Document:

<PAGE>

                                               EXHIBIT 10(v)
July 27, 1999

Mr. Willy L. Verbrugghe
144 Knoll Drive
Collegeville, PA 19426

Dear Willy:

I am pleased to offer you the position as President of the Industrial &
Commercial Motion Control Group and  Corporate Vice President of Kollmorgen
Corporation, with a home base in Waltham, MA, reporting to me, at a monthly
salary of $22,916.67. In addition to your base salary, Kollmorgen will provide
you with a monthly car allowance of $1,000, grant you an option for 70,000
shares as of your date of hire, and make you a participant in the annual bonus
plan for Kollmorgen executives beginning in the year 2000 with a target bonus
equal to 40% of your base salary.

In lieu of an annual bonus for 1999, Kollmorgen will pay you the sum of $75,000,
one half payable in a lump sum within thirty days of your date of hire, the
remainder to be paid in January 2000. Should Kollmorgen terminate your
employment for any reason, other than for cause or following a change in
control, you will receive your annual base salary in a lump sum as a severance
payment. Kollmorgen will execute a separate retention agreement with you
regarding employment following a change in control (double trigger with a 2.5
times payout).

Kollmorgen will provide you with relocation assistance as follows:
    1. Closing cost for your current home (including reasonable realtor fees),
    2. Closing costs for the purchase of a new home (including a maximum of 2
       points on a new mortgage),
    3. Moving costs for household goods,
    4. Temporary living expenses not to exceed $200 per day, and
    5. Gross up of the additional tax liability.
The total relocation assistance provided by Kollmorgen will not exceed $75,000.

As a regular, full time, at will Kollmorgen employee, you will be eligible for
benefits, a summary of which follows:

1. Medical - You will be eligible for medical coverage effective the first of
the month following your date of hire. Employees currently pay 20% of the
premium cost through pre-tax payroll deductions.

2. Dental - You will be eligible for dental coverage effective the first of the
month following your date of hire. Employees currently pay 20% of the premium
cost through pre-tax payroll deductions.
<PAGE>

Mr. Willy L. Verbrugghe
July 27, 1999
Page 2

3. Flexible Spending Accounts - You may elect to contribute on a pre-tax basis
to either or both  the medical and dependent care flexible spending accounts.

4. Life Insurance - Kollmorgen provides twice your annual salary in life
insurance at no cost to you. You have the option of purchasing through payroll
deduction an additional one or two times your annual salary in life insurance.
Guaranteed issue is capped at $500,000.

5. Long Term Disability - This coverage is available to you at cost through
payroll deductions effective the first of the month following your date of hire.

6. Pension Plan - You are automatically enrolled in the pension plan after one
year of service. No contributions are required of employees to participate.

7. 401(k) Plan - You are eligible to participate in the plan immediately upon
starting. Kollmorgen currently matches pre-tax contributions at the rate of
$0.50 on the dollar, capping its contribution when you put in 4% of your base
salary. You will be vested in the company matching contributions following one
year of service.

8. Holidays -  There are eleven paid holidays during the year. A number of
holidays are clustered around the December holidays such that the office is
normally closed between Christmas and New Year's. In 1998, you will be eligible
for two additional holidays to be scheduled at your choosing.

9. Vacation - You will be immediately eligible for three weeks of vacation per
year. Vacation accrual will otherwise follow the standard vacation policy.

10. Educational Assistance - You will be eligible for this plan following three
months of service. Courses must be approved in advance by your supervisor.
Tuition, fees, and books are eligible for reimbursement with a passing grade.

If you should have any questions concerning this offer, please don't hesitate to
contact me. I would be pleased to provide you with whatever additional detail
you may require.
<PAGE>

Mr. Willy L. Verbrugghe
July 27, 1999
Page 3

We are pleased to extend this offer to you and await your response. Upon
acceptance of this offer, kindly return a signed copy to my attention.

