Document:

Side Letter

 EXHIBIT 10.4 
 February 15, 2007 
 Pfizer Inc. 
 235 East 42nd
Street 
 New York, NY 10017-5755 

			
	Attention:	  	    Edmund P. Harrigan
		  	    Senior Vice President, World-Wide Business Development

  

			
	Re:	  	Exclusive License Agreement

 Dear Mr. Harrigan: 
 As you are aware, pursuant to the Exclusive License Agreement dated February 15, 2007 (“Pfizer Agreement”), Pfizer Inc. and Pfizer Products, Inc. (collectively, “Pfizer”) have licensed to
InSite Vision Incorporated (“Licensor”) certain rights owned by Pfizer. Licensor proposes to enter into an agreement (the “Licensee Agreement”) with Inspire Pharmaceuticals, Inc. (“Licensee”) pursuant to which Licensor
would grant to Licensee among other things a sublicense under the rights and licenses granted to Licensor under the Pfizer Agreement. 
 1. No Default. Pfizer confirms that, as of the date of this letter agreement (the “Letter Agreement”), the Pfizer Agreement remains in full force and effect and Pfizer has not given any notice to
Licensor of any default by Licensor under the Pfizer Agreement. 
 2. Consent to Sublicense. Pfizer hereby gives its
consent, pursuant to Section 2(b) of the Pfizer Agreement, to Licensor granting sublicenses to Licensee pursuant to the Licensee Agreement under the rights and licenses granted to Licensor under the Pfizer Agreement. Licensor and Licensee agree
to promptly notify Pfizer as to the date the Licensee Agreement becomes effective (the “Effective Date”). 
 3.
Effective Date. Paragraphs 4 - 10 of this Letter Agreement shall become effective as of the Effective Date, and except as otherwise expressly provided the provisions of this Letter Agreement shall be effective from the date of first written
above. 
 4. Licensor Default. Under Pfizer Agreement. Pfizer agrees to provide Licensee with notice of any breach or
default by Licensor under the Pfizer Agreement at the same time it notifies Licensor of such breach or default. Such notice to Licensee shall be given in accordance with Paragraph 9 below. Licensee will be provided, in all respects, the opportunity
to cure on behalf of Licensor any breach or default by Licensor under the Pfizer Agreement within the sixty (60) day cure period (or ten (10) day cure period, with respect to breach or default of a payment obligation) as set forth in
Section 13 of the Pfizer Agreement, and Pfizer shall accept any such cure by Licensee on Licensor’s behalf. 

 5. Patents. If and to the extent Licensor is permitted to prosecute any patent
application or maintain any patent within the Licensed Patents (as defined in the Pfizer Agreement) in the United States or Canada (such countries collectively being referred to herein as the “Territory”), and Licensor does not exercise
such right within ten (10) days of the date such right arises under the Pfizer Agreement, Licensee may, upon written notice to Pfizer, assume full responsibility, at Licensee’s discretion, cost and expense, for prosecution of such
application or maintenance of such patent in such country. If and to the extent Licensor is permitted to initiate legal proceedings against an infringer of any of the Licensed Patents in any country in the Territory pursuant to Section 8(a) or
8(c) of the Pfizer Agreement, and Licensor does not exercise such right within ten (10) days of the date such right arises under the Pfizer Agreement, Licensee may, upon notice to Pfizer, initiate and carry on such legal proceedings pursuant to
the terms of Sections 8(a), 8(c), 8(d) and 8(e) thereof. 
 6. Continuation of Licensee’s Sublicense Rights Upon
Termination of the Pfizer Agreement. Subject to the licenses granted to Licensor in the Pfizer Agreement, Pfizer agrees to grant to Licensee all rights and licenses granted to Licensor under the Pfizer Agreement on the same terms and conditions
that such rights and licenses were granted to Licensor under the Pfizer Agreement, to the extent such terms and conditions arise from or apply to the grant of rights and licenses from Licensor to Licensee under the Licensee Agreement with respect to
the Territory, including all payment and termination provisions of the Pfizer Agreement (collectively, the “Stand-By License”); provided, however, that Pfizer will grant such rights and licenses only after the Pfizer Agreement first
terminates or otherwise ceases to be in effect for any reason, whether or not in connection with any laws governing an insolvency, reorganization, bankruptcy, liquidation or winding up of Licensor as applicable (the effective time of such
termination or other cessation, the “Effective Time”). Accordingly, as of the Effective Time, the Stand-By License shall become effective and Licensee may exercise the rights granted by Pfizer in this Paragraph 6 notwithstanding any
failure by Licensee to cure Licensor’s breach or default pursuant to Paragraph 4 above without the need for further action by Pfizer or Licensee, and Licensee shall be subject to all of the terms and conditions of the Pfizer Agreement to the
extent such terms and conditions arise from or apply to the grant of rights and licenses from Licensor to Licensee under the Licensee Agreement with respect to the Territory. Nothing in this Letter Agreement shall affect, modify or diminish in any
way, any of Pfizer’s rights or remedies relating to breaches of the Pfizer Agreement by Licensor; provided, however, that if Licensee pays Pfizer any overdue amounts owed to Pfizer by Licensor under the Pfizer Agreement, Licensee shall be
subrogated to any claim that Pfizer has against Licensor for such amounts. 
 7. Payments and Obligations Following
Effective Time. For clarity and without limiting Paragraph 6 above, from and after the Effective Time, all payments to Pfizer under Section 3 of the Pfizer Agreement shall be an obligation of and payable by Licensee to Pfizer and calculated
based on amounts that would have been payable by Licensor under the Pfizer Agreement had it stayed in effect. 
 8.
Bankruptcy. All rights and licenses granted under or pursuant to this Letter Agreement and all the other agreements referred to herein (including, without limitation, the Licensee Agreement) are, and shall otherwise be deemed to be, for
purposes of Section 

