Document:

Unassociated Document

     

    
      	
               
      

            	
              Exhibit
      10.1

            

    

     

    INSITE
VISION INCORPORATED

    SEVERANCE
PLAN

     

    ARTICLE
1

    ESTABLISHMENT,
TERM, AND PURPOSE

     

    1.1           Establishment of the
Plan.  InSite Vision
Incorporated, a Delaware corporation (the “Company”), hereby
establishes a severance plan to be known as the “InSite Vision Incorporated
Severance Plan” (the “Plan”).

     

    1.2           Purpose of the
Plan.  The
Plan is designed to provide certain severance benefits to a select group of
management or highly compensated employees of the Company who become eligible to
receive such benefits pursuant to Article 4 hereof. 

     

    1.3           Term of the
Plan.  The
Plan shall commence upon the date of its approval by the Committee (the “Effective Date”), and
shall continue in effect through December 31, 2011 (such period being referred
to herein as the “Term”); provided,
however, that the Term shall be automatically extended for one (1) additional
year on January 1, 2011 and on each annual anniversary of such date thereafter
(each, an “Extension
Date”) (such that on January 1, 2011 the Term would be extended to
December 31, 2012), unless the Company has, prior to such Extension Date,
delivered written notice to each Participant then in the Plan that the Term will
not be extended, and if such notice is given, the Plan will terminate at the end
of the Term then in effect (with no extension or further extension, as the case
may be, as to any Extension Date that would otherwise occur after the giving of
such notice).  Notwithstanding the foregoing, in the event that a
Change in Control occurs during the Term (or extended Term, as the case may be),
the Term shall be extended through, and shall end no earlier than, the later of
(i) the date that is two (2) years after such Change in Control or (ii) the date
on which all obligations of the Company hereunder have been
fulfilled.  The termination or expiration of the Term shall not affect
the rights of Participants to benefits pursuant to the Plan to the extent the
Participant’s employment is terminated during the Term.

     

    ARTICLE
2

    DEFINITIONS

     

    Whenever
used in the Plan or a Participation Agreement (as defined in Section 3.2), the
following terms shall have the meanings set forth below (such defined terms are
in addition to terms defined elsewhere in the Plan) unless the context clearly
indicates to the contrary:

     

    
      	
               
      

            	
              (a)

            	
              “ADEA” means the
      United States Age Discrimination in Employment Act of 1967, as
      amended.

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (c)

            	
              “Board” means
      the Board of Directors of the
Company.

            

    

     

    
      	
               
      

            	
              (d)

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

            

    

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    
      	
               
      

            	
              (v)

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

            

    

     

    
      	
               
      

            	
              (vi)

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

            

    

     

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

     

    
      	
               
      

            	
              (e)

            	
              “Change in
      Control” means the occurrence of any of the following after the
      Effective Date:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (f)

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

            

    

     

    
      	
               
      

            	
              (g)

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

            

    

     

    
      	
               
      

            	
              (h)

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

            

    

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (j)

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

            

    

     

    
      	
               
      

            	
              (k)

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

            

    

     

    
      	
               
      

            	
              (l)

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

            

    

     

    
      	
               
      

            	
              (m)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (n)

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

            

    

     

    
      	
               
      

            	
              (o)

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

            

    

     

    
      	
               
      

            	
              (p)

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

            

    

     

    
      	
               
      

            	
              (q)

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

            

    

     

    
      	
               
      

            	
              (r)

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

            

    

     

    ARTICLE
3

    PARTICIPATION

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.2           Participation
Agreement.  To the extent the
Committee has designated an Eligible Person as being eligible to participate in
the Plan, the Eligible Person shall become a Participant only by promptly
completing, fully executing, and returning to the Company a participation
agreement (a “Participation
Agreement”) in substantially the form attached hereto as Exhibit A (or
such other form as the Committee may require and provide for at the time it
designates the Eligible Person as being eligible to participate in the
Plan).

     

    ARTICLE
4

    SEVERANCE BENEFITS

     

    4.1           Severance
Benefits.  Provided that a
Participant is not entitled to any benefits set forth in Section 4.2 below and
subject to the other provisions of the Plan (including, without limitation,
Section 4.6 and Articles 5 and 6), if a Participant’s employment with the
Company or a Subsidiary is terminated during the Term by the Company or a
Subsidiary without Cause (and other than due to the Participant’s death or
Disability), the Participant shall be entitled to receive from the Company the
following severance benefits:

     

    
      	
               
      

            	
              (a)

            	
              Cash
      Severance.  A cash payment equal to the Participant’s
      Severance Multiplier multiplied by the Participant’s annualized rate of
      Base Salary in effect at the time of the Participant’s Separation from
      Service.

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    
      	
               
      

            	
              (a)

            	
              Cash
      Severance.  A cash payment equal to the sum of (i) the
      Participant’s Change in Control Severance Multiplier, multiplied by the
      Participant’s annualized rate of Base Salary in effect at the time of the
      Participant’s Separation from Service (or, if greater, at the time of the
      Change in Control) and (ii) the Participant’s Target
  Bonus.

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (c)

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

            

    

     

    4.3           Termination for Other
Reasons.  For avoidance of
doubt, the Company and its Subsidiaries shall have no obligations (or no further
obligations, as the case may be) to the Participant under the Plan
if:

     

    
      	
               
      

            	
              (a)

            	
              the
      Participant’s employment terminates for any reason prior to the Effective
      Date or after the Term; or

            

    

     

    
      	
               
      

            	
              (b)

            	
              after
      the Effective Date,

            

    

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.5           Termination of
Employment - Asset Sale.  Notwithstanding
anything else contained in this Plan to the contrary, a Participant shall not be
entitled to benefits under this Plan as a result of a termination of the
Participant’s employment with the Company or a Subsidiary (or any related
circumstances such as, without limitation, a sale of the business in which the
Participant is employed that might otherwise have constituted Good Reason as to
the Participant) if such termination of employment occurs in connection with a
sale of assets by the Company or a Subsidiary and each of the following
conditions is satisfied in connection with such sale: (1) the Participant
becomes employed by the purchaser of such assets (or one of its parent,
subsidiary, or other affiliated entities) upon or within sixty (60) days
following such sale or such purchaser (or one of its parent, subsidiary, or
other affiliated entities) offers the Participant employment effective upon or
within sixty (60) days following such sale (regardless of whether the
Participant actually accepts or commences such employment) on substantially the
same terms; and (2) such purchaser (or one of its parent, subsidiary, or other
affiliated entities) adopts the Plan (or a substantially similar severance plan)
to provide the Participant (with respect to the Participant’s employment or
offer of employment with such purchaser or one of its parent, subsidiary or
other affiliated entities) with substantially the same severance protections
afforded by this Plan had this Plan continued in effect as to the Participant
after such sale on its terms (subject, without limitation, to any such entity’s
right to terminate the Plan and any Participant’s participation from time to
time pursuant to Sections 1.3 and 3.1) for a period of no less than two (2)
years following the closing of such asset sale.  Whether employment is
on “substantially the same terms” for this purpose shall be determined by
comparing the relevant aspects of the terms of the Participant’s employment
(determined in light of the Good Reason definition applicable to the
Participant) before giving effect to such asset sale to the relevant aspects of
the terms of the Participant’s employment (or offer of employment, as the case
may be) with the purchaser (or one of its parent, subsidiary, or other
affiliated entities) after giving effect to such asset sale.

     

    4.6           Benefit
Offset.  Notwithstanding
anything else contained in the Plan to the contrary, any severance benefits
otherwise payable under the Plan to a Participant shall be offset or reduced by
the amount of severance benefits payable or deliverable to the Participant under
any other plan, program, or agreement of or with the Company or any of its
Subsidiaries (including, without limitation, any benefits, including pay in lieu
of notice and similar requirements, of the Worker Adjustment and Retraining
Notification Act (“WARN”) and similar
laws).

     

    4.7           Notice of
Termination. Any
termination of a Participant’s employment by the Company or a Subsidiary for
Cause or due to Disability, or by a Participant for Good Reason, shall be
communicated by Notice of Termination.  For purposes of the Plan, a
“Notice of
Termination” shall mean a written notice which shall indicate the element
of Cause, Disability or Good Reason, as applicable, relied upon for the
termination.  The Notice of Termination shall be delivered in
accordance with the general notice provisions set forth in Section
12.6.