Sincerely,                            Agreed and accepted:

Gideon Argov                          ---------------------------
President, Chief Executive Officer
& Chairman<PAGE>
                                                                     Exhibit 4.1

NUMBER                              INSPIRE [LOGO]                      SHARES
                                 PHARMACEUTICALS, INC.
IP              Incorporated Under the Laws of the State of Delaware

COMMON STOCK                                                   CUSIP 457733 10 3
                                             SEE REVERSE FOR CERTAIN DEFINITIONS

        THIS CERTIFIES THAT

        IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001 PER
                                   SHARE, OF
                         INSPIRE PHARMACEUTICALS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to the laws of the State of Delaware and the provisions of
the Certificate of Incorporation and the By-Laws of the Corporation, as amended
from time to time, to which the holder by acceptance hereof assents. This
certificate is not valid unless countersigned and registered by the transfer
agent and registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
                         its duly authorized officers.

/s/ Christy L. Shaffer                           Dated:
President and Chief Executive Officer

                                    [SEAL]

                                    Countersigned and Registered:
                                      American Securities Transfer & Trust, Inc.
                                                (DENVER, CO)
                                    BY                          Transfer Agent
/s/ Gregory J. Mossinghoff                                      and Registrar
Chief Business Officer and Secretary

                                                          Authorized Signature
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+  NOTICE: The signature to this assignment must correspond with the name as   +
+  written upon the face of the Certificate, in every particular, without      +
+  alteration or enlargement, or any change whatever.                          +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                            INSPIRE PHARMACEUTICALS

        THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUESTS MAY BE MADE TO THE CORPORATION
AT ITS PRINCIPAL OFFICE OR TO ITS TRANSFER AGENT.

        The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM-as tenants in common          UNIF GIFT MIN ACT-_______Custodian________
                                                        (Cust)          (Minor)

TEN ENT-as tenants by the entireties         under Uniform Gifts to Minors Act

JT TEN-as joint tenants with right           _________________________________
       of survivorship and not as                          (State)
       tenants in common

    Additional abbreviations may also be used though not in the above list.

For value received, ______________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________

__________________________________________________________________________Shares

of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________

________________________________________________________________________________
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.

Dated:_______________________________

                                     X__________________________________________
                                      THE SIGNATURE(S) MUST BE GUARANTEED BY AN
                                      ELIGIBLE GUARANTOR INSTITUTION (BANKS,
                                      STOCKBROKERS, SAVINGS AND LOAN
                                      ASSOCIATIONS AND CREDIT UNIONS WITH
                                      MEMBERSHIP IN AN APPROVED SIGNATURE
                                      GUARANTEE MEDALLION PROGRAM) PURSUANT TO
                                      S.E.C. RULE 17Ad-15.<PAGE>

                                                                    EXHIBIT 10.7

[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.]

                                   EXCLUSIVE
                               LICENSE AGREEMENT

     THIS LICENSE AGREEMENT is made and entered into this 10/th/ day of March,
1995 between THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL having an address
at 300 Bynum Hall, Chapel Hill, N.C. (hereinafter referred to as University) and
Inspire Pharmaceuticals, Inc., a corporation organized and existing under the
laws of Delaware and having an address at c/o Burr, Egan, Deleage & Co., One
Post Office Square, Boston, Massachusetts (hereinafter referred to as Licensee).

                              W I T N E S S E T H

     WHEREAS, University owns and controls the inventions described in U.S.
Patent No. 5,292,498 entitled "Method of Treating Lung Disease with Uridine
Triphosphates," certain inventions relating to the therapeutic use of phenamil
and benzamil for lung disease, and certain inventions relating to the diagnosis
of AIDS-related Pneumocysitis carinii pneumonia ("PCP"), lung cancer, and
tuberculosis (collectively, the "Inventions"); and

     WHEREAS, the Inventions were developed by Drs. Richard C. Boucher and M.
Jackson Stutts (collectively, the "Inventors"), of the University; and

     WHEREAS, Licensee is desirous of producing, using and selling products
which include the use of the Inventions and is willing to expend best efforts to
do so if it can obtain a license to use the Inventions under the terms and
conditions set forth herein; and

     WHEREAS, University desires to facilitate a timely transfer of its
information and technology concerning the Inventions for the ultimate benefit of
the public and this transfer is best accomplished by the grant of this license;
and

     WHEREAS, in the opinion of the University, this transfer can best be
accomplished consistent with its mission by affiliation with Licensee;

     NOW, THEREFORE, for and in consideration of the covenants, conditions, and
undertakings hereinafter set forth, it is agreed by and between the parties as
follows:

1.   Definitions
     -----------

     1.1.    "University Technology" means any unpublished research and
development information, unpatented inventions, know-how, clinical data, and
technical data in the possession of the University prior to the effective date
of this Agreement or which comes into the possession of University during the
term of this Agreement which relates to and is necessary for the practice of the
Inventions or any Licensed Improvements and which University has the right to
provide to Licensee.
<PAGE>

     1.2.    "Licensed Products" means any method, procedure, product, or
component part thereof whose manufacture, sale, or use includes any use of
University Technology or is covered by any Valid Claim included in the Patent
Rights.

