<PAGE>

                                                                    Exhibit 10.7

          Confidential Materials omitted and filed separately with the

         Securities and Exchange Commission. Asterisks denote omissions.












                SPONSORED RESEARCH AND LICENSE AGREEMENT BETWEEN

   CRITICAL THERAPEUTICS, INC. AND NORTH SHORE - LONG ISLAND JEWISH RESEARCH
                                   INSTITUTE
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                     <C>
ARTICLE 1.  DEFINITIONS.........................................        1

         1.1.     "Affiliate"...................................        1
         1.2.     "Effective Date"..............................        2
         1.4.     "First Commercial Sale".......................        2
         1.5.     "License Term"................................        2
         1.6.     "Net Sales"...................................        2
         1.7.     "North Shore Patent Rights"...................        2
         1.8.     "North Shore Technology"......................        3
         1.9.     "North Shore Valid Patent Claim"..............        3
         1.10.    "Principal Investigator"......................        4
         1.11.    "Product(s)"..................................        4
         1.12.    "Research Plan"...............................        4
         1.13.    "Research Term"...............................        4
         1.14.    "Research Year"...............................        4
         1.15.    "Sponsored Research"..........................        4
         1.16.    "Territory"...................................        4

ARTICLE 2.  SPONSORED RESEARCH..................................        4

         2.1.     CTI Support...................................        4
         2.2.     Research Cooperation..........................        5
         2.3.     Conduct of the Sponsored Research.............        5
                  2.3.1.   Use of Research Funding..............        5
                  2.3.2.   Other Funding........................        5
                  2.3.3.   Data.................................        5
                  2.3.4.   Quarterly Reports....................        6
         2.4.     Visit of Facilities...........................        6

ARTICLE 3.  LICENSE.............................................        6

         3.1.     License Grant.................................        6
         3.2.     Government Rights.............................        7
         3.3.     Retention of North Shore Rights...............        7
         3.4.     CTI Diligence.................................        7

ARTICLE 4.  LICENSE FEE, ROYALTIES AND MILESTONES...............        8

         4.1.     License Fees..................................        8
         4.2.     Royalties.....................................        8
                  4.2.1.   Minimum Royalties....................        8
                  4.2.2.   Royalty Reports and Payments.........        9
                  4.2.3.   One Royalty..........................       10
                  4.2.4.   Sublicense Income....................       10
                  4.2.5.   Third-Party Licenses.................       10
         4.3.     Milestone Payments............................       11
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                                                                     <C>
ARTICLE 5.  PATENTS.............................................       12

         5.1.     CTI Authority.................................       12
         5.2.     Patent Expenses...............................       12
         5.3.     Right of North Shore to be Informed...........       12
         5.4.     North Shore Rights............................       13
         5.5.     Enforcement of North Shore Patent Rights......       13

ARTICLE 6.  CONFIDENTIALITY AND PUBLICATION.....................       13

         6.1.     Non-Disclosure Obligations....................       13
         6.2.     Release of Obligations........................       14
         6.3.     Publications..................................       14

ARTICLE 7.  REPRESENTATIONS AND WARRANTIES......................       14

         7.1.     Authorization.................................       14
         7.2.     License Warranty..............................       15
         7.3.     Remedies......................................       15

ARTICLE 8.  TERM AND TERMINATION................................       15

         8.1.     Expiration....................................       15
         8.2.     Termination for Cause.........................       15
         8.3.     Effect of Termination.........................       15

ARTICLE 9.  INDEMNIFICATION AND INSURANCE.......................       16

         9.1.     Indemnity.....................................       16
         9.2.     Insurance.....................................       16

ARTICLE 10.  MISCELLANEOUS......................................       16

         10.1.    Force Majeure.................................       16
         10.2.    Assignment....................................       17
         10.3.    Severability..................................       17
         10.4.    Notices.......................................       18
         10.5.    Applicable Law................................       18
         10.6.    Dispute Resolution............................       18
         10.7.    Entire Agreement..............................       19
         10.8.    Headings......................................       19
         10.9.    Independent Contractors.......................       19
         10.10.   Waiver........................................       19
         10.11.   Counterparts..................................       19
         10.12.   Use of Names..................................       20

</TABLE>



                                       ii
<PAGE>
                    SPONSORED RESEARCH AND LICENSE AGREEMENT

      This Sponsored Research and License Agreement (the "Agreement") is made
between Critical Therapeutics, Inc., a Delaware corporation ("CTI") and North
Shore - Long Island Jewish Research Institute, a New York not-for-profit
corporation ("North Shore").

