Document:

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                                                                   EXHIBIT 10.33

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                           INTROGEN THERAPEUTICS, INC.

                            SERIES B PREFERRED STOCK

                               PURCHASE AGREEMENT

                               301 Congress Avenue
                                   Suite 2025
                               Austin, Texas 78701

                                 October 7, 1994

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     Page
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<S>                                                                                   <C>
1.       Purchase and Sale of Stock ............................................      1
         1.1         Authorization .............................................      1
         1.2         Sales of Preferred ........................................      1
         1.3         Seven Closings ............................................      1

2.       Closing Dates; Delivery  ..............................................      2
         2.1         First Closing Date ........................................      2
         2.2         Second Closing Date .......................................      2
         2.3         Third Closing Date ........................................      2
         2.4         Fourth Closing Date .......................................      2
         2.5         Fifth Closing Date ........................................      3
         2.6         Sixth Closing Date ........................................      3
         2.7         Seventh Closing Date ......................................      3
         2.8         Delivery ..................................................      3

3.       Representations and Warranties of the Company .........................      4
         3.1         Organization, Good Standing and Qualification .............      4
         3.2         Capitalization ............................................      4
         3.3         Subsidiaries ..............................................      4
         3.4         Authorization .............................................      5
         3.5         Valid Issuance of Preferred and Common Stock ..............      5
         3.6         Liabilities ...............................................      5
         3.7         Governmental Consents .....................................      5
         3.8         Litigation ................................................      6
         3.9         Employees .................................................      6
         3.10        Patents and Trademarks ....................................      6
         3.11        Compliance with Other Instruments .........................      7
         3.12        Agreements; Action ........................................      7
         3.13        Disclosure ................................................      8
         3.14        Registration Rights .......................................      8
         3.15        Title to Property and Assets ..............................      8
         3.16        Financial Statements ......................................      8
         3.17        Employee Benefit Plans ....................................      9
         3.18        Tax Returns, Payments and Elections .......................      9
         3.19        Insurance .................................................      9
         3.20        Labor Agreements and Actions ..............................      9
         3.21        Real Property Holding Corporation .........................     10
         3.22        Offering ..................................................     10

4.       Representations and Warranties of the Investor ........................     10
         4.1         Authorization .............................................     10
         4.2         Purchase Entirely for Own Account .........................     10
         4.3         Disclosure of Information .................................     10
         4.4         Investment Experience .....................................     11
         4.5         Restricted Securities .....................................     11
         4.6         Further Limitations on Disposition ........................     11
</TABLE>

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<TABLE>
<S>      <C>                                                                         <C>
         4.7        Legends ....................................................     12

5.       Conditions to First Closing of Investor ..............................      12
         5.1        Representations and Warranties Correct .....................     12
         5 2        Covenants ..................................................     12
         5.3        Compliance Certificate .....................................     12
         5.4        Blue Sky ...................................................     12
         5.5        Restated Certificate .......................................     12
         5.6        Directors ..................................................     12
         5.7        Collaboration Agreements ...................................     13

6.       Conditions to First Closing of Company ................................     13
         6.1        Representations ............................................     13
         6.2        Blue Sky ...................................................     13
         6.3        Restated Certificate .......................................     13

7.       Conditions to Second Closing of Investor ..............................     13
         7.1        Phase I Trials .............................................     13
         7.2        Representations and Warranties .............................     13
         7.3        Covenants ..................................................     13
         7.4        Compliance Certificate .....................................     13
         7.5        Collaboration Agreements ...................................     14
         7.6        Blue Sky ...................................................     14

8.       Conditions to Second Closing of Company ...............................     14
         8.1        Representations ............................................     14
         8.2        Blue Sky ...................................................     14
         8.3        Collaboration Agreements ...................................     14

9.       Conditions to Third Closing of Investors ..............................     14
         9.1        Phase I Trials .............................................     14
         9.2        Representations and Warranties .............................     14
         9.3        Covenants ..................................................     15
         9.5        Blue Sky ...................................................     15
         9.6        Collaboration Agreements ...................................     15

10.      Conditions to Third Closing of Company ................................     15
         10.1       Representations ............................................     15
         10.2       Blue Sky ...................................................     15
         10.3       Collaboration Agreements ...................................     15

11.      Conditions to Fourth Closing of Investor ..............................     15
         11.1        Phase II Trials ...........................................     15
         11.2        Representations and Warranties ............................     16
         11.3        Covenants .................................................     16
         11.4        Compliance Certificate ....................................     16
         1l.5        Blue Sky ..................................................     16
         11.6        Collaboration Agreements ..................................     16
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>      <C>                                                                            <C>
12.      Conditions to Fourth Closing of Company ...............................        16
         12.1        Representations ...........................................        16
         12.2        Blue Sky ..................................................        16
         12.3        Collaboration Agreements ..................................        16

13.      Conditions to Fifth Closing of Investor ...............................        17
         13.1        Phase II Trials ...........................................        17
         13.2        Representations and Warranties ............................        17
         13.3        Covenants .................................................        17
         13.4        Compliance Certificate ....................................        17
         13.5        Blue Sky ..................................................        17
         13.6        Collaboration Agreements ..................................        17

14.      Conditions to Fifth Closing of Company ................................        17
         14.1        Representations ...........................................        17
         14.2        Blue Sky ..................................................        17
         14.3        Collaboration Agreements ..................................        18

15.      Conditions to Sixth Closing of Investor ...............................        18
         15.1        Phase III Trials ..........................................        18
         15.2        Representations and Warranties ............................        18
         15.3        Covenants .................................................        18
         15.4        Compliance Certificate ....................................        18
         15.5        Blue Sky ..................................................        18
         15.6        Collaboration Agreements ..................................        18

16.      Conditions to Sixth Closing of Company ................................        19
         16.1        Representations ...........................................        19
         16.2        Blue Sky ..................................................        19
         16.3        Collaboration Agreements ..................................        19

17.      Conditions to Seventh Closing of Investor .............................        19
         17.1        Phase III Trials ..........................................        19
         17.2        Representations and Warranties ............................        19
         17.3        Covenants .................................................        19
         17.4        Compliance Certificate ....................................        19
         17.5        Blue Sky ..................................................        19
         17.6        Collaboration Agreements ..................................        20

18.      Conditions to Seventh Closing of Company ..............................        20
         18.1       Representations ............................................        20
         18.2       Blue Sky ...................................................        20
         18.3       Collaboration Agreements ...................................        20
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                      Page
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<S>      <C>                                                                          <C>
19.      Additional Covenants and Restrictions Regarding the
         Purchase of Series B Preferred ........................................       20
         19.1       Purchase Price Adjustment ..................................       20
         19.2       Acceleration of Purchases Upon a Public Offering ...........       21
         19.3       Purchase of Outstanding Stock ..............................       21
         19.4       Purchase of Common Stock ...................................       22
         19.5       Standstill Agreement .......................................       22

20.      Registration Rights ...................................................       22
         20.1        Definitions ...............................................       22
         20.2        Request for Registration ..................................       23
         20.3        Company Registration ......................................       25
         20.4        Obligations of the Company ................................       25
         20.5        Furnish Information .......................................       27
         20.6        Expenses of Demand Registration ...........................       27
         20.7        Expenses of Company Registration ..........................       27
         20.8        Underwriting Requirements .................................       28
         20.9        Delay of Registration .....................................       28
         20.10       Indemnification ...........................................       28
         20.11       Reports Under Securities Exchange Act of 1934 .............       30
         20.12       Form S-3 Registration .....................................       31
         20.13       Assignment of Registration Rights .........................       32
         20.14       Limitations on Subsequent Registration Rights .............       32
         20.15       "Market Stand-Off" Agreement ..............................       33
         20.16       Amendment of Registration Rights and Information
                     Rights ....................................................       33
         20.17       Termination of Registration Rights ........................       34

21.      Covenants of the Company ..............................................       34
         21.1        Delivery of Financial Statements ..........................       34
         21.2        Assignment of Rights to Financial Information .............       35
         21.3        Termination of Covenants ..................................       35

22.      Investor's Right of First Refusal .....................................       35
         22.1       Right of First Refusal .....................................       35

23.      Investor's Board Representation .......................................       36
         23.1       Amendment to Certificate of Incorporation ..................       36
         23.2       Scientific Advisory Board ..................................       37
         23.3       Post Conversion ............................................       37

24       Miscellaneous .........................................................       37
         24.1        Survival of Warranties ....................................       37
         24.2        Successors and Assigns ....................................       37
         24.3        Governing Law .............................................       37
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                               Page
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<S>            <C>                                                                             <C>
     24.4      Counterparts ............................................................        37
     24.5      Titles and Subtitles ....................................................        37
     24.6      Notices .................................................................        37
     24.7      Finder's Fee ............................................................        38
     24.8      Expenses ................................................................        38
     24.9      Amendments and Waivers ..................................................        38
     24.10     Severability ............................................................        38
     24.11     Aggregation of Stock ....................................................        38
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS
<S>            <C>
     A         Restated Certificate of Incorporation
     B         Schedule of Purchases
     C         Schedule of Exceptions
     D-1       Compliance Certificate for the First Closing
     D-2       Compliance Certificate for the Second Closing
     D-3       Compliance Certificate for the Third Closing
     D-4       Compliance Certificate for the Fourth Closing
     D-5       Compliance Certificate for the Fifth Closing
     D-6       Compliance Certificate for the Sixth Closing
     D-7       Compliance Certificate for the Seventh Closing
     E         Collaboration Agreement (Kras Products)
     F         Collaboration Agreement (P53 Products)
</TABLE>

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                                                                   EXHIBIT 10.33

                            STOCK PURCHASE AGREEMENT

         THIS PREFERRED STOCK PURCHASE AGREEMENT is made as of the 7th day of
October 1994, by and between Introgen Therapeutics, Inc., a Delaware corporation
(the "Company"), and Rhone-Poulenc Rorer Pharmaceuticals Inc. (the "Investor").

         THE PARTIES HEREBY AGREE AS FOLLOWS:

         1. Purchase and Sale of Stock.

            1.1 Authorization. The Company will authorize the sale and issuance
of up to 2,114,100 shares of its Series B Preferred Stock (the "Series B
Preferred") having the rights, privileges and preferences as set forth in the
Restated Certificate of Incorporation (the "Restated Certificate") in the form
attached to this Agreement as Exhibit A.

            1.2 Sales of Preferred. Subject to the terms and conditions hereof,
the Company will issue and sell to the Investor, and the Investor will buy from
the Company at the Closings (defined below) set forth in column 2 of the
Schedule of Purchases attached hereto as Exhibit B, the number of shares of
Series B Preferred set forth in column 3 of the Schedule of Purchases for the
aggregate purchase price set forth in column 4 of the Schedule of Purchases (The
aggregate shares of Preferred Stock to be sold to the Investor hereunder are
hereinafter referred to as the "Shares"). The Shares shall be issued to the
entity listed in Column 1 of the Schedule of Purchases.

            1.3 Seven Closings. The purchase and sale of the Shares shall occur
in seven installments. The first 525,000 shares (the "First Installment") of the
Company's Series B Preferred to be sold and purchased hereunder shall be sold at
the First Closing (as defined below). An additional 200,735 shares (the "Second
Installment") of the Company's Series B Preferred to be sold and purchased
hereunder shall be sold and purchased at the Second Closing (as defined below).
An additional 200,735 shares (the "Third Installment") of the Company's Series B
Preferred Stock to be sold and purchased hereunder shall be sold and purchased
at the Third Closing (as defined below). An additional 312,500 shares (the
"Fourth Installment") of the Company's Series B Preferred to be sold and
purchased hereunder shall be sold and purchased at the Fourth Closing (as
defined below). An additional 312,500 shares (the "Fifth Installment") of the
Company's Series B Preferred to be sold and purchased hereunder shall be sold
and purchased at the Fifth Closing (as defined below). An additional 281,315
shares (the "Sixth Installment") of the Company's Series B Preferred to be sold
and purchased hereunder shall be sold and purchased at the Sixth Closing
(defined below). An additional 281,315 shares (the "Seventh Installment") of the
Company's Series B Preferred to be sold and purchased hereunder shall be sold
and purchased at the

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Seventh Closing (defined below). The issuance of the First, Second, Third,
Fourth, Fifth, Sixth and Seventh Installments shall be subject to satisfaction
of the conditions precedent to the First, Second, Third, Fourth, Fifth, Sixth
and Seventh Closings, respectively, described herein.

         2. Closing Dates; Delivery.

            2.1 First Closing Date. The closing of the First Installment
hereunder shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, a
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304 at
3:00 p.m., local time, on October 7, 1994 or at such other time and place upon
which the Company and the Investor shall agree (the "First Closing"). The date
of the First Closing is hereinafter referred to as the "First Closing Date."

            2.2 Second Closing Date. The closing of the Second Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-2 at such
place as the Company and Investors shall agree (the "Second Closing"). Should
the conditions precedent to the Second Closing specified in Section 7 hereof not
be satisfied or waived in writing by the Investor within twelve months of the
First Closing, the Investor's obligation to buy the Second Installment and the
Company's obligation to sell the Second Installment shall terminate. The date of
the Second Closing is hereinafter referred to as the "Second Closing Date."

            2.3 Third Closing Date. The closing of the Third Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-3, at such
place as the Company and the Investors shall agree (the "Third Closing"). Should
the conditions precedent to the Third Closing specified in Section 9 hereof not
be satisfied or waived in writing by the Investor within twenty-four months of
the First Closing, the Investor's obligation to buy the Third Installment and
the Company's obligation to sell the Third Installment shall terminate. The date
of the Third Closing is hereinafter referred to as the "Third Closing Date."

            2.4 Fourth Closing Date. The closing of the Fourth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-4, at such
place as the Company and the Investor shall agree (the "Fourth Closing"). Should
the conditions precedent to the Fourth Closing specified in Section 11 hereof
not be satisfied or waived in writing by the Investor by January 15, 1997, the
Investor's obligation to buy the Fourth Installment and the Company's obligation
to sell the Fourth

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<PAGE>   9
Installment shall terminate. The date of the Fourth Closing is hereinafter
referred to as the "Fourth Closing Date."

            2.5. Fifth Closing Date. The closing of the Fifth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-4, at such
place as the Company and the Investor shall agree (the ("Fifth Closing"). Should
the conditions precedent to the Fifth Closing specified in Section 13 hereof not
be satisfied or waived in writing by the Investor by January 15, 1997, the
Investor's obligation to buy the Fifth Installment and the Company's obligation
to sell the Fifth Installment shall terminate. The date of the Fifth Closing is
hereinafter referred to as the "Fifth Closing Date."

            2.6 Sixth Closing Date. The closing of the Sixth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-5, at such
place as the Company and the Investor shall agree (the "Sixth Closing"). Should
the conditions precedent to the Sixth Closing specified in Section 15 hereof not
be satisfied or waived in writing by the Investor by June 15, 1999, the
Investor's obligation to buy the Sixth Installment and the Company's obligation
to sell the Sixth Installment shall terminate. The date of the Sixth Closing is
hereinafter referred to as the "Sixth Closing Date."

            2.7 Seventh Closing Date. The closing of the Seventh Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-6, at such
place as the Company and the Investor shall agree (the "Seventh Closing").
Should the conditions precedent to the Seventh Closing specified in Section 17
hereof not be satisfied or waived in writing by the Investor by June 15, 1999,
the Investor's obligation to buy the Seventh Installment and the Company's
obligation to sell the Seventh Installment shall terminate. The date of the
Seventh Closing is hereinafter referred to as the "Seventh Closing Date." The
First Closing, the Second Closing, the Third Closing, the Fourth Closing, the
Fifth Closing, the Sixth Closing and the Seventh Closing shall be individually
referred to as a "Closing" and collectively referred to as "Closings."

            2.8 Delivery. At each Closing, the Company will deliver to the
Investor at such Closing a certificate, registered in the Investor's name,
representing the number of shares of Series B Preferred to be purchased by the
Investor at such Closing as specified in the Schedule of Purchases, against
payment of the purchase price therefor by check payable to the Company, by
surrender and cancellation of outstanding notes of the Company and/or by wire
transfer per the Company's wiring instructions.

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<PAGE>   10

         3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, which exceptions shall be deemed to
be representations and warranties as if made hereunder:

            3.1 Organization. Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to carry on its business
as now conducted and as proposed to be conducted, to enter into this Agreement
and to sell the Shares and carry out the other transactions contemplated
hereunder. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.

            3.2 Capitalization. The authorized capital of the Company consists,
or will consist prior to the First Closing, of:

                (a) 5,125,523 shares of Preferred Stock ("Preferred Stock"), of
which 3,011,423 shares have been designated Series A Preferred Stock and
2,114,100 shares have been designated Series B Preferred Stock. Prior to the
First Closing, there will be 3,011,423 shares of issued and outstanding Series A
Preferred Stock and no issued or outstanding shares of Series B Preferred Stock.
The rights, privileges and preferences of the Series A and the Series B
Preferred Stock are as stated in the Restated Certificate.

                (b) 10,000,000 shares of Common Stock ("Common Stock"), of which
2,036,132 shares are issued and outstanding.

                (c) Except as set forth in this Agreement and the Exhibits
hereto, there are no outstanding options, warrants, rights (including conversion
or preemptive rights) or agreements for the Purchase or acquisition from the
Company of any shares of its capital stock or any other securities of the
Company.

                (d) Except as set forth in this Agreement and the Exhibits
hereto, the Company is not a party to or is not subject to any agreement or
understanding relating to, and to the Company's knowledge there is no agreement
or understanding between any persons and/or entities which affects or relates
to, the voting of shares of capital stock of the Company or the giving of
written consents by a shareholder or director of the Company.

            3.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.

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            3.4 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Series B Preferred sold hereunder and the Common
Stock issuable upon conversion of the Series B Preferred has been taken or will
be taken prior to the Closing. This Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and similar
laws affecting creditor rights.

            3.5 Valid Issuance of Preferred and Common Stock.

                (a) The Series B Preferred purchased by the Investors hereunder,
when issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and not subject to any preemptive rights, rights of first refusal
or other similar rights imposed by the Company, and will be issued in compliance
with all applicable federal and state securities- laws. The Common Stock
issuable upon conversion of the Series B Preferred has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate, shall be duly and validly issued, fully paid and
nonassessable, free of any liens or encumbrances and not subject to any
preemptive rights, rights of first refusal or other similar rights imposed by
the Company, and-issued in compliance with all applicable federal and state
securities laws.

                (b) The outstanding shares of Common Stock and Series A
Preferred Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.

            3.6 Liabilities. The Company has not incurred any indebtedness for
money borrowed or any other liabilities (absolute, accrued or contingent) in
excess of $10,000 individually or $50,000 in the aggregate.

            3.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for registration or qualification, or
taking such action to secure exemption from such registration or qualification,
under applicable state or federal securities laws, which actions shall be taken
on a timely basis as may be required.

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            3.8 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any adverse changes in the
assets, condition, affairs or prospects of the Company, financially `or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (on any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

            3.9 Employees. The Company is not aware, nor has a third party
asserted to the Company, that any of its employees is obligated under any
contract (including licenses, covenants or contracts of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of the Company or that would conflict with the company's
business as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.

            3.10 Patents and Trademarks. The Company has sufficient title and
ownership of all trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights, processes, and, to its knowledge,
patents, necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others.
There are no outstanding options, licenses, or agreements of any and relating to
the foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company was
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate

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<PAGE>   13

any of the patents, trademarks, service marks, trade names, copyrights or
trade secrets or other proprietary rights of any other person or entity.

            3.11 Compliance with Other Instruments.

                (a) The Company is not in violation or default of any provisions
of its Certificate of Incorporation or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company, and, to its knowledge, there is no such
provision which materially and adversely affects the business of the Company or
its properties or assets. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or in
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company.

                (b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.

            3.12 Agreements; Action.

                (a) Except for agreements explicitly contemplated hereby, there
are no agreements, understandings, transactions or proposed transactions between
the Company and any of its officers, directors, affiliates, or any affiliate
thereof, and none of any such individuals or entities have any interest in any
party to any such agreement, understanding, transaction or proposed transaction.

