Stock must be so converted and exchanged so that after
one conversion no shares of Series A-1 Preferred Stock will remain outstanding.

               (ii) Shares of Series A-1 Preferred Stock shall be converted
first into the aggregate number of shares of Common Stock of the Company that is
equal to (A) the aggregate Value of all shares of Series A-1 Preferred Stock
divided by (B) the then current Fair Market Value of the Common Stock up to a
maximum of 4,300,000 shares of Common Stock, as may be adjusted for stock
splits, stock dividends, recapitalizations and the like. Any remaining shares of
Series A-1 Preferred Stock which are not so converted shall be redeemed and
exchanged for a promissory note of the Company in accordance with Article 7
hereof.

           (c) The "Value" of a share of Series A-1 Preferred Stock for purposes
of such conversions shall be the actual purchase price of such share of Series
A-1 Preferred Stock, plus accumulated and unpaid dividends (without any interest
thereon) on such share of Series A-1 Preferred Stock.

                                       9
<PAGE>

           (d) The "Fair Market Value" of the Company's Common Stock is equal to
the average of the closing sales prices for the five trading days immediately
preceding the date of the Notice of conversion of the Company's Common Stock on
any national securities exchange, or on the National Association of Securities
Dealers Automated Quotation System (NASDAQ), or if the Common Stock is not
traded on any such market, based on the reasonable opinion of value of an
independent investment banker of national reputation reasonably acceptable to
Investor and the Company.

7. Exchange of Series A-1 Preferred Stock for Promissory Notes.

           (a) In the event that Investor elects to convert the Series A-1
Preferred Stock into Common Stock pursuant to Section 6 hereof upon an Investor
Termination, subject to Section 160 of the Delaware General Corporation Law and
other applicable law, all then outstanding shares of Series A-1 Preferred Stock
which have not been converted into Common Stock in accordance with Section 6
(the "AVAILABLE SHARES") shall be repurchased and redeemed by the Company by
issuing to the holder thereof a promissory note, in the form set forth in
Exhibit 7-A attached hereto, with a principal balance equal to the aggregate
Value of the Series A-1 Preferred Stock so redeemed and a rate per annum equal
to the Exchanged Share Interest Rate (expressed as a percentage) without
compounding. For purposes hereof, the "EXCHANGED SHARE INTEREST RATE" shall be
equal to the "prime" rate of interest published by Citibank N.A. for loans to
its commercial customers, plus 2.00% per annum.

           (b) The Company, at the Company's sole option, may in the event of a
Corporate Change (as defined below), subject to Section 160 of the Delaware
General Corporation Law and other applicable law, repurchase and redeem (a
"CORPORATE CHANGE REDEMPTION") all then outstanding shares of Series A-1
Preferred Stock by issuing to the holder thereof a promissory note, in the form
set forth in Exhibit 7-B attached hereto, with a principal balance equal to the
aggregate Value of the Series A-1 Preferred Stock then outstanding and a rate
per annum equal to the Corporate Change Redemption Interest Rate (expressed as a
percentage) without compounding. For purposes hereof, the "CORPORATE CHANGE
REDEMPTION INTEREST RATE" shall be equal to the quotient of: (i) the product of
(a) the aggregate purchase price paid for the Series A-1 Preferred Stock being
exchanged for the promissory note and (b) 0.06 over (ii) the aggregate Value of
the Series A-1 Preferred Stock being exchanged for the promissory note.

           (c) In the event of a Corporate Change Redemption, all Subsequent
Closings that take place after the date of the Corporate Change Redemption will
be debt financings in lieu of equity financings. Upon payment of each
"INVESTMENT AMOUNT" set forth on Exhibit 1.2 to this Agreement, the Company in
lieu of issuing Series A-1 Preferred Stock shall issue to Investor a promissory
note, in the form set forth in Exhibit 7-B attached hereto, with a principal
balance equal to the "INVESTMENT AMOUNT" bearing interest at a rate of 6% per
annum (without compounding).

                                       10
<PAGE>

           (d) Upon the issuance of any promissory notes pursuant to this
Section 7, all provisions in this Agreement and the provisions in the License
Agreement relating to the Series A-1 Preferred Stock, preferred stock or equity
securities issued to the Investor shall be deemed to refer to the promissory
notes and all rights and obligations relating to the Series A-1 Preferred Stock
under this Agreement and the License Agreement shall apply to the promissory
notes, including but not limited to Section 5.1(b), 5.1(c) and Section 19.5 of
the License Agreement pertaining to forfeiture of the equity interests;
provided, however, any promissory notes issued pursuant to Section 7(a) shall
not be convertible into shares of the Company's Common Stock.