     1.3.    "Patent Rights" means any unexpired U.S. patents and/or pending
patent applications covering the Inventions or any Licensed Improvements owned
or controlled by University prior to or during the term of this Agreement and
which University has the right to provide to Licensee, as well as any
continuations, continuations in part, divisions, or reissues thereof, and any
foreign counterpart of any of the foregoing.

     1.4.    "Net Sales Price" means the invoiced sales price, less (i) trade,
quantity and cash discounts or rebates actually allowed, (ii) credits or
allowances actually given for rejections or returns, (iii) sales, use and value
added taxes, and (iv) freight, shipping or other costs of transportation charged
to a customer

     In the event any Licensed Product is sold as a component of a combination
of functional elements, Net Sales Price for purposes of determining royalty
payments on such combination shall be calculated by subtracting from the net
sales price of the combination the gross selling price of the inhaler device
component (if any) and then multiplying this adjusted net sales price by the
fraction A over A+B, in which "A" is the gross selling price of the Licensed
Product portion of the combination and "B" is the gross selling price of the
other active elements of the combination, including the inhaler device
component.  For the purposes of this Section 1.4, the term "gross selling price"
shall mean the price at which the relevant component was sold separately during
the accounting period in which the sale of the combination was made.  In the
event that there is no separate sale of such above designated Licensed Product,
inhaler device, or other active element of the combination during the accounting
period in which the sale of the combination was made, Net Sales Price shall be
calculated by subtracting from the net sales price of the combination the gross
selling price, if available, or the fully allocated cost, if not, of the inhaler
device component (if any) and then multiplying this adjusted net sales price by
the fraction C over C+D, in which "C" is the fully allocated cost of the
Licensed Product portion of such combination and "D" is the fully allocated cost
of the other active elements of the combination, including the inhaler device
component.  The fully allocated cost of a component shall be determined in
accordance with conventional cost accounting principles.  [CONFIDENTIAL
TREATMENT REQUESTED].

     1.5.    "Net Sales" means the total Net Sales Price of Licensed Products.
Licensed Products will be considered sold when billed out, or when delivered or
paid for before delivery, whichever first occurs.

     1.6.    "Licensed Territory" means the entire world.

     1.7.    "Licensed Improvements" shall have the meaning set forth in the
Sponsored Research Agreement.

                                      -2-
<PAGE>

     1.8.    "Valid Claim" means a claim of an issued patent which has not
lapsed or become abandoned or been declared invalid or unenforceable by a court
of competent jurisdiction or an administrative agency for which there is no
right of appeal or for which the right of appeal is waived.

     1.9.    "Sponsored Research Agreement" means the Sponsored Research
Agreement attached as Exhibit A.
                      ---------

2.   Grant of License and Term
     -------------------------

     2.1.    University grants to Licensee to the extent of the Licensed
Territory, an exclusive license (with the right to grant sublicenses) under the
Patent Rights and University Technology to make, have made, use and sell
Licensed Products, upon the terms and conditions set forth herein.

     2.2.    Any license granted herein is exclusive for a term beginning on the
date of execution of this Agreement and, unless terminated sooner as herein
provided, ending at the expiration of the last to expire patent included in the
Patent Rights.

     2.3.    Licensee shall not disclose any unpublished University Technology
furnished by University pursuant to Paragraph 2.1 above to third parties during
the term of this Agreement or any time thereafter, provided, however, that
disclosure may be made of any such University Technology at any time:  (1) with
the prior written consent of University, (2) after the same shall have become
public through no fault of Licensee, (3) as demonstrated by documentary
evidence, if the same was independently developed or discovered by Licensee
prior to the time of its disclosure, (4) the same is or was disclosed to
Licensee at any time, whether prior to or after the time of its disclosure under
this Agreement, by a third party having no fiduciary relationship with
University and having no obligation of confidentiality with respect to such
University Technology or (5) the same is required to be disclosed to comply with
applicable laws or governmental regulations, provided the University receives
prior written notice of such disclosure and that Licensee takes all reasonable
and lawful actions to minimize the extent of such disclosure and, if possible,
to avoid such disclosure.

