8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported) February 18, 2010

INSPIRE PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-31135	04-3209022
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
4222 Emperor Boulevard, Suite 200, Durham, North Carolina		27703-8466
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (919) 941-9777

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Adrian Adams

Effective February 22, 2010, the Board of Directors (the “Board”) of Inspire Pharmaceuticals, Inc. (the “Company”) appointed Adrian Adams, age 59, as President and Chief Executive Officer of the Company, and as a member of the Board.

On February 18, 2010, the Company entered into an employment agreement (the “Employment Agreement”) with Mr. Adams. The Employment Agreement provides for an initial term from February 22, 2010 to December 31, 2014. The term of the Employment Agreement shall thereafter be automatically extended for an unlimited number of additional one-year periods unless the Company or Mr. Adams provides six months notice of termination, or until such employment is terminated in accordance with the change of control provisions or other termination provisions set forth in the Employment Agreement.

The Employment Agreement provides that Mr. Adams will receive a base salary of $650,000 for the first year of his employment term. Thereafter, the base salary shall be reviewed by the Board and may be adjusted upward, but in no event shall it be reduced. In addition, Mr. Adams is eligible for an annual cash incentive award equal to: 75% of base salary for performance at threshold levels; 100% of base salary for performance at target levels; and 150% of base salary for performance at or above maximum levels. The Board will meet annually and consult with Mr. Adams to determine the financial and other goals to be used to measure Mr. Adams’ performance for the year. He is also eligible for discretionary cash bonuses, to be paid at the Board’s sole discretion. His annual cash bonus payable in 2011 with respect to 2010 shall not be less than $650,000.

Mr. Adams will be eligible for annual grants of long term incentive and equity compensation awards at the Board’s discretion, based upon the evaluation of the Compensation Committee of the Board of his performance and peer company compensation practices. In addition, on February 22, 2010, Mr. Adams was granted 350,000 stock options at an exercise price equal to $6.35, the fair market value of the Company’s common stock on the grant date (the “Sign-On Options”). Twenty-five percent (25%) of the Sign-On Options vested on February 22, 2010 and the remaining 75% will vest ratably over the 36 months following the first anniversary of the effective date of Mr. Adams’ employment. In addition, the Company will grant Mr. Adams an award of 650,000 restricted stock units (the “Sign-On RSUs”) following the registration of the shares of common stock underlying the Sign-On RSUs. When issued, 25% of the Sign-On RSUs will be non-forfeitable as of the grant date and the remaining 75% will become non-forfeitable ratably over the 36 months following the first anniversary of the effective date of his employment.

Mr. Adams is eligible to participate in standard company employee benefit plans or programs in the same manner as other executives of the Company; however, Mr. Adams shall be permitted to receive cash in lieu of participating in such coverage where permitted by the plan or applicable law. Mr. Adams is also entitled to an allowance of $4,500 per month to cover housing costs. The Company will provide Mr. Adams a leased automobile valued at approximately $75,000. He will be reimbursed for his commuting expenses from his home in Pennsylvania, from which he is expected to commute on a weekly basis and sporadically at other times. Mr. Adams will also be reimbursed for the payment of any taxes on his housing allowance, leased automobile perquisite, and commuting expenses.

Mr. Adams has also entered into an agreement regarding non-disclosure of confidential information and assignment of inventions. He will be subject to a covenant not to compete with the Company during the period of his employment and for one year thereafter.

Under the Employment Agreement, either party may terminate Mr. Adams’ employment with or without cause under certain conditions. In the event of termination by either party, Mr. Adams must resign from the Board and any other position he may hold with the Company. In the event that Mr. Adams is terminated with Cause, the Company may immediately cease payment of any further wages, benefits or other compensation other than earned but unpaid salary and benefits (including accrued but unused vacation days and earned incentive awards) earned through the date of termination. Mr. Adams shall also have continuing obligations under the Employment Agreement including, but not limited to agreements regarding non-disclosure of confidential information of the Company, in the event that he is terminated with Cause.

In the event that Mr. Adams is terminated without Cause or if Mr. Adams resigns for Good Reason, he shall be entitled to severance pay equal to two times Mr. Adams’ last annual salary and the average annual cash bonus received for the three calendar years preceding his termination, as well as a pro rata annual cash bonus for the year of termination, immediate vesting of all unvested Sign-On Options and all outstanding Sign-On RSUs shall immediately become non-forfeitable, and an additional 24 months of vesting of all other equity awards, with vested options remaining exercisable until the earlier of: (i) the two-year anniversary of the termination date or (ii) the end of such options’ maximum stated term. Mr. Adams shall be entitled to this severance pay in addition to the same earned but unpaid benefits he would receive upon a termination for Cause.

Upon a Change of Control Event (as defined in the paragraph below), Mr. Adams is entitled to: (i) three times Mr. Adams’ last annual salary and the highest annual cash bonus received for the three calendar years preceding his termination (or, if greater, immediately prior to any event constituting Good Reason), (ii) a pro rata annual cash bonus for the year of termination, (iii) full vesting of all unvested equity awards, and (iv) the same earned but unpaid benefits he would receive upon a termination for Cause.

A “Change of Control Event” occurs in the event that:

• within two years following a Change of Control, Mr. Adams terminates his employment with Good Reason (or with Good Reason as the result of the Company taking actions in anticipation of a Change of Control); or

• the Company terminates Mr. Adams employment without Cause within two years following a Change of Control (or in anticipation of a Change in Control that actually occurs within six months of such termination).

The foregoing description of the Employment Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein. Capitalized terms used herein without definition have the meanings given such terms in the Employment Agreement.