                                    RECITALS

      WHEREAS, CTI desires to support North Shore research in the Field (defined
below) and to receive a license from North Shore in the Field; and,

      WHEREAS, North Shore desires to receive research support from CTI relating
to the Field and is willing to grant CTI a license under its rights in the
Field;


      NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, CTI and North Shore mutually agree as follows:

                             ARTICLE 1. DEFINITIONS

      For purposes of this Agreement, the terms defined in this Article shall
have the meanings specified below:

      1.1. "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with a party to this
Agreement. A corporation or other entity shall be regarded as in control of
another corporation or entity if it owns or directly or indirectly controls more
than fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or other entity or the power to elect or appoint fifty percent (50%)
or more of the members of the governing body of the corporation or other entity.

      1.2. "Effective Date" of this Agreement shall mean January 1, 2003.
<PAGE>
      1.3. "Field" shall mean the field of cholinergic anti-inflammatory
pathway-based products and methods.

      1.4. "First Commercial Sale" of any Product shall mean the first sale for
use or consumption by the general public of such Product in a country.

      1.5. "License Term" shall mean the later of ten years from the First
Commercial Sale for each Product or the last to expire of the North Shore Patent
Rights covering each Product on a country-by-country basis.

      1.6. "Net Sales" shall mean the gross amount billed or invoiced and
received by CTI or its Affiliates (but not sublicensees) for sale or other
disposition of Product(s) to independent third parties, less the following: (i)
customary trade, quantity, or cash discounts to the extent actually allowed and
taken; (ii) amounts repaid and credited by reason of rejection or return; and
(iii) to the extent separately stated on purchase orders, invoices, or other
documents of sale, any taxes or other governmental charges levied on the
production, sale, transportation, delivery, or use of the Product that is paid
by or on behalf of CTI or its Affiliates. Net Sales will be determined from the
books and records of CTI and its Affiliates maintained in accordance with
generally accepted accounting principles, consistently applied.

      1.7. "North Shore Patent Rights" shall mean (1) the patent applications
and patents listed on Schedule 1.7 together with any continuations,
continuations-in-part, divisionals, non-provisional applications, patents which
are granted based on any of the aforementioned applications and any reissues,
renewals, reexaminations, substitutions or extensions thereof and any foreign
counterparts to any of the foregoing and (2) all patent applications and granted
patents owned and/or controlled by North Shore which are based on inventions
made during the Research Term of this Agreement by the Principal Investigator
and/or his staff relating to the


                                       2
<PAGE>
Field, together with any continuations, continuations-in-part, divisionals,
non-provisional applications, patents which are granted based on any of the
aforementioned applications and any reissues, renewals, reexaminations,
substitutions or extensions thereof and any foreign counterparts to any of the
foregoing.

      1.8. "North Shore Technology" shall mean (1) all existing confidential and
proprietary information, data, know-how, materials (including biological
materials), inventions (whether patentable or not), models, screens, trade
secrets, patents, patent applications, and other intellectual property of any
kind, whether patented or unpatented, relating to the Field and owned and/or
controlled by North Shore and (2) all confidential and proprietary information,
data, know-how, materials (including biological materials), inventions (whether
patentable or nor), models, screens, trade secrets, patents, patent
applications, and other intellectual property of any kind, whether patented or
unpatented, relating to the Field, owned and/or controlled by North Shore and
developed by the Principal Investigator and/or his staff during the Research
Term of this Agreement.

      1.9. "North Shore Valid Patent Claim" shall mean either (a) a claim of an
issued and unexpired patent included within the North Shore Patent Rights, which
has not been held permanently revoked, unenforceable or invalid by a decision of
a court or other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been admitted
to be invalid or unenforceable through reissue, disclaimer or otherwise or (b) a
claim of any pending patent application included within the North Shore Patent
Rights, which claim was filed in good faith and has not been abandoned or
finally disallowed without the possibility of appeal or refiling of said
application.



                                       3
<PAGE>
      1.10. "Principal Investigator" shall be Kevin J. Tracey, M.D. If Dr.
Tracey is unable to perform as the Principal Investigator for any reason, CTI
and North Shore shall agree upon a new Principal Investigator mutually
acceptable to both.