     

    ARTICLE
5

    TIMING AND CONDITIONS OF PAYMENTS;
TAXES

     

    5.1           Form and Timing of
Severance Payments.  Subject to Sections 5.2 and 12.8(b) and
Article 6, any severance benefits described in Sections 4.1(a) and 4.2(a), as
applicable, that become payable to a Participant in accordance with the
provisions of the Plan shall be paid at the times and in the manner set forth in
this Section 5.1.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (a)

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

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      	
               
      

            	
              (c)

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

            

    

     

    
      	
               
      

            	
              (d)

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

            

    

     

    
      	
               
      

            	
              (e)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (f)

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

            

    

     

    5.2           Release.  Notwithstanding
anything to the contrary contained in the Plan, the Company’s obligation to make
any payment of benefits with respect to a Participant under the Plan is subject
to the condition precedent that (i) the Participant execute a release of claims
(in the form attached hereto as Exhibit B or such
other form as the Committee may reasonably require in the circumstances, which
other form shall be substantially similar to that attached hereto as Exhibit B but with
such changes as the Committee may determine to be required or reasonably
advisable in order to make the release enforceable and otherwise compliant with
applicable laws) and deliver such release to the Company so that it is received
by the Company in the time period specified below, and (ii) such release is not
revoked by the Participant pursuant to any revocation rights afforded by
applicable law.  In order to satisfy the requirements of this Section
5.2, a Participant’s release referred to in the preceding sentence must be
delivered by the Participant to the Company so that it is received by the
Company no later than thirty (30) calendar days after the Participant’s
Separation from Service (or such later date as may be required for an
enforceable release of the Participant’s claims under the ADEA, to the extent
the ADEA is applicable in the circumstances, in which case the Participant will
be provided with either twenty one (21) or forty five (45) days, depending on
the circumstances of the termination, to consider the release).  In
addition, the Company may require that the Participant’s release be executed no
earlier than the date of the Participant’s Separation from Service.

     

    5.3           Withholding of
Taxes.  Notwithstanding anything else herein to the contrary,
the Company may withhold (or cause there to be withheld, as the case may be)
from any amounts otherwise due or payable under or pursuant to the Plan such
federal, state and local income, employment, or other taxes as may be required
to be withheld pursuant to any applicable law or regulation.

     

    ARTICLE
6

    SECTION 280G

     

    Notwithstanding
anything contained in this Plan, to the extent that any payment, distribution,
transfer or other benefit of any type to or for a Participant by the Company or
any of its parents, subsidiaries or other affiliates, whether paid or payable or
distributed or distributable pursuant to the terms of this Plan or otherwise
(including, without limitation, any accelerated vesting of stock options or
other equity-based awards granted by the Company or any of its parents,
subsidiaries or other affiliates pursuant to this Plan or otherwise)
(collectively, the “Total Payments”) is
or will be subject to the excise tax imposed under Section 4999 of the Code,
then the Total Payments shall be reduced (but not below zero) so that the
maximum amount of the Total Payments (after reduction) shall be one dollar
($1.00) less than the amount which would cause the Total Payments to be subject
to the excise tax imposed by Section 4999 of the Code; provided that such
reduction to the Total Payments shall be made only if the total after-tax
benefit to the Participant is greater after giving effect to such reduction than
if no such reduction had been made.  If such a reduction is required,
the Company shall reduce the Total Payments by first reducing or eliminating any
cash severance benefits, then by reducing or eliminating any accelerated vesting
of stock options or similar awards, then by reducing or eliminating any
accelerated vesting of restricted stock or similar awards, then by reducing or
eliminating any other remaining Total Payments.  The preceding
provisions of this Article 6 shall take precedence over the provisions of any
other plan, arrangement or agreement governing the Participant’s rights and
entitlements to any benefits or compensation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
7

    PAYMENT OBLIGATIONS

     

    7.1           Payment of
Obligations.  The Company’s
obligation to make any benefit payment (or installment thereof) pursuant to the
Plan shall immediately cease upon failure by the Participant (or former
Participant) entitled to such payment to comply with Section
5.2.  Participants shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
the Plan, and the obtaining of any such other employment shall not effect any
reduction of the Company’s obligations to make the payments required to be made
under the Plan.

     

    7.2           Unsecured General
Creditor.  Participants and
their heirs, successors, and assigns shall have no legal or equitable rights,
claims, or interest in any specific property or assets of the Company or any
Subsidiary.  No assets of the Company or any Subsidiary shall be held
under any trust, or held in any way as collateral security, for the fulfilling
of the obligations of the Company under the Plan.  Any and all of the
Company’s and each Subsidiary’s assets shall be, and remain, the general
unpledged, unrestricted assets of the Company or Subsidiary, as applicable
(unless pledged or restricted with respect to such entity’s obligations other
than the Plan).  The Company’s obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Company to pay money in
the future, and the rights of the Participants and their heirs or successors as
to benefits under the Plan shall be no greater than those of unsecured general
creditors of the Company. 

     

    7.3           Other Benefit
Plans.  All payments,
benefits and amounts provided under the Plan shall be in addition to and not in
substitution for any pension rights under the any tax-qualified pension or
retirement plan in which the Participant participates, and any disability,
workers’ compensation or other Company or Subsidiary benefit plan distribution
that a Participant is entitled to (other than severance benefits), under the
terms of any such plan, at the time the Participant ceases to be employed by the
Company or a Subsidiary.  Notwithstanding the foregoing, the Plan
shall not create an inference that any duplicate payments shall be
required.  Payments received by a person under the Plan shall not be
deemed a part of the person’s compensation for purposes of the determination of
benefits under any other employee pension, welfare or other benefit plans or
arrangements, if any, provided by the Company or a Subsidiary, except where
explicitly provided under the terms of such plans or arrangements.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
8

    CLAIMS
PROCEDURES

     

    8.1           Presentation of
Claim.  Any Participant
(such Participant being referred to below as a “Claimant”) may
deliver to the Committee a written claim for a determination with respect to the
benefits payable to such Claimant pursuant to the Plan.  If such a
claim relates to the contents of a notice received by the Claimant, the claim
must be made within sixty (60) days after such notice was received by the
Claimant.  All other claims must be made within one hundred eighty
(180) days of the date on which the event that caused the claim to arise
occurred.  The claim must state with particularity the determination
desired by the Claimant.

     

    8.2           Notification of
Decision.  The Committee shall
consider a Claimant’s claim within a reasonable time, but no later than ninety
(90) days after receiving the claim.  If the Committee determines that
special circumstances require an extension of time for processing the claim,
written notice of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period.  In no event shall
such extension exceed a period of ninety (90) days from the end of the initial
ninety (90) day period.  The extension notice shall indicate the
special circumstances requiring an extension of time and the date by which the
Committee expects to render the benefit determination.  The Committee
shall notify the Claimant in writing:

     

    
      	
               
      

            	
              (a)

            	
              that
      the Claimant’s requested determination has been made, and that the claim
      has been allowed in full; or

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    
      	
               
      

            	
              (v)

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

            

    

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (a)

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

            

    

     

    
      	
               
      

            	
              (b)

            	
              may
      submit written comments or other documents;
  and/or

            

    

     

    
      	
               
      

            	
              (c)

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

            

    

     

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

     

    
      	
               
      

            	
              (a)

            	
              specific
      reasons for the decision;

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      	
               
      

            	
              (c)

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

            

    

     

    
      	
               
      

            	
              (d)

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

            

    

     

    ARTICLE
9

    RESOLUTION OF
DISPUTES

     

    Notwithstanding
anything to the contrary contained in the Plan, the Participant, in his or her
sole discretion, may elect to have any claim or controversy arising out of or in
connection with the Plan and/or a Participation Agreement submitted to binding
arbitration and adjudicated in accordance with this Article 9 without first
having to exhaust the claims procedures set forth in Article 8.

     

    The
Company and each Participant hereby consent to the resolution by mandatory and
binding arbitration of all claims or controversies arising out of or in
connection with the Plan and/or the Participant’s Participation Agreement that
the Company may have against the Participant, or that the Participant may have
against the Company or against any of its officers, directors, employees or
agents acting in their capacity as such, and which are not resolved under the
terms of Article 8 (or which are not required to be resolved under the terms of
Article 8, as the case may be).  Each party’s promise to resolve all
such claims or controversies by arbitration in accordance with the Plan rather
than through the courts is consideration for the other party’s like
promise.  It is further agreed that the decision of an arbitrator on
any issue, dispute, claim or controversy submitted for arbitration, shall be
final and binding upon the Company and the Participant and that judgment may be
entered on the award of the arbitrator in any court having proper
jurisdiction.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Except as
otherwise provided in this procedure or by mutual agreement of the parties, any
arbitration shall be before a sole arbitrator (the “Arbitrator”) selected
from Judicial Arbitration & Mediation Services, Inc., San Francisco,
California, or its successor (“JAMS”), or if JAMS is
no longer able to supply the arbitrator, such arbitrator shall be selected from
the American Arbitration Association, and shall be conducted in accordance with
the provisions of California Civil Procedure Code Sections 1280 et. seq. as the exclusive
remedy of such dispute.

     

    The
Arbitrator shall interpret the Plan, any applicable Company policy or rules and
regulations, any applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or applicable federal
law.  If arbitration is brought after the claim or controversy has
been submitted for review by the Committee in accordance with Article 8, the
Arbitrator shall limit his or her review to whether or not the Committee has
abused its discretion in its interpretation of the Plan and such policies,
rules, and regulations; provided, however, that the Arbitrator shall apply a
de novo standard of
review with respect to any claim for benefits under the Plan that arises in
connection with or following a Change in Control event.  In reaching
his or her decision, the Arbitrator shall have no authority to change or modify
any lawful Company policy, rule or regulation, or the Plan.  Except as
provided in the next paragraph, the Arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of the Plan, including but not limited to, any claim that all or any
part of the Plan is voidable.  The Arbitrator shall have the authority
to decide dispositive motions.  Following completion of the
arbitration, the arbitrator shall issue a written decision disclosing the
essential findings and conclusions upon which the award is based.