Prior to joining the Company, Mr. Adams was President and Chief Executive Officer of Sepracor Inc., a specialty pharmaceutical company, from March 2007 and May 2007, respectively. Prior to his appointment as Chief Executive Officer of Sepracor, Mr. Adams served as its Chief Operating Officer. From January 2002 until March 2007, Mr. Adams served as the President and Chief Executive Officer of Kos Pharmaceuticals, Inc., a specialty pharmaceutical company, and from April 2001 until January 2002 as its President and Chief Operating Officer. Prior to joining Kos Pharmaceuticals, Mr. Adams served as President and Chief Executive Officer of Novartis Pharmaceuticals in Europe. Mr. Adams has served as a director of Amylin Pharmaceuticals, Inc. since October 2007 and as a director of Sepracor since March 2007 until his resignation in February 2010.

Mr. Adams is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

On February 19, 2010, the Company issued a press release announcing Mr. Adams’ appointment as Director, President and CEO. A copy of the press release is furnished with this Form 8-K and attached hereto as Exhibit 99.1. The Company also issued a press release on February 23, 2010, announcing the Sign-On Options and Sign-On RSUs, a copy of which is furnished with this Form 8-K and attached hereto as Exhibit 99.2. Mr. Adams’ agreement regarding the Sign-On Options is attached hereto as Exhibits 10.2.

Resignation of Christy L. Shaffer, Ph.D.

On February 19, 2010, the Company’s Board of Directors received and accepted Christy L. Shaffer’s resignation from the Company’s Board of Directors and as President and Chief Executive Officer, effective February 22, 2010.

In connection with her resignation, Dr. Shaffer has entered into a Separation of Employment and Consulting Agreement, effective February 22, 2010 (the “Separation and Consulting Agreement”) with the Company, pursuant to which she will provide consulting services to the Company for a period of twenty-four (24) months. The Separation and Consulting Agreement provides for: (i) a separation payment of $982,680; (ii) an award of 100,000 stock options; (iii) a stock award for 100,000 shares of the Company’s common stock; and (iv) consulting payments, to be paid quarterly, at the annual rate of $467,943.

The stock award and awards of stock options granted to Dr. Shaffer under the Separation and Consulting Agreement shall be made on the first business day following the Revocation Period (a period of seven days following her execution of the Separation and Consulting Agreement). Such stock options shall be fully vested and exercisable upon the grant date.

In addition, Dr. Shaffer’s existing stock options with an exercise price equal to or less than $9.42 per share will be amended, effective at the end of the Revocation Period, to provide that the exercise period for such options will be extended to the earlier of (i) the applicable award’s expiration date, and (ii) February 22, 2013. All such options, to the extent unvested, shall become fully vested and exercisable on the first business day following the Revocation Period. All of Dr. Shaffer’s stock options with an exercise price greater than $9.42 per share were terminated on February 22, 2010.

Dr. Shaffer’s existing unvested restricted stock units (20,000 units) will become fully vested simultaneously with the expiration of the Revocation Period.

The Separation and Consulting Agreement also provides:

• a mutual general release of all claims and causes of actions between Dr. Shaffer and the Company and any and all of its affiliates, including officers, directors, shareholders, partners, employees and agents; provided, however, that Dr. Shaffer may still pursue claims for: (i) indemnification pursuant to applicable state law or under the Company’s bylaws; (ii) coverage under any directors’ and officers’ liability insurance policies maintained or required to be maintained by the Company; (iii) actions unrelated to her employment with the Company and termination thereof; and (iv) enforcement of her rights (including rights to payment), under the Separation and Consulting Agreement); and

• that during the consulting period, Dr. Shaffer shall not engage in or participate in any business that develops, sells, markets, or offers to sell ophthalmic or Cystic Fibrosis products that would directly compete with the Company’s products and product candidates (including, without limitation, topical ocular antibiotic products, product candidates for dry eye and blepharitis, ion-channel modulators, and agents that hydrate or clear airways) anywhere in the world.

The foregoing description of the Separation and Consulting Agreement is qualified in its entirety by reference to the full text of the Separation and Consulting Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated by reference herein. Capitalized terms used herein without definition have the meanings given such terms in the agreement.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

No.	Description
10.1	Executive Employment Agreement, between Inspire Pharmaceuticals, Inc. and Adrian Adams, made as of February 18, 2010.
10.2	Stock Option Agreement by and between Inspire Pharmaceuticals, Inc. and Adrian Adams, effective as of February 22, 2010.
10.3	Separation of Employment and Consulting Agreement between Inspire Pharmaceuticals, Inc. and Dr. Christy L. Shaffer, Ph.D., made as of February 19, 2010.
99.1	Press release re: Mr. Adams’ appointment, dated February 19, 2010.
99.2	Press release re: NASDAQ 5635(c)(4) awards, dated February 23, 2010.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Inspire Pharmaceuticals, Inc.
By:	/s/ Thomas R. Staab II
	Thomas R. Staab II,
	Chief Financial Officer and Treasurer

Dated: February 24, 2010

EXHIBIT INDEX

No.	Description
10.1	Executive Employment Agreement, between Inspire Pharmaceuticals, Inc. and Adrian Adams, made as of February 18, 2010.
10.2	Stock Option Agreement by and between Inspire Pharmaceuticals, Inc. and Adrian Adams, effective as of February 22, 2010.
10.3	Separation of Employment and Consulting Agreement between Inspire Pharmaceuticals, Inc. and Dr. Christy L. Shaffer, Ph.D., made as of February 19, 2010.
99.1	Press release re: Mr. Adams’ appointment, dated February 19, 2010.
99.2	Press release re: NASDAQ 5635(c)(4) awards, dated February 23, 2010.

EX-10.1

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made as of February 18, 2010, by and between Inspire Pharmaceuticals, Inc. (together with its successors and assigns, “Inspire” or the “Company”), and Adrian Adams (“Executive”).