  

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365(n) of the U.S. Bankruptcy Code, 11 U.S.C. section 101 through 1330 et seq., licenses of rights to “intellectual property” as defined under
Section 101 of the U.S. Bankruptcy Code. 
 9. Notices. Any notices required hereunder shall be sent by
registered or certified mail or by an equivalent service capable of verification at the address stated below or such other address as to which the parties may provide in the future. 
  

			
	If to Pfizer:	    	Pfizer Inc. and Pfizer Products Inc.
		    	235 East 42nd Street
		    	New York, New York 10017-5755
		    	Attention: General Counsel
		    	Fax: 212-309-0564
		
	If to Licensee:	    	Inspire Pharmaceuticals, Inc.
		    	4222 Emperor Boulevard, Suite 200
		    	Durham, North Carolina 27703
		    	Attention: General Counsel
		    	Facsimile No.: 919-941-9797
		
	With a copy to:	    	Smith, Anderson, Blount,
		    	Dorsett, Mitchell & Jernigan, L.L.P.
		    	2500 Wachovia Capitol Center
		    	Raleigh, North Carolina 27601
		    	Attention: Christopher Capel
		    	Facsimile No.: 919-821-6800

 10. Miscellaneous. 
 a. Sublicenses. Upon termination of any license rights granted to Licensee under the Stand-By License, each of Licensee’s
permitted sublicenses thereunder shall remain in effect and become a direct license of such rights by Pfizer to the sublicensee thereunder, provided that such sublicensee agrees in writing to be bound by the terms of the Stand-By License as if it
were a party thereto. 
 b. Counterparts. This Letter Agreement may be executed in any number of counterparts each of
which shall be original and all originals of which shall be deemed a single instrument. 
 c. Full Understanding. This
Letter Agreement, the Licensee Agreement and the Pfizer Agreement represent the full understanding among the parties with respect to the subject matter hereof. 
 d. Modification/Waiver. No modification or waiver of this Letter Agreement shall be effective except in a written document signed
by the party against whom such waiver or modification is to be enforced. 
  

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 e. No Assignment. This Letter Agreement may not be assigned without the prior
written consent of each party hereto except to an affiliate of the assigning party or to any successor in interest in connection with the sale or transfer of substantially all or the entire business and assets of the assigning party related to the
subject matter hereof, provided that such affiliate or successor in interest agrees in writing to be bound by the terms of this Letter Agreement as if it were a party hereto, or in connection with a permitted assignment by Licensor or Pfizer of the
Pfizer Agreement as provided in Article 16 of the Pfizer Agreement. 
 f. Independent Contractors. This Letter
Agreement shall not constitute any party as the joint venturer, legal representative or agent of any other party hereto and no party hereto shall have the right or authority to assume or create any obligation on the part of any other party hereto.