     

    Notwithstanding
the foregoing, provisional injunctive relief may, but need not, be sought by the
Participant or by the Company in a court of law while arbitration proceedings
are pending, and any provisional injunctive relief granted by such court shall
remain effective until the matter is finally resolved by the Arbitrator in
accordance with the foregoing.  Final resolution of any dispute
through arbitration may include any remedy or relief which would otherwise be
available at law and which the Arbitrator deems just and
equitable.  The Arbitrator shall have the authority to award full
damages as provided by law.  Any award or relief granted by the
Arbitrator hereunder shall be final and binding on the parties hereto and may be
enforced by any court of competent jurisdiction.

     

    The Company shall pay the reasonable
fees and expenses of the Arbitrator and of a stenographic reporter, if
employed.  Each party shall bear its own attorneys fees and costs
(other than for payment of the forum costs which in any event shall be born by
the Company as provided in the preceding sentence).  Subject to
Section 12.8(b), any such payment or reimbursement shall be made promptly after
the expenses are incurred by the Participant (and in no event later than the
taxable year of the Participant after the Participant’s taxable year in which
such expenses are incurred).  The Participant agrees to provide the
Company with reasonable documentation of such expenses.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
10

    SUCCESSORS AND
ASSIGNMENT

     

    10.1           Successors to the
Company.  The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company or of any division or subsidiary thereof (the business
and/or assets of which constitute all or substantially all of the total business
and/or assets of the Company) to expressly assume and agree to perform the
Company’s obligations under the Plan in the same manner and to the same extent
that the Company would be required to perform them if such succession had not
taken place.  

     

    10.2           Assignment by the
Participant.  None of the
benefits, payments, proceeds or claims of any Eligible Person or Participant
shall be subject to any claim of any creditor and, in particular, the same shall
not be subject to attachment or garnishment or other legal process by any
creditor, nor shall any such Eligible Person or Participant have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits or
payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.  Notwithstanding the foregoing, benefits
which are in pay status may be subject to a court-ordered garnishment or wage
assignment, or similar order, or a tax levy.  The Plan shall inure to
the benefit of and be enforceable by each Participant’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.  If a Participant dies while any amount would
still be payable to him or her hereunder had he or she continued to live, all
such amounts, unless otherwise provided herein, shall be paid to the
Participant’s estate in accordance with the terms of the Plan.

     

    ARTICLE
11

    ADMINISTRATION OF THE
PLAN

     

    11.1           Administration -
General.  The Company shall be
the plan administrator (within the meaning of Section 3(16)(A) of
ERISA).  The Company delegates its duties under the Plan to the
Committee.  The Committee delegates the day-to-day ministerial duties
with respect to the Plan to the Company’s management.  The Committee
and its delegates shall be named fiduciaries of the Plan to the extent required
by ERISA.

     

    11.2           Powers and Duties of
the Committee.  The Committee shall
enforce the Plan in accordance with its terms, shall be charged with the general
administration of the Plan, and shall have all powers necessary to accomplish
its purposes, including, but not by way of limitation, the power and authority
to do the following:

     

    (a)           To
determine eligibility for and participation in the Plan;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)           To
construe and interpret the terms and provisions of the Plan;

     

    (c)           To
compute and certify to the amount and kind of benefits payable to Participants
and their beneficiaries, and to determine the amount of withholding taxes to be
deducted pursuant to Section 5.3;

     

    (d)           To
maintain all records that may be necessary for the administration of the
Plan;

     

    (e)           To
provide for the disclosure of all information and the filing or provision of all
reports and statements to Participants, beneficiaries or governmental agencies
as shall be required by law;

     

    (f)           To
make and publish such rules for the regulation of the Plan and procedures for
the administration of the Plan as are not inconsistent with the terms hereof;
and

     

    (g)           To
appoint a plan manager or any other agent, and to delegate to them such powers
and duties in connection with the administration of the Plan as the Committee
may from time to time prescribe.

     

    11.3           Committee
Action.  Subject to Article
8, the Committee shall act with respect to the Plan at meetings by affirmative
vote of a majority of the members of the Committee.  Any action
permitted to be taken at a meeting with respect to the Plan may be taken without
a meeting if, prior to such action, a written consent to the action is signed by
all members of the Committee and such written consent is filed with the minutes
of the proceedings of the Committee.  A member of the Committee shall
not vote or act upon any matter which relates solely to himself or herself as a
Participant.  The Chairman or any other member or members of the
Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee.

     

    11.4           Construction and
Interpretation. The
Committee shall have full discretion to construe and interpret the terms and
provisions of the Plan and any and all Participation Agreements, which
interpretation or construction shall, subject to Article 9, be final and binding
on all parties, including but not limited to the Company and any Participant,
beneficiary or other person.

     

    ARTICLE
12

    MISCELLANEOUS

     

    12.1           Employment
Status.  Except as may be
provided under any other written agreement between a Participant and the Company
or a Subsidiary (other than the Plan and the Participation Agreement entered
into with respect to the Plan), the employment of each Participant by the
Company or any Subsidiary is “at will,” and may be terminated by either the
Participant or the Company (or, if the Participant is employed by a Subsidiary,
by the Subsidiary) at any time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    12.2           Payments on Behalf of
Persons Under Incapacity.  In the event that
any amount becomes payable under the Plan to a person who, in the sole judgment
of the Committee, is considered by reason of physical or mental condition to be
unable to give a valid receipt therefor the Committee may direct that such
payment be made to any person found by the Committee, in its sole judgment, to
have assumed the care of such person.  Any payment made pursuant to
such determination shall constitute a full release and discharge of the
Committee and the Company.

     

    12.3           Gender and
Number.  Except where
otherwise indicated by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular, and the singular
shall include the plural.

     

    12.4           Severability.  In the event any
provision of the Plan or any Participation Agreement shall be adjudicated by a
court of competent jurisdiction to be invalid, prohibited or unenforceable under
any present or future law, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of the Plan or
Participation Agreement, as applicable, or affecting the validity or
enforceability of such provision in any other
jurisdiction.  Furthermore, in lieu of such invalid or unenforceable
provision there will be added automatically as a part of the Plan or
Participation Agreement, as applicable, a legal, valid and enforceable provision
as similar in terms to such invalid or unenforceable provision as may be
possible.  Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of the Plan or Participation Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.

     

    12.5           Modification;
Waiver.  The Committee may
from time to time amend the Plan or Participation Agreement in any way it
determines to be advisable; provided that no such amendment shall materially and
adversely affect the rights of any Participant (or former Participant) under the
Plan or Participation Agreement, as applicable, without that Participant’s (or
former Participant’s, as the case may be) consent.  For purposes of
clarity, a notice of non-renewal of the Term pursuant to Section 1.3 or a notice
of any change as contemplated by and in accordance with Section 3.1 shall not,
however, constitute an amendment that requires the Participant’s
consent.  Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under the Plan or any
Participation Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege preclude any other
or further exercise of the same or of any right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.  No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.

     

    12.6           Notice.  All notices under or
with respect to the Plan or any Participation Agreement shall be in writing and
shall be either personally delivered or mailed postage prepaid, by certified
mail, return receipt requested:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)           if
to the Company:

     

    InSite
Vision Incorporated

    Attention:
Compensation Committee

    965
Atlantic Avenue

    Alameda,
CA 94501

     

                                    with
a copy to:

     

    O’Melveny
& Myers LPP

    Attention:
Timothy Curry, Esq.

    2765 Sand
Hill Road

    Menlo
Park, CA 94025

     

    
      	
               
      

            	
              (b)

            	
              if
      to the Participant, to the address most recently on file in the payroll
      records of the Company.

            

    

     

    Notice
shall be effective when personally delivered, or five (5) business days after
being so mailed.  Any party may change its address for purposes of
giving future notices pursuant to the Plan and any Participation Agreement by
notifying the other party in writing of such change in address, such notice to
be delivered or mailed in accordance with the foregoing.

     

    12.7           Applicable
Law.  The
Plan and any Participation Agreement will be governed by and construed in
accordance with ERISA and, to the extent not preempted thereby, the laws of the
State of California, without giving effect to any choice of law or conflicting
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the laws of any jurisdiction other than United States federal
law and the law of the State of California to be applied.  In
furtherance of the foregoing, applicable federal law and, to the extent not
preempted by applicable federal law, the internal law of the State of
California, will control the interpretation and construction of the Plan and any
Participation Agreement even if under such jurisdiction’s choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.  Any statutory reference in the Plan or any
Participation Agreement shall also be deemed to refer to all applicable final
rules and final regulations promulgated under or with respect to the referenced
statutory provision.

     

    12.8           Construction -
Section 409A.  

     

    
      	
               
      

            	
              (a)

            	
              To
      the extent that the Plan is subject to Section 409A of the Code, the Plan
      shall be construed and interpreted to the maximum extent reasonably
      possible to avoid the imputation of any tax, penalty or interest pursuant
      to Section 409A of the Code.