R E C I T A L S

WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company as the Company’s President and Chief Executive Officer.

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and conditions herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:

A G R E E M E N T

1. Employment and Term. The Company hereby agrees to employ Executive and Executive hereby accepts employment by the Company on the terms and conditions hereinafter set forth. Executive’s term of employment by the Company under this Agreement (the “Term”) shall commence on February 22, 2010 (the “Effective Date”) and continue through December 31, 2014; provided, however, that the Term shall thereafter be automatically extended for unlimited additional one-year periods unless, at least six months prior to the then-scheduled date of expiration of the Term, either (x) the Company gives notice to Executive that it is electing not to so extend the Term or (y) Executive gives notice to the Company that he is electing not to so extend the Term. Notwithstanding the foregoing, the Term may be earlier terminated in strict accordance with the provisions of Section 5 below, in which event Executive’s employment with the Company shall expire in accordance therewith.

2. Position, Duties and Responsibilities; Location.

2.1 Position and Duties. Executive shall be employed as President and Chief Executive Officer of the Company and shall serve as a member of the Company’s Board of Directors (the “Board”). Executive shall have, subject to the general direction of the Board, general overall authority and responsibility for the day-to-day management of the affairs and business of the Company and its subsidiaries, if any, and primary responsibility for the formulation, implementation and execution of strategic policies relating to Inspire’s business operations, financial objectives and market growth. Executive shall also have such other duties, powers and authority as are commensurate with his position as President and Chief Executive Officer of a biopharmaceutical company focused on researching, developing and commercializing prescription pharmaceutical products, including such other duties and

responsibilities as are reasonably delegated to him from time to time by the Board. The Executive shall report only to the Board and all employees of the Company shall report to the Executive or his delegee.

2.2 Exclusive Services and Efforts. Executive agrees to devote his efforts, energies, and skill to the discharge of the duties and responsibilities attributable to his position and, except as set forth herein, agrees to devote substantially all of his professional time and attention exclusively to the business and affairs of the Company. It is expressly understood and agreed that, during the Term, Executive will not be employed by, render services to, or represent, any other person, firm or company engaged in a business of a similar nature or in competition with the Company without the prior written consent of the Company. Executive also agrees that he shall not take personal advantage of any business opportunities which arise during his employment and which in his good faith judgment may benefit the Company and are within the scope of the Company’s then business or natural extension thereof without the consent of the Company, provided that the foregoing does not apply to future employment opportunities. Notwithstanding the foregoing, Executive shall be entitled to engage in (a) service on the board of directors of Amylin Pharmaceuticals, Inc. (b) service on the board of directors of one other for-profit company, business or trade organization, (c) with the consent of the Board (which consent shall not be unreasonably withheld) service on the board of directors of a second additional for-profit company, business or trade organization, provided, that, the Executive shall provide the Company prior written notice of his intention to join any such board and provided further that he shall not serve on the board of any entity that directly and materially competes with the Company, (d) service on the board of directors of not-for-profit organizations, (e) other charitable activities and community affairs and (f) manages his personal and family investments and affairs, in each case to the extent such activities do not either individually or in the aggregate, materially interfere with the performance of his duties and responsibilities to the Company.

2.3 Compliance with Company Policies. To the extent not inconsistent with the terms and conditions of this Agreement and with due regard for his position, Executive shall be subject to the Bylaws, policies, practices, procedures and rules of the Company, including those policies and procedures explained in the Company’s Employee Handbook, but in no event shall anything in such documents expand the definition of a “Cause” termination hereunder. Notwithstanding the foregoing, the Board shall amend the Bylaws as soon as practicable following the execution of this Agreement so that roles, responsibilities, authority, and reporting lines of the President and Chief Executive Officer as described therein are consistent with the terms of this Agreement.

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2.4 Location. Executive’s principal office, and principal place of employment, shall be at the Company’s offices in Durham, North Carolina, but it is understood that Executive will commute on a weekly basis and sporadically at other times to the Company office from his home in Pennsylvania. The Company will provide an allowance of $4,500 per month for each month during the Term to cover housing costs and at the same time period an additional payment such that after the payment of all taxes on the allowance and the additional payment Executive retains the amount of the allowance. The Company will also reimburse the Executive for the cost of commuting (but in no event greater than the cost of first-class commercial airfare) and at the same time period provide an additional payment such that after the payment of all taxes on the commuting expenses and the additional payment Executive shall have the amount of the commuting expenses. During the Term, the Company will also provide a leased automobile with a value of approximately $75,000 and cover all reasonable costs related thereto. On or before March 15 of each year during the Term (including the first March 15 following the year in which the Term ends), the Company shall pay to the Executive an additional payment such that after the payment of all taxes on the taxable portion of the automobile perquisite and the additional payment Executive retains the amount of the taxable portion of automobile perquisite.

3. Compensation.

3.1 Base Salary. During the Term, the Company hereby agrees to pay to Executive an annualized base salary of Six Hundred and Fifty Thousand Dollars ($650,000) (the “Salary”), subject to all applicable federal, state and local income and employment taxes and other required or elected withholdings and deductions, payable in equal installments on the Company’s regularly-scheduled paydays as it is earned. Executive’s Salary will be reviewed at least annually by the Board following the first anniversary date of the Effective Date and may be adjusted upward (in which case such increased amount shall be the “Salary” hereunder) or remain the same (but in no event shall the Salary be reduced) in consideration of (a) Executive’s performance, (b) peer company compensation reviews by the Compensation Committee of the Board (the “Compensation Committee”), (c) the Company’s financial performance, (d) the general economic environment and (e) such other factors as the Board or the Compensation Committee may deem relevant.