      1.11. "Product(s)" shall mean any product in the Field: (1) covered by a
North Shore Valid Patent Claim; and/or (2) made by a process covered by a North
Shore Valid Patent Claim; and/or (3) resulting from the use of North Shore
Technology.


      1.12. "Research Plan" shall mean the research program described in
Attachment A hereto, as revised from time to time as provided for in this
Agreement.

      1.13. "Research Term" shall mean the initial three-year period starting on
the Effective Date of this Agreement and any extension of this initial period
mutually agreed upon by CTI and North Shore.

      1.14. "Research Year" shall mean each twelve-month period of the Research
Term with the first Research Year beginning on the Effective Date of this
Agreement.


      1.15. "Sponsored Research" shall be the research described in the Research
Plan.

      1.16. "Territory" shall mean the entire world.

                         ARTICLE 2. SPONSORED RESEARCH

      2.1. CTI Support. CTI agrees to financially support the Sponsored Research
at North Shore for the Research Term. The amount of CTI financial support shall
be:

         First Research Year            Two Hundred Thousand Dollars

                                        ($200,000.00)

         Second Research Year           Two Hundred Thousand Dollars

                                        ($200,000.00)

         Third Research Year            Two Hundred Thousand Dollars

                                        ($200,000.00)

         Fourth Research Year           To be mutually agreed upon


                                       4
<PAGE>
         Fifth Research Year            To be mutually agreed upon.

CTI shall make payments of Fifty Thousand Dollars ($50,000.00) to North Shore in
advance of the commencement of the Research Term and in advance of each
three-month anniversary thereof.

      2.2. Research Cooperation. During the Research Term, North Shore will
share with CTI data North Shore generates pursuant to the Research Plan on a
timely basis and North Shore and CTI will discuss and mutually agree upon
priorities, future research to be conducted, and any changes to the Research
Plan.


      2.3. Conduct of the Sponsored Research. The conduct of the Sponsored
Research shall be the primary responsibility of North Shore according to the
Research Plan, with participation, as appropriate, by CTI. The Sponsored
Research shall be conducted in good scientific manner, and in compliance with
all applicable good laboratory practices, and applicable legal requirements, to
attempt to achieve efficiently and expeditiously the objectives described in the
Research Plan. North Shore shall proceed diligently with the work set out in the
Research Plan using efforts consistent with North Shore's best research
practices. Without limiting the generality of the foregoing:

            2.3.1. Use of Research Funding. North Shore shall apply the research
funding it receives from CTI under this Agreement to conduct the research set
forth in the Research Plan.

            2.3.2. Other Funding. During the Research Term, North Shore shall
not accept research funding from any third-party for any research in the Field
in the laboratory of the Principal Investigator, except for funding from the
U.S. Government, without prior written approval from CTI, such approval not to
be unreasonably withheld.


            2.3.3. Data. North Shore shall maintain records in sufficient detail
and in good scientific manner as will properly reflect all work done and results
achieved in the performance


                                       5
<PAGE>
of the Research Plan (including all data in the form required to be maintained
under applicable governmental regulations). Such records shall include books,
records, reports, research notes, charts, graphs, comments, computations,
analyses, recordings, photographs, computer programs and documentation thereof,
computer information storage means, samples of materials and other graphic or
written data generated in connection with the Research Plan. North Shore shall
provide CTI with the right to inspect such records, and shall provide copies of
all requested records, to the extent reasonably required by CTI. Further, North
Shore will instruct all of its employees doing Sponsored Research to record
their inventions in bound laboratory notebooks and to sign and date each
notebook page and have it read, witnessed and signed by a scientific colleague
who is not a co-inventor of the work described.

            2.3.4. Quarterly Reports. Within fourteen (14) days following the
end of each calendar quarter, North Shore shall provide to CTI written reports
which summarize in reasonable detail the work it has performed under the
Research Plan during the preceding calendar quarter.

            2.4. Visit of Facilities. Representatives of CTI may, upon
reasonable notice and at times reasonably acceptable to North Shore, (a) visit
the North Shore facilities where the Sponsored Research is being conducted, and
(b) consult informally, during such visits, and by telephone at other times,
with personnel of North Shore performing the Sponsored Research.