                (b) There are no agreements, understandings, instruments,
contracts transactions or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of $5,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company.

                (c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $10,000 or in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person,

                                      -7-
<PAGE>   14

other than ordinary advances for travel expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.

                (d) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificates or Bylaws, which materially adversely affects its business
as now conducted or as proposed to be conducted.

            3.13 Disclosure. The Company has fully provided the Investor with
all the information which the Investor has requested for deciding whether to
purchase the Shares and all information which the Company believes is reasonably
necessary to enable the Investor to make such decision. Neither this Agreement
nor any other statements or certificates made or delivered in connection
herewith or otherwise provided to the Investor, when taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein or therein not misleading.

            3.14 Registration Rights. Except as provided in Section 20 of this
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.

            3.15 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.

            3.16 Financial Statements. The Company has delivered to the Investor
its unaudited financial statements (balance sheet and profit and loss statement)
at December 31, 1993 and for the fiscal year then ended (respectively), and its
unaudited financial statements (balance sheet and profit and loss statement) as
at and for the eight-month period ended August 31, 1994 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that the Financial
Statements are prepared on a cash basis and do not contain all footnotes
required by generally accepted accounting principles. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, subject to normal audit
adjustments. Except as set forth in the Financial Statements and in the material
agreements listed in the

                                      -8-
<PAGE>   15

Schedule of Exceptions, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to August 31, 1994 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

            3.17 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.

            3.18 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section 341(f)
or Section 1362(a) of the Code, nor has it made any other elections pursuant to
the Code (other than elections which relate solely to methods of accounting,
depreciation or amortization) which would have a material effect on the Company,
its financial condition, its business as presently conducted or proposed to be
conducted or any of its properties or material assets.

            3.19 Insurance. The Company has in full force and effect fire,
casualty and liability insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.

            3.20 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The

                                      -9-
<PAGE>   16

Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of the Company is
terminable at the will of the Company.

            3.21 Real Property Holding Corporation. The Company is not, and
has not been at any time a "United States real property holding corporation" as
defined in Section 897 of the Internal Revenue Code of 1986, as amended.

            3.22 Offering. Subject in part on the accuracy of the Investor's
representations set forth in Section 4 of this Agreement, the offer, sale and
issuance of the Shares to be issued in conformity with the terms of this
Agreement constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Act"), and from all
applicable state registration or qualification requirements.

         4. Representations and Warranties of the Investor. The Investor hereby
represents and warrants the following:

            4.1 Authorization. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms, except as such
enforcement is limited by bankruptcy, insolvency and similar laws affecting
creditor rights.

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

            4.3 Disclosure of Information. The Investor has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred hereunder. The Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the

                                      -10-
<PAGE>   17

terms and conditions of the offering of the Series B Preferred. The foregoing,
however, does not limit or modify the representations and warranties of
the Company in Section 3 of this Agreement or the right of the Investor to rely
thereon.

            4.4 Investment Experience. The Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, and bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred hereunder.

            4.5 Restricted Securities. The Investor understands that the shares
of Series Preferred it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act only in certain limited circumstances. In
this connection, the Investor represents that it is familiar with Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.

            4.6 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Series B Preferred purchased hereunder
or Common Stock issuable upon the conversion of the Series B Preferred, unless
and until:

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

                (b) (i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act.

                (c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor pursuant to Rule 144 if such Investor makes the
factual representations reasonably requested by the Company indicating the
availability of the exemption provided by Rule 144.

                                      -11-
<PAGE>   18
            4.7 Legends. It is understood that the certificates evidencing the
Series B Preferred and the Common Stock issuable upon conversion thereof, may
bear one or all of the following legends:

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

                (b) Any legend required by applicable state Securities laws.

         5. Conditions to First Closing of Investor. The Investor's obligation
to purchase the First Installment at the First Closing is, at the option of each
Investor, subject to the fulfillment as of the First Closing Date of the
following conditions:

            5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 thereof shall be true and correct in
all material respects as of the first Closing Date.

            5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the company on or prior to the First Closing
Date shall have been performed or complied with in all material respects.

            5.3 Compliance Certificate. The Company shall have delivered to the
Investors a certificate of the Company in the form of Exhibit D-l hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in sections 5.1 and 5.2 of this Agreement.

            5.4 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            5.5 Restated Certificate. The Restated Certificate shall have been
filed with the Delaware Secretary of State.

            5.6 Directors. The Company will have a Board of directors with six
members. Upon the Closing the members of the Company's Board of Directors shall
be David G. Nance, Mahendra G. [ILLEGIBLE] Ph.D., Austin Long, III, John N.
Kapoor, Ph.D., Mark B. Chandler and Thierry Soursac, M.D., Ph.D.

                                      -12-
<PAGE>   19

            5.7 Collaboration Agreements. The Company and the Investor shall
have entered into the Collaboration Agreement (Kras Products) in substantially
the form of Exhibit E and the Collaboration Agreement (P53 Products) in
substantially the form of Exhibit F (these agreements shall be collectively
referred to as the "Collaboration Agreements").

         6. Conditions to First Closing of Company. The Company's obligation to
sell and issue the First Installment at the First Closing is, at the option of
the Company, subject to the fulfillment as of the First Closing Date of the
following conditions:

            6.1 Representations. The representations made by the Investor in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the First Closing Date.

            6.2 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            6.3 Restated Certificate. The Restated Certificate shall have been
filed with the Delaware Secretary of State.

         7. Conditions to Second Closing of Investor. The Investor's obligation
to purchase the Second Installment at the Second Closing is, at the option of
the Investor, subject to the fulfillment as of the Second Closing Date of the
following conditions:

            7.1 Phase I Trials. "Phase I" clinical trials shall have commenced
for a potential product within the "Field". The terms "Phase I" and "Field"
shall have the meanings assigned to them in the Collaboration Agreements.

            7.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct in
all material respects as of the Second Closing Date.

            7.3 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Second Closing
Date shall have been performed or complied with in all material respects.

            7.4 Compliance Certificate. The Company shall have delivered to the
Investor a certificate of the Company in the form of Exhibit D-2 hereto,
executed by the President of the Company,

                                      -13-
<PAGE>   20

dated the Second Closing Date, and certifying to the fulfillment of the
conditions specified in Sections 7.1, 7.2 and 7.3 of this Agreement.

            7.5 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

            7.6 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

         8. Conditions to Second Closing of Company. The Company's obligation to
sell and issue the Second Installment at the Second Closing is, at the option of
the Company, subject to the fulfillment as of the Second Closing Date of the
following conditions:

            8.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Second Closing Date.

            8.2 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            8.3 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

         9. Conditions to Third Closing of Investors. The Investor's obligation
to purchase the Third Installment at the Third Closing is, at the option of the
Investor, subject to the fulfillment as of the Third Closing Date of the
following conditions:

            9.l Phase I Trials. Phase I clinical trials shall have commenced for
a second potential product within the Field. For the purposes of this Agreement
a "second potential product" shall include the combination of an existing
product with another therapeutic agent (such as cis platinum).

            9.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct in
all respects as of the Third Closing Date.

                                      -14-

<PAGE>   21

            9.3 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Third Closing
Date shall have been performed or complied with in all material respects.

            9.4 Compliance Certificate. The Company shall have delivered to the
Investors a certificate of the Company in the form of Exhibit D-3 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 9.1, 9.2 and 9.3 of this Agreement.

            9.5 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            9.6 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

         10. Conditions to Third Closing of Company. The Company's obligation to
sell and issue the Third Installment at the Third Closing is, at the option of
the Company, subject to the fulfillment as of the Third Closing Date of the
following conditions:

            10.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Third Closing Date.

            10.2 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.

            10.3 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

         11. Conditions to Fourth Closing of Investor. The Investor's
obligations to purchase the Fourth Installment at the Fourth Closing is, at the
option of the Investor, subject to the fulfillment as of the Fourth Closing Date
of the following:

            11.1 Phase II Trials. "Phase II" or "Phase II/III" (such terms shall
hereinafter have the meanings assigned to them in the Collaboration Agreements)
clinical trials shall have commenced

                                      -15-
<PAGE>   22

for a potential product in the Field or the date shall be January 1, 1997 or
later.

            11.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct and
all material respects as of the Fourth Closing Date.

            11.3 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Fourth
Closing Date shall have been performed or complied with in all material
respects.

            11.4 Compliance Certificate. The Company shall have delivered to the
Investors a certificate of the Company in the form of Exhibit D-4 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 11.1, 11.2 and 11.3 of this Agreement.

            11.5 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            11.6 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

         12. Conditions to Fourth Closing of Company. The Company's obligation
to sell and issue the Fourth Installment at the Fourth Closing is, at the option
of the Company, subject to fulfillment as of the Fourth Closing Date of the
following conditions:

            12.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Fourth Closing Date.

            12.2 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.

            12.3 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

                                      -16-
<PAGE>   23

     13. Conditions to Fifth Closing of Investor. The Investor's obligations to
purchase the Fifth Installment at the Fifth Closing is, at the option of the
Investor, subject to the fulfillment as of the Fifth Closing Date of the
following:

            13.1 Phase II Trials. Phase II or Phase II/III clinical trials
shall have commenced for a second potential product in the Field or the date
shall be January 1, 1997 or later.

            13.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct and
all material respects as of the Fifth Closing Date.

            13.3 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Fifth
Closing Date shall have been performed or complied with in all material
respects.

            13.4 Compliance Certificate. The Company shall deliver to the
Investors a certificate of the Company in the form of Exhibit D-4 hereto,
executed by the President of the Company, dated the Fifth Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 13.1,
13.2 and 13.3 of this Agreement.

            13.5 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            13.6 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

     14. Conditions to Fifth Closing of Company. The Company's obligation to
sell and issue the Fifth Installment at the Fifth Closing is, at the option of
the Company, subject to fulfillment as of the Fifth Closing Date of the
following conditions:

            14.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Fifth Closing Date.

            14.2 Blue Sky. The Company shall have obtained all necessary Blue
Sky law Permits, and qualifications, or have the availability of exemptions
therefrom, required by any state for the

                                      -17-

<PAGE>   24

offer and sale of the Series B Preferred Stock and the Common Stock issuable
upon conversion thereof.

            14.3. Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

     15. Conditions to Sixth Closing of Investor. The Investor's obligations to
purchase the Sixth Installment at the Sixth Closing is, at the option of the
Investor, subject to the fulfillment as of the Sixth Closing Date of the
following:

            15.1 Phase III Trials. "Phase III" (such term shall hereinafter have
the meaning assigned to it in the Collaboration Agreements) clinical trials for
a potential product in the Field shall have been completed in either the United
States, France, United Kingdom, Germany, Sweden, Italy, Spain or Japan (each of
which is a "Major Country") or the date shall be June 1, 1999 or later.

            15.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions shall be true and correct in
all material respects as of the Sixth Closing Date.

            15.3 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Sixth
Closing Date shall have been performed or complied with in all material
respects.

            15.4 Compliance Certificate. The Company shall deliver to the
Investors a certificate of the Company in the form of Exhibit D-6 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 15.1, 15.2 and 15.3 of this Agreement.

            15.5 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

            15.6 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

                                      -18-

<PAGE>   25

     16. Conditions to Sixth Closing of Company. The Company's obligation to
sell and issue the Sixth Installment at the Sixth Closing is, at the option of
the Company, subject to fulfillment as of the Sixth Closing Date of the
following conditions:

            16.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Sixth Closing Date.

            16.2 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.

            16.3 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

     17. Conditions to Seventh Closing of Investor. The Investor's obligations
to purchase the Seventh Installment at the Seventh Closing is, at the option of
the Investor, subject to the fulfillment as of the Seventh Closing Date of the
following:

            17.1 Phase III Trials. Phase III clinical trials in a Major Country
shall have been completed for a second potential product in the Field or the
date shall be June 1, 1999 or later.

            17.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions shall be true and correct and
all material respects as of the Seventh Closing Date.

            17.3 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Seventh
Closing Date shall have been performed or complied with in all material
respects.

            17.4 Compliance Certificate. The Company shall deliver to the
Investor a certificate of the Company in the form of Exhibit D-7 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 17.1, 17.2 and 17.3 of this Agreement.

            17.5 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.

                                      -19-

<PAGE>   26

            17.6 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.

         18. Conditions to Seventh Closing of Company. The Company's obligation
to sell and issue the Seventh Installment at the Seventh Closing is, at the
option of the Company, subject to fulfillment as of the Seventh Closing Date of
the following conditions:

            18.1 Representations. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Seventh Closing Date.

            18.2 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.

            18.3 Collaboration Agreements. The Investor or its affiliate shall
not have delivered notice of termination for each of the Collaboration
Agreements to the Company.

         19. Additional Covenants and Restrictions Regarding the Purchase of
Series B Preferred. Notwithstanding the foregoing provisions, the following
provisions shall govern the purchase of Series B Preferred pursuant to this
Agreement:

            19.1 Purchase Price Adjustment.

               (a) For all Closings which occur after January 1, 1995 and prior
to an underwritten public offering of the Common Stock of the Company, the
purchase price per share of Series B Preferred indicated on Exhibit B hereto
shall be increased (but not decreased) to the price per share (the "Adjusted
Purchase Price") paid in the most recent equity financing of the Company, if
any, which occurs prior to the applicable Closing and which involves gross
proceeds of at least $2,000,000. The adjustment of the price per share shall not
reduce the aggregate purchase price indicated in Exhibit B, but shall reduce the
number of shares of Series B Preferred Stock purchased to the quotient of the
aggregate purchase price indicated for the applicable Closing divided by the
Adjusted Purchase Price;

               (b) At the election of the Investor, the purchase price per share
of Series B Preferred indicated on Exhibit B hereto or the Adjusted Purchase
Price calculated pursuant to Section 9.1(a) above, as applicable, may be
increased (but not decreased) to a price per share (the "Elected Adjusted
Purchase Price") that when divided into the aggregate purchase price indicated
on Exhibit

                                      -20-
<PAGE>   27

B for the applicable Closing would result in the Investor holding no more than
19.9% of the outstanding stock of the Company after such Closing. The adjustment
of the purchase price per share shall not reduce the obligation to pay the
aggregate purchase price indicated on Exhibit B for any Closing, but shall
reduce the number of shares of Series B Preferred Stock to be purchased
(possibly to zero).

            19.2 Acceleration of Purchases Upon a Public Offering. In the event
of an underwritten public offering of Common Stock of the Company with aggregate
gross proceeds of more than $10,000,000 (an "IPO"):

               (a) The Investor shall be obligated to purchase at the closing of
an IPO, the dollar amount of stock indicated on Exhibit B hereto which still
remains unpurchased pursuant to the Closings (the "Scheduled IPO Purchase
Amount"). The price per share shall be the price per share to the public in the
IPO.

               (b) Notwithstanding the provisions of paragraph (a) above, the
Investor can reduce the IPO Purchase Amount (x) to 20% of the gross proceeds to
be received in the IPO, but not to exceed the lesser of $4,000,000 or
such dollar amount of shares that when aggregated with the other shares held by
the Investor would amount to 19.9% of the outstanding stock of the Company
(calculated on an as converted to Common Stock basis) following the IPO, in the
event that there is reasonable evidence of local efficacy of a Company product
in Phase I or later stage clinical trials or (y) to zero, in the event that
there is not reasonable evidence of local efficacy of a Company product in Phase
I or later stage clinical trials. Such reduced amount shall be referred to as
the "Actual IPO Purchase Amount".

               (c) In the event that the Investor reduces the Scheduled IPO
Purchase Amount pursuant to paragraph (b) above, then the Investor shall be
obligated to pay a sum equal to the Scheduled IPO Purchase Amount less the
Actual IPO Purchase Amount; provided, however, that such sum shall only be
payable (i) at those times when a purchase of Series B Preferred would have
occurred at a Closing, if the Company had not undertaken the IPO and (ii) no
payments need be made until the dollar amount of the Series B Preferred that
would have been purchased at a Closing or Closings following the date of the IPO
(if the Company had not undertaken the IPO) exceeds the Actual IPO Purchase
Amount.

            19.3 Purchase of Outstanding Stock. Up to fifteen percent (15%) of
the shares of capital stock of the Company to be purchased at each Closing
contemplated by this Agreement and up to fifteen percent (15%) of the shares to
be purchased at an acceleration upon an IPO shall, upon the election of Texas
Biomedical Development Partners ("TBDP"), be purchased from TBDP.

                                      -21-
<PAGE>   28

Such purchases shall be made upon the same terms (including the applicable price
per share and conditions to closing) as the purchase of Series B Preferred,
except the Investor, shall receive shares of Series A Preferred Stock (or Common
Stock, in the event that the Series A Preferred Stock has converted to Common
Stock) from TBDP. TBDP shall exercise its right to sell such shares at the First
Closing. In the event that TBDP wishes to exercise its right to sell such shares
at subsequent Closings, it shall do so by delivering a notice of election to the
Company and the Investor at least five business days prior to a Closing. Such
election shall indicate the number of shares which TBDP wishes to sell and be
accompanied by stock certificate(s), representing at least the amount of shares
that TBDP wishes to sell, which are duly endorsed for transfer to the Investor.

            19.4 Purchase of Common Stock. In the event that the Investor is
obligated to purchase Series B Preferred Stock at a Closing or upon the
acceleration of purchases upon an IPO and the Series B Preferred Stock has
converted to Common Stock pursuant to the terms of the Company's Certificate of
Incorporation then obligation to purchase and sell Series B Preferred shall be
an obligation to purchase and sell Common Stock.

            19.5 Stand still Agreement. Prior to the date which is five years
from the date of the Company's initial public offering, neither the Investor nor
any subsidiary, parent corporation or other affiliate of the Investor's shall
acquire beneficial ownership of any voting stock in the Company ("Voting
Stock"), any securities convertible into or exchangeable for Voting Stock, or
any other right to acquire Voting Stock (except, in any case, by way of stock
dividends or other distributions or offerings made available to holders of any
Voting Stock generally) or authorize or make a tender, exchange or other offer,
without the written consent of the Company, if the effect of such acquisition
would be to increase the Investor's percentage ownership beyond thirty-two
percent (32%) of the voting power of all Voting Stock of the Company.

         20. Registration Rights. The Company covenants and agrees as follows:

            20.1 Definitions. For purposes of this Section 20:

               (a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;

               (b) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the

                                      -22-
<PAGE>   29

Series B Preferred sold pursuant to this Agreement, (2) the Common Stock
issuable or issued upon conversion of any Series A Preferred Stock held by
individuals and entities who have signed a consent for the purpose of being
bound by this section 20, (3) any Common Stock held by individuals and
entities who have signed a consent for the purposes of being bound by this
Section 20 and (4) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such Series A preferred Stock, Series B Preferred Stock,
or Common Stock, excluding in all cases, however, (i) any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 20 are not assigned, or (ii) any Registrable Securities sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction.

               (c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.

               (d) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 20.13 hereof; and

               (e) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.

               (f) The term "Act" shall mean the Securities Act of 1933, as
amended.

         20.2 Request for Registration.

               (a) If the Company shall receive at any time after December 31,
1998, either (i) a written request from the Holders of at least fifty percent
(50%) of the Registrable Securities (including securities convertible into
Registrable Securities) then outstanding that the Company file a registration
statement under the Act covering the registration of at least forty percent
(40%) of the Registrable Securities (or a lesser percentage if the anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $10,000,000) or (ii) a written request from the Investor that the Company
file a registration statement  under the Act covering the registration of at
least sixty percent (60%) of the Registrable Securities held by the Investor

                                      -23-

<PAGE>   30

(or a lesser percentage if the anticipated aggregate offering price, net of
underwriting discounts and commissions would exceed $10,000,000), then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
subsections 20.2(b) and (c), effect as soon as practicable, and in any event
within 120 days of the receipt of such request, the registration under the Act
of all Registrable Securities which the Holders request to be registered within
20 days of the mailing of such written notice by the Company.