 g. Confidentiality. All trade secrets or other proprietary information regarding a party’s technology,
products, business or objectives, including without limitation the terms of this Letter Agreement, the Licensee Agreement and any sublicense agreement permitted hereunder and any information provided or made available pursuant to the reporting,
audit or other provisions of the Pfizer Agreement, provided by a party to another party hereto in connection with the activities contemplated by this Letter Agreement, the Pfizer Agreement or the Licensee Agreement shall be deemed the confidential
information of the party originally providing such information, subject the limitations set forth in Section 1(c) of the Pfizer Agreement (“Confidential Information”). Each party agrees to treat the Confidential Information of the
other parties hereto in accordance with all terms and conditions set forth in Section 11(a) of the Pfizer Agreement as if such terms and conditions were set forth in full in this Letter Agreement. 
 h. Publicity. Licensee shall be permitted to publicly announce (1) the execution of the Pfizer Agreement in an announcement
comparable to the announcement agreed by Pfizer and Licensor in Section 11(b) of the Pfizer Agreement and (2) the execution of this Letter Agreement. 
 Remainder of Page Intentionally Left Blank 
  

 4 

 Please sign and return a copy of this Letter Agreement to us to acknowledge our mutual agreement on this
matter. Both Licensee and Licensor wish to thank you, again, for all of your assistance. 
  

			
	Inspire Pharmaceuticals, Inc.
		
	By:	 	 /s/ Christy L. Shaffer

	Name:	 	Christy L. Shaffer, Ph.D.
	Title:	 	President & CEO
	
	AGREED AND ACKNOWLEDGED:
	
	Pfizer Inc.
		
	By:	 	 /s/ Edmund P. Harrigan

	Name:	 	Edmund P. Harrigan
	Title:	 	Senior Vice President
	
	Pfizer Products, Inc.
		
	By:	 	 /s/ Brian C. Zielinski

	Name:	 	Brian C. Zielinski
	Title:	 	Vice President, attorney-in-fact
	
	ACKNOWLEDGED:
	
	InSite Vision Incorporated
		
	By:	 	 /s/ S. Kumar Chandrasekaran

	Name:	 	S. Kumar Chandrasekaran
	Title:	 	CEOAmended and Restated Directors Compensation Policy

 EXHIBIT 10.5 
 INSPIRE PHARMACEUTICALS, INC. 
 AMENDED
AND RESTATED 
 DIRECTOR COMPENSATION POLICY 

 

			
	Amended and Restated: March 29, 2007	  	Page 1 of 4

  

 All non-employee members (each, a “Director” and, collectively, the “Directors”) of the Inspire Pharmaceuticals, Inc. (the “Company”) Board of Directors (the “Board”) shall
receive the following compensation pursuant to this Amended and Restated Director Compensation Policy (this “Policy”): 
  

	A.	Cash Compensation.  

 1. Each Director shall
receive $30,000 annually to cover general availability and participation in meetings and conference calls of the Board; 
 2. Each Audit
Committee member shall receive $10,000 annually to cover general availability and participation in Audit Committee conference calls and meetings; 
 3. Each Corporate Governance Committee member shall receive $10,000 annually to cover general availability and participation in Corporate Governance Committee conference calls and meetings; 
 4. Each Compensation Committee member shall receive $10,000 to cover general availability and participation in Compensation Committee conference calls and
meetings; 
 5. The Chairman of the Board shall receive an additional $30,000 annually. The Chairman of each committee identified above shall
receive an additional $10,000 annually; and 
 6. Each Director shall receive $3,500 per day, plus reasonable out-of-pocket travel expenses,
to cover preparation for, attendance at and participation in the meetings, seminars and other events comprising the Company’s “Science Day”, including any follow-up discussions relating to the issues discussed at the Science Day (it
being understood that such compensation shall be paid only to those Directors that attend a Science Day and that the events constituting a Science Day may take place over a period of time covering up to 48 hours). 

			
	INSPIRE AMENDED AND RESTATED DIRECTOR COMPENSATION POLICY	  	PAGE 2 OF 4

  
  

	B.	Stock Option Grants. 

 1. A stock option grant in the amount of 50,000 shares will be granted to each Director upon initial election to the Board, which stock option will vest over three years commencing on the date of grant as follows:
20,000 shares in year one (1/4th of such 20,000 shares per quarter), 15,000 shares in year two (1/4th of such 15,000 shares per quarter) and 15,000 shares in year three (1/4th of such 15,000 shares per quarter); provided, however, that all vesting will cease if the Director resigns from the Board or otherwise ceases to
serve as Director, unless the Board determines that the circumstances warrant continuation of vesting; 
 2. A stock option grant in the amount of 30,000 shares shall be granted to each Director at the time of each annual meeting of the Board of Directors, which stock option will vest over the one year period commencing
on the date of grant (1/4th of such 30,000 shares per quarter); provided, however, that all vesting
will cease if the Director resigns from the Board or otherwise ceases to serve as Director, unless the Board determines that the circumstances warrant continuation of vesting; and 
 3. A stock option grant in the amount of 10,000 shares shall be granted to the Chairman of the
Board at the time of the annual meeting of the Board of Directors, which stock option grant will vest over the one year period commencing on the date of grant (1/4th
of such 10,000 shares per quarter); provided, however, that all vesting will cease if such person resigns from the position of Chairman of the Board, unless the Board
determines that the circumstances warrant continuation of vesting. 
  