                               ARTICLE 3. LICENSE

      3.1. License Grant. North Shore hereby grants to CTI and its Affiliates a
worldwide, royalty-bearing, sole and exclusive license in the Territory, with
the right to sublicense, to make, have made, use, offer for sale, sell and/or
import Product(s) under North Shore Patent Rights and North Shore Technology.
CTI shall provide North Shore with timely notification of each substantive
negotiation to sublicense rights hereunder and will thereafter keep North Shore


                                       6
<PAGE>
reasonably informed as to the substantive progress of such negotiations by
providing North Shore with copies of significant drafts of term sheets, any
final term sheets, and drafts of any contracts or sublicense agreements prior to
execution thereof so that North Shore will have an opportunity to review same.
CTI will also provide North Shore with a full and complete copy of each
sublicense actually granted, if any, pursuant to this Agreement and any
documents evidencing the consideration to be paid to CTI or its Affiliates
relating to the grant of any such sublicense within thirty (30) days of
execution thereof by CTI.

      3.2. Government Rights. CTI and North Shore mutually acknowledge that the
United States Government, as a matter of statutory right under 35 U.S.C.
Sections 200-212, holds or may hold a non-exclusive license and certain other
rights to North Shore Patent Rights as a consequence of research whose funding
includes funds supplied by the U.S. Government. North Shore warrants that to the
extent it is aware of any funding supplied by the U.S. Government, the details
of such funding shall be provided to CTI prior to execution of this Agreement.
The term "sole and exclusive" license shall be understood to be subject to the
rights of the U.S. Government without any effect on the parties' remaining
obligations, as set forth in this Agreement.


      3.3. Retention of North Shore Rights. Notwithstanding the exclusive rights
granted to CTI pursuant to Article 3.1, North Shore shall retain the right to
make and use Products in its own laboratories solely for non-commercial,
scientific purposes and for continued noncommercial research.

      3.4. CTI Diligence. During the term of this Agreement, CTI will use its
reasonable best efforts to develop and commercialize Products.



                                       7
<PAGE>
                ARTICLE 4. LICENSE FEE, ROYALTIES AND MILESTONES

      4.1. License Fees. CTI shall pay to North Shore One Hundred and Seventy
Five Thousand Dollars ($175,000.00) within one month after the Effective Date.
CTI shall pay to North Shore Ten Thousand Dollars ($10,000) within one month of
written notification to CTI of the filing of any new U.S. Patent Application
which is included in the definition of North Shore Patent Rights pursuant to
Paragraph 1.7(2). CTI shall pay to North Shore Fifteen Thousand Dollars
($15,000) within one month of written notification to CTI of the issuance of any
U.S. Patent which is included in the definition of North Shore Patent Rights
pursuant to Paragraph 1.7(2). All payments made pursuant to this paragraph shall
be non-refundable and not creditable against any other payment due hereunder.


      4.2. Royalties. CTI shall additionally pay to North Shore royalties in the
following amounts:

            [**]% on Net Sales of Products covered by a North Shore Valid Patent
Claim up to [**] Dollars ($[**]);

            [**]% on Net Sales of Products covered by a North Shore Valid Patent
Claim between [**] Dollars ($[**]) and [**] Dollars ($[**]);


            [**]% on Net Sales of Products covered by a North Shore Valid Patent
Claim above [**] Dollars ($[**]); and

            One-half of the above-specified amounts for Products not covered by
and not made by a process covered by a North Shore Valid Patent Claim.

      4.2.1. Minimum Royalties. During the Research Term, there shall be no
minimum royalties. Commencing in the first calendar year after the end of the
Research Term, CTI shall pay to North Shore non-refundable minimum annual
royalty payments as follows: First calendar year after Research Term - $100,000;
Second calendar year after Research Term


                                       8
<PAGE>
$150,000; Third calendar year after Research Term - $200,000; Fourth calendar
year after Research Term - $250,000; Fifth calendar year after Research Term -
$300,000; Sixth calendar year after Research Term - $350,000; Seventh calendar
year after Research Term - $400,000; and Eighth calendar year after Research
Term and each calendar year thereafter - $400,000. Each minimum annual royalty
payment will be payable to North Shore on January 15 of the calendar year in
which it is due and shall be creditable against royalties and/or milestone
payments due to North Shore for that calendar year only. Notwithstanding the
foregoing, if a generic version of a Product is marketed in the United States,
then the amount of the next minimum annual royalty payment shall equal [**]% of
the current minimum annual royalty payment or $[**], whichever is greater. Such
reduced minimum annual royalty payment shall continue for so long as the generic
version remains on the U.S. market.