               (b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to subsection 20.2(a):

                  (i) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
months immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;

                  (ii) After the Company has effected two registrations pursuant
to subsection 20.2(a) (i) if the request is being made pursuant to subsection
20.2(a)(i), and such registration has been declared or ordered effective, or
after the Company has effected a single registration pursuant to subsection
20.2(a)(ii) (if the request is being made pursuant to subsection 20.2(a)(ii))
and such registration has been declared or ordered effective;

                  (iii) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register, qualify
or comply under subsection 20.2(a) shall be deferred for a period not to exceed
120 days from the date of receipt of written request from the Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve-month period.

               (c) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 20.2 and the Company
shall

                                      -24-
<PAGE>   31

include such information in the written notice referred to in subsection
20.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Holders requesting the registration and such
Holder) to the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in subsection 20.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Holders requesting the
registration and reasonably acceptable to the company. Notwithstanding any other
provision of this Section 20.2, if the underwriter advises the Holders
requesting the registration that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from such
underwriting.

                  20.3 Company Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 20.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.

                  20.4 Obligations of the Company. Whenever required under this
Section 20 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

                                      -25-
<PAGE>   32

                           (a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to sixty (60)
days.

                           (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

                           (c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

                           (d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

                           (e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

                           (f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

                           (g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 20, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 20, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement

                                      -26-
<PAGE>   33

with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.

                  20.5 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 20
with respect to the Registrable Securities of any selling Holder that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.

                  20.6 Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions and any fees and expenses of a special
counsel of a selling stockholder, incurred in connection with registrations,
filings or qualifications pursuant to Section 20.2, including (without
limitation) all registration, federal and state filing and qualification fees
and expenses, printers' and accounting fees and fees and disbursements of
counsel for the Company, shall be paid by the Company; provided, however, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 20.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 20.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 20.2. The Company's
obligations under this 20.6 shall apply to each registration pursuant to Section
20.2.

                  20.7 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 20.3 for each Holder (which right may be assigned as
provided in Section 20.13),

                                      -27-
<PAGE>   34

including (without limitation) all registration, filing, qualification, printers
and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities and
any fees or expenses of a special counsel of a selling stockholder.

                  20.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 20.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as is provided for herein. If the underwriters determine
that marketing factors require a limitation of the number of shares to be
underwritten, the underwriters may limit the number of Registrable Securities to
be included in the registration on a pro-rata basis, or may exclude Registrable
Securities entirely from such registration (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 20.2 be excluded from such offering. For purposes of apportionment, any
selling stockholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.

                  20.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 20.

                  20.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 20:

                           (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act of the Securities Exchange Act of 1934, amended
(the "1934 Act"),

                                      -28-
<PAGE>   35

against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 20.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.

                           (b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 20.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 20.10(b) shall not apply to amounts paid in settlement

                                      -29-
<PAGE>   36

of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
this subsection 20.10(b) exceed the gross proceeds from the offering received by
such Holder.

                           (c) Promptly after receipt by an indemnified party
under this Section 20.10 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 20.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 20.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
20.10.

                           (d) The obligations of the Company and Holders under
this Section 20.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 20, and otherwise.

                  20.11 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:

                           (a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;

                           (b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act,

                                      -30-
<PAGE>   37

as is necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration statement filed by
the Company for the offering of its securities to the general public is
declared effective;

                           (c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and

                           (d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC (exclusive of Rule
144A) which permits the selling of any such securities without registration or
pursuant to such form.

                  20.12 Form S-3 Registration. In case the Company shall
receive from any Holder or Holders of the Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to shares of Registrable
Securities the reasonably anticipated aggregate price to the public of which,
net of underwriting discounts and commissions, would exceed $1,000,000 all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:

                           (a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and

                           (b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 20.12: (1)
if Form S-3 is not

                                      -31-
<PAGE>   38

available for such offering by the Holders; (2) if the Holders, together with
the holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters' discounts
or commissions) of less than $1,000,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 120 days after receipt of the request of the Holder or
Holders under this Section 20.12; provided, however, that the Company shall not
utilize this right more than once in any twelve (12) month period; or (4) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.

                           (c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt or
the request or requests of the Holders. All expenses incurred in connection with
the registrations requested pursuant to Section 20.12, (exclusive of
underwriting discounts and commissions and any fees and expenses of a special
counsel to a selling shareholder) shall be paid by the Company.

                  20.13 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 20 may
be assigned by a Holder to a transferee or assignee of such securities who
acquires (i) at least 300,000 shares of Registrable Securities, or (ii) all
shares of Registrable Securities then held by such Holder if such Holder
transfers all such Registrable Securities to a single entity, provided the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and the address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. Notwithstanding the
above, such rights may be assigned by a Holder to a limited partner or general
partner of the Holder regardless of the number of shares acquired by such
transferee.

                  20.14 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of

                                      -32-
<PAGE>   39

the Registrable Securities, enter into any agreement (other than an amendment to
this agreement or supplemental agreement effected in accordance with Section
20.16 of this Agreement) with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed pursuant to Section 20.2
hereof, unless under the terms of such agreement such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of such securities will not reduce the amount of the
Registrable Securities of the Holders which are included in any such
registration or (b) to make a demand registration which could result in such
registration being declared effective prior to the earlier of either of the
dates set forth in subsection 20.2(a) or within six months of the effective date
of any registration effected pursuant to Section 20.2.

                  20.15 "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed 180 days, following the effective date of a registration statement of
the Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock or Preferred
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that:

                           (a) such agreement shall be applicable only to the
first such registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and

                           (b) all officers and directors of the Company, and
all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.

         In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

                  20.16 Amendment of Registration Rights and Information Rights.
Any provision of Sections 20 and 21 may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company,
the holders of at least sixty-seven percent (67%) of the Registrable Securities
then outstanding and the holders of a majority of the Series B Preferred Stock
then outstanding, and with the same consent the Company may

                                      -33-
<PAGE>   40

enter into a supplemental agreement for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of Sections 20 or
21. Any amendment, waiver or supplemental agreement effected in accordance with
this Section 20.16 shall be binding upon each holder of any securities which are
or at one time were Registrable Securities (or which are or were convertible
into Registrable Securities), each future holder of all such securities, and
the Company.

                  20.17 Termination of Registration Rights. No stockholder shall
be entitled to exercise any right provided for in this Section 20 after six (6)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial underwritten offering of its securities to the general public.

         21. Covenants of the Company.

                  21.1 Delivery of Financial Statements. The Company shall
deliver to each Holder which holds 300,000 shares of Registrable Securities:

                           (a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, statements of
operations and cash flow for such fiscal year, a balance sheet of the Company as
of the end of such year, and a schedule as to the sources and applications of
funds for such year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;

                           (b) as soon as practicable, but in any event within
forty-five (45) days of the end of each quarter, an unaudited statement of
operations and balance sheet for and as of the end of such quarter, in
reasonable detail and prepared in accordance with GAAP, subject to year end
audit adjustments and the absence of footnotes;

                           (c) as soon as practicable, but in any event within
thirty (30) days of the end of each month (commencing six calendar months from
the first Closing), an unaudited statement of operations and balance sheet for
and as of the end of such month, in reasonable detail and prepared in accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes;
and

                           (d) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the Holder
may from time to time request, provided, however, that the Company shall not be
obligated to provide information which it deems in good faith to be proprietary
unless

                                      -34-
<PAGE>   41
such Investor or assignee of such Investor agrees in writing to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so provided.

              21.2 Assignment of Rights to Financial Information. The rights
granted pursuant to Section 21.1 may not be assigned or otherwise conveyed by
any Holder or by any subsequent transferee of any such rights without the
prior written consent of the Company; provided, however, that any Holder may
assign to any transferee, other than a competitor of the Company, and after
giving notice to the Company, the rights granted pursuant to Section 21.1 to (i)
a transferee who acquires at least 300,000 shares of Registrable Securities.

              21.3 Termination of Covenants. The covenants set forth in Section
21.1 shall terminate as to Holders when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934,
whichever event shall first occur.

          22. Investor's Right of First Refusal.

              22.1 Right of First Refusal. As more specifically set forth below,
the Company hereby grants to the Investor the right of first refusal to
purchase, pro rata, all or any part of New Securities (as defined in this
Section 22.1) which the Company may, from time to time, propose to sell and
issue. A pro rata share, for purposes of this right of first refusal, is the
ratio that the sum of the number of shares of Common Stock and Common Stock
issuable upon conversion of the Series B Preferred then held by the Investor
bears to the sum of the total number of shares of Common Stock then outstanding
and the number of shares of Common Stock issuable upon conversion of the then
outstanding Preferred Stock.

                  (a) Except as set forth below, "New Securities" shall mean any
shares of Common Stock or Preferred Stock of the Company, whether now authorized
or not, and rights, options or warrants to purchase shares of Common Stock or
Preferred Stock, and securities of any type whatsoever that are, or may become,
convertible into shares of Common Stock or Preferred Stock. Notwithstanding the
foregoing, "New Securities" does not include (i) the Preferred purchased under
this Agreement, including Common Stock issuable upon conversion of the Series B
Preferred, (ii) securities offered to the public generally pursuant to a
registration statement or pursuant to Regulation A under the Act, (iii)
securities issued pursuant to the acquisition of or strategic partnering with
another corporation by the Company by merger, purchase of substantially all of
the assets, licensing arrangement, joint

                                      -35-
<PAGE>   42

venture arrangement or other transaction, (iv) employees, officers and directors
of, and consultants, customers, and vendors to, the Company, pursuant to any
arrangement approved by the Board of Directors of the Company, (v) stock issued
pursuant to any rights or agreements, including without limitation convertible
securities, options and warrants, provided that the rights of first refusal
established by this Section 22.1 apply with respect to the initial sale or grant
by the Company of such rights or agreements, (vi) stock issued in connection
with any stock split, stock dividend or recapitalization by the Company.

                  (b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give the Investor written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Investor shall have 20 days from the
date of receipt of any such notice to agree to purchase up to its pro rata share
of such New Securities for the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.

                  (c) In the event the Investor fails to exercise the right of
first refusal within the 20 day period, the Company shall have 120 days
thereafter to enter into an agreement to sell the New Securities not elected to
be purchased by the Investor at the price and upon the terms no more favorable
to the purchasers of such securities than specified in the Company's notice. In
the event the Company has not entered into an agreement to sell the New
Securities within the 120 day period, the Company shall not thereafter issue or
sell any New Securities, without first offering such securities in the manner
provided above.

                  (d) The right of first refusal granted under this Agreement
shall expire upon the closing of the first public offering of the Common Stock
of the Company to the general public which is effected pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Act.

                  (e) The right of first refusal hereunder is not assignable
except by the Investor.

          23. Investor's Board Representation.

              23.1 Amendment to Certificate of Incorporation. The Company shall
not amend its Certificate of Incorporation to eliminate the right of the holders
of Series B Preferred Stock to select a member of the Company's Board of
Directors, without the consent of the holders of at least a majority of the
Series B Preferred Stock.

                                      -36-
<PAGE>   43

              23.2 Scientific Advisory Board. The holders of Series B Preferred
Stock shall be entitled to appoint a member to the Company's Scientific Advisory
Board who is reasonably acceptable to the Company.

              23.3 Post Conversion. Following a conversion of Series B Preferred
Stock into Common Stock and provided that the Investor is still holding, at
least fifteen percent (15%) of the outstanding stock of the Company, the Company
shall (i) include a nominee of the Investor who is reasonably acceptable to the
Company in its recommended slate for the Board of Directors and shall utilize
the same degree of effort to have such nominee elected as it utilizes to have
the other members of the slate elected, and (ii) include a nominee of the
Investor who is reasonably acceptable to the Company upon the Company's
Scientific Advisory Board.

          24. Miscellaneous.

              24.1 Survival of Warranties. The warranties, representations and
covenants of the Company and the Investor contained in this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investor or the Company.

              24.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities. under or by reason of this Agreement, except as expressly provided
in this Agreement.

              24.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.

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

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

              24.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in

                                      -37-
<PAGE>   44

writing and shall be deemed effectively given upon personal delivery to the
party to be notified or upon deposit with the United States Post Office, by
registered or certified mail, or other courier service, postage prepaid and
addressed to the party to be notified at the address indicated for such party in
the Company's stock records or in the case of the Company on the first page of
this Agreement, or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.

          24.7 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.

          24.8 Expenses. Each party shall pay its own fees and expenses with
respect to this Agreement. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Restated Articles, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.

          24.9 Amendments and Waivers. Any term of this Agreement (except those
set forth in Sections 20 and 21) may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the Investor. Amendments, waivers and supplemental agreements
relating to Sections 20 and 21 hereof shall be governed by the provisions of
Section 17.16 hereof.

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

          24.11 Aggregation of Stock. All shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock held or acquired by affiliated
entities or persons shall be aggregated

                                      -38-

<PAGE>   45

together for the purpose of determining the availability of any rights under
this Agreement.

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

                                        INTROGEN THERAPEUTICS, INC.

                                        By: /s/ [ILLEGIBLE]
                                           --------------------------------
                                        Title: President
                                              -----------------------------

                                        RHONE-POULENC RORER
                                          PHARMACEUTICALS INC.

                                        By: /s/ [ILLEGIBLE]
                                           --------------------------------
                                        Title: President
                                              -----------------------------

                                      -39-

<PAGE>   46

                         Exhibit Cross-Reference Sheet

<TABLE>
<CAPTION>
Exhibit                            Document                           Location
-------         ----------------------------------------------     ----------------
<S>             <C>                                                <C>
A               Restated Certificate of Incorporation              See tab no. 3.
B               Schedule of Purchases                              Attached hereto.
C               Schedule of Exceptions                             Attached hereto.
D-1             Compliance Certificate for the First Closing       Attached hereto.
D-2             Compliance Certificate for the Second Closing      Attached hereto.
D-3             Compliance Certificate for the Third Closing       Attached hereto.
D-4             Compliance Certificate for the Fourth Closing      Attached hereto.
D-5             Compliance Certificate for the Fifth Closing       Attached hereto.
D-6             Compliance Certificate for the Sixth Closing       Attached hereto.
D-7             Compliance Certificate for the Seventh Closing     Attached hereto.
E               Collaboration Agreement (Kras Products)            See tab no. 7.
F               Collaboration Agreement (P53 Products)             See tab no. 8.
</TABLE>

<PAGE>   47

                                    EXHIBIT B

                              SCHEDULE OF PURCHASES

<TABLE>
<CAPTION>
                                                                    (4)
                                                   (3)            Aggregate
             (1)                     (2)        Number of         Purchase
           Investor                Closing       Shares             Price
           --------                -------      ---------       --------------
<S>                                <C>            <C>           <C>
Rhone-Poulenc Rorer                First          525,000       $ 3,003,000.00(1)
  International (Holdings) Inc.    Second         200,735         1,499,490.45
Delaware Corporate Center I        Third          200,735         1,499,490.45
Suite 114                          Fourth         312,500         2,500,000.00
1 Righter Parkway                  Fifth          312,500         2,500,000.00
Wilmington, DE 19803               Sixth          281,315         3,001,631.05
                                   Seventh        281,315         3,001,631.05
                                                ---------       --------------
                           TOTAL                2,114,100       $17,005,243.00
                                                =========       ==============
</TABLE>

(1)    $500,000 of this purchase price was paid prior to closing pursuant to the
       Letter of Intent between the Company and the Investor dated June 15,
       1994.

<PAGE>   48

                                    EXHIBIT C

                             SCHEDULE OF EXCEPTIONS

          This Schedule of Exceptions, dated as of October 7, 1994, is made and
given pursuant to Section 3 of the Introgen Therapeutics, Inc. Series B and
Series B Preferred Stock Purchase Agreement dated October 7, 1994 (the
"Agreement"). The Section numbers in this Schedule of Exceptions correspond to
the Section numbers in the Agreement; however, any information disclosed herein
under any Section number shall be deemed to be disclosed and incorporated into
any other Section number under the Agreement where such disclosure would be
appropriate. Any terms defined in the Agreement shall have the same meaning when
used in this Schedule of Exceptions as when used in the Agreement unless the
context otherwise requires.

3.6       Liabilities.

          The Company is a party to the following agreements (copies of which
          have been provided to the Investor) which may result in liabilities in
          excess of $10,000:

          -         Consulting Agreement with EJ Financial Enterprises, Inc.

          -         Consulting Agreement with Jack A. Roth, M.D.

          -         Service Agreement with Domecq Technologies, Inc.

          -         Sponsored Research Agreements and Clinical Study Agreements
                    with the University of Texas M.D. Anderson Cancer Center.

          -         Genetix License and Materials Transfer Agreement.

          -         Patent and Technology License Agreement with the Board of
                    Regents of the University of Texas System.

          Legal fees and expenses due to Wilson & Varner, PC.

          Legal fees and expenses due to Wilson, Sonsini, Goodrich & Rosati, PC.

3.8       Litigation.

          In December 1993, Schering Corporation contacted the Company (then
          known as Intron Therapeutics, Inc.) and asked that the name "Intron",
          allegedly a Schering trademark, cease to be used by the Company.
          Schering threatened the Company with

<PAGE>   49
          trademark infringement litigation. On January 28, 1994, Schering
          notified the Company that Schering would not file an infringement
          complaint based upon the Company's representation that the Company
          would change its name. The Company subsequently changed its name to
          Introgen Therapeutics, Inc. and has notified Schering of the name
          change.

          The Company believes there will continue to be significant litigation
          regarding patent and other intellectual property rights of companies
          involved in gene therapy.

3.9       Employees.

          The Company entered into a consulting Agreement with Domecq
          Technologies, Inc. effective July 1, 1994. The Company acknowledged in
          the Consulting Agreement that Mr. Nance serves as an officer, director
          and or trustee of other entities and that it is in the best interest
          of the Company for Mr. Nance to continue those activities which are
          deemed by the Company to be not conflicting with the Company's
          interests.

3.10      Patents and Trademarks.

          The Company's success will depend, in large part, on the strength of
          its current and future patent position relating to gene therapy. The
          Company's patent position, like that of others in the gene therapy
          field, is highly uncertain and involves complex legal and factual
          questions. The Company is the licensee of certain patents and patent
          applications of the University of Texas System. Claims made under
          patent applications may be denied or significantly narrowed and issued
          patents may not provide significant commercial protection to the
          Company. There is no assurance that the Company's patents will not
          be challenged by others, and the Company could incur substantial costs
          in proceedings before the United States Patent Office, including
          interference proceedings. These proceedings could also result in
          adverse decisions as to the priority of the Company's licensed
          inventions. There can be no assurance that the Company's products do
          not or will not infringe on the patent or proprietary rights of
          others, and the Company may be required to obtain additional licenses
          to the patents, patent applications or other proprietary rights of
          others. There can be no assurance that any such licenses would be made
          available on terms acceptable to the Company, if at all.

                                      -2-

<PAGE>   50

3.12     Agreement; Action. The following parties:

<TABLE>
<CAPTION>
                                              Association with
          Name                                   the Company
-----------------------          -----------------------------------------
<S>                              <C>
David G. Nance                   President and Chief Executive Officer

Jack A. Roth, M.D.               Consultant and Chairman of the Scientific
                                 Advisory Board

Mahendra G. Shah, Ph.D.          Vice President

Timothy R. Kelly                 Chief Financial Officer

Rodney Varner                    Secretary

John N. Kapoor, Ph.D.            Director
</TABLE>

are associated with the following entities which are also affiliated with the
Company.

          -         Dr. Kapoor, Dr. Shah and Mr. Kelly are associated with EJ
                    Financial Enterprises, Inc. (a consultant to the Company)
                    and Texas Biomedical Development Partners (a major
                    shareholder of the Company).

          -         Mr. Nance is associated with Texas Biomedical Development
                    Partners and Technology Capital Corporation.

          -         Rodney Varner is associated with Wilson & Varner PC which
                    provides legal services to the Company.

          -         Dr. Roth is an employee of M.D. Anderson Cancer Center which
                    is a component of Regents of the University of Texas System
                    (a Licensor to the Company).

3.13      Disclosure.

          The Company's License Agreement with the Board of Regents of the
          University of Texas System has been amended. However, such amendment
          is not legally binding until it has been approved at a meeting of the
          Board of Regents, and no such approval has been obtained.