	C.	Vacancies. In the event that a Director is appointed to fill a vacancy on the Board, any Committee of the Board, or as Chairman of the Board, the Board will determine
the amount of cash compensation and stock option grants appropriate to provide such Director with comparable compensation for the period such Director will so serve for the remainder of the term. 

  

	D.	Payment/Grant Procedure. All cash compensation payments made pursuant to this Policy shall be paid quarterly in arrears as soon as practicable, but not later than 10
days, after the last day of such quarter. 

 All stock options awarded pursuant to this Policy (other than options granted
pursuant to Paragraph C and, in certain circumstances options granted pursuant to Paragraph B.1) shall be granted on the date of the annual meeting of the Board of Directors, and the exercise price for each share available under such option will be
equal to the fair market value of the common stock of the Company, par value of $.001 per share (the “Common Stock”), on the date of such grant. All stock options awarded pursuant to Paragraphs B.1 and C of this Policy shall be granted on
the date of such appointment, and the exercise price for each share available under such option will be equal to the fair market value of the Common Stock, on the date of such grant. 
  

	E.	 Effective Date. All cash compensation provisions of this Policy and any stock option grant pursuant to Paragraph B.1 shall be effective as of
April 1, 2007. The Stock option grant provisions of Sections B.2 and B.3 of this Policy shall be effective for Directors 

			
	INSPIRE AMENDED AND RESTATED DIRECTOR COMPENSATION POLICY	  	PAGE 3 OF 4

  

	 	 
elected or serving as of the annual meeting of stockholders to be held in, or after, 2007, or appointed to a Committee or as Chairman of the Board at the
annual meeting of the Board of Directors to be held in, or after, 2007. 

  

	F.	Change of Control Provisions. Notwithstanding the foregoing, all options granted under this Policy shall vest immediately if: (i) there is a Change of Control (as
hereinafter defined); and (ii) the optionee will cease to serve as a Director of the Company as a result of such Change of Control. 

 (a) For purposes of this Policy, a “Change of Control” means the determination (which may be made effective as of a particular date) by the Board, made by a majority vote that a Change of Control has
occurred, or is about to occur. Such a change shall not include, however, a restructuring, reorganization, merger or other change in capitalization in which the Persons (as defined below) who own an interest in the Company on the date hereof (the
“Current Owners”) (or any individual or entity which receives from a Current Owner an interest in the Company through will or the laws of descent and distribution or otherwise) maintain more than a fifty percent (50%) interest in the
resultant entity. Regardless of the vote of the Board or whether or not the Board votes, a Change of Control will be deemed to have occurred as of the first day any one (1) or more of the following subsections shall have been satisfied:

 (b) Any Person (other than the Person in control of the Company as of the date of this Agreement, or other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or a company owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the
beneficial owner, directly or indirectly, of securities of the Company representing more than thirty-five percent (35%) of the combined voting power of the Company’s then outstanding securities; or 
 (c) The stockholders of the Company approve: 
 (i) A plan of complete liquidation of the Company; 
 (ii) An agreement for the sale or disposition of all or substantially all of
the Company’s assets; or 
 (iii) A merger, consolidation or reorganization of the Company with or involving any other company, other
than a merger, consolidation or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization. 
 (d) However, in no event shall a Change of Control be deemed to have occurred, with respect to the optionee, if the optionee is part of a purchasing
group which consummates the Change of Control transaction. The optionee shall be deemed “part of the purchasing group” for purposes of the preceding sentence if the optionee is an equity participant or has agreed to become an equity
participant in the purchasing company or group (except for (i) passive 

			
	INSPIRE AMENDED AND RESTATED DIRECTOR COMPENSATION POLICY	  	PAGE 4 OF 4

  
 
ownership of less than five percent (5%) of the voting securities of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise deemed not to be significant, as determined prior to the Change of Control by a majority of the continuing non-employee Directors). 
 (e) For purposes of this Paragraph F, “Person(s)” shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934
(the “Exchange Act”), as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (A) the Company or any of its subsidiaries; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; (D) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the Company; or (E) an entity or entities which are eligible to file and have filed a Schedule 13G under Rule 13d-l(b) of the Exchange Act, which Schedule indicates
beneficial ownership of fifteen percent (15%) or more of the outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities.

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