     2.4.    Notwithstanding the foregoing, any and all licenses granted
hereunder are subject to the rights of the United States Government which arise
out of its sponsorship of the research which led to the Inventions or any
Licensed Improvements.

3.   License Fee, Milestone Payments, and Royalties
     ----------------------------------------------

     3.1.    (a)    Licensee shall pay to University the following license issue
     fees:

     Amount of Fee            Description of Technology Licensed
     -------------            ----------------------------------

     .    [CONFIDENTIAL       .    U.S. Patent No. 5,292,498 entitled "Method of
          TREATMENT                Treating Lung Disease with Uridine
          REQUESTED]               Triphosphates."

                                      -3-
<PAGE>

     .    [CONFIDENTIAL       .    Certain inventions relating to the
          TREATMENT                therapeuticuse of phenamil and benzamil for
                                   lung disease.
     .    REQUESTED]          .    Certain inventions relating to the
                                   diagnosis of AIDS-related Pneumocysitis
                                   carinii pneumonia, lung cancer, and
                                   tuberculosis.

     (b)  Licensee will also reimburse the University for properly documented
costs (including attorney's fees) arising out of the patenting of the Inventions
pursuant to Article 10 of this Agreement.

     (c)  Licensee shall pay to University the following milestone payments
within thirty (30) days after each milestone is achieved:

     Payment                          Milestone
     -------                          ---------

     [CONFIDENTIAL TREATMENT REQUESTED]

     (d)  In partial consideration of the license granted under Section 2.1 of
this Agreement, Licensee shall issue to the University a total of Five Hundred
Twenty One Thousand shares of Common Stock of the Company, $.001 par value per
share.

     (e)  Both the license issue fee and the reimbursement of patenting costs
shall be non-refundable and shall not be a credit against any other amounts due
hereunder except as may be provided for elsewhere in this Agreement.

     3.2. Beginning on the effective date of this Agreement and continuing for
the life of this Agreement, Licensee will pay University a running royalty of
[CONFIDENTIAL TREATMENT REQUESTED] of all Net Sales of the Licensed Product(s)
that are sold by Licensee.

     3.3. After the first commercial sale of a Licensed Product, Licensee agrees
to make quarterly written reports to University within 30 days after the first
days of each January,

                                      -4-
<PAGE>

April, July, and October during the life of this Agreement and as of such dates,
stating in each such report the number, description, and aggregate Net Selling
Prices of Licensed Products sold or otherwise disposed of during the preceding
three calendar months and upon which royalty is payable as provided in Article
3.2 hereof.  The first such reports shall include all such Licensed Products so
sold or otherwise disposed of prior to the date of such report.

     3.4.    Concurrently with the making of each such report, Licensee shall
pay to the University royalties at the rate specified in Article 3.2 of this
Agreement on the Licensed Products included therein.

     3.5.    (a)    If in any calendar year during the term of this Agreement,
[CONFIDENTIAL TREATMENT REQUESTED]

             (b)    [CONFIDENTIAL TREATMENT REQUESTED]

     3.6.    University may, by written notice to Licensee, terminate this
Agreement during any April subsequent to the second anniversary of the first
commercial sale of a Licensed Product if Licensee, together with its
sublicensees, have not practiced the Invention during each calendar year which
precedes each such April to the extent of generating earned payments to
University under Section 3.2 and 5.3 of this Agreement in an amount no less than
[CONFIDENTIAL TREATMENT REQUESTED].

     3.7.    Should this Agreement become effective or terminate or expire
during a calendar year, the minimum royalty under paragraph 3.5 for such portion
of a year shall be determined by multiplying the minimum royalty set forth in
said paragraph for the year in which this Agreement becomes effective,
terminates or expire, by a fraction, the numerator of which shall be the number
of days during such calendar year for which this Agreement shall be in effect
and the denominator of which shall be 365.

     3.8.    In the event of default in payment of any payment owing to
University under the terms of this Agreement, and if it becomes necessary for
University to undertake legal action to collect said payment, Licensee shall pay
all legal fees and costs incurred by University in connection therewith.