3.2 Cash Bonuses.

(a) Annual Cash Bonus. For each calendar year that ends during the Term, Executive shall be entitled to receive an annual cash incentive award (the “Annual Cash Bonus”) equal to: (i) 75% of Salary for performance at threshold levels; (ii) 100% of Salary for performance at target levels; and (iii) 150% of Salary for performance at or above maximum levels (with the exact percentage of Salary to be determined by linear interpolation for

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performance between each such levels). For each such year, the Board shall, after consultation with Executive and good faith consideration of the budget and goals developed by management (x) determine the financial and other goals to be used to measure Executive’s performance for such year, (y) establish the threshold and maximum performance levels for the goals for purposes of determining the amount of the Annual Cash Bonus for such year and (z) advise Executive of such goals and levels in writing prior to March 31 of such year. Within sixty (60) days after the end of each such calendar year, the Board shall consult with Executive to determine and approve Executive’s Annual Cash Bonus for such calendar year. Subject to any valid deferral election by Executive, the Annual Cash Bonus shall be paid in a cash lump sum as soon as reasonably practicable following the Board’s approval thereof, but in no event later than March 15 of the following calendar year. In no event shall Executive’s Annual Cash Bonus payable in 2011 with respect to 2010 be less than $650,000.

(b) Discretionary Cash Bonuses. The Board may, at any time or from time-to-time, grant Executive additional cash bonuses in amounts to be determined by the Board should it, in its sole discretion, deem the same appropriate in light of Executive’s performance and the Company’s financial performance (each, a “Discretionary Cash Bonus”); provided, however, that the failure of the Board to award any such bonus shall not give rise to any claim against the Company. The timing of the payment of any Discretionary Cash Bonus shall be determined in the Board’s sole discretion; however, in no event will any Discretionary Cash Bonus be paid later than March 15 following the year in which it vests.

3.3 Equity Compensation.

(a) Annual Equity Award. Executive will be eligible for annual grants of long-term incentive and equity compensation awards at the Board’s good faith discretion, based upon the Compensation Committee’s evaluation of his performance and peer company compensation practices.

(b) Discretionary Equity Award. The Board may, at any time or from time-to-time, grant Executive additional equity or equity-based awards in forms and amounts to be determined by the Board should it, in its sole discretion, deem the same appropriate in light of Executive’s performance and the Company’s financial performance (each, a “Discretionary Equity Award”); provided, however, that the failure of the Board to grant any such award shall not give rise to any claim against the Company.

3.4 Sign-On Awards. The Company shall grant to Executive an award of 650,000 Restricted Stock Units (the “Sign-On RSUs”) and options to purchase 350,000 shares of Common Stock (the “Sign-On Options” and, together with the Sign-On RSUs, the “Sign-On Awards”).

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(a) Sign-On Options. The Sign-On Options shall be granted on the Effective Date. Subject to the terms of this Agreement and the Sign-On Option award agreement into which Executive and the Company shall enter evidencing the grant of the Sign-On Option, 25% of the shares of Common Stock subject to the Sign-On Option shall become vested and non-forfeitable on the Effective Date (the “Initial Vested Sign-On Portion”). However, notwithstanding the preceding sentence, the Initial Vested Sign-On Portion shall not be exercisable prior to the date on which the shares underlying the Sign-On Option are registered on Form S-8. In addition, 2.0833% of the shares of Common Stock subject to the Sign-On Option shall vest and become exercisable on the first day of each of the first thirty-six (36) calendar months that begins after the first anniversary of the Effective Date.

(b) Sign-on RSUs. The Sign-On RSUs shall be granted as soon as practicable following execution of this Agreement but in no event prior to the date on which the shares underlying such awards are registered on Form S-8. Subject to the terms of this Agreement and the Sign-On RSUs award agreement into which Executive and the Company shall enter evidencing the grant of the Sign-On RSUs, 25% of the Sign-On RSUs shall become vested and non-forfeitable, on the grant date of the Sign-On RSUs. In addition, 2.0833% of the shares of the Sign-On RSU shall vest and become non-forfeitable on the first day of each of the first thirty-six (36) calendar months that begins after the first anniversary of the Effective Date.

3.5 Registration of Common Stock; Equitable Adjustment. The Company shall register a sufficient number of shares of Common Stock on a Form S-8 to satisfy its obligations under this Agreement as soon as practicable following the execution of this Agreement and in any event prior to the issuing of the Sign-On RSUs. The Company shall also accompany the S-8s with reoffer prospectuses and shall use reasonable best efforts to maintain the effectiveness of the form S-8s and reoffer prospectuses. Within ten (10) days following each vesting date of a Restricted Stock Unit or date of exercise of an Option (as applicable) described in this Agreement, a number of shares of Common Stock equal to the number of Restricted Stock Units that have vested, and the number of shares of Common Stock with respect to which an Option has been exercised, shall be transferred to Executive’s personal brokerage account and such shares shall be validly issued, fully paid, non-assessable and freely tradable. The Company shall issue the shares pursuant to the NASDAQ inducement grant exception and shall comply with the terms thereof.

3.6 Compensation As A Member of the Board. Executive shall not be eligible for equity or cash compensation for his service as a member of the Board during the Term.

4. Employee Benefits.

4.1 Participation in Benefit Plans. During the Term, Executive shall be entitled to participate in such health, group insurance, welfare, pension, and other employee

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benefit plans, programs and arrangements as are made generally available from time to time to senior executives of the Company (which shall include customary health, life insurance and disability plans), such participation in each case to be on terms and conditions no less favorable to Executive than to other senior executives of the Company generally. In the event that Executive elects to decline coverage under any or all of the aforementioned benefit plans, programs or arrangements, then he shall be permitted to receive cash in lieu of such coverage to the maximum extent permissible under the applicable plan document and applicable law. In lieu of participation in the health plan (if Executive so elects), the Company shall reimburse him for premiums for participation in his prior employer’s health plan upon presentation of evidence of payment of premiums with regard therewith.