3.19      Insurance.

          The Company has no insurance at this time.

                                      -3-

<PAGE>   51

3.20      Labor Agreements and Actions.

          The Company is not bound by ANY labor union agreements, except as
          may indirectly apply through the Company's agreements with the
          University of Texas M.D. Anderson Cancer Center ("UTMDACC") related
          to sponsored research and clinical studies. The Company pays UTMDACC
          which in turn pays UTMDACC and University of Texas personnel and
          employees. Some of these personnel and employees may be associated
          with a state employee labor union or other union.

                                      -4-
<PAGE>   52

                                   EXHIBIT D-l

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 5.1 and 5.2 of the
                  Series B Preferred Stock Purchase Agreement dated October 1,
                  1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   53

                                   EXHIBIT D-2

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 7.1, 7.2 and 7.3 of the
                  Series B Preferred Stock Purchase Agreement dated October 1,
                  1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   54

                                  EXHIBIT D-3

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 9.1, 9.2 and 9.3 of the
                  Series B Preferred Stock Purchase Agreement dated October 1,
                  1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   55

                                   EXHIBIT D-4

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 11.1, 11.2 and 11.3 of
                  the Series B Preferred Stock Purchase Agreement dated October
                  1, 1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   56

                                   EXHIBIT D-5

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 13.1, 13.2 and 13.3 of
                  the Series B Preferred Stock Purchase Agreement dated October
                  1, 1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   57

                                   EXHIBIT D-6

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Sections 15.1, 15.2 and 15.3 of
                  the Series B Preferred Stock Purchase Agreement dated October
                  1, 1994 have been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President

<PAGE>   58

                                  EXHIBIT D-7

         The undersigned, hereby certifies that:

         1.       He is the duly elected and acting President of Introgen
                  Therapeutics, Inc., a Delaware corporation.

         2.       The conditions specified in Section _______ of the Series B
                  Preferred Stock Purchase Agreement dated October 1, 1994 have
                  been fulfilled.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of _____________.

                                                      -------------------------
                                                      ---------------, President<PAGE>

                                                                    Exhibit 10.5

[NOTE:  CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION.  THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]

                          SPONSORED RESEARCH AGREEMENT

     RESEARCH AGREEMENT, effective March 10, 1995 (the "Effective Date"), by and
between The University of North Carolina at Chapel Hill, having an address at
300 Bynum Hall, Chapel Hill, North Carolina (the "University"), and Inspire
Pharmaceuticals, Inc., a corporation existing, under the laws of the State of
Delaware, and having its principal place

of business at c/o Burr, Egan, Deleage & Co., One Post Office Square, Boston,
Massachusetts (the "Sponsor").

                                  WITNESSETH:

     WHEREAS, in pursuit of its educational purposes, which include research and
training, the University undertakes scholarly research and experimental
activities in a variety of academic disciplines; and

     WHEREAS, the Sponsor wishes to fund, and desires that the University
undertake, a research program in accordance with said research and training
mission, which research program is described more fully in Exhibit A, attached
hereto and made a part hereof (hereinafter, the "Research"); and

     WHEREAS, in furtherance of its scholarly research and instructional
interests, the University is willing to undertake the Research upon the terms
and conditions set forth
below;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:

     1.  Scope of Research
         -----------------

     During the term of this Agreement, the University shall, use its best
efforts to perform

the Research, as described in Exhibit A, attached hereto and made a part hereof.
Notwithstanding the foregoing, the University makes no warranties or
representations regarding its ability to achieve any particular research
objective or results.

     2.  Personnel
         ---------

     The Research shall be performed by, and under the supervision and direction
of, Dr. Richard C. Boucher, who shall be designated the Principal Investigator,
together with Drs. Ken Harden and Jack Stutts and such additional personnel as
may be assigned by the
<PAGE>

University. If for any reason the Principal Investigator is unable to continue
to serve as Principal Investigator, and a successor acceptable to both the
University and the Sponsor is not available, this agreement may be terminated as
provided in Article 10 (b).

     3.    University Policies and Procedures
           ----------------------------------

     All Research conducted hereunder shall be performed in accordance with
established University policies and procedures, including, but not limited to,
policies and procedures applicable to research involving human subjects,
laboratory animals, and hazardous agents and materials.

     4.    Reimbursement of Costs
           ----------------------

     The Sponsor shall reimburse the University for all direct and indirect
costs incurred by the University in connection with the Research in accordance
with the budget set forth on Exhibit B. Provided, however, that the University
may submit to the Sponsor at any time, and the Sponsor may at its discretion
approve in writing, requests for additional funds. Any such written approval
shall constitute a modification of the Agreement. However, the Sponsor is not
liable for any cost in excess of the amount specified herein, unless this
Agreement is modified to indicate such in writing by both parties. All checks
shall be made payable to The University of North Carolina at Chapel Hill, shall
include reference to the University Principal Investigator and his department,
and shall be sent to:

     S. Kent Walker
     University of North Carolina at Chapel Hill
     Office of Contracts and Grants
     440 West Franklin Street
     Chapel Hill, NC 27599
     Tel: (919) 966-5625
     Fax: (919) 962-0646

Payments shall be made in accordance with the schedule set forth on Exhibit B.

     5.  Research Reports
         ----------------

     The University and its employees will prepare and maintain records,
including bound laboratory notebooks maintained in accordance with standard
scientific procedures, containing all appropriate data reflecting the results of
the Research.  The Principal Investigator shall furnish to the Sponsor during
the term of this Agreement periodic informal written reports regarding the
progress of the Research.  The Principal Investigator, or a mutually agreeable
substitute, shall meet with representatives of the Sponsor at the reasonable
request of the Sponsor to facilitate exchange of information regarding the
Research. Unless such meeting takes place at the University, the meeting shall
be at the expense of Sponsor, including travel. A final report setting forth the
significant research findings shall be prepared by the Principal Investigator
and submitted to the Sponsor within ninety (90) days following the expiration of
the term of this Agreement or the effective date of early termination, as set
forth in Article 10.

                                      -2-
<PAGE>

     6.   Publication
          -----------

     The University will be free to publicly disclose (through journals,
lectures, or otherwise) the results of the research, provided that the
University shall have provided a copy of the proposed publication to the Sponsor
at least sixty (60) days prior to the intended submission of any written
publication and at least thirty (30) days prior to any other public disclosure
to allow the Sponsor to determine whether any patentable invention or Sponsor's
Confidential Information (as defined below) would be disclosed.

     If the proposed disclosure contains Sponsor's Confidential Information, the
University shall remove or cause the author to remove such Sponsor Confidential
Information prior to its submission for publication or other public disclosure.
If the proposed disclosure would disclose a patentable invention, the University
shall, at the request of the Sponsor, delay or cause the author to delay
submission of the work for publication or other public disclosure for up to an
additional sixty (60) days to enable the University or the Sponsor to file a
patent application. If the Sponsor has obtained an extension for the thirty-day
evaluation period as set forth in this Section 6, the Sponsor shall use
reasonable efforts to reduce this sixty-day filing period by the amount of time
previously granted in the extension.

     As between the Sponsor and the University, the University shall have
ownership of any copyrights or copyrightable materials first produced or
composed by or on behalf of the University by its faculty, staff, employees and
agents.  The Sponsor shall have ownership of all copyrightable materials that
contain Confidential Information of the Sponsor; University shall either cause
such Confidential Information to be removed from such materials or assign
copyright to such materials to the Sponsor.  In addition, the University shall
grant to the Sponsor upon request an irrevocable, royalty-free, nonexclusive
right to reproduce, translate, and use, for the Sponsor's own purposes, which
purposes shall not conflict with any other provision of this Agreement, all of
the University's copyrighted material derived from the results of the Research.

     The Sponsor, at its election, shall be entitled to receive in any
publication describing the results of the Research an acknowledgment of its
sponsorship of the Research.

     It is specifically agreed that nothing contained in this agreement will
interfere with the oral defense of research theses and dissertations of graduate
students.

     7.   Proprietary Information
          -----------------------

     All confidential information of either party disclosed to the other party
in connection with the Research hereunder ("Confidential Information") will be
treated by the receiving party as confidential and restricted in its use to only
those uses contemplated by the terms of this Agreement. Any information which is
to be treated as confidential must be clearly marked as confidential prior to
transmittal to the other party. If such Confidential Information is disclosed
orally, it shall be identified as being confidential at the time of disclosure,
and shall thereafter be summarized in writing within 30 days, marked as
confidential, and transmitted to the receiving party. The Sponsor may submit
Confidential

                                      -3-
<PAGE>

Information only to the Principal Investigator, who shall be free to refuse to
accept such Confidential Information. The obligations of this paragraph shall
survive and continue for five (5) years after termination of this Agreement.
Specifically excluded from such confidential treatment shall be information
which: (a) as of the date of disclosure and/or delivery, is already known to the
party receiving such information; (b) is or becomes part of the public domain,
through no fault of the receiving party; (c) is lawfully disclosed to the
receiving party by a third party who is not obligated to retain such information
in confidence; (d) is independently developed at the receiving party, as
demonstrated by its written records, by someone not privy to the Confidential
Information; or (e) is required to be disclosed to comply with applicable laws
or governmental regulations, provided that the disclosing party receives prior
written notice of such disclosure and that the receiving party takes all
reasonable and lawful actions to minimize the extent of such disclosure and, if
possible, to avoid such disclosure.

     From time to time, the Sponsor may also provide the University with
biological, chemical, or physical materials ("Materials") for use in the
Research; Materials shall be proprietary to the Sponsor if they were developed
prior to or outside the performance of this Agreement ("Proprietary Materials").
University shall not, and shall take reasonable steps to assure that its
faculty, staff, employees, and agents will not, either: (1) use the Proprietary
Materials for any purpose other than the conduct of the Research, or (2) make
the Proprietary Materials available to third party without the prior written
consent of the Sponsor. Materials developed in the performance of this Agreement
shall be treated as described in Section 8.

     Each party shall retain full ownership of any Confidential Information or
Proprietary Materials in the possession of the other party. At the termination
of this Agreement, each party shall use its best efforts to secure the return
of, or destroy, any Confidential

Information or Proprietary Materials that are in its possession and are owned by
the other party, unless such party grants specific written permission to retain
possession of such Confidential Information or Proprietary Materials.

     8.   Inventions
          ----------

     a.   All rights in any inventions or discoveries (including all Materials),
whether or not patentable, that are developed, conceived, or reduced to practice
in the course of the Research solely by University employees shall be property
of the University ("University Inventions"). All rights in any inventions or
discoveries (including Materials) whether or not patentable, that are developed,
conceived, or reduced to practice jointly by University employees and Sponsor
employees in the course of the Research shall be jointly owned by the University
and the Sponsor ("Joint Inventions"). All rights in any inventions or
discoveries (including Materials) whether or not patentable, that are developed,
conceived, or reduced to practice in the course of the Research solely by
Sponsor employees shall be property of the Sponsor. The University shall
promptly report to the Sponsor any University Inventions or Joint Inventions by
University employees.

                                      -4-
<PAGE>

     b.   The University hereby grants the Sponsor a first option to obtain an
exclusive license under any University Inventions or Joint Inventions that are
conceived and reduced to practice during the term of this Agreement. The
University agrees to notify the Sponsor of any such Inventions promptly and in
writing. This option for Inventions shall become effective when the Sponsor
receives notice from the University and shall remain open for ninety (90) days.
During, this ninety (90) day period, the University shall make available to the
Sponsor information that the Sponsor reasonably requests which would be useful
and necessary in evaluating such Invention, subject to reasonable
confidentiality requirements that may be imposed by the University. The Sponsor
shall indicate the exercise of its option by written notification to the
University. Upon receipt of such notice, the University shall automatically
grant the Sponsor an exclusive license under such Invention under the terms of
the License Agreement attached hereto as Exhibit C (the "License Agreement"),
                                         ---------
whereupon such Invention shall become a "Licensed Improvement" under the terms
of such License Agreement.

     c.  The University also grants the Sponsor a right of first negotiation,
during the sixty-day period immediately following the termination of this
Agreement, to obtain an exclusive license under any University Inventions and
Joint Inventions that arise as a direct result of the sponsored research
("Developments"). The University agrees to notify the Sponsor of any
Developments promptly and in writing. The Sponsor shall have the right of first
negotiation with respect to a given Development for a period of sixty (60) days
after the Sponsor receives notice of that Development.  The University shall
promptly make available to the Sponsor any information that the Sponsor
reasonably requests which would be useful and necessary in evaluating a
Development, subject to reasonable confidentiality requirements that may be
imposed by the University.  In the event that the Sponsor desires to obtain an
exclusive license to any Development, the University agrees to negotiate in good
faith the terms and conditions of such license. If the parties cannot reach
agreement on the terms of an exclusive license to a Development within the
sixty-day negotiation period, the University shall be free to offer that
Development to third parties; provided, however, that for a period of eighteen
(18) months if the University offers to a third party the opportunity to license
such Development on financial terms that are more favorable than the financial
terms last offered to the Sponsor, then the University shall offer the Sponsor
an opportunity to license such Development on the same terms as those offered by
the University to such third party.

     d.  If the Sponsor fails to exercise its exclusive license option to any
Invention within the applicable option period, or if the Sponsor notifies the
University in writing that it will not exercise such option, then the University
shall be free to offer its rights in such Invention to any third parties. The
foregoing notwithstanding, the Sponsor retains its rights in any Joint
Invention.

     e.  During any option period applicable to a University Invention, the
University agrees, if requested by the Sponsor, to cause U.S. or foreign patent
applications to be filed and prosecuted in its name at the Sponsor's expense,
using patent counsel reasonably acceptable to the Sponsor. The University shall
consult with the Sponsor regarding the preparation, filing, prosecution, and
maintenance of such patent applications and shall furnish to the Sponsor copies
of documents relating thereto in sufficient time to enable the Sponsor to
comment on them prior to filing. If the Sponsor declines to license such
University Invention,

                                      -5-
<PAGE>

then the University shall have no further obligation to obtain patent protection
for such Invention and the Sponsor shall have no further obligation to reimburse
the University for its expenses. If the Sponsor elects to license such
University Invention, then the responsibility for patenting such Inventions and
any associated expenses shall be governed by the terms of the resulting license
agreement. In the event that the University desires to file a patent application
with respect to a University Invention, and the Sponsor does not agree within
sixty (60) days after receipt of written notification from the University of its
intent to file such patent application, the University may file and prosecute
such patent at its own expense and the Sponsor shall have no farther rights
under this Agreement with respect to such University Invention.

     f.  During any option period applicable to a Joint Invention, the Sponsor
shall have the first right to cause patent applications to be filed and
prosecuted in the names of both parties at the Sponsor's expense using patent
counsel reasonably acceptable to the University. The Sponsor shall consult with
the University regarding the preparation, filing, prosecution, and maintenance
of such patent applications and shall furnish to the University copies of
documents relating thereto in sufficient time to enable the University to
comment on them prior to filing. If the Sponsor elects to license such Joint
Invention, then the responsibility for patenting such Inventions and any
associated expenses shall be governed by the terms of the resulting license
agreement. If the Sponsor elects not to license such Joint Invention or not to
seek patent protection for such Invention, then the University shall be free to
cause patent applications to be filed and prosecuted in the names of both
parties at the University's expense using patent counsel reasonably acceptable
to the Sponsor. The University shall consult with the Sponsor regarding the
preparation, filing, prosecution, and maintenance of such patent applications
and shall furnish to the Sponsor copies of documents relating thereto in
sufficient time to enable the Sponsor to comment on them prior to filing.

     9.  Ownership of Property
         ---------------------

     Title to any equipment purchased or manufactured in the performance of the
work funded under this agreement shall vest in the University.

     10.  Term and Termination
          --------------------

     a.   This Agreement shall commence on the Effective Date and remain in
effect for a period of two (2) years and may be extended thereafter by mutual
agreement of the parties in writing.

     b.   Notwithstanding the foregoing, this Agreement may be terminated by
either party at any time upon sixty (60) days advance written notice to the
other party. Upon receipt of notice of early termination, the University shall
use its best efforts promptly to limit or terminate any outstanding commitments
and to conclude the work. All costs associated with such termination shall be
reimbursable, including, without limitation, all non- reimbursed costs and non-
cancelable commitments incurred prior to the receipt of the notice of
termination, such reimbursement together with other payments not to exceed the
total estimated project cost specified in Article 4.

                                      -6-
<PAGE>

     c.   The provisions of paragraphs 5, 6, 7, 8, 9, 12, 14, 15, and 20 shall
survive such termination of this Agreement.

     11.  Notices
          -------

     Any notices given under this Agreement shall be in writing and shall be
deemed delivered when received by means of confirmed facsimile transmission or
recognized national overnight courier or when sent by first-class mail, postage
paid, addressed or transmitted to the parties as follows (or at such other
addresses or facsimile numbers as the parties may notify each other of in
writing):

                The University of North Carolina At Chapel Hill:
                ------------------------------------------------

Dr. Robert P. Lowman
Director
Office of Research Services
The University of North Carolina at Chapel Hill
CB #4100, 300 Bynum Hall
Chapel Hill, NC 27599-4100
Ph:   (919) 966-5625
Fax:   (919) 962-0646

                                    Sponsor:
                                    --------

H. Jeff Leighton
President and Chief Executive Officer
Inspire Pharmaceuticals, Inc.
c/o Burr, Egan, Deleage & Co.
One Post Office Square
Boston, MA 02110
Ph: (617) 482-8020
Fax: (617) 566-0848

With a copy to:

Michael Lytton, Esq.
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Fax: (617) 227-4420

     12.  Use of University Name
          ----------------------

     Sponsor shall not employ or use the name of the University in any
promotional materials, advertising, or in any other manner without the prior
express written permission of the University, except that Sponsor may, during
the term of this Agreement, state that it is sponsoring the Research by the
Principal Investigator at the University.  The foregoing

                                      -7-
<PAGE>

notwithstanding, Sponsor shall have the right to identify the University and to
disclose the terms of this Agreement in any prospectus, offering memorandum, or
other document or filing required by applicable securities laws or other
applicable law or regulation, provided that Sponsor shall have given University
at least five (5) days prior written notice of the proposed text of any such
identification or disclosure for the purpose of giving University the
opportunity to comment on such proposed text. In no event shall the sponsoring
of the Research be considered to be an endorsement of the Sponsor by the
University of any commercial product which may result, indirectly or directly,
from the Research.

     13.  Relationship of the Parties
          ---------------------------

     The University, for all purposes related to this Agreement, shall be deemed
an independent contractor of the Sponsor, and nothing in this Agreement shall be
deemed to create a relationship of employment or agency or to constitute the
parties as partners or joint venturers.

     14.  Indemnification
          ---------------

     The Sponsor hereby agrees to indemnify, defend and hold harmless the
University, its employees, students and agents from and against any loss, claim,
damage or liability of any kind arising out of or in connection with the act(s)
or failure(s) to act of Sponsor's employees or agents in connection with the
performance of this Agreement, and/or involving Sponsor's use and/or possession
of the results of the Research and/or biological samples or other Materials
provided by the University to the Sponsor pursuant to the Research.

     15.  No Warranties
          -------------

     The University makes no warranties, either express or implied, as to any
matter, including, without limitation, the results of the research or any
inventions or product, tangible or intangible, conceived, discovered or
developed under this Agreement; or the merchantability or fitness for a
particular purpose of the research results of any such invention or product. The
University shall not be liable for any direct, consequential or other damages
suffered by the Sponsor or by any Licensee or any others resulting from the use
of the research results or any such invention or product.

     16.  Force Majeure
          -------------

     The University shall not be liable for any failure to perform as required
by this Agreement, to the extent such failure to perform is caused by any reason
beyond the University's control, or by reason of any of the following: labor
disturbances or disputes of

                                      -8-
<PAGE>

any kind, accidents, failure of any required governmental approval, civil
disorders, acts of aggressions, acts of God, energy or other conversation
measures, failure of utilities, mechanical breakdowns, material shortage,
disease, or similar occurrences.