            

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (c)

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

            

    

     

    12.9           Headings.  Headings and
subheadings of the Plan and Participation Agreements are inserted for
convenience of reference only and are not to be considered in the construction
of the provisions hereof or thereof, as applicable.

     

     

    IN WITNESS WHEREOF, the
Company has caused its duly authorized officer to execute the Plan on
the 28th day of April, 2009.

     

     

    
      
        	 	
                INSITE VISION
      INCORPORATED,

                a Delaware corporation

              	 
	 	 	 	 
	 	
                By:
      

              	/s/ Louis
      Drapeau	 
	 	 	 	 
	 	Its:	Interim Chief Executive Officer, Vice President and Chief Financial
      Officer	 
	 	 	 	 

      

    

     

                                    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

     

    FORM
OF PARTICIPATION AGREEMENT

     

    [Date]

     

    _______________

    _______________

    _______________

    

     

    Dear
______________:

     

     

    You have been selected to participate
in the InSite Vision Incorporated Severance Plan (the “Plan”), subject to
your execution and return of this letter agreement (this “Participation
Agreement”) to InSite Vision Incorporated (the “Company”).

     

    For purposes of determining any
severance benefits you may become entitled to under the Plan, your “Severance
Multiplier” will be [0.5 (meaning, in general, one-half year or six months of
severance)] and your “Change in Control Severance Multiplier” will be [1.0
(meaning, in general, one year or twelve months of severance)].

     

    With respect to your participation in
the Plan, the term “Good Reason” means the occurrence of any one or more of the
following conditions without your express written consent:

     

    (i)           a
material diminution in your rate of base compensation;

     

    
      	
               
      

            	
              (ii)

            	
              a
      change in the location of your principal workplace for the Company (or the
      Subsidiary that employs you, as applicable) to a location that is more
      than thirty (30) miles from your principal workplace as of the date
      immediately preceding the occurrence of a Change in Control and that
      results in an increased commute for you from your principal residence
      (except for periods of travel required for the business of the Company or
      a Subsidiary substantially consistent with the travel demands placed on
      you prior to the Change in
Control);

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    provided,
however, that any such condition shall not constitute “Good Reason” unless both
(x) you provide written notice to the Company (such notice to be given in
accordance with the notice provisions of the Plan) of the condition claimed to
constitute Good Reason within ninety (90) days of the initial existence of such
condition, and (y) the Company fails to remedy (or fails to cause the Subsidiary
that employs you to remedy, as the case may be) such condition within thirty
(30) days of receiving such written notice thereof; and provided, further, that
in all events the termination of your employment with the Company (or the
Subsidiary that employs you, as applicable) shall not be treated as a
termination for “Good Reason” unless such termination occurs not more than one
(1) year following the initial existence of the condition claimed to constitute
“Good Reason.”

     

    By
signing this Participation Agreement you specifically agree that you have
received and read the Plan and agree to be bound by its terms.  The
Plan is incorporated into (made a part of) this Participation Agreement by this
reference.  You acknowledge and agree that the Company has not made
any promises or representations to you concerning the Plan other than as set
forth in the Plan and this Participation Agreement.

     

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

     

    
       

      
        
          	 	
                  INSITE VISION
      INCORPORATED,

                  a Delaware
      corporation

                	 
	 	 	 	 
	 	
                  By:
      

                	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Title:	 	 
	 	 	 	 

        

      

    

    

    ACCEPTED
AND AGREED:

    

    ________________________________________________

    Print
Participant’s Name:______________________________

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    PARTICIPATION
AGREEMENT

     

    [Date]

     

    Louis
Drapeau

    _______________

    _______________

    

     

    Dear
Louis:

     

     

    You have been selected to participate
in the InSite Vision Incorporated Severance Plan (the “Plan”), subject to
your execution and return of this letter agreement (this “Participation
Agreement”) to InSite Vision Incorporated (the “Company”).

     

    For purposes of determining any
severance benefits you may become entitled to under the Plan, your “Severance
Multiplier” will be 1.0 (meaning, in general, one year of severance) and your
“Change in Control Severance Multiplier” will be 1.5 (meaning, in general, one
and one-half years of severance).

     

    Notwithstanding anything contained in
Section 4.2 of the Plan to the contrary but subject to the other provisions of
the Plan (including, without limitation, Section 4.6 and Articles 5 and 6 of the
Plan), you shall be entitled to the severance benefits provided in Section 4.2
of the Plan upon the occurrence of a Change in Control regardless of whether
your employment is terminated under any circumstances upon or following such
Change in Control, provided that you are employed by the Company at the time of
such Change in Control or your employment is terminated by the Company without
Cause within the ninety (90) day period prior to the Change in
Control.  You agree to be reasonably available to provide reasonable
transition services for a period of thirty (30) days following such Change in
Control (for no additional compensation), to the extent the Company or any
successor to all or substantially all of the business or assets of the Company
requests such services from you at such time.  If you become entitled
to the benefits described in this Section 4.2, you will not be entitled to any
benefits under the Plan in connection with any termination of your employment
upon or following the Change in Control.

     

    Notwithstanding
anything contained in the Plan to the contrary, the provisions of Section 4.5 of
the Plan shall not apply to you.

     

    By
signing this Participation Agreement you specifically agree that you have
received and read the Plan and agree to be bound by its terms.  The
Plan is incorporated into (made a part of) this Participation Agreement by this
reference.  You acknowledge and agree that the Company has not made
any promises or representations to you concerning the Plan other than as set
forth in the Plan and this Participation Agreement.

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    
       

      
        
          
             

            
              
                	 	
                        INSITE VISION
      INCORPORATED,

                        a Delaware
      corporation

                      	 
	 	 	 	 
	 	
                        By:
      

                      	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Title:	 	 
	 	 	 	 

              

            

          

          

            

            ACCEPTED
AND AGREED:

            

            ________________________________________________

            Print
Participant’s
Name:______________________________                                                                 

          

        

      

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
B

     

    FORM
OF RELEASE AGREEMENT1

     

    This
Release Agreement (this “Release Agreement”)
is entered into this ___ day of _________ 20__, by and between
_____________________, an individual (“Executive”), and
InSite Vision Incorporated, a Delaware corporation (the “Company”).

     

    WHEREAS, Executive has been
employed by the Company or one of its subsidiaries; and

     

    WHEREAS, Executive’s
employment by the Company or one of its subsidiaries has terminated and, in
connection with the Company’s Severance Plan (the “Plan”), the Company
and Executive desire to enter into this Release Agreement upon the terms set
forth herein;

     

    NOW, THEREFORE, in
consideration of the covenants undertaken and the releases contained in this
Release Agreement, and in consideration of the obligations of the Company (or
one of its subsidiaries) to pay severance benefits (conditioned upon this
Release Agreement) under and pursuant to the Plan, Executive and the Company
agree as follows:

     

    1.           Termination of
Employment.  Executive’s employment with the Company terminated
on [______________, _____] (the “Separation Date”).  Executive waives
any right or claim to reinstatement as an employee of the Company and each of
its affiliates.  Executive hereby confirms that Executive does not
hold any position as an officer, director, employee, member, manager and in any
other capacity with the Company and each of its parents, subsidiaries and other
affiliates.  Executive acknowledges and agrees that Executive has
received all amounts owed for Executive’s regular and usual salary (including,
but not limited to, any severance (other than any benefits due pursuant to the
Plan), overtime, bonus, accrued vacation, commissions, or other wages),
reimbursement of expenses, and usual benefits, and that all payments due to
Executive from the Company have been received.2

     

     

    
        
        
          

        

        1 The
Company reserves the right to modify this form as to any Participant employed
outside of California.

      

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

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    3.           1542
Waiver.  It is
the intention of Executive in executing this Release Agreement that the same
shall be effective as a bar to each and every Claim hereinabove
specified.  In furtherance of this intention, Executive hereby
expressly waives any and all rights and benefits conferred upon him or her by
the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly
consents that this Release Agreement (including, without limitation, the Release
set forth above) shall be given full force and effect according to each and all
of its express terms and provisions, including those related to unknown and
unsuspected Claims, if any, as well as those relating to any other Claims
hereinabove specified. SECTION 1542 provides:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

     

    Executive acknowledges that he or she
may hereafter discover Claims or facts in addition to or different from those
which Executive now knows or believes to exist with respect to the subject
matter of this Release Agreement and which, if known or suspected at the time of
executing this Release Agreement, may have materially affected this
settlement.  Nevertheless, Executive hereby waives any right, Claim or
cause of action that might arise as a result of such different or additional
Claims or facts.  Executive acknowledges that he or she understands
the significance and consequences of such release and such specific waiver of
SECTION 1542.