     3.9.    In the event that licensee is legally required to pay license fees
or royalties to one or more third parties under patents other than the Patent
Rights in order to make, use or sell a Licensed Product, then Licensee shall be
entitled to a credit against royalties due University on sales of that Licensed
Product in an amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of the
royalties paid to such third parties, provided than in no event shall the
royalties otherwise due University be reduced by more than [CONFIDENTIAL
TREATMENT REQUESTED]. In the event that such third party license fee or royalty
payments exceed [CONFIDENTIAL TREATMENT REQUESTED] of the royalties payable to
University on sales of that Licensed Product for the quarterly payment period in
which such third party license fees or royalties are incurred, the excess shall
be carried forward and

                                      -5-
<PAGE>

offset against royalties due to University in successive payment periods.  This
Section 3.9 shall apply only to the Licensed Product portion of any combination
product, as described in Section 1.4 above.

4.   Diligence Requirements
     ----------------------

     4.1.    Licensee shall use its best efforts to proceed diligently with the
manufacture and sale of Licensed Products and shall earnestly and diligently
offer and continue to offer for sale such Licensed Products, both under
reasonable conditions, during the term of this Agreement.

     4.2.    In particular, Licensee shall meet the performance milestones set
forth in Exhibit B, which is attached hereto.
         ---------

5.   Sub-licenses
     ------------

     5.1.    Subject to this Article, Licensee may grant sub-licenses under its
rights under Section 2.1 above provided that each sublicense contains a
provision that such sub-license and the rights thereby granted are personal to
the sub-licensee thereunder and such sub-license cannot be further sub-licensed.

     5.2.    Any sub-license granted pursuant to this Article shall be in
accordance with the terms and conditions of this Agreement.

     5.3.    Licensee shall promptly pay University [CONFIDENTIAL TREATMENT
REQUESTED] of any royalty income received from any sublicensee in consideration
of the grant of sublicense rights pursuant to this Article 5.  If non-monetary
consideration is so received, then a commercially reasonable monetary value will
be assigned for purposes of calculating University's share of sublicense royalty
income.  Licensee shall retain the entirety of all other payments received from
such sublicensees, including without limitation license fees, milestone
payments, research and development payments, and payments for the issuance of
equity or debt securities of Licensee.

6.   Cancellation
     ------------

     6.1.    It is expressly agreed that, notwithstanding the provisions
of any other paragraph of this contract, if Licensee should fail to deliver to
University any royalty at the time or times that the same should be due to
University or if either party should in any material respect violate or fail to
keep or perform any covenant, conditions, or undertaking of this Agreement on
its part to be kept or perform hereunder, then and in such event the affected
party shall have the right to cancel and terminate this Agreement, and the
license herein provided for, by written notice to the other party if such party
has failed to cure any such breach within 30 days of receipt of written notice
from the affected party describing such breach.  The right to cure a breach with
apply only to the first two breaches properly noticed under terms of this
Agreement, regardless of the nature of those breaches.  Any subsequent breach by
that party will entitle the affected party to terminate this Agreement upon
proper notice.

                                      -6-
<PAGE>

     6.2.    If Licensee should fail to meet performance milestones number 1, 3,
4 or 5 as set forth on Exhibit B, University may terminate this Agreement upon
                       ---------
thirty (30) days written notice to Licensee. If Licensee fails to meet
performance milestone number 2 as set forth on Exhibit B, then University may
                                               ---------
revoke the license granted under Section 2.1 with respect to such amiloride
analogs upon 30 days prior written notice to Licensee; provided, however, that
all other provisions of this Agreement shall remain in full force and effect,
including without limitation the licenses to the Patent Rights and University
Technology associated with technologies other than such sodium uptake
inhibitors.

     6.3.    If Licensee should be adjudged bankrupt or enter into a composition
with or assignment to its creditors, then in such event University shall have
the right to cancel and terminate this Agreement, and the license herein
provided for, by written notice to Licensee.

     6.4.    Any termination or cancellation under any provision of this
Agreement shall not relieve Licensee of its obligation to pay any royalty or
other fees (including attorney's fees pursuant to Article 3.1 hereof) due or
owing at the time of such cancellation or termination.