            4.2.2. Royalty Reports and Payments. During the License Term and
following the First Commercial Sale of a Product in each country in the
Territory, CTI and its Affiliates shall furnish to North Shore quarterly reports
within sixty (60) days of the end of each calendar quarter, showing, on a
country-by-country basis, the gross sales of all Products sold by CTI and its
Affiliates during the reporting period, the calculation of Net Sales from such
gross sales, all consideration received by CTI and/or its Affiliates from
sub-licensees in connection with the grant of any sub-licenses pursuant to this
Agreement and the amount of any payments due to North Shore. Such quarterly
reports shall be accompanied by payment of the royalty amount or other payments
due for that calendar quarter. CTI and/or its Affiliates shall maintain complete
and accurate books of account and records showing Net Sales and amounts received
from sublicensees. Such books and records shall be open to inspection, in
confidence, by North Shore during usual business hours, by an independent
certified public accountant to whom CTI has no


                                       9
<PAGE>
reasonable objection, for two (2) years after the calendar year to which they
pertain, for the purpose of verifying the accuracy of the payments made to North
Shore pursuant to this Agreement. CTI and/or its Affiliates shall use
commercially reasonable efforts to require any sub-licensees hereunder to
maintain such books and allow such inspection by North Shore and shall, on
request, disclose such information to North Shore as part of such inspection.
Inspection shall be at North Shore's sole expense, shall be reasonably limited
to those matters related to the payment obligations under this Agreement, and
shall be permitted no more than once per calendar year. Any underpayment to
North Shore revealed by the inspection shall be paid to North Shore by CTI
within thirty (30) days of the inspection. If the inspection reveals an
underpayment to North Shore in excess of 10%, then CTI will also pay the cost of
the inspection.

            4.2.3. One Royalty. Royalty payments pursuant to Article 4.2 shall
be due only on the first sale or other disposition of Product(s) to an
independent third party.

            4.2.4. Sublicense Income. In the event that CTI or its Affiliates
grants one or more sublicenses, CTI shall pay or cause its Affiliates to pay, as
the case may be, to North Shore an amount equal to [**] percent ([**]%) of all
consideration in any form (net of any payments required to be made by CTI to any
third party pursuant to any technology and/or patent license agreement between
CTI and such third party because of the receipt of such consideration by CTI)
received by CTI and/or its Affiliates for the sublicense(s).

            4.2.5. Third-Party Licenses. In the event that CTI or its Affiliates
are required to make payments to any third party pursuant to any technology
and/or patent license agreement between CTI and such third party because of the
sale of Products by CTI or its Affiliates, the amount of royalties due under
Article 4.2 to North Shore for such Products shall be reduced by an amount equal
to [**] percent ([**]%) of the payments due to third-parties but in no event


                                       10
<PAGE>
shall payments due under Article 4.2 be reduced by more than [**] percent
([**]%) because of the reduction permitted by this paragraph.

      4.3. Milestone Payments. CTI and its Affiliates shall additionally pay to
North Shore the following Milestone Payments:

      (a)   [**]:

            (i)   [**] Dollars ($[**]); and

            (ii)  [**] Dollars ($[**]) in CTI Common Stock at the last valuation
                  prior to this milestone being met.

      (b)   [**]:

            (i)   [**] Dollars ($[**]); and

            (ii)  [**] Dollars ($[**]) in CTI Common Stock at the last valuation
                  prior to this milestone being met.

      (c)   [**]:

            (i)   [**] Dollars ($[**]).

      (d)   [**]:

            (i)   [**] Dollars ($[**]).


                               ARTICLE 5. PATENTS

      5.1. CTI Authority. CTI shall have primary responsibility for filing,
prosecuting, issuing, maintaining and defending North Shore Patent Rights in the
United States and worldwide, employing patent counsel of its choice. Initially,
CTI's choice for patent counsel is the firm of Hamilton, Brook, Smith &
Reynolds, P.C., Concord, Massachusetts, for which North Shore grants its
approval. If CTI decides to retain a different or additional patent counsel in
the future, North Shore shall have the right to approve CTI's selection of a
different or additional patent counsel, such approval not to be unreasonably
withheld. Patent counsel selected by CTI shall treat North Shore as its client
and the owner of North Shore Patent Rights.