     17.  Severability
          ------------

     In the event that a court of competent jurisdiction holds any provision of
this Agreement to be invalid, such holding shall have no effect on the remaining
provisions of this Agreement, and they shall continue in full force and effect.

     18.  Entire Agreement; Amendments
          ----------------------------

     This Agreement and the Exhibits hereto contain the entire agreement between
the parties. No amendments or modifications to this Agreement shall be effective
unless made in writing and signed by authorized representatives of both parties.

     19.  Similar Research
          ----------------

     Nothing in this Agreement shall be construed to limit the freedom of the
University or of its researchers who are participants under this Agreement, from
engaging in similar research made under other grants, contracts or agreements
with parties other than the Sponsor, provided that the Sponsor receives advance
written notice describing any research not funded by the Federal Government.
The Sponsor agrees to maintain all such disclosures in strict confidence.

     20.  Governing Law
          -------------

     This Agreement shall be governed by and construed in accordance with the
law of North Carolina.

                                      -9-
<PAGE>

     IN WITNESS HEREOF, the parties hereto have executed this Agreement by their
duly authorized officers or representatives.

THE UNIVERSITY OF NORTH CAROLINA       INSPIRE PHARMACEUTICALS,
CHAPEL HILL                            INC.

By:    /s/ Wayne R. Jones                By:      /s/ H. Jeff Leighton
    --------------------------               -------------------------------
       Wayne R. Jones                           H. Jeff Leighton, Ph.D
       Vice Chancellor,                         President & Chief Executive
       Business and Finance                     Officer

Consented to by Principal Investigator:

By:    /s/ Richard C. Boucher
    ------------------------------
       Richard C. Boucher

                                      -10-
<PAGE>

                                   Exhibit A
                                   ---------

                            Description of Research

Exhibit A-1:   Research Plan for Dr. T. Kendall Harden.
-----------

Exhibit A-2:   Research Plan for Dr. M. Jackson Stutts.
-----------

Exhibit A-3:   Research Plan for Dr. Richard C. Boucher.
-----------
<PAGE>

                                                                     Exhibit A-1
                                                                     -----------

                Research Plan for Inspire Pharmaceuticals, Inc.

T. Kendall Harden, Ph.D.
CB #7365 FLOB
Department of Pharmacology
School of Medicine
University of North Carolina
Chapel Hill, NC  27599-7365
<PAGE>

I.   BACKGROUND

     Extracellular adenine nucleotides and nucleosides interact with cell
surface receptors in the central nervous system and peripheral tissues to
produce a broad range of physiological responses (1-3). Burnstock (1) proposed
in 1978 that these responses are mediated by two major receptor types: P1-
purinergic receptors, which are physiologically activated by adenosine and
exhibit a potency order of adenosine greater than AMP greater than ADP greater
than ATP, and P2-purinergic receptors, which are activated by ATP or ADP and
exhibit a potency order of ATP greater than ADP greater than AMP greater than
adenosine. Based on subsequent pharmacological, biochemical, and radioligand
binding studies, it became clear that at lest two subtypes of P1-purinergic
receptors (A1-and A2-adenosine receptors) exists (4). The development of
selective A1-and A2-receptor agonists, as well as antagonists that specifically
block P1-purinergic receptors with no effect on P2-purinergic receptors, has
facilitated reliable classification of P1-purinergic receptors. Biochemical
characterization, purification, and moleculor cloning of cDNA encoding A1-, A2-,
and the recently discovered A3-adenosine receptor subtypes has followed (5,6).

     Classification of P2-purinergic receptors has proven difficult since no
selective P2-receptor antagonists are available. Nonetheless, observation of
differential pharmacological effects of analogs of ATP and ADP led Burnstock and
Kennedy to propose that at least two subtypes of P2-purinergic receptors exist
(7). Pharmacological responses mediated through P2x-purinergic receptors, e.g.
contraction of smooth muscle, occur with the potency order of a,B-methylene ATP
greater than B,y-methylene ATP greater than ADP greater than 2-methylthio ATP.
Pharmacological responses mediated through P2y-purinergic receptors, e.g.
relaxation of smooth muscle 2-methylthio ATP greater than ATP greater than a,B-
methylene ATP = B,y-methylene ATP. Important physiological roles for P2-
purinergic receptors exist in addition to those well-established for the
cardiovascular system (1-3). For example, activiation of a P2y-purinergic
receptor results in marked increased in liver glycogenolysis (8,.9), in insulin
secretion from pancreas (10), and in K+ efflux and amylase secretion from
parotid acinar cells (11). ATP is released from hypoxic myocardiium and cardiac
autonomic nerve endings, and as a P2-purinergic receptor agonist, influences
cardiac contractility (1,12), presumably at least in part by activating a P2y-
purinergic receptor-regulated Ca2a channel (13).

     P2y-purinergic receptors in addition to P2x- and P2y-purinergic receptors
exist.  A receptor (P2T; ref. 2,16) that response to ADP but not ATP is
expressed on platelets.  This receptor also has been observed in osteoblastic
cells.  Very high concentrations of ATP permeabilize cells through a so-called
"receptor" (the P2Z-receptor: ref. 2,15), but the general physiological
significant of this entity is not known.

     In the late 1980's it became apparent that activation of phospholipase C by
ATP in many target tissues occurred through a receptor that was
pharmacologically distinct from the P2y-purinergic receptor that had been
previously thought to be the principle inositol lipid hydrolysis-promoting
purinergic receptor.  This so-called P2u-purinergic receptor (P2U-R) was shown
to be activated by ATP, UTP, ATPyS, and only weakly or not at all by other
analogs of ATP or UPT including those that are selective for P2X-and P2y-
<PAGE>

receptors (16-21).  The presence of this receptor has been recognized on many
different types of target cells ranging from glial cells to circulating
monocytes.  Perhaps one of its most prominent localizations is on epithelial
cells of various origins, including those of the lung, where the P2U-R
stimulates phospholipase C, mobilizes intracellular Ca++, and increases C1
secretion (16,22).

     Over the past year, our laboratory has been involved in studies that have
led to the delineation of additional nucleotide receptor subtypes.  This work
has moved down three different avenues: a) we have obtained available drugs and
in a very fruitful collaboration with Ken Jacobson at the NIH, we have
synthesized novel compounds; b) we have taken an approach we used in the mid
1980's to delineate multiple muscarinic cholinergic receptor subtypes-this
involves showing that certain receptor subtypes have difference specificities of
coupling to G-protein-linked second messenger pathways; and c) we have used
tumor cell lines to illustrate the existence of receptors with heretofore
unrecognized pharmacological specificities.

     Motivated by the need to develop high affinity and selective P2-purinergic
receptor agonists and antagonists, we initiated a collaboration with Dr. Kenneth
Jacobson of NIH and Dr. Geoffrey Burnstock of University College, London.  We
have studied (23-26) structure-activity relationships of a large series of
nucleotide analogs and other molecules (~ 200 compounds) on the responses to
activation of P2X (rabbit saphenous artery, guinea-pig vas differencs, and
guinea-pig bladder) and P2y-purinergic receptors (C6 rat glioma cells, turkey
erythrocytes, guinea-pig taenia coli, rabbit aorta, and rabbit mesenteric
artery).  The nucleotides studies so far include modifications of the ATP
molecule at the purine base, at the phosphate chain, and at the ribose moiety.
Some of the most significant findings include the identification of potent (K0.5
in the 10/-11/ to 10/-10/ M range) 2-thioether derivatives of ATP that are P2x-
purinergic receptor agonists with decreased activity or no activity at P2x-
purinergic receptors.  Some nucleotide derivatives showed selectivity within the
P2x-and P2y-purinergic responses, suggesting the presence of multiple P2x-and
P2y-purinergic receptor subtypes.  Diphosphate and triphosphate nucleotide
analogs were equipotent as agonists for P2y- receptors.  Interestingly, several
2-thioether monophosphate derivatives also were full agonists. Since 2-thioether
derivatives of adenosine were inactive, these results indicate that a single
phosphate is the minimal requirement for activity at P2y-purinergic receptors.
Our results will lead to the design of more potent and selective P2y-purinergic
receptors agonists.  Preliminary results in our laboratory indicate that these
thoughts will find substantial experimental support, since we have identified
for the first time non-nucleotide compounds with activity at P2-purinergic
receptors (unpublished observations).  Some of the analogs we have studied can
be developed as molecular probes for ATP receptors including radioligands,
fluorescent probes, immobilized ligands for affinity chromatography, affinity
labels, and covalently reactive ligands.

     We have observed that a rat glioma cell line expresses a receptor with a
pharmacological specificty consistent with a P2y-purinergic receptor subtype
(16).  Stimulation of this receptor results in inhibition of adenylyl cyclase.
IN spite of rigorous attempts to do so, we have been unable to observe any
purinergic receptor-mediated
<PAGE>

activation of the inositol lipid/Ca++ signaling cascade in these cells. This
contrasts with the general property of response to P2Y-purinergic receptors
activation in other target tissues where activation of phospholipase C occurs
with no effect on adenylyl cyclase. These differential second messenger
signaling properties are reminiscent of the difference in signaling response
seen with subtypes of many other G-protein-linked receptors, e.g. M1-versus M2
muscarinic cholinergic receptors, a1- versus a2- adrenergic receptors, as well
as receptor subtyps for serotonin, angiotensin II, and thromboxanes to name a
few. The idea that different P2y-purinergic receptor subtypes can be identified
based on their second messenger coupling specificities now has been supported by
a pharmacological data (25,27). For example, the putative P2-purinergic receptor
antagonist PPADS competitively blocks the P2y-purinergic receptor that activates
phospholipase C on turkey erythrocytes, but has no effect on the adenylyl
cyclas-coupled P2y-purinergic receptor of C6 glioma cells. Suramin and reactive
blue 2 are competitive antagonists at both P2y-purinergic receptors, but he pKB
of reactive blue 2 differs by two orders of magnitude between the two systems.
Although remarkable differences in agonist potencies were not observed between
the two systems in our original studies, expansion of this work into comparison
of agonist affinities of newly synthesized ATP and ADP analogs has revealed
differences in agonist potencies of up to 300-fold. Since these differences go
in both directions, i.e. some drugs are more potent for the adenylyl cyclase-
coupled receptor whereas other agonists are more potent at thephospholipase C-
coupled receptor, this work adds additional evidence for the existence of two
P2y-purinergic receptor subtypes.

     The nucleotide receptor filed has made the tacit assumption that signaling
through the so-called P2U-R involves the same receptor types in all tissues,
e.g. epithelial cells form various originals.  However, pharmacological support
for this view is weak, and is made even more tenuous by the fact that
essentially only three compounds (UTP, ATP, ATPyS) have been used (UTP alone
often has been used) to delineate P2U-R.  With these issues in mind we have
carried out studies that have led to the identification of a new phospholipase
C-linked receptor that is activated by UDP, UTP, and by uridine nucleotide
analogs (28).  Neither ATP, ADP, nor any adenine nucleotide analog activates
this receptor, which we have termed a uridine nucleotide receptor.  The
physiological significance of this receptor has not been established.  Its
tissues distribution has not yet been studied, and the release of UTP and UDP to
extracellular tissues is at a nascent stage of understanding.  Nonetheless, UTP
is stored and released in high amounts from platelets, and there are soon to be
published data illustrating that uridine nucleotides are released in high
amounts from certain neurons.

     Progress in understanding of P2-purinergic receptors has been slow due to
the lack of receptor ligands and the absence of useful model systems. In the
date 1980's we were fortunate to identify a P2y-purinergic receptor on the
turkey erythrocyte.  This receptor markedly activates a readily measurable G-
protein-regulated phospholipase C(29).  The erythrocyte model allowed the
development of radioligands useful for reversibly (30) and irreversibly (31, 32)
labeling P2y-purinergic receptors.  We currently have some questions about the
selectivity of these radioligands even when used with turkey erythrocyte
membranes, and to date they have not been of use in labeling P2y-purinergic
receptors in various mammalian tissues.
<PAGE>

     Molecular cloning of many G-protein-linked receptors has been accomplished
during the last five years.  To date all of these follow a predicted seven
transmembrane-spanning motif with considerable sequence homology observed in
putative transmembrane regions, and much less percent identity in hydrophilic
stretches predicted to reside outside the membrane milieu (5,33).  Decades of
receptor subclassification based on availability of receptor-discriminating
ligands now has evolved to molecular biological approaches that produce
unambiguous definition of receptor structure.

     A P2y-purinergic receptor (34,35) and a P2U-R (36, 37) have been cloned.
These sequences both predict seven-transmembrane spanning G-protein-linked
receptors, but their overall sequence homology (34%) is very low.  Indeed, the
homology is so low that we predict that these two receptors will prove to be
members of difference general families of proteins.  It would not be surprising
to observe that the uridine nucleotide specific receptor that we have recently
identified (28) and are now trying to clone has higher sequence homology to the
P2U-R than to the P2y-purinergic receptor that has been closed.  Our lab was the
first to describe the specificity of coupling to second messenger pathways of a
cloned P2y-purinergic receptor and to define in detail its pharmacological
specificities.  The turkey P2y-purinergic receptor was stably expressed in
1321N1 human astrocytoma cells and in CHO cells (35).  This receptor markedly
activates phospholipase C without producing any reproducible effect on adenylyl
cyclase activity.  We have carried out a detailed pharmacological analysis of
this receptor, and specificities of over a dozen drugs nicely fit what we have
observed previously in turkey erythrocytes.  We are using knowledge of this
receptor to clone additional P2y-purinergic receptor subtypes, including the
P2y-purinergic receptor on C6 glioma cells that inhibits adenylyl cyclase but
does not activate phospholipase C (26).  cDNAs encoding what are apparently two
subtypes of the P2y-purinergic receptor also have been cloned recently (38,39).
These sequences predict proteins with structures similar to ion channels,
particularly those that gate K.

II.  SPECIFIC AIMS

     The overall goal of this research is to develop biochemical systems that
will be optimal for assessment of ddrug affinity and selectivity for P2U-R.  The
specific aims are:

1.  To develop a radioligand binding assay for P2U-R.  A baculovirus expression
vectors will be constructed with the human P2U-R cDNA, and P2U-R will be
expressed to high levels in Sf9 insect cells in the absence and presence of G-
protein subunits.  We will synthesize [35S]UTPyS and use this high affinity P2U-
R agonist as a radioligand to label the P2U-R membranes prepared from Sf9 cells
overexpressing the receptor.

2.  To stably express the human P2u-purinergic receptor.  We will continue our
characterization of the stably expressed P2U-R as a test for agonists and
antagonists of this receptor.
<PAGE>

III. EXPERIMENTAL PLAN

     The long-term goal of this research is to identify a series of drugs that
have high affinity for the human airway epithelial cell P2U-R, that are
selective for these receptors, that are more resistant to metabolism, and that
have a high degree of bioavailability.  It is imperative that a rational well-
designed set of biological tests be established to meet the goal of identifying
better drugs, and the research described here focuses on the development of such
assays.  Enormous strides have been made in the nucleotide receptor filed in the
last several years.  After a decade of near dormancy, the field has made
significant and broad progress in identifying second messenger responses that
are regulated by P2-purinergic receptors, in delineating new receptor subtypes,
in developing more specific pharmacological agents, and in cloning cDNA for
multiple members of the nucleotide receptor class of proteins.  The research
described here will take advantage of this remarkable progress in molecular
knowledge.

     The lack of reliable radioligands to specifically label various of the
nucleotide receptor subtypes is a disadvantage in the screening and study of
drugs that interact with these receptors.  This deficity emanates from the lack
of availability of high affinity receptor antagonists and the existence of a
large number of high abundance proteins in addition to purinergic receptors that
bind adenine and uridine nucleotides with high affinity.  Our group continues to
pursue the generation of new radioligands that can be used to label purinergic
receptors.  This seems imminently possible in the case of P2y-purinergic
receptors where we already have in hand highly specific agonists with K0.5
values in some cases in the 30 pM range.  We also have begun structure activity
work on identifying higher affinity P2y-purinergic receptor antagonists

     [CONFIDENTIAL TREATMENT REQUESTED]

     There are a number of problems that can be circumvented by co-expressing
the human

     [CONFIDENTIAL TREATMENT REQUESTED]

     We will take advantage of our previously utilized methodology (45) to
purify enriched fractions of plasma membranes from P2U-R-expression Sf9 cells.
[35S]UTPyS will be synthesized using conditions that we have recently developed
(40).  The radioligand will be
<PAGE>

purified and chemically characterized.  A radioligand binding assay then will be
established modeled on conditions we have used previously to radiolabel B-
adrenergic (45), histamine (46), and muscarinic cholinergic (47) receptors.

     [CONFIDENTIAL TREATMENT REQUESTED]

     Our principle interest must be on the P2U-R.  Thus, the primary goals of
this research will be the development of a radioligand binding assay for the
P2U-R and on characterizing the P2U-R stably expressed in 1321N1 cells and
possibly in other cells.  However, there is other research supported by our NIH
funding that potentially will be helpful to the research efforts of Inspire.
This work is discussed in the final paragraph of this document.

     Although there is little reason to believe that the pharmacological
specificity exhibited by the human receptor will significantly differ from that
of its avian homologue, it will be important that definition of selectivity of
P2U-R drugs be made among all of the P2-purinergic receptors and these should be
from the same species (human).  This obviously is not yet possible since all of
these have not been cloned.  That is, cDNA has not been identified for at least
two additional P2y-purinergic receptor subtypes, the P2T-purinergic receptor(s)
of platelets (and other tissues), the P2Z-purinergic receptor, the uridine
nucleotide selective receptor, and additional P2X-purinergic receptors.  In work
supported by one of our NIH research grantS [CONFIDENTIAL TREATMENT REQUESTED],
we have cloned the human homologue of the phospholipase C-linked P2y-purinergic
receptor and are stably expressing this receptor in 1321N1 cells.  The P2X-
purinergic receptors, which represent one of the major classes of P2-purinergic
receptor subtypes, have been difficult to study other than in intact tissue or
with electrophysiological tests.  However, two of these recetnly have been
cloned (37, 38).  The availability of sequence information has allowed us to
begin work aimed at obtaining the human sequences, which then can be expressed
in a null cell line.  This would provide us with a test system in which
interaction of drugs with P2y-purinergic receptors could be examined in a simple
straghtforward way using, for example, Ca++ imaging.  Definition of P2U-R
selectivity of drugs also would be greatly augmented by the availability of the
platelet P2T-purinergic receptor stably expressed in an appropriate null cell
line.