7.   Disposition of Licensed Products On Hand Upon Cancellation or Termination
     -------------------------------------------------------------------------

     7.1.    Upon cancellation of this Agreement or upon termination in whole or
in part, Licensee shall provide University with a written inventory of all
License Products in process of manufacture, in use or in stock. Except with
respect to termination by University for nonpayment of royalties pursuant to
Paragraph 6.1, Licensee shall have the privilege of disposing of the inventory
of such Licensed Products within a period of one hundred and eighty (180) days
of such termination upon conditions most favorable to University that Licensee
can reasonably obtain. Licensee will also have the right to complete performance
of all contracts executed by Licensee prior to cancellation or termination by
University and requiring use of the University Technology, Patent Rights (except
in the case of termination by University for nonpayment of royalties pursuant to
Paragraph 6.1) or Licensed Products within and beyond said 180-day period
provided that the remaining terms of any such contract does not exceed one year.

8.   Use of University's Name
     ------------------------

     8.1.    The use of the name of University, or any contraction thereof, in
any manner in connection with the exercise of this license is expressly
prohibited except with prior written consent of University. The foregoing
notwithstanding, Licensee 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 Licensee 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.

                                      -7-
<PAGE>

9.   University Use
     --------------

     9.1.    It is expressly agreed that, notwithstanding any provisions herein,
University is free to make noncommercial use of university Technology, Patent
Rights and Licensed Products for its own research, public service, clinical,
teaching and educational purposes without payment of royalties.  Furthermore,
except as provided in the Sponsored Research Agreement, University shall be free
to publish University Technology, as it sees fit.

10.  Patents and Infringements
     -------------------------

     10.1.   Licensee shall reimburse University for up to [CONFIDENTIAL
TREATMENT REQUESTED] of any properly documented costs incurred to date in
relation to patenting the Inventions. As of the effective date of this
Agreement, Licensee shall bear the cost of filing and prosecuting U.S. Patent
applications and maintenance of issued patents included within the Patent
Rights. Such filings and prosecution shall be by counsel of University's
choosing but shall be reasonably acceptable to Licensee. University shall keep
Licensee advised as to the prosecution of such applications by forwarding to
Licensee copies of all official correspondence, (including, but not limited to,
Applications, Office Actions, responses, etc.) relating thereto. Licensee shall
have the right to advise University as to such prosecution, and further, shall
have the right to make reasonable requests as to the conduct of such
prosecution.

     10.2.   As regards filing of foreign patent applications and maintenance of
issued patents corresponding to the U.S. applications described in paragraph
10.2 above, Licensee shall designate that country or those countries, if any, in
which Licensee desires such corresponding patent application(s) to be filed.
Licensee shall pay all costs and legal fees associated with the preparation and
filings of such designated foreign patent applications and maintenance of issued
patents, and such applications shall be in the University's name and by counsel
of the University's choosing and reasonably acceptable to Licensee.  University
may elect to file corresponding patent applications in countries other than
those designated by Licensee, but in that event University shall be responsible
for all costs associated with such non-designated filings.  In such event,
Licensee shall forfeit its rights under this license in the country or countries
where University exercises its option to file such corresponding patent
applications.

     10.3.   If the production, sale or use of Licensed Products under this
Agreement by Licensee results in any claim for patent infringement against
Licensee, Licensee shall promptly notify the University thereof in writing,
setting forth the facts of such claim in reasonable detail.  As between the
parties to this Agreement, Licensee shall have the first and primary right and
responsibility at its own expense to defend and control the defense of any such
claim against Licensee, by counsel of its own choice.  It is understood that any
settlement of such actions must be approved by University.  Such approval shall
not be unreasonably withheld.  University agrees to cooperate with Licensee in
any reasonable manner deemed by Licensee to be necessary in defending any such
action.  Licensee shall reimburse University for any out of pocket expenses
incurred in providing such assistance.

     10.4.   If an action is brought against Licensee as described in Section
10.3, Licensee may offset the royalty paid to University in each quarterly
royalty period by

                                      -8-
<PAGE>

[CONFIDENTIAL TREATMENT REQUESTED] of the amount of expenses incurred in that
royalty period as a result of such action, said expenses to include costs,
attorney's fees, judgments, and all other expenses incident to the infringement
action, to a maximum of [CONFIDENTIAL TREATMENT REQUESTED]  of the amount
otherwise payable to University in that royalty period.  Expenses in excess of
the amounts due in any royalty period may be carried over into subsequent
royalty periods.