4.2 Fringe Benefits, Perquisites and Vacations. During his employment by the Company, Executive shall be entitled to participate in all fringe benefits and perquisites made available to other senior executives of the Company, such participation to be at levels, and on terms and conditions, that are commensurate with his position and responsibilities at the Company and that are no less favorable than those applying to other senior executives of the Company. In addition, Executive shall be entitled to 25 days paid vacation per calendar year (which, if not used, may be carried over from year to year).

4.3 Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable business and travel expenses (including first class airplane travel) incurred in the performance of his job duties and the promotion of the Company’s business, promptly upon presentation of appropriate supporting documentation and otherwise in accordance with the expense reimbursement policy of the Company.

4.4 Attorneys’ Fees. The Company shall pay promptly upon presentation of appropriate supporting documentation, for all reasonable attorneys’ fees incurred by Executive in connection with the negotiation and execution of this Agreement and to the extent taxable, an additional amount such that the Executive has no after tax cost for such fees and the additional payment.

5. Termination.

5.1 General. The Company may terminate Executive’s employment for any reason or no reason, and Executive may terminate his employment for any reason or no reason, in either case subject only to the terms of this Agreement. In the event of the termination of Executive’s employment hereunder for any reason, he shall promptly resign from the Board, any other board or committee, and any other position he then holds that is affiliated with the Company or that he was holding at the Company’s request. For purposes of this Agreement, the following terms have the following meanings:

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(a) “Accrued Obligations” shall mean: (i) Executive’s earned but unpaid Salary through the Termination Date; (ii) payment of any annual, long-term, or other incentive award earned in respect to any period ending on or before the Termination Date, or payable (but not yet paid) on or before the Termination Date; (iii) a lump-sum payment in respect of accrued but unused vacation days at Executive’s per-business-day Salary rate in effect as of the Termination Date; and (iv) any unpaid expense or other reimbursements due pursuant to Sections 2.4 or 4.3 hereof or otherwise.

(b) “Cause” shall mean (i) Executive is convicted of, or pleads guilty or nolo contendere to, a felony or a crime involving moral turpitude; (ii) in carrying out his duties hereunder, Executive engages in conduct that constitutes willful gross misconduct, or willful gross neglect and that, in either case, results in material economic or reputational harm to the Company; or (iii) Executive refuses to perform, or repeatedly fails to undertake good faith efforts to perform, the duties or responsibilities reasonably assigned to him (consistent with Section 2) by the Board, in either case after written notice thereof.

(c) “Change in Control” shall mean the first to occur of any of the following, provided that for any distribution that is subject to Section 409A (as defined in Section 8.2), a Change in Control under this Agreement shall be deemed to occur only if such event also satisfies the requirements under Treas. Regs. Section 1.409A-(i)(5):

(i) the determination by a vote of a majority of the members of the Board (which may be made effective as of a particular date), that a Change in Control has occurred, or is about to occur;

(ii) any Person or group of Persons becomes the beneficial owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities (a “Majority of the Securities”);

(iii) (A) the stockholders of the Company approve a plan of complete liquidation of the Company; (B) the sale or disposition of all or substantially all of the Company’s assets; or (C) a merger, consolidation or reorganization of the Company with or involving any other entity, other than (i) a merger, consolidation or reorganization that would result in the voting securities of Inspire outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a Majority of the Securities of Inspire (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization owned in approximately the same proportion of such ownership by each of the prior shareholders as prior to the transaction; or (ii) a merger, consolidation or reorganization that would result in the voting

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securities of Inspire outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a Majority of the Securities of Inspire (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization owned in approximately the same proportion of such ownership by each of the prior shareholders as prior to the transaction except for the fact that one of the shareholders owning more than 5% of the Company’s outstanding Common Stock as of the effective date of this Agreement increases its percentage of ownership by no more than 20% and to no greater than 49.99% immediately after the merger, consolidation or reorganization and the percentage ownership of the other shareholders are reduced proportionally; or

(iv) the date a majority of the members of the Board are replaced during any 12-month period by directors whose appointment or election are not endorsed by a majority of the members of the Board before the date of the appointment or election.

Notwithstanding the foregoing, in no event shall a restructuring, reorganization, merger or other change in capitalization in which the Persons who own an interest in the Company on the date hereof (the “Current Owners”) (or any individual or entity which receives from a Current Owner an interest in the Company through will or the laws of descent and distribution) maintain more than a fifty-percent (50%) interest in the resultant entity owned in approximately the same proportion of such ownership by each of the Current Owners as before the transaction, be deemed a Change in Control.

(d) “Company Arrangement” shall mean any plan, program, agreement, corporate governance document or arrangement of the Company or any of its affiliates;

(e) “Disability” shall mean that Executive has been unable, with or without reasonable accommodation and due to physical or mental incapacity, to substantially perform his duties and responsibilities hereunder for 180 consecutive days; and

(f) “Good Reason” shall mean the occurrence of any of the following events without either (x) Executive’s express prior written consent or (y) full cure within 30 days after Executive gives written notice to the Company requesting cure, such notice to be given by Executive no later than 90 days after the date the event has occurred: (i) a material diminution in Executive’s authority, duties, responsibilities or reporting lines; (ii) the Company ceases to have any class of common equity securities required to be registered under section 12 of the Securities Exchange Act of 1934; (iii) a reduction in the Executive’s base salary; (iv) any relocation of Executive’s principal office, or principal place of employment, to a location that is more than 50

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miles from Durham, North Carolina; or (v) any other action or inaction that constitutes a material breach of this Agreement by the Company. No event shall constitute grounds for a Good Reason termination unless Executive terminates his employment hereunder within one year after such event occurs.