     [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

IV.    LITERATURE CITED

1.     Burnstcok, G. (1978) in Cell membrane receptors for drugs and hormones: A
       multidisciplinary approach (Straub, R. W. and Bolis, L., eds) pp. 107-
       118, Raven Press, New York

2.     Gordon, J. L. (1986) Biochem.J. 233, 309-319

3.     Dubyak, G. R. and El-Motassim, C. (1993) Am.J.Physiol. 34, C577-C606

4.     Williams, M. (1987) Ann.Rev.Pharmacol.Toxicol. 27, 315-345

5.     Stiles, G. L. (1992) J.Biol.Chem. 267, 6451-6454

6.     Zhou, F. Q., Olah, M.E., Li, S., Johnson, R. A., Stiles, G. L., and
       Civelli, O. (1992) Proc.Natl.Acad.Sci,U.S.A. 89, 7432-7436

7.     Burnstock, G. and Kennedy, C. (1985) Gen.Pharmacol. 16, 433-440

8.     Buxton, D. B., Robertson, S. M., and Olson, M. S. (1986) Biochem.J. 237,
       773-780

9.     Keppens, S. and DeWulf, H. (1986) Biochem.J. 240, 367-371

10.    Loubatieres-Mariana, M. M., Chapal, J., Lignon, F., and Valette, G.
       (1979) Eur.J.Pharmacol. 59, 277-286

11.    McMillan, M. K., Soltoff, S. P., Cantley, L. C., and Talamo, B. R. (1987)
       Biochem.Biophys.Res.Commun. 149, 523-530

12.    Legssyer, A., Poggoli, JK., Renard, D., and Vassort, G. (1988) J.
       Physiol. (London) 401, 185-199

13.    Bjornsson, O. G., Monck, J. R., and Williamson, J. R. (1989) Eur.J.
       Biochem. 186 395-404

14.    MacFarlane, D. E., Srivastava, P. C., and Mills, D. C. B. (1983)
       J.Clin.Invest. 71, 420-428

15.    Cockcroft, S. and Gomperts, B. D. (1979) Nature 279, 541-542

16.    Brown, H. A., Lazarowski, E. E., Boucher, R. C., and Harden, T. K. (1991)
       Mol.Pharmacol. 40, 648-655

<PAGE>

17.    Cowen, D. W., Baker, B., and Dubyak, G. R. (1990) J. Biol.Chem. 265,
       16181-16189

18.    Cockcroft, S. and Stutchfield, J. (1989) Biochem.J. 263, 715-723

19.    Okajima, F., Sato, K., and Kondo, Y. (1989) kFEBS Lett. 253, 132-136

20.    Fine, J., Cole, P., and Davidson, J. S. (1989) Biochem,J. 263, 371-376

21.    Davidson, J.S., Wakefield, I.I., Sohnius, Kul, Van Der Merwe, P. A., and
       Miller, R. P. (1990) Endocrinology 126, 80-87

22.    Mason, S. J., Paradiso, A. M., and Boucher, R. C. (1991) Br.J.Pharmacol.
       103, 1649-1656

23.    Fischer, B., Boyer, J. L., Hoyle, C. HK. V., Ziganshin, A. U.,
       Brizzolara, A. L., Knight, G. E., Zimmet, J., Burnstock, G., Harden, T.
       K., and Jacobson, K. A. (1993) J.Med.Chem. 36, 3937-3946

24.    Burnstock, G., Fischer, B., Khoyle, C.H. V., Maillard, M., Ziga shin, A.
       KU., Brizzolara, A. L., von Isakovics, A., Boyer, JK. L., Harden, T. K.,
       and Jacobson, K. A. (1994) Drug Dev. Res. 31, 200-219

25.    O'Tuell, J. W., Boyer, J. L., Fisher, B., Jacobson, K. A., and Harden, T.
       K. (1994) Manuscript in preparation

26.    Boyer, JK. L., Lazarowski, E. R., Chen, X. -H., and Harden, T. K. (1993)
       J.Pharmacol,Exp.Ther. 267, 1140-1146

27.    Boyer, J. L., Zohn, I., Jacobson, K. A., and Harden, T. K. (1994)
       Br.J.Pharmacol, 113, 614-620

28.    Lazarowski, E. R. and Harden, T. K. (1994) J. Biol. Chem. 269, 11830-
       11836

29.    Boyer, JK. L., Downes, C. P., and Harden, T. K. (1989) J.Biol.Chem. 264,
       884-890

30.    Cooper, C. L., Morris, A. J., and Harden, T. K. (1989) J.Biol.Chem. 264,
       6202-6206

31.    Boyer, J. L. and Harden, T. K. (1989) Mol.Pharmacol. 36, 831-835

32.    Boyer, J. L. and Cooper, C. L., and Harden, T. K. (1990) J. Biol.Chem.
       265, 13515-13520

<PAGE>

33.    O'David, B. F., Lefkowitz, R. J., and Caron, M. G. (1989)
       Ann.Rev.Nekurosci. 12, 67-83

34.    Webb, T. E., Simon, J., Krishek, B. J., Bateson, A. N., Smart, T. G.,
       King, B. F., Burnstock, G., and Barnard, E. A. (1993) FEBS Lett. 324,
       219-225

35.    Filtz, T., Li, Q., Boyer, J. L., Nicholas, R. A., and Harden, T. K.
       (1994) Mol.Pharmacol. 46, 8-14

36.    Lustig, K. D., Shiau, A. K., Brake, A. JK., and Julius, D. (1993)
       Proc.Natl.Acad.Sci. U.S.A. 90, 5113-5117

37.    Parr, C. E., Sullivan, D. M., Paradiso, A. M., Lazarowski, E.R., Burch,
       L. H., Olsen, J. C. , Erb, L., Weisman, G. A., Boucher, R. C., and
       Turner, J. T. (1994) Proc.Natl.Acad.Sci. U.S.A. 91, 3275-3297

38.    Valera, S., Hussy, N., Evans, R. J., Adami, N., North, R. A., Skuprenant,
       A., and Buell, G. (1994) Nature 371, 516-519

39.    Brake, A. J., Wagenbach, M. J., and Julius, D. (1994) Nature 371, 519-513

40.    Lazarowski, E. R., Stutts, M. J., Watt, W. C., Boucher, R. C., and
       Harden, T. K. (1995) in preparation

41.    Maurice, D. H., Waldo, G. L., Mkorriw, A. J., Nicholas, R. A., and
       Harden, T. K. (1993) Biochem.J. 290, 765-770

42.    Boyer, J. L., Graber, S. G., Waldo, G. L., Harden, T.K. and Garrison, J.
       C. (1994) J.Biol.Chem. 269, 2814-2819

43.    Paterson, A., Morris, A. J., Boyer, J. L., Price, E. M., and Harden, T.
       K. (1994) Submitted for publication

44.    Parker, E. M. , Kameyama, K., Higashijima, T., and Ross, E. M. (1991) J.
       Biol.Chem. 266, 519-527

45.    Waldo, G. L., Noirthrup, J. K., Perkins, J. P., and Hardcen, T.K. (1983)
       J.Biol.Chem. 258, 13900-13908

46.    Nakahata, N., Martin, M. W., Hughes, A. R. Hepler, J. R., and Harden, T.
       K. (1986) Mol.Pharmacol. 29, 188-195

47.    Harden, T. K., Petch. L.A., Traynelis, S. F., and Waldo, G. L. (1985)
       J.Biol.Chem. 260, 13000-13006
<PAGE>

                                                                     Exhibit A-2
                                                                     -----------

            Work Plan Prepared for Inspire Pharmaceuticals, Inc. by

                           M. Jackson Stutts, Ph.D.

                        Associate Professor of Medicine

            Cystic Fibrosis/Pulmonary Research and Treatment Center

                         University of North Carolina

                          Chapel Hill, NC 27599-7020
<PAGE>

                                 Specific Aims

    Severe airway disease results from abnormal epithelial Na+ absorption and
C1-secretion in cystic fibrosis (CF) patients, suggesting that these opposing
ion transport processes are normally coordinated for efficient airway
mucociliary clearance (MCC). We speculate that purinergic P2u receptors (P2U-Rs)
play a central role in coordinated regulation of airway surface liquid (ASL)
metabolism and MCC. Our general hypothesis is that P2U-R mediated C1- secretion
can be manipulated through the processes that regulate the concentration of
endogenous P2U-R agonists or through introduction of novel agonists with greater
potency and/or resistance to metabolism. We will test this general hypothesis
with two specific aims.

1.  [CONFIDENTIAL TREATMENT REQUESTED]

2.  We will screen up to ten potential P2U-R agonists per year for their ability
    to (1) stimulate and (2) sustain C1- secretion in human airway epithelium,
    and relate these functional indices to the resistance of the tested
    compounds to lung ectonucleotidase.
<PAGE>

                            Background and Rationale

    P2U-Rs on the airway surface are prime candidates to coordinate separate
functions that constitute MCC. Both ATP and UTP, natural P2U-R agonists,
stimulate C1- secretion(1), mucin release (2,3) and ciliary beat frequency (4),
in vitro. Moreover, UTP increased MCC in humans, in vivo (observations by M.R.
Knowles, M.D.). If P2U-Rs do indeed participate in a paracrine regulatory system
for MCC under physiologic conditions, then several fundamental processes will
control the effective concentration of P2U-R agonists. Among the most important
of these are

[CONFIDENTIAL TREATMENT REQUESTED]

A second strategy to maintain activated P2U-Rs is to supply exogenous agonists
that are more potent than UTP, and/or metabolized less rapidly.  In Aim 2, we
propose to test compounds that have been shown to potently activate
phospholipase C in broken cell preparations, for their ability to activate and
sustain C1-secretion.
<PAGE>

                        Experimental Design and Methods

       [CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO THE ENTIRE PAGE]
<PAGE>

[CONFIDENTIAL TREATMENT REQUESTED]

Aim 2     We will screen up to ten potential P2U-R agonists per year for their
          ability to (1) stimulate and (2) sustain C1 - secretion in human
          airway epithelium, and relate these functional indices to the
          resistance of the tested compounds to lung ectonucleotidase.

     Epithelial cells will be isolated from surgical specimens and cultured on
permeable collagen membranes as we have described previously (7). The
reconstituted epithelia will be studied in modified Ussing chambers under
conditions that permit identification of active
<PAGE>

chloride secretion (i.e. 104 M amiloride to block sodium absorption).
Cumulative dose-response curves will be established for ATP and UTP stimulation
of C1- secretion (10-9 - 10-8M).  Putative C1- secretogogues will be initially
tested in the same concentration range, with subsequent shits in range if
necessary.  The maximum stimulated C1- current (efficacy) and apparent ED50
(potency) will be calculated from the dose-response curves.  Once the minimum
concentration of agonist that gives the maximum stimulation of C1- secretion has
been determined, we will examine, in separate experiments, its duration of
action, and compare this time course to that obtained for ATP and UTP.  All
compounds will be tested for resistance to hydrolysis (see Aim 1.).  This
strategy will identify any agents which equal or better ATP or UTP in efficacy
and/or potency.  It will also reveal if a test compound has a significantly more
sustained action than ATP or UTP, and whether that action is due to resistance
to metabolic degradation.

                                    Summary

The combined Aims will result in development of [CONFIDENTIAL TREATMENT
REQUESTED] selected phospholipase C agonists according to their effectiveness as
C1- secretogogues and resistance to metabolism by ectonucleotidases. This
twofold approach is important to the rational selection of P2U-R aronists with
improved therapeutic potential.
<PAGE>

                                     Budget

<TABLE>
<CAPTION>

Personnel                                                                     Year 01              Year 02
<S>                                                                     <C>                  <C>
    Research Technician III, 50% effort                                      28,000.00            29,400.00
    Research Analyst I, 50% effort                                           18,500.00            19,425.00
                                                                      ----------------     ----------------
    Total Personnel (Includes Salary and Benefits)                          $46,500.00           $48,825.00
                                                                      ================     ================

Equipment:                                                                    1,800.00
    Circulating water bath                                                    1,500.00
    Custom heated perfusion column                                            7,200.00
                                                                      ----------------
    High sensitivity LCD
    HPLC columns and modifications                                                                 7,200.00
                                                                                           ----------------
    Total Equipment                                                         $10,500.00           $ 7,200.00
                                                                      ================     ================
Supplies:
    Luminometry                                                               4,350.00             4,515.00
    HPLC                                                                      6,600.00             6,720.00
    Molecular Biology                                                         5,250.00             5,500.00
                                                                      ----------------     ----------------
    Total Supplies                                                          $16,200.00           $16,735.00
                                                                      ================     ================

Miscellaneous:                                                                  800.00               825.00
    Copies and correspondence                                                 1,000.00             1,415.00
                                                                      ----------------     ----------------
    Equipment Repair                                                        $ 1,800.00           $ 2,240.00
                                                                      ================     ================
    Total Miscellaneous                                                     $75,000.00           $75,000.00
</TABLE>

Total by Year

Schedule: In Year 01 we will screen up to 10 potential agonists as C1-
secretagogues
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

References

1.  Knowles, M.R., L.L. Clarke, and R.C. Boucher.  1992.  Extracellular ATP and
    UTP induce chloride secretion in nasal epithelia of CR patients and normal
    subjects in vivo.  Chest 101, Suppl. 60S-63 S.

2.  Lethem, M.I., M.L. Dowell, M. Van Scott, J.R. Yankaskas, T. Egan, R.C.
    Boucher, and C.W. Davis. 1993. Nucleotide regulation of goblet cells in
    human airway epithelium, in vitro. Am. J. Respir. CellMol. Biol. 9:315-322.

3.  Davis, C.W., M.L. Dowell, M.I. Letham and M. Van Scott.  1992.  Goblet cell
    degranulation in isolated canine tracheal epithelium:  Response to exogenous
    ATP, ADP, and adenosine.  Am. J. Physiol.  262:C1313-C1323.

4.  Geary, C.A. C. W. Davis, A.M. Paradiso, and R.C. Boucher. 1995. Role of CNP
    in human airways: cGMP-mediated stimulation of ciliary beat frequency. Am.
    J. Physiol. (In Press)

5.  Pearson, J.D. 1985.  Ectonucleotidases.  Measurement of activities and use
    of inhibitors.  In Methods Used in Adenosine Research.  D.M. Paton, editor.
    Plenum Press, New York.  83-107.

6.  Lin, S. and G. Guidotti. 1989. Cloning and expression of a cDNA coding for a
    rat liver plasma membrane ecto-ATPase. The primary structure of the ecto-
    ATPase is similar to that of the human biliary glycoprotein I. J. Biol.
    Chem. 264: 14408-14414.

7.  Stutts, M.J., J.G. Fitz, A.M. Paradiso, and R.C. Boucher.  1994.  Multiple
    modes of regulation of airway epithelial chloride secretion by extracellular
    ATP.  Am. J. Physiol.:C 1442-C 1451, 1994.
<PAGE>

                                                                     Exhibit A-3
                                                                     -----------

PROJECT TITLE:             Knock-out of the Murine P2U-R Gene

PRINCIPAL INVESTIGATOR:    Richard Charles Boucher, M.D.

DATE:                      February 13, 1995
<PAGE>

1.  Specific Aims:

    The goals of this research agreement are to perform studies that relate to
the biology of the P2U receptor (P2U-R) in vivo.  With the exception of our
recent experience using aerosolized UTP in main, virtually all information
relating to the biology of the P2U-R has been derived from the studies of
cultured cells.  The goal of this project is to use the gene targeting technique
to molecularly delete the P2U-R gene from mice and assess the whole animal
phenotype.  The specific goal of this research agreement is to generate a mouse
homozygous for disruption of the murine P2U-R gene.  To perform this overall
goal we propose the following specific aims:

    1)  Identify a genomic clone for the P2U-R gene;
    2)  Construct a targeting vector for the P2U-R gene and electroporate this
        vector into embryonic stem cells;
    3)  Isolate clonal targeted cells for oocyte injection and breeding of mice
        homozygous for P2U-R gene disruption.

2.  Background/Significance

    P2U receptors are a subclass of receptors that are activated by
extracellular triphosphates nucleotides ligands, including ATP and possibly
UTP(1). Cells that express receptors that respond equally well to ATP and UTP
are termed P2U receptors (P2U-R). The precise biological functions of these
receptors, and the nature of the secreted ligands that activate them, are not
understood. In part, this lack of understanding reflects the fact that there are
no good agonists or antagonists selective for P2U-R so that its functions cannot
be completely characterized nor its role in organ level physiology tested.

    The P2U-R has been most completely studied in the lung. A series of studies
have demonstrated that P2U-R is an important receptor for overall lung
physiology. In brief, in 1991 the P2U-R was detected on the surface of airway
epithelial cells in culture(2). Ligands that activate this receptor, ATP and
UTP, were demonstrated to be extremely effective in inducing salt and water
secretion in both normal and, importantly, CF airways epithelium. These studies
led to a broader characterization of the effects of the P2U-R in airways
epithelium, including a series of investigations designed to describe the
mechanisms for intracellular signal transduction utilized by this receptor in
airways epithelium. In most airways cells, the P2U-R is coupled by a G-protein
to phospholipase C and to inositol (IP3) metabolism (1). Activation of P2U-R
leads to the formation of IP3 and the release of cytosolic Ca2+, with attendant
activation of protein kinase C, and via a Ca2+ dependent mechanism,
phospholipase A2(2,3). Thus, a spectrum of intracellular signal transduction
mechanisms are triggered by activation of the P2U receptor.

    A subsequent series of experiments identified broader actions of P2U-R in
regulating other critical activities of the mucociliary systems in airway
epithelia. Video microscopy studies revealed that P2U-R regulated the secretion
of mucin from the non-innervated airway epithelial goblet cell(4,5). Thus, this
receptor appears to be a unique receptor in regulating the discharge of this
protective layer onto airway surfaces. Further studies identified that
<PAGE>

ATP and UTP regulate the beat of ciliary beat frequency of airway epithelial
ciliated cells(6).  Quantitative analysis of these effects indicated that P2U-R
was more effective in increasing ciliary beat frequency than B or muscarinic
agonists(7).

    The recognition that P2U-R regulated the three components (ion transport,
mucin secretion, and ciliary beat frequency) of the major defense system of the
airways, the mucociliary clearance system (MCC), suggested the hypothesis that
P2U-R is the central coordinator for airways defense. This concept led to the
testing of inhaled UTP in man as a mechanism to increase mucociliary clearance
in normal patients and patients with diseases that reflect defects in this
system, e.g., cystic fibrosis. In a series of studies designed to test the
efficacy aerosolized UTP in man, we demonstrated unequivocally that UTP
accelerates mucociliary clearance rates in normal man and restores mucociliary
clearance rates to normal in CF(6,8). Thus, it appears that P2U-R is a candidate
for the master coordinator of the mucociliary system in airways.

    In parallel, other studies have suggested that P2U-R may have a more general
role, i.e., coordinating the mucosal defenses of a number of bodily epithelia.
The P2U receptor has recently been shown to regulate the salt and water content
of the luminal liquids of a number of bodily epithelia, including pancreatic
ducts, gall bladder, biliary ducts, and ducts of the reproductive systems,
including epididymis and oviducts(9-11). Thus, it appears likely that a more
general hypothesis can be advanced that P2U-R is a general coordinator of
mucosal defense.

    A rational way to test hypotheses relating to the functions of P2U-R in the
coordination of airways mucociliary clearance and airways defense and bodily
epithelial homeostasis is to examine the consequences of deletion of the
receptor from the whole organism. The experimental system that is capable of
addressing this question is the technique of "homologous" recombination, i.e.,
gene targeting. This technique uses gene targeting vectors to effect either
insertional or deletional disruptions of an endogenous gene. Gene targeting is
performed in embryonic stem cells, a cell line that is "pleuri-potential", i.e.,
these cells exhibit the potential when injected into oocytes to form all cells
of the body including germ line cells. The power of the gene targeting technique
for asking fundamental biological questions has recently been demonstrated by
the reports of the "cystic fibrosis mouse"(12). This mouse was created by
targeting the endogenous murine CFTR gene, a gene that codes for a protein that
performs both channel and regulatory functions in murine epithelia. In some
organs of the CF mouse, the phenotype of CFTR disruption ("knock-out") was as
expected from human data, e.g., gut obstruction(13). The CF mouse produced
fascinating novel insights into the biology of CFTR in the intact host by
revealing the presence of a P2U-R regulated "alternative" Cl-a channel that
protected the mouse from the deletion of the CFTR gene in other critical organs,
i.e., the lung and the pancreas(9). Thus, it is highly likely that the P2U-R
knock-out(-/-) mice will enable us to develop novel insights into the role of
the P2U receptor and provide us with important new leads to possible novel
therapeutic targets for P2U-R manipulation revealed by the pathophysiologic
consequences of P2U-R deletion.
<PAGE>

3.  Experimental Methods and Design:

    a) Methods: The strategy for gene targeting is straightforward. The first
step will be to use the murine cDNA clone that was reported by Lusting et al(14)
to screen a murine genomic library for the P2U-R gene under high stringency
conditions. We will screen a genomic library that has produced murine genomic
clones that encode the CFTR gene, the epithelial Na+ channel (ENaC) genes, and
the prostaglandin E1, E2, and E3 receptor genes. Attention will be paid on high
stringency Southern blots to test for the possibility that there may be more
than one P2U-R related gene.

    Following the isolation of the genomic clones, a restriction map and
sequencing of the clone will be performed. Based on the results of the
restriction mapping/sequencing, a gene

[CONFIDENTIAL TREATMENT REQUESTED]

Cells that are candidates for "targeting" are selected by gancycolivor (TK) and
G418 (neo1) selection.  Approximately 50-100 candidate clones will be picked and
screened for homologous targeting by Southern blot analyses.  Clones showing
targeted disruption will be expanded, cells injected into blastocysts, and
blastocysts impregnated into pseudopregnant mice.