           (e) For purposes of this Agreement, "CORPORATE CHANGE" shall mean (i)
any acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) and pursuant to which the holders of the outstanding voting
securities of the Company immediately prior to such merger or other form of
corporate reorganization fail to hold equity securities representing a majority
of the voting power of the Company or surviving entity immediately following
such merger or other form of corporate reorganization or (ii) a sale of all or
substantially all of the assets of the Company.

8. Miscellaneous.

        8.1. Survival. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investors or the Company. 8.2. Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

        8.3. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, without reference to its principles
regarding conflicts of laws.

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

                                       11
<PAGE>

        8.5. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the address
as set forth on the signature page hereof or at such other address as such party
may designate by ten days advance written notice to the other parties hereto.

        8.6. Expenses. Irrespective of whether the Closing is effected, each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement.

        8.7. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor.

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

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

        8.10. Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.

        8.11. Condition Precedent. All obligations of the parties hereunder
shall be subject to the receipt by B&L of (i) the written consent of SSP Co.
Ltd., copied to B&L, to the sublicense by Licensor to B&L of Licensor's rights
under the SSP License (as contained herein) and (ii) a copy of an amendment to
the SSP License that requires [***].

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       12
<PAGE>

In each case, the form and substance of the documents referred to in (i) and
(ii) above shall be acceptable to B&L, which shall be evidenced by B&L's written
acknowledgment to Licensor. If the conditions set forth herein are not achieved
on or before [***], this Agreement shall be of no further effect.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.*

                                              INSITE VISION INCORPORATED

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

                                              Address: 965 Atlantic Avenue
                                                       Alameda, CA 94501

                                              INVESTOR

                                              BAUSCH & LOMB INCORPORATED

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

                                              Address: One Bausch & Lomb Place
                                                       Rochester, NY 14604

----------

*  See Section 8.11, Condition Precedent.

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       13
<PAGE>

                                   EXHIBIT 1.1

                           CERTIFICATE OF DESIGNATIONS

                                       14
<PAGE>

                                  EXHIBIT 1.2

                        SCHEDULE OF SUBSEQUENT CLOSINGS

<TABLE>
<CAPTION>
                                                                   Number of              Estimated               Investment
Milestones/Investment Conditions for Subsequent Closings:           Shares:                Timing:                 Amount:
---------------------------------------------------------          ---------              ---------              ------------
<S>                                                               <C>                    <C>                    <C>
(a)   [***]                                                                                 Q1 2003                 [***]

(b)   [***]                                                                                 Q4 2003                 [***]

(c)   [***]                                                                                 Q3 2004                 [***]

(d)   [***]                                                                                 Q2 2004                 [***]

(e)   [***]                                                                                 Q1 2005                 [***]

(f)   [***]                                                                                 Q3 2005                 [***]

(g)   [***]                                                                                 Q3 2005                 [***]

(h)   [***]                                                                                 Q2 2006                 [***]
</TABLE>

----------

*       At each milestone, the following conditions and characteristics of the
        Product shall continue to be established by valid scientific evidence:

-       [***]

-       [***]

-       [***]

-       [***]

[***]   INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND
        FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2.
        CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
        PORTIONS.

                                       15
<PAGE>

                                                               EXECUTED VERSION

                                   EXHIBIT 1.3

                                LICENSE AGREEMENT

                                       16
<PAGE>

                                    EXHIBIT 2

                             SCHEDULE OF EXCEPTIONS

                                  NO EXCEPTIONS

                                       17
<PAGE>

                                   EXHIBIT 7-A

                             FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY OTHER APPLICABLE SECURITIES LAWS. IT MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNDER CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR SUCH OTHER LAWS.

$[_______________]                                         Dated: _____________

        FOR VALUE RECEIVED, the undersigned, Insite Vision Incorporated (the
"Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of
[______________] (the "Lender"), the principal sum of [______________________]
DOLLARS ($_______________) (the "Loan"). This Promissory Note is a demand note
and the outstanding principal amount of the Loan shall be due and payable on the
Business Day following demand on any date after five years following the date
hereof by the Lender (the "Maturity Date").

        The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note from the date hereof until maturity, in
arrears, on the Maturity Date, at a rate per annum equal to [_____]% without
compounding. All computations of interest shall be made on the basis of a year
of 365 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.

        All payments hereunder shall be made in lawful money of the United
States of America and in same day or immediately available funds, to the Lender,
at One Bausch & Lomb Place, Rochester, New York 14604, or at such other place or
to such account as the Lender from time to time shall designate in a written
notice to the Borrower.

        Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would otherwise
occur, on a day other than a Business Day (as defined below), then such payment
shall be made, and such interest payment date or other date shall occur, on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder. As used herein,
"Business Day" means a day (i) other than Saturday or Sunday, and (ii) on which
commercial banks are open for business in San Francisco, California.

        Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on the
basis

                                       18
<PAGE>

provided for in this Promissory Note, together with all fees, charges and other
payments which are treated as interest under applicable law, as provided for
herein or in any other document executed in connection herewith, would exceed
the amount of such interest computed on the basis of the Highest Lawful Rate,
the Borrower shall not be obligated to pay, and the Lender shall not be entitled
to charge, collect, receive, reserve or take, interest in excess of the Highest
Lawful Rate, and during any such period the interest payable hereunder shall be
computed on the basis of the Highest Lawful Rate. As used herein, "Highest
Lawful Rate" means the maximum non-usurious rate of interest, as in effect from
time to time, which may be charged, contracted for, reserved, received or
collected by the Lender in connection with this Promissory Note under applicable
law.

        The Borrower may prepay the outstanding amount hereof in whole or in
part at any time, without premium or penalty. Together with any such prepayment
the Borrower shall pay accrued interest on the amount prepaid.

        The Lender shall have all rights and remedies provided for at law, in
equity and by agreement of the parties.

        The Borrower agrees to pay on demand all the losses, costs, and expenses
(including, without limitation, attorneys' fees and disbursements) which the
Lender incurs in connection with enforcement or attempted enforcement of this
Promissory Note, or the protection or preservation of the Lender's rights under
this Promissory Note, whether by judicial proceedings or otherwise. Such costs
and expenses include, without limitation, those incurred in connection with any
workout or refinancing, or any bankruptcy, insolvency, liquidation or similar
proceedings.

        The Borrower hereby waives diligence, demand, presentment, protest or
further notice of any kind. The Borrower agrees to make all payments under this
Promissory Note without setoff or deduction and regardless of any counterclaim
or defense.

        No single or partial exercise of any power under this Promissory Note
shall preclude any other or further exercise of such power or exercise of any
other power. No delay or omission on the part of the Lender in exercising any
right under this Promissory Note shall operate as a waiver of such right or any
other right hereunder.

        This Promissory Note shall be binding on the Borrower and its successors
and assigns, and shall be binding upon and inure to the benefit of the Lender,
any future holder of this Promissory Note and their respective successors and
assigns. Neither party may assign or transfer this Promissory Note or any of its
obligations hereunder without the other party's prior written consent.

                                       19
<PAGE>

        THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH NEW YORK LAW.

                                           INSITE VISION INCORPORATED

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

                                           Address:

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

                                       20
<PAGE>

                                   EXHIBIT 7-B

                       FORM OF CONVERTIBLE PROMISSORY NOTE

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNDER
CIRCUMSTANCES THAT WOULD RESULT IN A VIOLATION OF THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933 OR SUCH OTHER LAWS.

$[_______________]                                         Dated: _____________

        FOR VALUE RECEIVED, the undersigned, Insite Vision Incorporated (the
"Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of
[______________] (the "Lender"), the principal sum of [______________________]
DOLLARS ($_______________) (the "Loan"). This Promissory Note is a demand note
and the outstanding principal amount of the Loan shall be due and payable on the
Business Day following the date of termination of the ISV-403 Technology License
Agreement, dated July ___, 2002 (the "License Agreement") between the Borrower
and Bausch & Lomb Incorporated pursuant to Section 19 thereof (the "Maturity
Date") unless earlier converted into shares of capital stock or other securities
of Borrower as set forth herein and in the License Agreement.

        The Borrower further promises to pay interest on the outstanding
principal amount of this Promissory Note from the date hereof until maturity, in
arrears, on the Maturity Date, unless earlier converted into shares of capital
stock of Borrower, at a rate per annum equal to [_____]% without compounding.
All computations of interest shall be made on the basis of a year of 365 days
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.

        Unless earlier converted into shares of capital stock of Borrower, all
payments hereunder shall be made in lawful money of the United States of America
and in same day or immediately available funds, to the Lender, at One Bausch &
Lomb Place, Rochester, New York 14604, or at such other place or to such account
as the Lender from time to time shall designate in a written notice to the
Borrower.

        Whenever any payment hereunder shall be stated to be due, or whenever
any interest payment date or any other date specified hereunder would otherwise
occur, on a day other than a Business Day (as defined below), then such payment
shall be made, and such interest payment date or other date shall occur, on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder. As used herein,
"Business Day" means a day (i) other

                                       21
<PAGE>

than Saturday or Sunday, and (ii) on which commercial banks are open for
business in San Francisco, California.