     10.5.   In the event that any Patent Rights licensed to Licensee are
infringed by a third party, Licensee shall have the primary rights, but not the
obligation, to institute, prosecute and control any action or proceeding with
respect to such infringement, by counsel of its choice, including any
declaratory judgment action arising from such infringement.  University agrees
to cooperation with Licensee in any reasonable manner deemed by Licensee to be
necessary in defending any such action, including joining such action if the
University is an indispensable party, provided that Licensee shall reimburse
University for its out-of-pocket expenses incurred in providing such assistance.
[CONFIDENTIAL TREATMENT REQUESTED].

     10.6.   Notwithstanding the foregoing, and in University's sole discretion,
University shall be entitled to participate through counsel of its own choosing
in any legal action involving the Inventions.  Nothing in the foregoing sections
shall be construed in any way which would limit the authority of the Attorney
General of North Carolina.

11.  Waiver
     ------

     11.1.   It is agreed that no waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent and/or similar breach or default.

12.  License Restrictions
     --------------------

     12.1.   It is agreed that the rights and privileges granted to Licensee are
each and all expressly conditioned upon the faithful performance on the part of
the Licensee of every requirements herein contained, and that each of such
conditions and requirements may be and the same are specific license
restrictions.

13.  Assignments
     -----------

     13.1.   This Agreement is binding upon and shall inure to the benefit of
the University, its successors and assigns. This Agreement shall not be
assignable or otherwise transferable by either party without the prior written
consent of the other, which consent shall not be unreasonably withheld, except
that Licensee may assign or otherwise transfer its rights under this Agreement
to the following parties without obtaining consent: (1) a successor to
Licensee's business, or a successor to that portion of Licensee's business that
pertains to the subject matter of the Patent Rights or any University
Technology, and (2) any entities controlled by, controlling, or under common
control with Licensee.

                                      -9-
<PAGE>

14.  Indemnity
     ---------

     14.1.   Licensee agrees to indemnify, hold harmless and defend University,
its officers, employees, and agents, against any and all claims, suits, losses,
damage, costs, fees, and expenses asserted by third parties, both government and
private, resulting from or arising out of the exercise of this license.

15.  Insurance
     ---------

     15.1.   Licensee is required to maintain in force at its sole cost and
expense, with reputable insurance companies, general liability insurance and
products liability insurance coverage in an amount reasonably sufficient to
protect against liability under Section 14, above.  The University shall have
the right to ascertain from time to time that such coverage exists, such right
to be exercised in a reasonable manner.

16.  Independent Contractor Status.
     -----------------------------

     16.1.   Neither party hereto is an agent of the other for any purpose.

17.  Representations and Warranties
     ------------------------------

     17.1.   University represents that as of the Effective Date the entire
right, title, and interest in the patent applications or patents comprising the
Patent Rights have been assigned to it and that University has the authority to
issue licenses under said Patent Rights.  University also represents that it has
received no notification that the Patent Rights are invalid nor that the
exercise by Licensee of the rights granted hereunder will infringe on any patent
or other proprietary right of any third party.  University makes no warranties
that any patent will issue on University Technology or Inventions.  University
further makes no warranties, express or implied as to any matter whatsoever,
including, without limitation, the condition of any invention(s) or product(s),
that are subject of this Agreement; or the merchantability or fitness for a
particular purpose of any such invention or product.  University shall not be
liability for any direct, consequential, or other damages suffered by Licensee
or any others resulting from the use of the Inventions of License Products.

     17.2.   Paragraph 3.1(d) of this Agreement is made with the University in
reliance upon the University's representation to the Company, which the
University hereby confirms by execution of this Agreement, that the Common Stock
to be received by the University (the "Securities") will be acquired for
investment for University'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
University has no present intention of selling, granting any participation in,
or otherwise distributing the same.  By executing this Agreement, the University
further represents that it 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.

     17.3.   The University has received all the information that it considers
necessary or appropriate for deciding whether to purchase the Securities.  The
University further

                                     -10-
<PAGE>

represents that it has had sufficient opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Securities.

     17.4.   The University acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities.

     17.5.   Purchaser understands that the Securities 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 Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances.  In this regard, the University
represents that it is familiar with SEC Rule 144, as currently in effect, and
understands the resale limitations imposed thereby and by the Act.