                                       11
<PAGE>
      5.2. Patent Expenses. CTI agrees to reimburse North Shore for all past
costs and fees incurred by North Shore for all patent work performed in
connection with North Shore Patent Rights prior to the Effective Date of this
Agreement. CTI also agrees to bear the future costs for all patent work
performed pursuant to Article 5.1. Bills for such work may be rendered to North
Shore, in which case CTI agrees to promptly reimburse North Shore for its
expenses in this regard. Alternatively, for convenience, bills for work
performed pursuant to Article 5.1 may be sent directly to CTI for payment, with
a copy to North Shore.

      5.3. Right of North Shore to be Informed. For work performed by patent
counsel selected by CTI pursuant to Article 5.1, such patent counsel shall keep
North Shore apprised of the status of each of the patent applications and
patents in the North Shore Patent Rights and will consult with North Shore
concerning the prosecution of such patent applications. Such patent counsel will
provide North Shore in a timely manner with copies of all documents related to
the filing, prosecution, issuance, maintenance and/or defense of such
applications or patents in the North Shore Patent Rights.

      5.4. North Shore Rights. If CTI decides to abandon any application or
patent in the North Shore Patent Rights, it agrees to provide North Shore with
sufficient notice to allow North Shore to assume filing, prosecution and/or
maintenance of that application or patent using counsel of its own choice. If
North Shore does assume future filing, prosecution or maintenance of such
application or patent, CTI shall no longer be licensed under that patent
application pursuant to this Agreement.


      5.5. Enforcement of North Shore Patent Rights. If CTI or North Shore
becomes aware of any actual or potential infringement of North Shore Patent
Rights, it will notify the other party and CTI and North Shore will subsequently
confer and agree about appropriate action against


                                       12
<PAGE>
such actual or potential infringement. If it is decided to enforce North Shore
Patent Rights against such infringement, CTI shall have the first right to do so
and North Shore shall provide full cooperation at the expense of CTI. Any
settlement or recovery received from any such proceeding shall be divided [**]
percent ([**]%) to CTI and [**] percent ([**]%) to North Shore after CTI deducts
from any such settlement or recovery its reasonable counsel fees and
out-of-pocket expenses relative to any such legal proceeding. If CTI decides not
to initiate legal proceedings against any such infringer, then North Shore shall
have the right to initiate such legal proceedings. Any settlement or recovery
received from any such proceeding shall be divided [**] percent ([**]%) to North
Shore and [**] percent ([**]%) to CTI after North Shore deducts from any such
settlement or recovery its reasonable counsel fees and out-of-pocket expenses
relative to any such legal proceeding.

                   ARTICLE 6. CONFIDENTIALITY AND PUBLICATION

      6.1. Non-Disclosure Obligations. During the Research Term and for a period
of five (5) years thereafter, both parties shall maintain in confidence, and use
only for purposes of this Agreement, confidential information and data received
from the other party. Upon expiration or termination of this Agreement, all
confidential information and data, and copies thereof, will be returned to the
transmitting party by the receiving party upon request of the transmitting
party.

      6.2. Release of Obligations. The obligations under Article 6.1 shall not
apply or shall cease to apply, as the case may be, to any information or data
that:

            (a) is or becomes publicly available;

            (b) is disclosed to the receiving party by a third party that is not
under an obligation to other party to this Agreement;

            (c) prior to disclosure to the other party, the receiving party was
already in possession of the information or data; or,

                                       13
<PAGE>
            (d) was independently developed by the receiving party without
breach of the obligations of Article 6.1.

      6.3. Publications. North Shore shall be free to publish any information or
data generated as a result of the Sponsored Research except for CTI confidential
information. Any proposed publication containing such information or data shall
be submitted to CTI at least thirty (30) days prior to the intended date of
submission for publication. CTI shall have the right to (i) delete CTI
confidential information from the proposed publication and/or (ii) request delay
of the submission for a maximum period of forty-five (45) days to allow for
patent applications covering such information or data to be filed. Nothing
herein contained shall preclude North Shore from making required reports or
disclosures to the National Institutes of Health or any other granting agency.