        Anything herein to the contrary notwithstanding, if during any period
for which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Promissory Note, together with all fees, charges and
other payments which are treated as interest under applicable law, as provided
for herein or in any other document executed in connection herewith, would
exceed the amount of such interest computed on the basis of the Highest Lawful
Rate, the Borrower shall not be obligated to pay, and the Lender shall not be
entitled to charge, collect, receive, reserve or take, interest in excess of the
Highest Lawful Rate, and during any such period the interest payable hereunder
shall be computed on the basis of the Highest Lawful Rate. As used herein,
"Highest Lawful Rate" means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Lender in connection with this Promissory Note
under applicable law.

        At the sole option of the Borrower, any portion of the outstanding
principal balance plus any portion of accrued and unpaid interest on this
Promissory Note may be converted into shares of the Borrower's common stock (the
"Common Stock"). The number of shares of Borrower's Common Stock into which
amounts due under this Promissory Note shall be converted shall be equal to the
quotient obtained by dividing (a) the aggregate outstanding principal balance
that is being converted, plus any accrued and unpaid interest being converted on
the date of conversion by (b) the then current Fair Market Value of the Common
Stock. Notwithstanding the foregoing, in no event shall Borrower be entitled to
convert any portion of the principal balance outstanding or any portion of
accrued and unpaid interest on this Promissory Note if such conversion (together
with any prior conversions pursuant to this Promissory Note or any other
Promissory Note issued pursuant to the Agreement (as defined below)) would cause
the issuance of more than 4,300,000 shares of Common Stock, as may be adjusted
for stock splits, stock dividends, recapitalizations and the like. The "FAIR
MARKET VALUE" of the Borrower's Common Stock is equal to the average of the
closing sales prices for the five trading days immediately preceding the date of
notice of conversion of the Borrower's Common Stock on any national securities
exchange, or on the National Association of Securities Dealers Automated
Quotation System (NASDAQ), or if the Common Stock is not traded on any such
market, based on the reasonable opinion of value of an independent investment
banker of national reputation reasonably acceptable to Lender and the Borrower.

        The Borrower may prepay the outstanding amount hereof in whole or in
part at any time, without premium or penalty. Together with any such prepayment
the Borrower shall pay accrued interest on the amount prepaid.

        All provisions in (a) the preferred stock purchase agreement (the
"Agreement") by and among the Borrower and Bausch & Lomb Incorporated ("B&L");
and (b) the ISV-403 Technology License Agreement (the "License Agreement") by
and among Borrower and B&L relating to the Series A-1 Preferred Stock, preferred
stock or equity securities issued to B&L shall be deemed to refer to this
promissory note and all

                                       22
<PAGE>

rights and obligations relating to the Series A-1 Preferred Stock, preferred
stock or equity securities issued to B&L shall apply to this promissory note,
including but not limited to Section 5.1(b), 5.1(c) and Section 19.5 of the
License Agreement pertaining to forfeiture of the equity interests.

        The Lender shall have all rights and remedies provided for at law, in
equity and by agreement of the parties.

        The Borrower agrees to pay on demand all the losses, costs, and expenses
(including, without limitation, attorneys' fees and disbursements) which the
Lender incurs in connection with enforcement or attempted enforcement of this
Promissory Note, or the protection or preservation of the Lender's rights under
this Promissory Note, whether by judicial proceedings or otherwise. Such costs
and expenses include, without limitation, those incurred in connection with any
workout or refinancing, or any bankruptcy, insolvency, liquidation or similar
proceedings.

        The Borrower hereby waives diligence, demand, presentment, protest or
further notice of any kind. The Borrower agrees to make all payments under this
Promissory Note without setoff or deduction and regardless of any counterclaim
or defense.

        If the Common Stock issuable upon conversion of this Promissory Note
shall be changed into the same or a different number of shares of any other
class or classes of stock, or into any other property whether by
recapitalization, reclassification, reorganization or otherwise (other than a
subdivision or combination of shares) in any such event the Promissory Note
shall thereafter be convertible into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification,
reorganization or other change by holders of the maximum number of shares of
Common Stock into which this Promissory Note could have been converted
immediately prior to such recapitalization, reclassification or change.

        No single or partial exercise of any power under this Promissory Note
shall preclude any other or further exercise of such power or exercise of any
other power. No delay or omission on the part of the Lender in exercising any
right under this Promissory Note shall operate as a waiver of such right or any
other right hereunder.

        This Promissory Note shall be binding on the Borrower and its successors
and assigns, and shall be binding upon and inure to the benefit of the Lender,
any future holder of this Promissory Note and their respective successors and
assigns. Neither party may assign or transfer this Promissory Note or any of its
obligations hereunder without the other party's prior written consent.

                                       23
<PAGE>

        THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH NEW YORK LAW.

                                           INSITE VISION INCORPORATED

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

                                           Address:

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

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

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

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