    The offspring of the injected mice will be scored for chimerism and animals
exhibiting more than 80% chimerism will be selected for breeding. These animals
will be crossed and tested for the capacity to pass the targeted P2U-R gene via
the germ line. Animals that transmit the disrupted P2U-R gene will be identified
by Southern blot and coat color. These animals (heterozygotes) will be bred to
generate progeny that would be expected to produce one wild type animal (+/+),
two animals that are heterozygous for the disrupted and wide type gene (+/-),
and one animal that is homozygous for the disrupted gene [P2U-R(-/-)].

    Once these animals are obtained, they will be characterized by our mouse for
the phenotype physiologists/pathologists by other (NIH) funding mechanisms.
Phenotypic characterization will include analyses of litter size and genotype,
survival curve analysis, weight gain analysis, pathologic evaluation of organs
at timed intervals, and functional challenges of the respiratory system with
inhaled pathogens as well as characterization of the mucociliary clearance
system by in vivo and ex vivo techniques designed to measure mucociliary
clearance rates.

[CONFIDENTIAL TREATMENT REQUESTED]

    b)  Data Analysis/Pitfalls:  The data analysis for the targeting is
straightforward. Most of the effort involves a substantial number of steps
involving molecular biologic techniques, e.g., screening of libraries,
sequencing, and generating restriction maps for the cloning of vectors. The
analysis of targeting involves multiple analyses of Southern blots searching for
disruption of the targeted gene, which results on Southern blot of the formation
of two distinct genes, i.e., the endogenous gene and the novel targeted gene.
<PAGE>

    The pitfalls of this portion of the experiment are few. The preliminary data
indicate that there is a single P2U-R gene. The primary pitfalls will come in
portions of the experiments that are outside of this funding mode, i.e., that
the phenotype of the P2U-R mouse may be a fetal or embryonic. The targeting
technology is well advanced in our laboratory and we perceive no technical
problems with these experiments.

[CONFIDENTIAL TREATMENT REQUESTED]

4.  References

1.  Brown, H.A., E.R. Lazarowski, R.C. Boucher, and T.K. Harden.  1991.
Evidence that UTP and ATP regulate phospholipase C through a common
extracellular 5'-nucleotide receptor in human airway epithelial cells. Mol.
Pharmacol. 40:648-655.

2.  Mason, S.J., A.M. Paradiso, and R.C. Boucher.  1991.  Regulation of
transepithelial ion transport and intracellular calcium by extracellular
adenosine triphosphate in human normal and cystic fibrosis airway epithelium.
Br. J. Pharmacol. 103:1649-1656.

3.  Lazarowski, E.R., R.C. Boucher, and T.K. Harden.  1994.  Calcium-dependent
release of arachidonic acid in response to purinergic receptor activation in
airway epithelium.  Am. J. Physiol. 266:C406-C415.

4.  David, C.W., M. L. Dowell, M.I. Lethem, and M. Van Scott.  1992.  Goblet
cell degranulation in isolated canine tracheal epithelium:  Response to
exogenous ATP, ADP, and adenosine.  Am. J. Physiol. 262:C1313-C1323.

5.  Lethem, M.I., M.L. Dowell, M.I. Lethem, M. Van Scott, J.R. Yankaskas, T.
Egan, R.C. Boucher, and C.W. David.  1993.  Nucleotide regulation of goblet
cells in human airway epithelium, in vitro.  Am. J. Respir. Cell Mol. Biol.
9:315-322.

6.  Olivier, K.N., W.D. Bennett, C.A. Geary, K.W. Hohneker, K. L. Zemen, L.J.
Edwards, R.C. Boucher, and M.R. Knowles.  1995.  Acute safety and effects of
mucociliary clearance of aerosolized uridine 5'-triphosphate +/- amiloride in
normal human adults (Submitted, Am. J. Respir. Crit. CareMed).

7.  Geary, C.A., C.W. Davis, A.M. Paradiso, and R.C. Boucher.  1995.  Role of
CNP in human airways: cGMP-mediated similation of ciliary beat frequency. Am. J.
Physiol. (In Press).

8.  Bennett, W.D., K.N. Olivier, K. L. Zeman, K.H. Hohneker, C.A. Geary, L.J.
Edwards, R.C. Boucher, and M.R. Knowles.  1995.  Effect of aerosolized UTP and
amiloride on mucociliary clearance in adult patients with cystic fibrosis
(Submitted, Lancet).

9.  Clarke, L.L., B.R. Grubb, J.R. Yankaskas, C.U. Cotton, A. McKenzie, and R.C.
Boucher.  1994.  Relationship of non-CFTR mediated chloride conductance to
organ-level disease in cftr(-/-) mice.  Proc. Natl. Acad. Sci. U.S.A. 91:479-
483.
<PAGE>

10.  Leung, A.Y.H., P.Y.D. Wong, S.E.Gabriel, J.R. Yankaskas, and R.C. Boucher.
1994.  cAMP-regulated but not a CA2+ -regulated C1- conductance in the oviduct
is defective in a mouse model of cystic fibrosis.  Am. J. Physiol. (In Press)

11.  Leung, A.Y.H., P.Y.D. Wong, J.R. Yankaskas, and R.C. Boucher.  1994.  cAMP
- regulated but not a CA2+ -regulated C1- conductance in the epididymes and
seminal vesicles is defective in a mouse model of cystic fibrosis.

12.  Tabcharani, J.A. and J.W. Hanrahan.  1991.  On the activation of outwardly
rectifying anion channels in excised patches.  Am. J. Physiol. 261:992-999.

13.  Snouwaert, J., K.K. Brigman, A.M. Latour, N.N. Malouf, R.C. Boucher, O.
Smithies, and B.H. Koller.  1992.  An animal model for cystic fibrosis made by
gene targeting.  Science 275:1083-1088.

14.  Lustig, K.D., A.K. Shiau, A.J. Brake, and D. Julius.  1993.  Expression
cloning of an ATP receptor from mouse neuroblastoma cells.  Proc. Natl. Acad.
Sci. U.S.A. 90:5113-5117.

15.  Koller, B.H., H. Kim, A.M. Latour, K. Brigman, R.C. Boucher, Jr., P.
Scambler, B. Wainwright, and O. Smithies.  1991.  Towards an animal model of
cystic fibrosis:  targeted interruption of exon 10 of the CFTR gene in embryonic
stem cells.  Proc. Natl. Acad Sci. U.S.A.  88:10730-10734.

16.  Lazarowski, E.R. and T.K. Harden.  1994.  Identification of a uridine
nucleotide-selective G-protein-linked receptor that activates phospholipase C.
J. Biol. Chem.  269:11830-11836.

17.  Gu, H., J.D. Marth, P.C. Orban, H. Mossman, and K. Rajewsky.  1994.
Deletion of a DNA polymerase beta gene segment in T cells using cell type-
specific gene targeting.  Science 265:103-106.
<PAGE>

BUDGET:  (per year x 2 years)

I.        Gene Targeting

          A.  Personnel:            1/2 time Postdoctoral Fellow    $15,000
          B.  Supplies:             cell culture, molecular
                                    Biologic supplies               $10,000
                                                                    -------
                                                                    $25,000

II.       Administrative Costs

          A.  Personnel:            1/2 time accounting technician  $15,000
          B.  Supplies:             FAX, FEDEX, Xeroxing, etc.      $10,000
                                                                    -------
                                                                    $25,000

                                            Total                   $50,000
<PAGE>

                                   Exhibit B
                                   ---------

                              Budget for Research

Direct Costs:      */yr
Indirect Costs:    */yr
Total Costs:       */yr

Payment Schedule:  * per calendar quarter
                   Payments shall be prorated in any partial quarter

Budget Breakdown:

          */yr to the laboratory of Dr. Kendall Harden.
          */yr to the laboratory of Dr. M. Jackson Stutts.
          */yr to the laboratory of Dr. Richard Boucher.

          The allocation of such funds between supplies, personnel, and other
          expenses shall be at the discretion of the investigator.

                      *[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

                                   Exhibit C
                                   ---------

                               License Agreement

<PAGE>

                                                                     EXHIBIT A-6

1.  Specific Aims:

       The Specific Aims of this Project are to characterize and identify the
enzymes on the surfaces of human airway epithelial cells that metabolize
extracellular 5' triphosphate nucleotides and characterize their metabolic
products.

2.  Background and Significance:

       [CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO THE REMAINDER OF THIS
PAGE AND TWO ADDITIONAL FOLLOWING PAGES]
<PAGE>

                                                             Boucher, Richard C.

INSPIRE
Budget Justification

Personnel:

Dr. R. C. Boucher will be responsible for over all supervision of design,
execution, and analysis of the project.  Dr. Picher will conduct the molecular
studies, including PCR and ISH.  The research Tech II will be responsible for
preparing the appropriate cell cultures, performing the metabolism studies, and
running HPLC analysis.  The Accounting Tech. will provide administrative support
at 15% FTE effort.

Fringe Benefits:

Fringe rate calculations with the exception of the Post Doc are social Security
& Retirement @19% and Medical Insurance @1735 x FTE.
Fringe rate calculations for the Post Doc position are Social Security @ 7.65%
and Medical Insurance @$1312 x FTE.

Supplies:

Production and maintenance of well-differentiated cultures (media, T Cell
supports, and disposables) are estimated at $5,391/yr. Radiochemicals (35S-UTP
for ISH; 32Pa - ATP for metabolism studies) estimated cost $4,000/yr. HPLC
supplies are estimated at, $2,000/yr.

Travel:

One trip to a National Meeting for Dr. M. Picher is requested.
<PAGE>

                                                                     Exhibit A-7
                                                                     -----------

Inspire Pharmaceuticals, Inc.
4222 Emperor Blvd., Suite 470
Durham, North Carolina  27703

M. Jackson Stutts
Associate Professor of Medicine
6023 Thurston-Bowles Building
Cystic Fibrosis/Pulmonary Research and Treatment Center
University of North Carolina
Chapel Hill, North Carolina  27799

Inspire Pharmaceuticals, Inc. routinely identifies compounds in their discovery
efforts which show promise as activators of Cl- secretion. Selected compounds
will assigned Inspire identification numbers and will be supplied by Inspire to
Dr. Stunts in research quantities (less the five-(5.0) milligrams). Dr. Stutts
will carry out assays of Cl- secretion by cultured human airway epithelia. In
these assays, the designated compounds will be tested for their ability to
activate Cl- secretion, and for additional obvious effects on cultured human
airway epithelia. Specifically, the approximate potency of each compound will be
determined from concentration effect relationships. In parallel, for each
compound or group of compounds tested, the potency of UTP will be determined. Up
to 12 compounds designated by Inspire will be assayed per year. Within two weeks
of each assay performed, Dr. Stutts will report to Inspire Pharmaceuticals, Inc.
the potency of each compound tested as a chloride secretogogue, relative to the
potency of UTP in the same group of cultured human epithelia. In addition, he
will report any other observations of interest to Inspire Pharmaceuticals, Inc.
which arise from the application of these compounds in the in vitro experiments
described above. This information will be reported in the form of charts, tables
and summaries that will be for the use of Inspire Pharmaceuticals, Inc. as they
see fit.
<PAGE>

Inspire Pharmaceuticals Budget
M. Jackson Stutts

Personnel

                  Role         % Effort     Salary   Fringe   Total
MJ Stutts         PI               *           *        *       *
E Rogers          Temp Res Tech    *           *        *       *

                                               *        *       *

Supplies          Cell Culture Supplies      3,000
                  Miscellaneous Supplies      362             3,362

Other Expenses    Phones, fax                 200              200

                                             TOTAL              *
                                             Indirect Cost    4,450
                                             Total              *

Fringe Benefit Rates: MJ Stutts at 19% for social security and retirement, plus
$1,735
             X FTE for medical insurance; E Rogers at 7.65% for social security.

*[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

                                                                     Exhibit A-8

                       THE UNIVERSITY OF NORTH CAROLINA
                                      AT
                                  CHAPEL HILL

<TABLE>
<CAPTION>
<S>             <C>                                                                 <C>
                 School of Medicine                                                          C. William Davis, Ph.D.
         Cystic Fibrosis /Pulmonary Research                                         CB#7248, 6009 Thurston-Bowles Building
                and Treatment Center                                                       Chapel Hill, NC 27599-7248
                                                                                            Telephone:  919/966-7060
                                                                                               FAX:  919/966-7060
                                                                                           E-mail: cwdavis@med.unc.edu

</TABLE>
                                                                  19 April 1999

Proposed Research Contract with:    Inspire Pharmaceuticals
                                    4222 Emperor Blvd., Suite 470
                                    Durham, NC 27703

Title:  Purinergic Regulation of Ciliary Activity in the Airways

     Inspire Pharmaceuticals, Inc. is developing compounds active against
purinoceptors to stimulate the mucociliary clearance system in the lung and
thereby provide major relief to patients suffering from chronic obstructive
pulmonary disease (COPD: e.g., cystic fibrosis, chronic bronchitis, emphysema,
asthma).  The contract will serve this purpose in two ways.

I.  Compound Testing

     Up to 50% of the research effort expended for this contract is expected to
relate directly to experiments in which we test the effects of compounds
provided by the company on ciliary activity in human airway epithelial cells.
The experimental protocol for a particular compound will be determined in
consultation with Ms. Janet Rideout, VP of Discovery, or other appropriate
company official.

     The test assay will use epithelial explant cultures of human nasal or
bronchial epithelia attached to Transwell-Col supports.  These cultures are
provided by the CF Center Tissue Culture Core with all The cells are
continuously superfused and ciliary activity is monitored by video microscopy.
The frequency of ciliary beating is determined by FFT analysis of 10 seconds of
data digitized at 1 minute intervals from a photocell positioned on the monitor
over a ciliated cell.  The digitization occurs in real-time, at 40 MHz; the FFT
analysis occurs off-line after the experiment is over.  The data are typically
presented as plots of ciliary beat frequency normalized to baseline as a
function of time, using the mean + SE of 4 to 6 identical experiments.
                                 --

II.  Regulation of Ciliary Activity

     The remainder of the work that is performed under the auspices of this
contract will relate top the regulation of

[CONFIDENTIAL TREATMENT REQUESTED]

                                    Page 1
<PAGE>

[CONFIDENTIAL TREATMENT REQUESTED]

Dates of Contracted Studies
     1 April 1999 to 31 December 1999

Budget (full budget appears on next page)
     Personnel.  Funds have been allotted to cover a 5% effort for the PI, Dr.
C. William Davis, and a 75% effort for Diane Morse, a Temporary Technician (Lab
Assistant).

     Supplies.  The funds requested will cover the costs of tissue culture
supports (Transwell-Col), culture medium and plasticware, and the various
secretagogues and inhibitors necessary for the proposed studies.

     No funds have been allocated for any other Direct Costs budget category.

                                     Page2
<PAGE>

<TABLE>
<CAPTION>
<S>                <C>               <C>           <C>            <C>           <C>                  <C>              <C>
DETAILED BUDGET FOR INITIAL BUDGET PERIOD                                       FROM                                  THROUGH
                        DIRECT COSTS ONLY                                       04/01/99                              12/31/99
------------------------------------------------------------------------------------------------------------------------------------
NAME               ROLE ON PROJECT   TYPE          %              INST.         DOLLAR AMOUNT REQUESTED (omit cents)
                                     APPT.         EFFORT         BASE
                                     (months)      ON             SALARY        ----------------------------------------------------
                                                   PROJ.                             SALARY             FRINGE           TOTALS
                                                                                    REQUESTED          BENEFITS
------------------------------------------------------------------------------------------------------------------------------------
C.W. Davis         Principal                  12              *              *                    *                *               *
                   Investigator
------------------------------------------------------------------------------------------------------------------------------------
D. Morse           Lab Assistant              12              *              *                    *                *               *
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Fringe benefits: * for social security & retirement
------------------------------------------------------------------------------------------------------------------------------------
+* x FTE x 9 months for medical insurance for
------------------------------------------------------------------------------------------------------------------------------------
C.W. Davis; * for social security only for D.Morse.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

   SUBTOTALS                                                                                      *                *               *
------------------------------------------------------------------------------------------------------------------------------------
Consultant Costs
                                                None                                                                            0
------------------------------------------------------------------------------------------------------------------------------------
Equipment (Itemize)
                                                None                                                                            0
------------------------------------------------------------------------------------------------------------------------------------
Supplies (Itemized by category)
                                                             6,365                                                            6,365
------------------------------------------------------------------------------------------------------------------------------------
Travel
------------------------------------------------------------------------------------------------------------------------------------
                                                   INPATIENT                                                                       0
Patient Care Costs                                                                                None               0
                                                   ---------------------------------------------------------------------------------
                                                   OUTPATIENT                                                                      0
                                                                                                  None               0
------------------------------------------------------------------------------------------------------------------------------------
Alterations and Renovations (Itemize by category)                                                                                  0
                                                                                                  None               0
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses (Itemize by category)
                                                                                                                                   0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
SUBTOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD                                                                                    *
------------------------------------------------------------------------------------------------------------------------------------
CONSORTIUM/CONTRACTUAL               DIRECT COSTS                                                                                  *
COSTS
                                     -----------------------------------------------------------------------------------------------
                                     FACILITIES AND ADMINISTRATION COSTS                            44.50%                         *
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD (Item 9a, Face Page)                                                                  *
------------------------------------------------------------------------------------------------------------------------------------
*[CONFIDENTIAL TREATMENT REQUESTED]
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                <C>               <C>           <C>            <C>           <C>                  <C>              <C>
------------------------------------------------------------------------------------------------------------------------------------
DETAILED BUDGET FOR INITIAL BUDGET PERIOD                                       FROM                                  THROUGH
DIRECT COSTS ONLY                                                               10/01/98                              09/30/99
------------------------------------------------------------------------------------------------------------------------------------
PERSONNEL (Applicant organization only)                                         DOLLAR AMOUNT REQUESTED(omit cents)
------------------------------------------------------------------------------------------------------------------------------------
NAME               APPT.             EFFORT                       INST.         SALARY               FRINGE           TOTALS
ROLE ON PROJECT    (months)          ON                           BASE          REQUESTED            BENEFITS
TYPE               %                 PROJ                         SALARY
------------------------------------------------------------------------------------------------------------------------------------
R.C. Boucher       Principal                  12              *              *                    *                *               *
                   Investigator
------------------------------------------------------------------------------------------------------------------------------------
M. Pincher         Pos Doc Res                12              *              *                    *                *               *
                   Assoc
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

TBN                Res Tech                   12              *              *                    *                *               *
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

TBN                Res Tech                   12              *              *                    *                *               *
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
                            SUBTOTALS                                                             *                *               *
------------------------------------------------------------------------------------------------------------------------------------

Consultant Costs
                                      None                                                                                       0
------------------------------------------------------------------------------------------------------------------------------------
Equipment (Itemize)
                                      None                                                                                       0
------------------------------------------------------------------------------------------------------------------------------------
Supplies (Itemized by category)
Cell Culture Supplies                           5,931,
Raiochemicals                                   4,000
HPLC Supplies                                   2,000
                                                                                                                             11,931.
------------------------------------------------------------------------------------------------------------------------------------
Travel
One trip per year for M. Picher to present data at scientific meeting             1,000                                       1,000.
------------------------------------------------------------------------------------------------------------------------------------
                                                   INPATIENT                                                                       0
Patient Care Costs                                                              None           0
                                                   ---------------------------------------------------------------------------------
                                                   OUTPATIENT                   None           0                                   0
------------------------------------------------------------------------------------------------------------------------------------
Alterations and Renovations (Itemize by category)                               None           0                                   0
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses (Itemize by category)
                                                                                                                                   0
------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
SUBTOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD                                                                                    *
------------------------------------------------------------------------------------------------------------------------------------
CONSORTIUM/CONTRACTUAL               DIRECT COSTS                                                                                  *
COSTS
------------------------------------------------------------------------------------------------------------------------------------
                                     INDIRECT COSTS                             44.50%                                             *
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD (Item 7a, Face Page)                                                                  *
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                              Budget for Research

                      [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

                                   Exhibit C
                                   ---------

                               License Agreement
<PAGE>

                   Extension of Sponsored Research Agreement

This Extension of Sponsored Research Agreement is dated as of March 7, 1997 by
and between the University of North Carolina at Chapel Hill (the "University")
and Inspire Pharmaceuticals, Inc. (the "Company").  The University and the
Company agree to extend the Sponsored Research Agreement, effective March 10,
1995, as previously amended (the Agreement"), as follows:

     1.  The term of the Agreement shall be extended until the date on which the
University and the Company execute an Amendment to the Agreement, but no later
than September 30, 1997.