(g) “Pro Rata Annual Cash Bonus” shall mean an amount equal to (i) the Annual Cash Bonus that Executive would have been entitled to receive for the calendar year during which his employment hereunder terminated if his employment hereunder had continued (such amount to be determined with any subjective or personal performance goals rated at no less than target), multiplied by (ii) a fraction, the numerator of which is the number of days he was employed hereunder during such year and the denominator of which is the number of days in such year; and

(h) “Termination Date” shall mean the date on which Executive’s employment hereunder terminates in accordance with this Agreement (which, in the case of a notice of non-renewal of the Term in accordance with Section 1 hereof, shall mean the date on which the Term expires).

5.2 Termination by the Company Without Cause or by Executive With Good Reason. In the event that Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, the Term shall expire on the Termination Date and Executive shall be entitled to:

(a) a single sum cash amount, payable on the 60^th day following his Termination Date, in an amount equal to (i) two times (ii) the sum of (1) his Salary as in effect immediately prior to the Termination Date and (2) the average Annual Cash Bonus that Executive received for each of the three preceding calendar years, provided, however, that if Executive is not employed for a sufficient time to have received three Annual Cash Bonuses, such calculation will assume that a target Annual Cash Bonus (or the minimum payment in the case of a termination in 2010) was paid in each missing year and, provided further, that if Executive is terminated during the first six months of the Company’s fiscal year, then the prior year’s Annual Cash Bonus shall be disregarded if less than the average of the other two preceding years;

(b) a Pro-Rata Annual Cash Bonus, such amount to be paid in a cash lump sum to Executive on the date his Annual Cash Bonus for the year of termination would have been paid if his employment hereunder had continued;

(c) an immediate 100% vesting of the Sign-On Equity and an additional twenty-four months of vesting, exercisability and non-forfeitability service credited, as

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of the Termination Date, for any other outstanding equity or equity-based award, including but not limited to any outstanding Annual Equity Award or Discretionary Equity Award (with vested stock options remaining exercisable throughout the period ending on the first to occur of (A) the second anniversary of the Executive’s Termination Date; or (B) the end of their maximum stated term); and

(d) the Accrued Obligations.

5.3 Death and Disability. Executive’s employment shall terminate in the event of his death, and either Executive or the Company may terminate Executive’s employment in the event of his Disability (provided that no termination of Executive’s employment hereunder for Disability shall be effective unless the party terminating Executive’s employment first gives at least 15 days’ written notice of such termination to the other party). In the event that Executive’s employment hereunder is terminated due to his death or Disability, the Term shall expire on the Termination Date and he and/or his estate or beneficiaries (as the case may be) shall be entitled to the benefits described in Section 5.2(b), (c) and (d).

5.4 Termination by the Company For Cause or by Executive Without Good Reason. In the event that Executive’s employment hereunder is terminated by Executive without Good Reason or by the Company for Cause, the Term shall expire as of the Termination Date and Executive shall be entitled to the Accrued Obligations.

5.5 Expiration of the Term. Executive or the Company may elect not to renew or extend the Term in accordance with Section 1 above, in which case the Termination Date shall be the date the Term expires. In the event of such a termination, Executive shall be entitled to the Accrued Obligations and on any termination of employment upon or after such expiration the Sign-On Award shall remain exercisable for the lesser of two years or the remainder of the initial term of such Sign-On Award.

5.6 Due to Change in Control. In the event that (x) within two years following a Change in Control Executive terminates his employment hereunder with Good Reason or the Company takes an action within the six-month time period specified in the flush language below in anticipation of a Change in Control and the Executive terminates his employment for Good Reason as a result thereof or (y) within two years following a Change in Control, or in anticipation of a Change in Control that actually occurs within six months thereafter, the Company terminates Executive’s employment hereunder without Cause, then, in lieu of the payments otherwise due to Executive under Section 5.2 above, the Term shall expire on the Termination Date and Executive shall be entitled to (subject to the last paragraph of this Section 5.6):

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(a) an amount equal to (i) three (3) times (ii) the sum of (A) Executive’s Salary as in effect immediately prior to the Termination Date (or, if greater, immediately prior to any event constituting Good Reason) and (B) the highest Annual Cash Bonus paid or payable to him in respect of any of the three completed years immediately prior to his Termination Date (if in 2010, than $650,000 shall be the Annual Cash Bonus utilized), such payment to be made in a cash lump sum to Executive on the sixtieth (60^th) day following the Termination Date (subject to the six-month delay provided under Section 8.2, as applicable);

(b) a Pro-Rata Annual Cash Bonus (determined for this purpose by reference to either (i) Executive’s target Annual Cash Bonus then in effect, such payment to be made in a cash lump sum to Executive no later than thirty (30) days following the Termination Date;

(c) full vesting, exercisability and non-forfeitability, as applicable, as of the Termination Date, of any outstanding equity or equity-based awards, including but not limited to any outstanding Annual Equity Award, Discretionary Equity Award or Sign-On Award; and

(d) the Accrued Obligations.

Notwithstanding the foregoing, in the event Executive is terminated in anticipation of a Change in Control or terminates for Good Reason as a result of a Company action in anticipation of a Change in Control then (i) if a Change in Control actually occurs within six-months thereafter, the Executive shall continue to receive the amount due under Section 5.2 and granted therein and any additional amounts above such amount due in accordance with this Section 5.6 shall be payable upon the later of the Change in Control and on the sixtieth (60^th) day after the termination of employment (subject to the six-month delay provided under Section 8.2, as applicable); and (ii) any outstanding equity or equity-based awards, including but not limited to any outstanding Annual Equity Award, Discretionary Equity Award or Sign-On Award that are not otherwise vested (or will not otherwise vest) in accordance with Section 5.2 of this Agreement shall not terminate before the six-month anniversary of the Executive’s termination of employment and, if a Change in Control actually occurs before such date, shall become fully vested and exercisable, as applicable in accordance with Section 5.6(c).