                   ARTICLE 7. REPRESENTATIONS AND WARRANTIES

      7.1. Authorization. Each party warrants and represents to the other that
it has the legal right and power to enter into this Agreement, to fully perform
its obligations hereunder, and that it has not made nor will it make any
commitments to others in conflict with or in derogation of such rights or this
Agreement. Except as otherwise disclosed, each party further represents to the
other that it is not aware of any legal obstacles, including patent rights of
others, which could prevent it from carrying out the provisions of this
Agreement.

      7.2. License Warranty. In addition, North Shore warrants and represents
that it has the legal right and power to grant the licenses granted to CTI under
this Agreement.

      7.3. Remedies. The liability of North Shore for CTI's damages for any
breach of the warranties and representations contained in this Article will be
limited to reimbursement to CTI by North Shore of the total of all of the
payments received by North Shore pursuant to this Agreement.

                                       14
<PAGE>
                        ARTICLE 8. TERM AND TERMINATI0N

      8.1. Expiration. Unless terminated earlier pursuant to Article 8.2 below,
the term of this Agreement shall extend to the full License Term.

      8.2. Termination for Cause. Upon or after a breach of any material
provision of this Agreement by a party (including non-timely payment of any
payment due to North Shore hereunder), the non-breaching party may terminate
this Agreement by giving the breaching party thirty (30) days notice in writing
specifying the breach; providing, however, that such notice of termination shall
not be effective: (1) if the breaching party cures the specified breach within
such thirty (30) day period; or (2) if the specified breach is not reasonably
curable within such thirty (30) day period, and the breaching party has
commenced cure of such breach within the thirty (30) day period and thereafter
has proceeded diligently to cure such breach within a reasonable time.

      8.3. Effect of Termination. Expiration or termination of this Agreement
shall not relieve the parties of any obligation accruing prior to such
expiration or termination. Moreover, the provisions of Article 6 shall survive
the expiration or termination of this Agreement.

                    ARTICLE 9. INDEMNIFICATION AND INSURANCE

      9.1. Indemnity. CTI shall indemnify and hold North Shore harmless from and
against any liability, losses, damages, claims, costs and expenses (including
reasonable fees of attorneys and other professionals and court cost) arising
from CTI's conduct under this Agreement or a product liability claim, action or
cause of action related to the sale of Products or an act of infringement by CTI
of a third party's patent, copyright or trademark in connection with the
manufacture, use, sale, storage or advertising of Products except to the extent
that such claims, demands, suits or causes of action are based upon gross
negligence or willful malfeasance by North Shore (hereafter collectively called
"Claim"). Subject to the terms and conditions of this


                                       15
<PAGE>
Agreement, CTI will have the primary responsibility for defending against any
Claim (whether arising under theories of negligence, strict liability, tort,
product liability or otherwise and whether or not North Shore is named as a
defendant in such claim, action or cause of action).


      9.2. Insurance. In accordance with the provisions of Article 9.1 above,
CTI shall arrange for sufficient insurance and/or self-insurance coverage
commencing no later than the First Commercial Sale and, if possible, will name
North Shore as an additional insured.

                           ARTICLE 10. MISCELLANEOUS

      10.1. Force Majeure. Neither party shall be held liable or responsible to
the other party or be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from cases beyond the reasonable
control of the affected party, including, but not limited to, fire, floods,
embargos, war, acts of war (whether war is declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God, or acts, omissions or delays in acting by any Governmental authority for
the other party.

      10.2. Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the written consent of the other party;
provided, however, that CTI and its Affiliates may, without such consent, assign
this Agreement and its rights and obligations hereunder in connection with the
transfer or sale of all or substantially all of its business relating to the
Field, or in the event of its merger or consolidation. Any purported assignment
in violation of the preceding sentence shall be void. Any permitted assignee
shall assume all obligations of its assignor under this Agreement. North Shore
shall have the right to sell, assign or otherwise transfer its entire right,
title and interest to the patent applications and/or patents within North Shore
Patent Rights to an North Shore Affiliate, provided the Affiliate assumes all of
the obligations of North Shore hereunder. Otherwise, North Shore shall not sell,
assign or


                                       16
<PAGE>
otherwise transfer title or any portion thereof to any patent application or
patent within the North Shore Patent Rights as long as exclusive licenses under
that patent application and/or patent are still held by CTI without the prior
written consent of CTI, which consent will not be unreasonably withheld.