     2.  All other terms and conditions of the Agreement shall remain in full
force and effect.

The University of North Carolina                Inspire Pharmaceuticals, Inc.
At Chapel Hill

By:     /s/ Robert P Lowman                          /s/ David J. Drutz
    -----------------------------------------        --------------------------
                                                         David J. Drutz, M. D.
Title:  Director, Office of Research Services               President and CEO
       --------------------------------------
<PAGE>

Extension of Sponsored Research Agreement

This Extension of Sponsored Research Agreement is dated as of October 1, 1997 by
and between the University of North Carolina at Chapel Hill (the "University")
and Inspire Pharmaceuticals, Inc. (the "Company").  The University and the
Company agree to extend the Sponsored Research Agreement, effective March 10,
1995, as previously amended (the "Agreement"), as follows:

        1.   The term of the Agreement shall be extended until the date on which
the University and the Company execute an Amendment to the Agreement, but no
later than September 30, 1998.

        2.   All other terms and conditions of the Agreement shall remain in
full force and effect.

The University of North Carolina                Inspire Pharmaceuticals, Inc.
At Chapel Hill

By:      /s/ Robert P. Lowman                      By:   /s/ David J. Drutz
    ------------------------------------------        -------------------------
                                                        David J. Drutz, M.D.
                                                          President and CEO
Title:  Director, Office of  Research Services
       ---------------------------------------
<PAGE>

                                   AMENDMENT

This Amendment, made and entered into this 30th day of September, 1998, by and
between The University of North Carolina at Chapel Hill, hereinafter referred to
as the "University" and Inspire Pharmaceuticals, Inc., hereinafter referred to
as the "Company".

                                  WITNESSETH:

WHEREAS, the parties previously entered into a Sponsored Research Agreement
dated March 10, 1995, and have mutually agreed to amend said Sponsored Research
Agreement on December 4, 1995, June 6, 1996, March 7, 1997, and October 1, 1997,
hereinafter referred to as the "Agreement"; and

WHEREAS, the parties desire to continue the research activities being conducted
under the Agreement as well as to conduct additional research initiatives under
the same terms and conditions of the Agreement; and

WHEREAS, this amendment is in accordance with the amendment provision
authorizing amendments in writing executed by the duly authorized officials of
both parties.

NOW, THEREFORE, in consideration of the premises and of the following mutual
promises, covenants, considerations and the sums to be paid, the University and
the Company agree as follows:

1.  Paragraph 10, Term and Termination shall be amended as follows:
                  --------------------

"This Agreement shall commence on the Effective Date and shall continue through
September 30, 2000 and may be extended thereafter by mutual agreement of the
parties in writing."

2. All terms of the Agreement not altered by this Amendment shall remain in full
force and effect throughout the term of said Agreement.

IN WITNESS WHEREOF, the parties have hereunto signed this Agreement in their
official capacities of the day and year listed below.

FOR AND ON BEHALF OF                   FOR AND ON BEHALF OF THE
INSPIRE PHARMACEUTICALS, INC.          UNIVERSITY OF NORTH
                                       CAROLINA AT CHAPEL HILL
   /s/ Janet L. Rideout
-----------------------------
Signature                                  /s/ Robert P. Lowman
                                       --------------------------
                                       Signature
       Janet L. Rideout
-----------------------------
Name                                       Robert P. Lowman, Ph.D.
                                       --------------------------
                                       Name
   V.P. Discovery
-----------------------------
Title                                     Director, Office of Research Services
                                       ----------------------------------------
                                       Title

Date:     OCT 2, 1998                  Date:    OCT 13 1998
-----------------------------                ----------------------
<PAGE>

STATE OF NORTH CAROLINA
COUNTY OF ORANGE

                                   AMENDMENT

This Amendment, made and entered into this 9th day of December, 1998 by and
between The University of North Carolina at Chapel Hill, hereinafter referred to
as the "University" and Inspire Pharmaceuticals, Inc., hereinafter referred to
as the "Company".

                                  WITNESSETH:

WHEREAS, the parties previously entered in a Sponsored Research Agreement dated
March 10, 1995, hereinafter referred to as the "Agreement"; and

WHEREAS, this amendment is in accordance with the amendment provision
authorizing amendments in writing executed by the duly authorized officials of
both parties.

NOW, THEREFORE, in consideration of the premises and of the following mutual
promises, covenants, considerations and the sums to be paid, the University and
the Company agree as follow:

1.  Article 1, Scope of Research, is amended by adding the following:
               -----------------

"University shall use its best efforts to perform the research as described in
Exhibit A-6."

2.  Article 2, Personnel, is amended by adding the following:
               ---------

"The Research described in Exhbit A-6 shall be performed under the supervision
and direction of Dr. Richard Boucher, together with additional personnel as may
be assigned by the University."

3.  Article 4, Reimbursement of Cost, shall be amended by adding the following:
               ---------------------

"The Sponsor shall agrees to pay the University for all direct and indirect
costs incurred by the University in connection with the Research described in
Exhibit A-6 in the amount not to exceed [CONFIDENTIAL TREATMENT REQUESTED].
Payment shall be made in accordance with the following schedule: one-quarter
(1/4) of the budget upon execution of this Amendment and equal quarterly
payments for the duration of the Research."
<PAGE>

4. Article 10, Term and Termination, shall be amended as follows:
               ---------------------

"The term for the Research to be performed under Exhibit A-6 shall be from
October 1, 1998 through September 30, 1999 and may be extended thereafter by
mutual agreement of the parties in writing.

5. All terms of the Agreement not altered by this Amendment shall remain in full
force and effect throughout the term of said agreement.

IN WITNESS WHEREOF, the parties have hereunto signed this Agreement in their
official capacities of the day and year listed below.

FOR AND ON BEHALF OF                FOR AND ON BEHALF OF THE
INSPIRE PHARMACEUTICALS, INC.       UNIVERSITY OF NORTH
                                    CAROLINA AT CHAPEL HILL

     /s/ Janet L. Rideout
------------------------------
Signature                               /s/ Robert P. Lowman
                                    -------------------------------------------
                                    Signature

 Janet L. Rideout
------------------------------
Name                                   Robert P. Lowman, Ph.D.
                                    -------------------------------------------
                                    Name

    V.P. Discovery
------------------------------
Title                                   Director, Office of Research Services
                                    -------------------------------------------
                                    Title

Date:     DEC 9, 1998               Date:   JAN 14 1999
------------------------------            -------------------------------------

Agreed and Accepted:      /s/ Richard Boucher
                       ---------------------------
                       Dr. Richard Boucher
<PAGE>

                                                                     EXHIBIT A-6

                      [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

STATE OF NORTH CAROLINA
COUNTY OF ORANGE

                                   AMENDMENT

This Amendment, made and entered into this 7th day of  April, 1999, by and
between The University of North Carolina at Chapel Hill, hereinafter referred to
as the "University" and Inspire Pharmaceuticals, Inc., hereinafter referred to
as the "Company".

                                  WITNESSETH:

WHEREAS, the parties previously entered in a Sponsored Research Agreement dated
March 10, 1995, hereinafter referred to as the "Agreement"; and

WHEREAS, this amendment is in accordance with the amendment provision
authorizing amendments in writing executed by the duly authorized officials of
both parties.

NOW, THEREFORE, in consideration of the premises and of the following mutual
promises, covenants, considerations and the sums to be paid, the University and
the Company agree as follows:

1.  Article 1, Scope of Research, is amended by adding the following:
               -----------------

"University shall use its best efforts to perform the research as described in
Exhibit A-7 for the period of January 1, 1999 through December 31, 1999."

2.  Article, 2, Personnel, is amended by adding the following:
                ---------

"The Research described in Exhibit A-7 shall be performed under the supervision
and direction of Dr. M. Jackson Stutts and such additional personnel as may be
assigned by the University."

3.  Article 4, Reimbursement of Cost, shall be amended by adding the following:
               ---------------------

"The Sponsor shall agrees to pay the University for all direct and indirect
costs incurred by the University in connection with the Research described in
Exhibit A-7 in the amount not to exceed [CONFIDENTIAL TREATMENT REQUESTED],
bringing the total funding under the Master Research Agreement to [CONFIDENTIAL
TREATMENT REQUESTED]. Payment for one-half of the [CONFIDENTIAL TREATMENT
REQUESTED] supplement shall be made upon execution of this Amendment, with the
balance to be paid upon submission of the final report."
<PAGE>

4.  All terms of the Agreement not altered by this Amendment shall remain in
full force and effect throughout the term of said agreement.

IN WITNESS WHEREOF, the parties have hereunto signed this Agreement in their
official capacities of the day and year listed below.

FOR AND ON BEHALF OF                FOR AND ON BEHALF OF THE
INSPIRE PHARMACEUTICALS, INC.       UNIVERSITY OF NORTH
                                    CAROLINA AT CHAPEL HILL

    /s/ Janet L. Rideout
-----------------------------
Signature                              /s/ Robert P. Lowman
                                    -------------------------------------
                                    Signature

         Janet L. Rieout
-----------------------------
Name                                    Robert P. Lowman, Ph.D.
                                    -------------------------------------
                                    Name

    V.P., Discovery
-----------------------------
Title                                Director, Office of Research Services
                                     -------------------------------------
                                     Title

Date:   April 7, 1999                Date:    APR 23 1999
-----------------------------              -------------------------------

Agreed and Accepted:      /s/ M. Jackson Stutts
                       --------------------------------
                       Dr. M. Jackson Stutts
<PAGE>

                                                                     Exhibit A-7

                      [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>

STATE OF NORTH CAROLINA
COUNTY OF ORANGE

                                   AMENDMENT

This Amendment, made and entered into this 2nd day of July, 1999, by and between
The University of North Carolina at Chapel Hill, hereinafter referred to as the
"University" and Inspire Pharmaceuticals, Inc., hereinafter referred to as the
"Company".

                                  WITNESSETH:

WHEREAS, the parties previously entered in a Sponsored Research Agreement dated
March 10, 1995, hereinafter referred to as the "Agreement"; and

WHEREAS, this amendment is in accordance with the amendment provision
authorizing amendments in writing executed by the duly authorized officials of
both parties.

NOW, THEREFORE, in consideration of the premises and of the following mutual
promises, covenants, considerations and the sums to be paid, the University and
the Company agree as follows:

1.  Article 1, Scope of Research, is amended by adding the following:
               -----------------

"University shall use its best efforts to perform the research as described in
Exhibit A-8 for the period of April 1, 1999 through December 31, 1999."

2.  Article, 2, Personnel, is amended by adding the following:
                ---------

"The Research described in Exhibit A-8 shall be performed under the supervision
and direction of Dr. C. William Davis and such additional personnel as may be
assigned by the University."

3.  Article 4, Reimbursement of Cost, shall be amended by adding the following:
               ---------------------

"The Sponsor shall agrees to pay the University for all direct and indirect
costs incurred by the University in connection with the Research described in
Exhibit A-8 in the amount not to exceed

[CONFIDENTIAL TREATMENT REQUESTED], bringing the total funding under the Master
Research Agreement to [CONFIDENTIAL TREATMENT REQUESTED].  Payment for one-half
of the [CONFIDENTIAL TREATMENT REQUESTED] supplement shall be made upon
execution of this Amendment, with the balance to be paid upon submission of the
final report."
<PAGE>

4.  All terms of the Agreement not altered by this Amendment shall remain in
full force and effect throughout the term of said agreement.

IN WITNESS WHEREOF, the parties have hereunto signed this Agreement in their
official capacities of the day and year listed below.

FOR AND ON BEHALF OF                    FOR AND ON BEHALF OF THE
INSPIRE PHARMACEUTICALS, INC.           UNIVERSITY OF NORTH
                                        CAROLINA AT CHAPEL HILL
/s/ Janet L. Rideout
------------------------------------
Signature                                   /s/ Robert P. Lowman
                                        ---------------------------------------
Janet L. Rideout                         Signature
------------------------------------
Name                                     Robert P. Lowman, Ph.D
                                        ---------------------------------------
V.P., Development                        Name
------------------------------------
Title                                    Director, Office of Research Services
                                        ---------------------------------------
                                         Title

Date:   July 2, 1999                     Date:  OCT 26 1999
      ------------------------------            -------------------------------

Agreed and Accepted:     /s/ C. William Davis
                        ---------------------------------
                         Dr. C. William Davis
<PAGE>

                                                                     Exhibit A-8

                      [CONFIDENTIAL TREATMENT REQUESTED].
<PAGE>

                                 INSPIRE

                                 PHARMACEUTICALS, INC.

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

December 15, 1999

C. William Davis, Ph.D.
CB#7248, 6009 Thurston-Bowles Building
Chapel Hill, NC 27599-7248

Dear Dr. Davis:

This is to confirm our previous conversation and our agreement that the
Sponsored Research Agreement , "Purinergic Regulation of Ciliary Activity in the
Airways" for which you are the PI can be extended from Dec. 31 1999 to end March
31, 2000. Both Dr. Christy Shaffer and myself have approved this amendment to
the above Agreement to enable you to conduct some instrumental development work.

Payment of [CONFIDENTIAL TREATMENT REQUESTED] will be made to Account #5-58336.

Sincerely yours,

/s/ Janet L. Rideout

Janet L. Rideout, Ph.D.
VP, Discovery

CC:  Rebecca Owen

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

4222 Emperor Boulevard, Suite 470 o Durham, North Carolina 27703
Telephone 919.941.9777 o Fax 919.941.9797
<PAGE>

                       THE UNIVERSITY OF NORTH CAROLINA
                                      AT
                                  CHAPEL HILL
<TABLE>
<S>                                                       <C>
Office of Contracts & Grants                              The University of North Carolina at Chapel Hill
Area Code 919-966-3411                                    Campus Box #135, 440 W. Franklin St.
FAX 919-962-5011                                          Chapel Hill, NC 27599-1350
</TABLE>

February 10, 2000

Ms. Janet Rideout, Ph.D.
Vice President, Discovery
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, NC 27703
919/941.9777

Dear Dr. Rideout:

Re:  Amendment to Sponsored Research Agreement between Inspire Pharmaceuticals,
Inc. and the University of North Carolina at Chapel Hill/UNC Account #5-58026,
UNCPI: M. Jackson Stutts

This Amendment made and entered into this 10th day of February 2000 by and
between The University of North Carolina at Chapel Hill, hereinafter referred to
as the "University" and Inspire Pharmaceuticals, Inc., hereinafter referred to
as the "Sponsor".

WHEREAS, the parties previously entered in a Sponsored Research Agreement dated
March 10, 1995, hereinafter referred to as the "Agreement".

WHEREAS, this Amendment is in accordance with the amendment provision
authorizing amendments in writing executed by duly authorized officials of both
parties:

NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties  hereto promise and agree as follows:

1.  The University will use its best efforts to perform the research as
described in Exhibit A for the period of January 1, 2000 through December 31,
2000.
<PAGE>

Janet Rideout, PH.D.                2                          February 10, 2000

2.   Sponsor shall pay the University during the term of the Amendment for all
     direct and indirect costs incurred by the University in connection with the
     Research, described in Exhibit A, in the amount not to exceed [CONFIDENTIAL
     TREATMENT REQUESTED]. Payment shall be made in accordance with the
     following schedule: one half (1/2) of the [CONFIDENTIAL TREATMENT
     REQUESTED] supplement shall be made upon the execution of this Amendment,
     with the balance to be paid upon submission of the Final Report. Budget
     attached as Exhibit B.

3.   Any and all provisions of the Agreement not expressly modified hereby will
     remain in full force and effect.

IN WITNESS THEREOF, the undersigned duly authorized representatives of the
parties have executed this first amendment.

Inspire Pharmaceuticals, Inc.

By:   /s/ Janet L. Rideout          By:    /s/ Robert P. Lowman
    ---------------------------         ----------------------------------------

Name:   Janet L. Rideout            Name:  Robert P. Lowman, Ph.D.
      -------------------------           --------------------------------------

Title:     V.P., Development        Title: Director, Office of Research Services
       ------------------------            -------------------------------------

Date:     2/15/00                   Date:    FEB 17 2000
       ------------------------            -------------------------------------

                                    Principal Investigator
                                    ----------------------

                                       /s/ Richard Boucher
                                    ----------------------

                                    Date:   2-17-00
                                          ----------------

<PAGE>

<TABLE>
<CAPTION>
                                               THE UNIVERSITY OF NORTH CAROLINA
                                                              AT
                                                          CHAPEL HILL
<S>                                                                                <C>
Office of Contracts & Grants                                                       The University of North Carolina at Chapel Hill
Area Code 919-966-3411                                                             Campus Box #135, 440 W. Franklin St.
FAX 919-962-5011                                                                   Chapel Hill, NC 27599-1350
</TABLE>

February 10, 2000

Ms. Janet Rideout, Ph.D.
Vice President, Discovery
Inspire Pharmaceuticals, Inc.
4222 Emperor Boulevard, Suite 470
Durham, NC 27703
919/941.9777

Dear Dr. Rideout:

Re:  Amendment to Sponsored Research Agreement between Inspire Pharmaceuticals,
Inc. and the University of North Carolina at Chapel Hill/UNC Account #5-58026,
UNCPI: Richard Boucher

This Amendment made and entered into this 10th day of February 2000 by and
between The University of North Carolina at Chapel Hill, hereinafter referred to
as the "University" and Inspire Pharmaceuticals, Inc., hereinafter referred to
as the "Sponsor".

WHEREAS, the parties previously entered in a Sponsored Research Agreement dated
March 10, 1995, hereinafter referred to as the "Agreement".

WHEREAS, this Amendment is in accordance with the amendment provision
authorizing amendments in writing executed by duly authorized officials of both
parties:

NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto promise and agree as follows:

        1.  The University will use its best efforts to perform the research as
            described in Exhibit A for the period of October 1, 1999 through
            September 30, 2000.
<PAGE>

Janet Rideout, PH.D.                 2                         February 10, 2000

        2.  Sponsor shall pay the University during the term of the Amendment
            for all direct and indirect costs incurred by the University in
            connection with the Research, described in Exhibit A, in the amount
            not to exceed [CONFIDENTIAL TREATMENT REQUESTED]. Payment shall be
            made in accordance with the following schedule: one half (1/2) of
            the [CONFIDENTIAL TREATMENT REQUESTED] supplement shall be made upon
            the execution of this Amendment, with the balance to be paid upon
            submission of the Final Report. Budget attached as Exhibit B.

        3.   Any and all provisions of the Agreement not expressly modified
             hereby will remain in full force and effect.

IN WITNESS THEREOF, the undersigned duly authorized representatives of the
parties have executed this first amendment.

Inspire Pharmaceuticals, Inc.                  University of North Carolina
                                               At Chapel Hill

By:    /s/ Janet L. Rideout        By:       /s/ Robert P. Lowman
     --------------------------        -----------------------------------------

Name:   Janet L. Rideout           Name:     Robert P. Lowman, Ph.D.
      -------------------------          ---------------------------------------

Title:     V.P., Development       Title:  Director, Office of Research Services
       ------------------------           --------------------------------------

Date:     2/15/00                   Date:    FEB 17 2000
       ------------------------           --------------------------------------

                                    Principal Investigator
                                    ----------------------

                                     /s/ M. Jackson Stutts
                                    ----------------------

                                    Date:   2-17-00
                                          ----------------

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