18.  Accounting and Records
     ----------------------

     18.1.   Licensee will keep complete, true and accurate books of account and
records for the purpose of showing the derivation of all amounts payable to
University under this Agreement.  Such books and records will be kept at
Licensee's principal place of business for at least three (3) years following
the end of the calendar quarter to which they pertain, and will be open at all
reasonable times for inspection by a representative of University for the
purpose of verifying licensee's royalty statements, or Licensee's compliance in
other respects with this Agreement.  The representative and the University will
be obliged to treat as confidential all relevant matters except information
relating to the accuracy of such reports and payments or except as required by
law.

     18.2.   Such inspections shall be at the expense of University, unless a
variation or error in excess of 2% is discovered in the course of any such
inspection, whereupon all costs relating thereto paid by Licensee.

     18.3.   Licensee will pay to University within thirty (30) days of
receiving notice from University the full amount of any under payment, together
with interest thereon at the maximum rate of interest allowed by law.

19.  Compliance with Laws
     --------------------

     19.1.   In exercising its rights under this license, Licensee shall fully
comply with the requirements of any and all applicable laws, regulations, rules
and orders of any governmental body having jurisdiction over the exercise of
rights under this license.  Licensee further agrees to indemnify and hold
University harmless from and against any costs, expenses, attorney's fees,
citation, fine, penalty and liability of every kind and nature which might be
imposed by reason of any asserted or established violation of any such laws,
order, rules and/or regulations.

                                     -11-
<PAGE>

20.  U.S. Manufacture
     ----------------

     20.1.   It is agreed that any Licensed Products sold in the United States
shall be substantially manufactured in the United States.

21.  Notices
     -------

     21.1.   Any notice required or permitted to be given to the parties hereto
shall be deemed to have been properly given when received by means of confirmed
facsimile transmission, recognized national overnight courier, or first-class
certified mail to the other party at the appropriate address or facsimile number
as set forth below or to such other addresses or facsimile numbers as may be
designated in writing by the parties from time to time during the terms of this
Agreement.

     UNIVERSITY                                 LICENSEE

Dr. Robert P. Lowman                         H. Jeff Leighton, Ph.D.
Office of Research Services                  President and Chief Executive
CB #4100, 300 Bynum Hall                     Officer
University of North Carolina at Chapel Hill  Inspire Pharmaceuticals, Inc.
Chapel Hill, NC 27599-4100                   c/o Burr, Egan, Deleage & Co.
Ph:  (919) 966-5625                          One Post Office Square
Fax:  (919) 962-0646                         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
22.  Governing Laws
     --------------

     22.1.   This Agreement shall be interpreted and construed in accordance
with the laws of the State of North Carolina.

3.   Complete Agreement
     ------------------

     23.1.   Except for the Sponsored Research Agreement, it is understood and
agreed between University and Licensee that this Agreement and the Exhibits
attached hereto constitute the entire Agreement, both written and oral, between
the parties, and that all prior agreements respecting the subject matter hereof,
either written or oral, expressed or implied, shall be abrogated, cancelled, and
are null and void and of no effect.

                                     -12-
<PAGE>

24.  Force Majeure.
     -------------

     24.1.   Neither party will be responsible for delays resulting from acts
beyond the control of such party, provided that the nonperforming party uses
reasonable commercial efforts to avoid or remove such causes of nonperformance
and continues performance hereunder with reasonable dispatch whenever such
causes are removed.  This Article 24 does not apply to the diligence
requirements set forth on Exhibit B.
                          ---------

25.  Survival of Terms
     -----------------

     25.1.   The provisions of Articles 7, 8, 14, 15, 18, 19 and 22 shall
survive the expiration or termination of this Agreement.

                                     -13-
<PAGE>

     IN WITNESS WHEREOF, both University and Licensee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, the day and year first above written.  The Inventors have likewise
indicated their acceptance of the terms hereof by signing below.

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

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

INVENTORS:

    /s/ Richard C. Boucher
-------------------------------
Richard C. Boucher

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

                                     -14-
<PAGE>

                                   EXHIBIT A

                         SPONSORED RESEARCH AGREEMENT
<PAGE>

                                   EXHIBIT B

                            DILIGENCE REQUIREMENTS

                      [CONFIDENTIAL TREATMENT REQUESTED]

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