      10.3. Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions, which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement, as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not have entered into this Agreement
without the invalid provisions.


      10.4. Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor, and shall be effective upon receipt by
the addressee.

      If to CTI:             CRITICAL THERAPEUTICS, INC.
                             675 Massachusetts Avenue
                             14th Floor
                             Cambridge, Massachusetts 02139
                             Attention:  President
                             Fax:  (617) 252-4342

                                       17
<PAGE>
      If to North Shore:     NORTH SHORE - LONG ISLAND JEWISH RESEARCH INSTITUTE
                             350 Community Drive
                             Manhasset, New York 11030
                             Attention:  Chief Executive Officer
                             Fax:  (516) 562-1022

      With a copy to:        LEGAL AFFAIRS NS-LIJ HEALTH SYSTEM
                             150 Community Drive
                             Great Neck, New York 11021
                             Attention:  General Counsel
                             Fax:  (516) 465-8105.

      10.5. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to any conflict
of laws provisions thereof.

      10.6. Dispute Resolution. Any disputes arising between the parties
relating to, arising out of or in any way connected with this Agreement or any
term or condition hereof, or the performance by either party of its obligations
hereunder, whether before or after termination of this Agreement, shall be
promptly presented to the President of CTI and the Chief Executive Officer of
North Shore for resolution. If prompt resolution is not reached, the dispute may
be submitted to the American Arbitration Association in New York, New York for
non-binding mediation.

      10.7. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both parties hereto.


                                       18
<PAGE>
      10.8. Headings. The captions to the several articles hereof are not a part
of this Agreement, but are merely guides or labels to assist in locating and
reading the several articles.


      10.9. Independent Contractors. It is expressly agreed that CTI and North
Shore are independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither CTI
nor North Shore shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the other party to do so.


      10.10. Waiver. The waiver of either party hereof of any right hereunder or
of any failure to perform by the other party or of a breach by the other party
shall not be deemed a waiver of any other right hereunder or of any other breach
or failure by said other party whether of a similar nature or otherwise.

      10.11. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, both of which together shall
constitute one and the same instrument.

      10.12. Use of Names. North Shore and CTI (and its respective Affiliates)
each shall not use the name of the other without prior written consent of the
other, which shall not be unreasonably withheld, except if the use of such name
is required by law, regulation or judicial order, in which event the party
intending to use or using such name will promptly inform the other party of such
required use.


                                       19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set
forth below.

<TABLE>
<S>                                                          <C>
CRITICAL THERAPEUTICS, INC.                                  NORTH SHORE - LONG ISLAND JEWISH RESEARCH INSTITUTE

By:   /s/ Paul Rubin                                         By:   /s/ illegible
      --------------                                               -------------
Its:  President & CEO                                        Its:  VP & COO

Date:  12-23-02                                              Date:  12/20/02


Agreed to and Accepted

By:  /s/ Kevin J. Tracey
     -------------------
     Kevin J. Tracey, M.D.
     Principal Investigator

Date:  20 December 2002

</TABLE>




                                       20
<PAGE>
                                  ATTACHMENT A

       RESEARCH PLAN: CHOLINERGIC ANTI-INFLAMMATORY PATHWAY (CAP) PROGRAM

                                      [**]
<PAGE>
                                SCHEDULE 1.7

              PATENT APPLICATIONS IN NORTH SHORE PATENT RIGHTS

<TABLE>
<CAPTION>
 REF. NO.  COUNTRY      TITLE   APP NO./ FILE  FILE TYPE  PARENT NO./   INVENTOR(S)   PATENT    STATUS
                                     DATE                  FILE DATE                    NO.
                                                                                      ISSUE
                                                                                       DATE

<S>        <C>          <C>     <C>            <C>        <C>           <C>           <C>       <C>
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   [**]     [**]        [**]         [**]        [**]        [**]           [**]                [**]
   [**]     [**]        [**]         [**]        [**]        [**]           [**]                [**]
   [**]     [**]        [**]         [**]        [**]        [**]           [**]                [**]
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   [**]     [**]        [**]         [**]        [**]        [**]           [**]       [**]     [**]

</TABLE>


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