     

    4.           [ADEA
Waiver.  Executive expressly acknowledges and agrees that by
entering into this Release Agreement, Executive is waiving any and all rights or
Claims that he or she may have arising under the Age Discrimination in
Employment Act of 1967, as amended (the “ADEA”), which have
arisen on or before the date of execution of this Release
Agreement.  Executive further expressly acknowledges and agrees
that:

     

    A.           In
return for this Release Agreement, Executive will receive consideration beyond
that which Executive was already entitled to receive before entering into this
Release Agreement;

     

    B.           Executive
is hereby advised in writing by this Release Agreement to consult with an
attorney before signing this Release Agreement;

     

    C.           Executive
has voluntarily chosen to enter into this Release Agreement and has not been
forced or pressured in any way to sign it;

     

    D.           Executive
was given a copy of this Release Agreement on [_________________, 20__] and
informed that he or she had [twenty one (21)/forty five
(45)] days within which
to consider this Release Agreement and that if he or she wished to execute this
Release Agreement prior to expiration of such [21-day/45-day] period, he or she should
execute the Endorsement attached hereto;

     

    E.           Executive
was informed that he or she had seven (7) days following the date of execution
of this Release Agreement in which to revoke this Release Agreement, and this
Release Agreement will become null and void if Executive elects revocation
during that time.  Any revocation must be in writing and must be
received by the Company during the seven-day revocation period.  In
the event that Executive exercises his or her right of revocation, neither the
Company nor Executive will have any obligations under this Release
Agreement;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    F.           Nothing
in this Release Agreement prevents or precludes Executive from challenging or
seeking a determination in good faith of the validity of this waiver under the
ADEA, nor does it impose any condition precedent, penalties or costs from doing
so, unless specifically authorized by federal law.]3

     

    5.           No Transferred
Claims.  Executive warrants and represents that Executive has
not heretofore assigned or transferred to any person not a party to this Release
Agreement any released matter or any part or portion thereof and he or she shall
defend, indemnify and hold the Company and each of its affiliates harmless from
and against any claim (including the payment of attorneys’ fees and costs
actually incurred whether or not litigation is commenced) based on or in
connection with or arising out of any such assignment or transfer made,
purported or claimed.

     

    6.           Compliance With
Participation Agreement.  Executive warrants and represents
that Executive has complied fully with his or her obligations pursuant to that
certain Participation Agreement entered into by Executive in connection with the
Plan.  Executive covenants that he or she will continue to abide by
the applicable provisions of such Participation Agreement and the
Plan.

     

    7.           Severability.  It
is the desire and intent of the parties hereto that the provisions of this
Release Agreement be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought.  Accordingly, if any particular provision of this Release
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable under any present or future law, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Release Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction; furthermore, in lieu
of such invalid or unenforceable provision there will be added automatically as
a part of this Release Agreement, a legal, valid and enforceable provision as
similar in terms to such invalid or unenforceable provision as may be
possible.  Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Release Agreement or affecting the
validity or enforceability of such provision in any other
jurisdiction.

     

    8.           Counterparts.  This
Release Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the
same agreement.

     

    9.           Successors.  This
Release Agreement is personal to Executive and shall not, without the prior
written consent of the Company, be assignable by Executive.  This
Release Agreement shall inure to the benefit of and be binding upon the Company
and its respective successors and assigns and any such successor or assignee
shall be deemed substituted for the Company under the terms of this Release
Agreement for all purposes.  As used herein, “successor” and
“assignee” shall include any person, firm, corporation or other business entity
which at any time, whether by purchase, merger, acquisition of assets, or
otherwise, directly or indirectly acquires the ownership of the Company,
acquires all or substantially all of the Company’s assets, or to which the
Company assigns this Release Agreement by operation of law or
otherwise.

     

     

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10.           Governing
Law.  THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY
UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE
STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW OF THE STATE OF
CALIFORNIA TO BE APPLIED.  IN FURTHERANCE OF THE FOREGOING, APPLICABLE
FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW, THE
INTERNAL LAW OF THE STATE OF CALIFORNIA, WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS RELEASE AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE
OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER
JURISDICTION WOULD ORDINARILY APPLY.

     

    11.           Amendment and
Waiver.  The provisions of this Release Agreement may be
amended and waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Release Agreement shall be construed as a waiver of such
provisions or affect the validity, binding effect or enforceability of this
Release Agreement or any provision hereof.

     

    12.           Descriptive
Headings.  The descriptive headings of this Release Agreement
are inserted for convenience only and do not constitute a part of this Release
Agreement.

     

    13.           Construction.  Where
specific language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it
relates.  The language used in this Release Agreement shall be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party.

     

    14.           Arbitration.  The
Company and Executive hereby consent to the resolution by mandatory and binding
arbitration of all claims or controversies arising out of or in connection with
this Release Agreement that the Company may have against Executive, or that
Executive may have against the Company or against any of its officers,
directors, employees or agents acting in their capacity as such.  Each
party’s promise to resolve all such claims or controversies by arbitration in
accordance with this Release Agreement rather than through the courts is
consideration for the other party’s like promise.  It is further
agreed that the decision of an arbitrator on any issue, dispute, claim or
controversy submitted for arbitration, shall be final and binding upon the
Company and Executive and that judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Except as
otherwise provided in this procedure or by mutual agreement of the parties, any
arbitration shall be before a sole arbitrator (the “Arbitrator”) selected
from Judicial Arbitration & Mediation Services, Inc., San Francisco,
California, or its successor (“JAMS”), or if JAMS is
no longer able to supply the arbitrator, such arbitrator shall be selected from
the American Arbitration Association, and shall be conducted in accordance with
the provisions of California Civil Procedure Code Sections 1280 et. seq. as the exclusive
remedy of such dispute.

     

    The
Arbitrator shall interpret this Release Agreement, any applicable Company policy
or rules or regulations, any applicable substantive law (and the law of
remedies, if applicable) of the state in which the claim arose, or applicable
federal law.  If arbitration is brought after the claim or controversy
has been submitted for review by the Committee (as such term is defined in the
Plan) in accordance with Article 2 of the Plan, the Arbitrator shall limit his
or her review to whether or not the Committee has abused its discretion in its
interpretation of the Plan and such policies, rules, and regulations; provided,
however, that the Arbitrator shall apply a de novo standard of review
with respect to any claim for benefits under the Plan in connection with a
Change in Control (as such term is defined in the Plan).  In reaching
his or her decision, the Arbitrator shall have no authority to change or modify
any lawful Company policy, rule or regulation, or this Release
Agreement.  Except as provided in the next paragraph, the Arbitrator,
and not any federal, state or local court or agency, shall have exclusive and
broad authority to resolve any dispute relating to the interpretation,
applicability, enforceability or formation of this Release Agreement, including
but not limited to, any claim that all or any part of this Release Agreement is
voidable.  The Arbitrator shall have the authority to decide
dispositive motions.  Following completion of the arbitration, the
arbitrator shall issue a written decision disclosing the essential findings and
conclusions upon which the award is based.

     

    Notwithstanding
the foregoing, provisional injunctive relief may, but need not, be sought by
Executive or the Company in a court of law while arbitration proceedings are
pending, and any provisional injunctive relief granted by such court shall
remain effective until the matter is finally resolved by the Arbitrator in
accordance with the foregoing.  Final resolution of any dispute
through arbitration may include any remedy or relief which would otherwise be
available at law and which the Arbitrator deems just and
equitable.  The Arbitrator shall have the authority to award full
damages as provided by law.  Any award or relief granted by the
Arbitrator hereunder shall be final and binding on the parties hereto and may be
enforced by any court of competent jurisdiction.

     

    The
Company shall pay the reasonable fees and expenses of the Arbitrator and of a
stenographic reporter, if employed.  Each party shall pay its own
legal fees and other expenses and costs incurred with respect to the
arbitration.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    15.           Nouns and
Pronouns.  Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and
vice-versa.

     

    16.           No
Wrongdoing.  This Release Agreement does not constitute an
adjudication or finding on the merits and it is not, and shall not be construed
as, an admission or acknowledgement by any party of any violation of any policy,
procedure, state or federal law or regulation, or any unlawful or improper act
or conduct, all of which is expressly denied.  Moreover, neither this
Release Agreement nor anything in this Release Agreement shall be construed to
be, or shall be, admissible in any proceeding as evidence of or an admission by
any party of any violation of any policy, procedure, state or federal law or
regulation, or any unlawful or improper act or conduct.  This Release
Agreement may be introduced, however, in any proceeding to enforce this Release
Agreement or the Plan.

     

    17.           Legal
Counsel.  Each party recognizes that this is a legally binding
contract and acknowledges and agrees that they have had the opportunity to
consult with legal counsel of their choice.  Executive acknowledges
and agrees that he or she has read and understands this Release Agreement
completely, is entering into it freely and voluntarily, and has been advised to
seek counsel prior to entering into this Release Agreement and he or she has had
ample opportunity to do so.

     

    The
undersigned have read and understand the consequences of this Release Agreement
and voluntarily sign it.  The undersigned declare under penalty of
perjury under the laws of the State of California that the foregoing is true and
correct.