5.7 Release. Executive’s entitlement to the payments described in this Section 5 is expressly contingent upon Executive first providing the Company with a signed mutual release in substantially the form attached hereto as Exhibit A (the “Release”). In order to be effective, such Release must be (a) delivered by Executive to the Company no later than forty-five (45) days following the Termination Date and (b) counter-signed and returned by the Company to Executive within 10 days following the Company’s receipt thereof; provided,

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however, that if the Executive delivers the Release to the Company on a timely bases and the Company does not return a counter-signed Release during the applicable time period allowed, such Release of the Executive shall be null and void and the payments hereunder shall cease to be contingent on the Release and this Section 5.7.

6. Excess Parachute Payments. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to the excise tax, then Exhibit B attached hereto shall apply.

7. Indemnification.

7.1 If Executive is made a party, is threatened to be made a party, or reasonably anticipates being made a party, to any Proceeding by reason of the fact that Executive is or was a director, officer, shareholder, employee, agent, trustee, consultant or representative of the Company or any of its affiliates or is or was serving at the request of the Company or any of its affiliates, or in connection with his service hereunder as a director, officer, shareholder, employee, agent, trustee, consultant or representative of another Person, or if any Claim is made, is threatened to be made, or is reasonably anticipated to be made, that arises out of or relates to Executive’s service in any of the foregoing capacities, then Executive shall promptly be indemnified and held harmless to the fullest extent permitted or authorized by any Company Arrangement, or if greater, by applicable law, against any and all costs, expenses, liabilities and losses (including, without limitation, advancement and payment of attorneys’ and other professional fees and charges, judgments, interest, expenses of investigation, penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement, with such legal fees advanced to the maximum extent permitted by law) incurred or suffered by him in connection therewith or in connection with seeking to enforce his rights under this Section 7.1, and such indemnification shall continue even if Executive has ceased to be a director, officer, shareholder, employee, agent, trustee, consultant or representative of the Company or other Person and shall inure to the benefit of his heirs, executors and administrators.

7.2 A directors’ and officers’ liability insurance policy (or policies) shall be kept in place, during the Term and thereafter until the sixth anniversary of the Termination Date, providing coverage to Executive that is no less favorable to him in any respect than the coverage then being provided to any other current or former director or officer of the Company.

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7.3 For purposes of this Agreement, the following terms shall have the following meanings: “Affiliate” of a Person shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with, such Person; “Claim” shall mean any claim, demand, request, investigation, dispute, controversy, threat, discovery request, or request for testimony or information; “Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or other person or entity; and “Proceeding” shall mean any threatened or actual action, suit or proceeding, whether civil, criminal, administrative, investigative, appellate, formal, informal or other.

8. Other Tax Matters.

8.1 The Company shall withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and other amounts as may be required by law with respect to compensation payable to Executive pursuant to this Agreement.

8.2 Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Code (“Section 409A”) or shall comply with the requirements of such provision. Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, any payments or arrangements due upon a termination of Executive’s employment under any arrangement that constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided on the earlier of (i) the date which is six months after Executive’s “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of Executive’s death. The Company acknowledges and agrees that if any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) made or provided to Executive or for Executive’s benefit in connection with this Agreement, or Executive’s employment with the Company or the termination thereof (the “Payments”) are determined to be subject to the additional taxes, interest or penalties imposed by Section 409A, or any interest or penalties with respect to such additional taxes, interest or penalties (such additional taxes, together with any such interest and penalties, are referred to collectively as the “Section 409A Tax”), then the Executive will be entitled to receive an additional payment (an “409A Gross-Up Payment”) from the Company such that the net amount the Executive retains after paying any applicable Section 409A Tax and any federal, state or local income or FICA taxes on such 409A Gross-Up

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Payment, shall be equal to the amount the Executive would have received if the Section 409A Tax were not applicable to the Payments. All determinations of the Section 409A Tax and 409A Gross-Up Payment, if any, will be made by tax counsel or other tax advisers designated by Executive and approved by the Company, which approval won’t be unreasonably withheld or delayed. For purposes of determining the amount of the 409A Gross-Up Payment, if any, Executive will be deemed to pay federal income tax at the actual marginal rate of federal income taxation in the calendar year in which the total Payments are made and state and local income taxes at the actual marginal rate of taxation in the state and locality of Executive’s residence on the date the total Payments are made, net of the maximum reduction in federal income taxes that could be obtained from deduction of such state and local taxes. If the Section 409A Tax is determined by the Internal Revenue Service, on audit or otherwise, to exceed the amount taken into account hereunder in calculating the 409A Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the 409A Gross-Up Payment), the Company shall make another 409A Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess). The Company and Executive shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Section 409A Tax with respect to the total Payments. The 409A Gross-Up Payments provided to Executive shall be made no later than the tenth (10th) business day following the last date the Payments are made but in all events within the time period specified in Section 8.5 also.

8.3 After any Termination Date, Executive shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A as of the Termination Date and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the Termination Date for purposes of this Agreement. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.

8.4 Any amounts otherwise payable to Executive following a termination of employment that are not so paid by reason of this Section 8 shall be paid as soon as practicable following, and in any event within thirty (30) days following, the date that is six months after Executive’s separation from service (or, if earlier, the date of Executive’s death) together with

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interest on the delayed payment at the Company’s cost of borrowing. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A.

8.5 To the extent that any reimbursements pursuant to Section 4 or otherwise are taxable to Executive, any reimbursement payment due to Executive pursuant to such Section shall be paid to Executive on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. The reimbursements pursuant to Section 4 or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Any tax gross-up shall be made no later than the end of the calendar year next following the calendar year in which the Executive remits the related tax.