     

    

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

    
       

      
        
          
             

            
              
                	 	“Executive”	 
	 	 	 
	 	 	 
	 	Print
      Name: ___________________________________________	 
	 	 	 
	 	
                        INSITE VISION
      INCORPORATED,

                        a Delaware
      corporation

                      	 
	 	 	 	 
	 	
                        By:
      

                      	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Title:	 	 
	 	 	 	 

              

            

          

          
                                     

        

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ENDORSEMENT

     

    I,
_______________________, hereby acknowledge that I was given [21/45] days to consider the
foregoing Release Agreement and voluntarily chose to sign the Release Agreement
prior to the expiration of the [21-day/45-day] period.

     

    I declare
under penalty of perjury under the laws of the United States and the State of
California that the foregoing is true and correct.

     

    EXECUTED
this [____] day of [_____________ 20__], at [_______], California.

     

    

    

    
      
        	 	 	 
	 	 	 	 
	
                 

              	 	 	 
	 	 	Print
      Name:______________________________________CALL
OPTION AGREEMENT

     

    This CALL
OPTION AGREEMENT (this “Agreement”) is made and
entered into as of October 8, 2008 (the “Effective Date”), between Rong
Yang, a resident of the People’s Republic of China (the “Purchaser”) and Rui Shen, a
resident of United States (the “Seller”).  Purchaser
and Seller are also referred to herein together as the “Parties” and individually as a
“Party.”

     

    RECITALS

     

    WHEREAS, pursuant to a Plan of
Reorganization and Share Exchange Agreement (the “Exchange Agreement”) by and
among Fidelity Aviation Corporation, a Colorado corporation (“FAC”), and Northern
Construction Holding, Ltd., a Hong Kong limited company (“NCH”), FAC is expected to
acquire 100% of the issued and outstanding capital stock of NCH;

    

    WHEREAS, at the closing of the
Exchange Agreement, the Seller will be issued twelve million (12,000,000)
shares, no par value, of common stock of FAC (the “Common Stock”);

     

    WHEREAS, the Seller has agreed
with the Purchaser to enter into this Agreement, as a condition to the Purchaser
continuing to provide services to Beijing Chengzi Qianmao Concrete Company, Ltd.
(the “Company”), a PRC
company, which is a subsidiary of NCH, as its Chairman and Chief Executive
Officer;

     

    WHEREAS, the Seller has
determined that it is in his best interest to receive benefits from the
Purchaser’s performance as Chairman and Chief Executive Officer of the
Company;

     

    WHEREAS, the Seller desires to
grant to the Purchaser an option to acquire twelve million (12,000,000) shares
of Common Stock to be issued to him pursuant to the Exchange Agreement (for
purposes of this Agreement, including the Call Right described herein, the
“Seller’s Shares”)
pursuant to the terms and conditions set forth herein;

    

    NOW, THEREFORE, the Parties,
in consideration of the foregoing premises and the terms, covenants and
conditions set forth below, and for other good and valuable consideration,
receipt of which is acknowledged, hereby agree as follows:

     

    AGREEMENT

     

    
      	
              1.

            	
              DEFINITIONS;
      INTERPRETATION

            

    

    

    
      1.1.         
Terms Defined in this
Agreement. The following terms when used in this Agreement shall have the
following definitions:

    

     

    “Bankruptcy Law” means any Law
of any jurisdiction relating to bankruptcy, insolvency, corporate
reorganization, company arrangement, civil rehabilitation, special liquidation,
moratorium, readjustment of debt, appointment of a conservator, trustee or
receiver, or similar debtor relief.

     

    “Business Day” means any day on
which commercial banks are required to be open in the United
States.

      

    “Call Price” means, with
respect to any exercise of the Call Right, $0.0001 per share of the Seller’s
Shares subject to any Call Exercise Notice.

     

    “Conditions” means Conditions 1
through 4, as defined below, in the aggregate.

     

    “Condition 1” means: the entry
by the Purchaser and the Company into a binding employment agreement for a term
of not less than five years for Purchaser to serve as the Company’s Chairman and
Chief Executive Officer.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Condition 2” means the Company
and its subsidiaries achieving not less than $5,000,000 in after-tax net income,
as determined under United States Generally Accepted Accounting Principles
consistently applied (“US
GAAP”) for the fiscal year ended May 31, 2009.

     

    “Condition 3” means the Company
and its subsidiaries achieving not less than $9,000,000 in after-tax profits, as
determined under US GAAP, for the fiscal year ending May 31, 2010.

    

    “Condition 4” means the Company
and its subsidiaries achieving not less than $14,000,000 in after-tax profits,
as determined under US GAAP, for the fiscal year ending May 31,
2011.

    

    "Distributions" means any cash
proceeds arising from or in respect of, or in exchange for, or accruing to or in
consequence of the Seller’s Shares from the date hereof to the Expiration Date,
including without limitation, the Dividends.

    

    "Dividends" means the dividends
declared by FAC and accrued in respect of the Seller’s Shares (whether or not
such dividends shall have been paid and received by the Purchaser or his
Nominee(s)).

     

    “Government Authority” means
any: (a) nation, principality, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or quasi
governmental authority of any nature (including any governmental division,
subdivision, department, agency, bureau, branch, office, commission, council,
board, instrumentality, officer, official, representative, organization, unit,
body or Person and any court or other tribunal); or (d) individual, Person or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.

     

    “Law” means any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, order, edict, decree,
proclamation, treaty, convention, rule, regulation, permit, ruling, directive,
pronouncement, requirement (licensing or otherwise), specification,
determination, decision, opinion or interpretation that is, has been or may in
the future be issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Government Authority.

     

    "Nominee" means such person
nominated by the Purchaser in the Transfer Notice to be the transferee of the
Call Right or the Seller’s Shares;

    

    “Person” means any individual,
firm, company, corporation, limited liability company, unincorporated
association, partnership, trust, joint venture, governmental authority or other
entity, and shall include any successor (by merger or otherwise) of such
entity.

     

    “Transfer Notice” means the
notice substantially in the form set out in Appendix
B.

    

    
      	
              1.2. 

            	
              Interpretation.

            

    

     

    (a)   Certain Terms. The
words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement
as a whole and not to any particular provision of this Agreement. The term
“including” is not limited and means “including without
limitation.”

     

    (b)   Section References;
Titles and Subtitles. Unless otherwise noted, all references to Sections
herein are to Sections of this Agreement. The titles, captions and headings of
this Agreement are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    (c)       Reference to Entities,
Agreements, Statutes. Unless otherwise expressly provided herein,
(i) references to a Person include its successors and permitted assigns,
(ii) references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements and other modifications thereto or supplements thereof and
(iii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such statute or
regulation.

     

    
      	
              2.

            	
              CALL
      RIGHT

            

    

    

    2.1.         
Call Right. The
Purchaser shall have, during the Exercise Period (as defined below), and when a
Condition is met, the right and option to purchase from the Seller, and upon the
exercise of such right and option the Seller shall have the obligation to sell
to the Purchaser or his Nominee(s), a portion of the Seller’s Shares identified
in the Call Exercise Notice (the “Call Right”). Purchaser or
Nominee(s) shall be permitted to purchase, and Seller shall be obligated to
sell, the following number of Seller’s Shares upon the attainment of the
following Conditions:

    

    
      
        
          
            
              	
                      Condition

                    	 	
                      Number of Seller’s Shares as to which there is a Call Right

                    	 
	 
      	 	 	 
	
                      Condition
      1

                    	 	 	4,000,000	 
	 
      	 	 	 	 
	
                      Condition
      2

                    	 	 	3,000,000	 
	 
      	 	 	 	 
	
                      Condition
      3

                    	 	 	3,000,000	 
	 
      	 	 	 	 
	
                      Condition
      4

                    	 	 	2,000,000	 

            

          

        

      

    

     

    However,
in case that the Company and its subsidiaries achieve not less than $14,000,000
in after-tax profits, as determined under US GAAP, for the fiscal year
ending  May 31, 2010, then the Purchaser or his Nominee(s) shall be
permitted to purchase and the Seller shall be obligated to sell, 5,000,000
Shares owned by the Seller and it shall be considered that both Condition 3 and
Condition 4 have been met; for purpose of avoiding doubt,  there will
be no more call right to be granted to the Purchaser even if the Company and its
subsidiaries achieves not less than $14,000,000 in after-tax profits, as
determined under US GAAP, for the fiscal year ending May 31, 2011.

    

    Notwithstanding
anything in this Agreement, in case that the Seller violates any provisions of
this Agreement, the Purchaser shall receive an irrevocable Call Right to any and
all of the Seller’s Shares then held by the Seller, without any regard to the
Conditions being met. The Purchaser shall be entitled to exercise such Call
Right immediately and the Seller shall transfer to the Purchaser or his
Nominee(s) all of the Seller’s Shares immediately upon the Purchaser’s or his
Nominee(s)’s exercise of such Call Right.

    

    2.2.         
Call Period.
The Call Right shall be exercisable by Purchaser, by delivering a Call Exercise
Notice at any time during the period (the “Exercise Period”) commencing
on the date hereof and ending at 6:30 p.m. (New York time) on the fifth
anniversary date therefrom (such date or the earlier expiration of the Call
Right is referred to herein as the “Expiration
Date”).

    

    2.3.          Nominees: The
Purchaser may, at any time during the Exercise Period, at his sole discretion,
nominate one or more person(s) (each a “Nominee”) to be the transferee(s) of
whole or part of his Call Right, who shall hold and/or exercise the transferred
Call Right on behalf of the Purchaser.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    2.4.          Exercise Process. In
order to exercise the Call Right during the Exercise Period, the Purchaser or
his Nominee(s) shall deliver to the Seller, a written notice of such exercise
substantially in the form attached hereto as Appendix A
(a “Call Exercise
Notice”) to such address or facsimile number as set forth therein. The
Call Exercise Notice shall indicate the number of the Seller’s Shares as to
which the Purchaser or his Nominee(s) is/are then exercising his/her Call Right
and the aggregate Call Price. Provided the Call Exercise Notice is delivered in
accordance with Section 6.4 to the Seller on or before 6:30 p.m. (New York time)
on a Business Day, the date of exercise (the “Exercise Date”) of the Call
Right shall be the date of such delivery of such Call Exercise Notice. In the
event the Call Exercise Notice is delivered after 6:30 p.m. (New York time) on a
Business Day or on a day which is not a Business Day, the Exercise Date shall be
deemed to be the first Business Day after the date of such delivery of such Call
Exercise Notice. The delivery of a Call Exercise Notice in accordance herewith
shall constitute a binding obligation (a) on the part of the Purchaser or his
Nominee(s) to purchase, and (b) on the part of the Seller to sell, the Seller’s
Shares subject to such Call Exercise Notice in accordance with the terms of this
Agreement.

     

    2.5.          Call Price. If the
Call Right is exercised pursuant to this Section 2, as payment for the Seller’s
Shares being purchased by the Purchaser or Nominee(s) pursuant to the Call
Right, such Purchaser or Nominee(s) shall pay the aggregate Call Price to the
Seller within fifteen (15) Business Days of the Exercise Date.

     

    2.6          
Delivery of the
Shares. Upon the receipt of a Call Exercise Notice, the Seller shall
deliver, or take all steps necessary to cause to be delivered the Seller’s
Shares being purchased pursuant to such Call Exercise Notice within three (3)
Business Days of the date of a Call Exercise Notice.

    

    2.7           Transfer Notice: In
case that the Purchaser transfers any or all of his Call Right to one or more
Nominees in accordance with Section 2.3 above, the Purchaser shall provide a
Transfer Notice to the Seller.

     

    
      	
              3.

            	
              ENCUMBRANCES;
      TRANSFERS, SET-OFF AND WITHHOLDINGS

            

    

    

    3.1.          Encumbrances. Upon
exercise of the Call Right, the Seller’s Shares being purchased shall be sold,
transferred and delivered to the Purchaser free and clear of any claim, pledge,
charge, lien, preemptive rights, restrictions on transfers (except as required
by securities laws of the United States), proxies, voting agreements and any
other encumbrance whatsoever.

     

    3.2           Transfers. Prior to
the Expiration Date, the Seller shall continue to own, free and clear of any
hypothecation, pledge, mortgage or other encumbrance, except pursuant to this
Agreement and except in favor of the Collateral Agent (as defined below) for the
benefit of the Purchaser, such amount of the Seller’s Shares as may be required
from time to time in order for the Purchaser to exercise his Call Right in
full.

     

    3.3.           Set-off. The
Purchaser shall be entitled to receive all of the Seller’s Shares subject to the
exercise of a Call Right, and for the purposes of this Agreement, Seller hereby
waives, as against the Purchaser or his Nominee(s), all rights of set-off or
counterclaim that would or might otherwise be available to the
Seller.

     

    3.4           Escrow of the Seller’s
Shares.

     

    (a)            Upon
execution of this Agreement, the Seller shall deliver to Global Law Office, with
an address at 15th Floor, Tower 1, China Central Place, No.81 Jianguo Road,
Beijing, China 100025, as Collateral Agent (the “Collateral Agent”), stock
certificates representing the Seller’s Shares. The stock certificates
representing the Seller’s Shares (together with duly executed stock powers in
blank) shall be held by the Collateral Agent.

     

    (b)            Upon
receipt of a Call Exercise Notice, the Collateral Agent shall promptly deliver
the Seller’s Shares being purchased pursuant to such Call Exercise Notice in
accordance with the instructions set forth therein.  In the event that
the Collateral Agent shall receive notice from the Parties that the Conditions
have not been met, the Seller’s Shares shall be distributed in accordance with
their instructions.

     

    
      	
              4.

            	
              REPRESENTATIONS,WARRANTIES
      AND COVENANTS.

            

    

    

    4.1.          Representations and
Warranties by the Seller. The Seller represents and warrants to the
Purchaser that:

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    (a)           Valid and Binding
Obligations. This Agreement, and all agreements and documents executed
and delivered pursuant to this Agreement, constitute valid and binding
obligations of the Seller, enforceable against such Seller in accordance with
its terms, subject to applicable Bankruptcy Laws and other laws or equitable
principles of general application affecting the rights of creditors
generally.

     

    (b)           No Conflicts. Neither
the execution or delivery of this Agreement by the Seller nor the fulfillment or
compliance by the Seller with any of the terms hereof shall, with or without the
giving of notice and/or the passage of time, (i) conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under,  any contract or any judgment, decree or order to which Seller
is subject or by which the Seller is bound, or (ii) require any consent,
license, permit, authorization, approval or other action by any Person or
Government Authority which has not yet been obtained or received. The execution,
delivery and performance of this Agreement by the Seller or compliance with the
provisions hereof by the Seller do not, and shall not, violate any provision of
any Law to which the Seller is subject or by which it is bound.

     

    (c)           No Actions. There are
no lawsuits, actions (or to the best knowledge of the Seller, investigations),
claims or demands from any other third party, or other proceedings pending or,
to the best of the knowledge of the Seller, threatened against the Seller which,
if resolved in a manner adverse to the Seller, would adversely affect the right
or ability of the Seller to carry out its obligations set forth in this
Agreement (the “Actions”) as of the execution of this Agreement. The Seller
further warrants and covenants that such actions will not occur after the
execution of this Agreement.

     

    (d)           Title. The Seller
owns the Seller’s Shares free and clear of any claim, pledge, charge, lien,
preemptive rights, restrictions on transfers, proxies, voting agreements and any
other encumbrance whatsoever, except as contemplated by this Agreement. The
Seller has not entered into or is a party to any agreement that would cause the
Seller to not own such Seller’s Shares free and clear of any encumbrance, except
as contemplated by this Agreement.

     

                  (e)             Exercise of Rights.
Without first obtaining written instruction from the Purchaser, the Seller will
not exercise any rights in connection with the Seller’s Shares to which the
Seller is entitled as of the date of this Agreement, including but not limited
to voting rights, share transfer right, dividends rights, preemptive right or
any rights in connection with pledge, proxy, charge, lien. The Seller further
warrants and covenants that it will, unconditionally and immediately, exercise
any rights in connection with the Seller’s Shares in compliance with the
Purchaser’s written instruction upon its receipt of such written
instruction.

    

    
      	
              4.2 

            	
              Representations and
      Warranties by Purchaser. The Purchaser represents and warrants to
      the Seller that:

            

    

     

    (a)           Valid and Binding
Obligations. This Agreement, and all agreements and documents executed
and delivered pursuant to this Agreement, constitute valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with its terms, subject to applicable Bankruptcy Laws and other laws or
equitable principles of general application affecting the rights of creditors
generally.

     

    (b)           No Conflicts. Neither
the execution nor delivery of this Agreement by the Purchaser nor the
fulfillment or compliance by the Purchaser with any of the terms hereof shall,
with or without the giving of notice and/or the passage of time, (i) conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract or any judgment, decree or order to
which Purchaser is subject or by which Purchaser is bound, or (ii) require any
consent, license, permit, authorization, approval or other action by any Person
or Government Authority which has not yet been obtained or received. The
execution, delivery and performance of this Agreement by the Purchaser or
compliance with the provisions hereof by the Purchaser do not, and shall not,
violate any provision of any Law to which Purchaser is subject or by which it is
bound.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (c)           No Actions. There are
no lawsuits, actions (or to the best knowledge of the Purchaser,
investigations), claims or demands or other proceedings pending or, to the best
of the knowledge of the Purchaser, threatened against the Purchaser which, if
resolved in a manner adverse to the Purchaser, would adversely affect the right
or ability of the Purchaser to carry out his obligations set forth in this
Agreement.

    

    
      	
              4.3

            	
              Covenants.

            

    

    

    (a)           Without
the prior written consent of the Purchaser, the Seller shall vote the Seller’s
Shares such that FAC shall not, (i) issue or create any new shares, equity,
registered capital, ownership interest, or equity-linked securities, or any
options or warrants that are directly convertible into, or exercisable or
exchangeable for, shares, equity, registered capital, ownership interest, or
equity-linked securities of FAC, or other similar equivalent arrangements, (ii)
alter the shareholding structure of FAC, (iii) cancel or otherwise alter the
Seller’s Shares, (iv) amend the charter or the by-laws of FAC, (v) liquidate or
wind up FAC, (vi) sell, transfer, assign, hypothecate or otherwise reduce the
value of any assets held by FAC, including but without limitation, any and all
shares in NCH and the Company or (vi) act or omit to act in such a way that
would be detrimental to the interest of the Purchaser in the Seller’s Shares,
(vii) transfer, assign, pledge, hypothecate or vest any option on his shares in
FAC to any third party.  The Seller shall cause FAC, NCH and the
Company to disclose to the Purchaser true copies of all the financial, legal and
commercial documents of FAC, NCH and the Company and the resolutions of the
shareholders and the board of directors.

    

    (b)           The
Seller agrees that the Purchaser or his Nominee(s) shall be entitled to all the
Distributions in respect of the Seller’s Shares.  In the event that
any such Distributions have been received by the Seller for any reason, the
Seller shall, at the request of the Purchaser, pay an amount equivalent to the
Distributions received by him to the Purchaser or his Nominee(s) at the time of
the exercise of the Call Right by the Purchaser or his Nominee(s).

    

    (c)           The
transaction contemplated hereunder and any information exchanged between the
Parties pursuant to this Agreement will be held in complete and strict
confidence by the concerned Parties and their respective advisors, and will not
be disclosed to any person except: (i) to the Parties’ respective officers,
directors, employees, agents, representatives, advisors, counsel and consultants
that reasonably require such information and who agree to comply with the
obligation of non-disclosure pursuant to this Agreement; (ii) with the express
prior written consent of the other Party; or (iii) as may be required to comply
with any applicable law, order, regulation or ruling, or an order, request or
direction of a government agency; provided, however, that the foregoing shall
not apply to information that: (1) was known to the receiving Party prior to its
first receipt from the other Party; (2) becomes a matter of public knowledge
without the fault of the receiving Party; or (3) is lawfully received by the
Party from a third person with no restrictions on its further
dissemination.

     

    (d)           If
at any time: (i) the Seller fails to deliver the Seller’s Shares in accordance
with this Agreement, if such failure is not remedied on or before the third
Business Day after notice of such failure is given to the Seller by the
Purchaser; (ii) the Seller fails to comply with or perform any agreement,
covenant or obligation to be complied with or performed by the Seller in
accordance with this Agreement if such failure is not remedied on or before the
third Business Day after notice of such failure is given to the Seller by the
Purchaser; or (iii) the Seller (1) becomes insolvent or is unable to pay his
debts or fails or admits in writing his inability generally to pay his debts as
they become due; (2) makes a general assignment, arrangement or composition with
or for the benefit of his creditors; (3) institutes or has instituted against
him a proceeding seeking a judgment of insolvency or bankruptcy or any relief
under any Bankruptcy Law, (4) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee, custodian
or other similar official for him or for all or substantially all his assets;
(5) has a secured party that takes possession of all or substantially all his
assets or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all his
assets, (6) causes or is subject to any event with respect to him which, under
the applicable Law, has an analogous effect to any of the events described in
clauses (1) through (5); or (7) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts, then the Call Right shall become immediately exercisable in respect of all
of the Seller’s Shares without further regard to the occurrence of any of the
Conditions as per Section 2 of this Agreement.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    
      	
              5.

            	
              MISCELLANEOUS.

            

    

    

    5.1.          Governing Law;
Jurisdiction. This Agreement shall be construed according to, and the
rights of the Parties shall be governed by, the laws of the State of New York,
without reference to any conflict of laws principle that would cause the
application of the laws of any jurisdiction other than New York. Each Party
hereby irrevocably submits to the exclusive jurisdiction of the federal and
state courts sitting in the City of New York, for the adjudication of any
dispute hereunder or in connection herewith, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that such, suit, action or proceeding is brought in
an inconvenient forum, or that the venue of such suit, action or proceeding is
improper.

     

    5.2.          Successors and
Assigns. No Party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other Party. The provisions
hereof shall inure to the benefit of, and be binding upon, the successors and
permitted assigns of the Parties.

     

    5.3.          Entire Agreement;
Amendment. This Agreement constitutes the full and entire understanding
and agreement between and among the Parties with regard to the subject matter
hereof. Any term of this Agreement may be amended only with the written consent
of each Party.

     

    5.4.          Notices and Other
Communications. Any and all notices, requests, demands and other
communications required or otherwise contemplated to be made under this
Agreement shall be in writing and shall be provided by one or more of the
following means and shall be deemed to have been duly given (a) if
delivered personally, when received, (b) if transmitted by facsimile, on
the date of transmission with receipt of a transmittal confirmation, or
(c) if by an internationally recognized overnight courier service, one
Business Day after deposit with such courier service. All such notices,
requests, demands and other communications shall be addressed to such address or
facsimile number as a party may have specified to the other parties in writing
delivered in accordance with this Section 6.4.

     

    5.5.         
Delays or
Omissions. No delay or omission to exercise any right, power or remedy
accruing to any Person hereunder, upon any breach or default under this
Agreement, shall impair any such right, power or remedy nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Person hereunder
of any breach or default under this Agreement, or any waiver on the part of any
Person of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing and
signed by the waiving or consenting Person.

    

     5.6.         Severability. If any
provision of this Agreement is found to be invalid or unenforceable, then such
provision shall be construed, to the extent feasible, so as to render the
provision enforceable and to provide for the consummation of the transactions
contemplated hereby on substantially the same terms as originally set forth
herein, and if no feasible interpretation would save such provision, it shall be
severed from the remainder of this Agreement, which shall remain in full force
and effect unless the severed provision is essential to the rights or benefits
intended by the Parties. In such event, the Parties shall use best efforts to
negotiate, in good faith, a substitute, valid and enforceable provision or
agreement which most nearly affects the Parties’ intent in entering into this
Agreement.

     

    5.7          
Construction.
The language used in this Agreement will be deemed to be the language chosen by
the Parties to express their mutual intent, and no rules of strict construction
will be applied against any Party.

     

    5.8.          
Further
Assurances. The Parties shall perform such acts, execute and deliver such
instruments and documents and do all other such things as may be reasonably
necessary to effect the transactions contemplated hereby.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    5.9.          Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.
Execution and delivery of this Agreement by exchange of facsimile copies bearing
the facsimile signature of a Party shall constitute a valid and binding
execution and delivery of this Agreement by such Party.

     

    [Remainder of the Page Intentionally
Left Blank]

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

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

    

    
      
        
          
            
              
                
                  	
                          Purchaser:

                        
	 
       
	
                          Rong
      Yang

                        

                

              

            

          

        

      

    

    

    
      
        
          
            
              
                
                  	
                          Seller:

                        
	  
      
	
                          Rui
      Shen

                        

                

              

            

          

        

      

    

    

    Acknowledged
and agreed to:

     

    Collateral
Agent:

    

    Global
Law Office

    

    
      
        
          	
                  By:
       

                
	
                  Name:

                

        

      

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    APPENDIX
A

    Form of Exercise
Notice

     

    [Date]

    [________________]
(the “Seller”)

    [________________]

    [________________]

    Attention:
[_______]

    

    
      
        
          	 
      	
                  Re:

                	
                  Call
      Option Agreement dated ____________ (the
      “Call Option Agreement”) between
      [                                    ]  (“Purchaser”) and
      [                                      ]
      (“Seller”).

                

        

      

    

    

    Dear
Sir:

    

    In
accordance with Section 2.3 of the Call Option Agreement, Purchaser hereby
provides this notice of exercise of the Call Right in the manner specified
below:

    

    
      	
            	
              (a)

            	
              The
      Purchaser hereby exercises its Call Rights with respect to Seller’s Shares
      pursuant to the Call Option
Agreement.

            

    

     

    
      	
            	
              (b)

            	
              The
      Purchaser intends to buy [    ] Seller’s Shares and
      shall pay the sum of $____________ to the
  Seller.

            

    

     

    
      
        
          
            
              
                	
                        Dated:
      _______________, ______

                      	 
      
	 
      	 
      
	 	  

              

            

          

        

      

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    APPENDIX
B

    

    Form of Transfer
Notice

    

    To          :           [                                    ]
(the “Seller”)

    

    From      :           [                                    ]
(the “Purchaser”)

    

    I, the
undersigned, refer to the Call Option Agreement (the "Call Option Agreement") dated
[     ], 2008 made between Purchaser and
Seller.  Terms defined in the Call Option Agreement shall have the
same meanings as used herein.

    

    I hereby
give you notice that I will transfer to [Nominees' names] the
following portion of the Call Right, expressed in terms of the number of
Seller’s Shares represented by the portion of the Call Right transferred in
accordance with the terms and conditions of the Call Option
Agreement,.

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Nominees

                              	 	
                                Option Shares to be
    Transferred

                              
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      

                      

                    

                  

                

              

            

          

        

      

    

    

    Dated [   ]

    

    Yours
faithfully

    

    
      
        
          	
                   

                
	
                  Name:

                
	
                  [Purchaser]

                

        

      

    

     

    
      
         

      

      
        11

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