9. Confidentiality, Invention Assignment and Non-Competition Agreement. Executive agrees to be bound by the terms of the Employee Confidentiality, Invention Assignment and Non-Compete Agreement, a copy of which is attached hereto as Exhibit C and incorporated herein by reference, except Section 7(b) thereof shall hereby be amended to exclude the solicitation of Executive’s executive assistant during the one (1) year period following the Termination Date (the “Non-Compete Agreement”). Except as expressly set forth in this Agreement and the Non-Compete Agreement, Executive shall be subject to no contractual or similar restrictions on his right to terminate his employment hereunder or on his activities after the Termination Date.

10. Non-Disparagement. During and after the Term, Executive and the Company agree not to make any statement that criticizes, ridicules, disparages, or is otherwise derogatory of the other; provided, however, that nothing in this Agreement shall restrict either party from making truthful statements (a) when required by law, subpoena, court order or the like; (b) when requested by a governmental, regulatory, or similar body or entity; (c) in confidence to a professional advisor for the purpose of securing professional advice; (d) in the course of performing his duties during the Term; (e) from rebutting any statement made or written about them; or (f) from making normal competitive statements about the Company’s business or products. This provision shall not apply after three (3) years from the date of termination of Executives employment with the Company.

11. Notices. Except as otherwise specifically provided herein, any notice, consent, demand or other communication to be given under or in connection with this Agreement shall be in writing and shall be deemed duly given when delivered personally, when transmitted by facsimile transmission, one (1) day after being deposited with Federal Express or other nationally recognized overnight delivery service or three (3) days after being mailed by first class mail,

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charges or postage prepaid, properly addressed, if to the Company, at its principal office, and, if to Executive, at his address set forth following his signature below. Either party may change such address from time to time by notice to the other.

12. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of North Carolina, exclusive of any choice of law rules.

13. Arbitration; Legal Fees.

(a) Any dispute or controversy arising under or in connection with this Agreement (except with respect to injunctive relief under Section 9) shall be settled exclusively by arbitration in North Carolina, in accordance with the rules of the American Arbitration Association for employment disputes as then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

(b) In the event of any material contest or dispute relating to this Agreement or the termination of Executive’s employment hereunder, each of the parties shall bear its own costs and expenses, except that the Company agrees to promptly reimburse Executive for his costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Executive in connection with such contest or dispute in the event Executive prevails, as determined by the arbitrator if in arbitration, by the court if pursuant to Section 9, or as a separate arbitration if otherwise. The amount shall be paid within thirty (30) days of the award of the arbitration or court, which shall also specify the amount due.

14. Amendments; Waivers. This Agreement may not be modified or amended or terminated except by an instrument in writing, signed by Executive and a duly-authorized officer of the Company (other than Executive). By an instrument in writing similarly executed, either party may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. To be effective, any written waiver must specifically refer to the condition(s) or provision(s) of this Agreement being waived.

15. Inconsistencies. In the event of any inconsistency between any provision of this Agreement and any provision of any Company arrangement, the provisions of this Agreement

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shall control, unless Executive and the Company otherwise agree in a writing that expressly refers to the provision of this Agreement that is being waived.

16. Assignment. Except as otherwise specifically provided herein, neither party shall assign or transfer this Agreement nor any rights hereunder without the consent of the other party, and any attempted or purported assignment without such consent shall be void; provided, however, that any assignment or transfer pursuant to a merger or consolidation, or the sale or liquidation of all or substantially all of the business and assets of the Company shall be valid, so long as the assignee or transferee (a) is the successor to all or substantially all of the business and assets of the Company and (b) assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. Executive’s consent shall not be required for any such transaction. This Agreement shall otherwise bind and inure to the benefit of the parties hereto and their respective successors, penalties, assigns, heirs, legatees, devisees, executors, administrators and legal representatives.

17. Voluntary Execution; Representations. Executive acknowledges that (a) he has consulted with or has had the opportunity to consult with independent counsel of his own choosing concerning this Agreement and has been advised to do so by the Company and (b) he has read and understands this Agreement, is competent and of sound mind to execute this Agreement, is fully aware of the legal effect of this Agreement, and has entered into it freely based on his own judgment and without duress. Executive represents and covenants that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound and in connection with his employment with the Company he will not engage in any unauthorized use of any confidential or proprietary information he may have obtained in connection with his employment with any other employer. The Company represents and warrants that it is fully authorized, by any person or body whose authorization is required, to enter into this Agreement and to perform its obligations under it.

18. Headings. The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

19. Beneficiaries/References. Executive shall be entitled, to the extent permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit hereunder following Executive’s death by giving written notice thereof. In the event of Executive’s death or a judicial determination of his incompetence, references in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

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20. Survivorship. Except as otherwise set forth in this Agreement, the respective rights and obligations of the parties shall survive any termination of Executive’s employment.

21. Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but the invalidity or unenforceability of any provision or portion of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision or portion of any provision, in any other jurisdiction.

22. No Mitigation/No Offset. Executive shall be under no obligation to seek other employment or to otherwise mitigate the obligations of the Company under this Agreement, and there shall be no offset against amounts or benefits due to Executive under this Agreement or otherwise on account of any claim (other than any preexisting debts then due in accordance with their terms) the Company may have against him or any remuneration or other benefit earned or received by Executive after such termination.

23. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. Signatures delivered by facsimile or PDF shall be effective for all purposes.

24. Entire Agreement. This Agreement and the agreements described in the attached Exhibits contain the entire agreement of the parties and supersedes all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties, regarding the subject matter of this Agreement.

[Signature Page to Follow]

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IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written.

INSPIRE PHARMACEUTICALS, INC.:
By:    /s/ Kenneth B. Lee, Jr.
Name:	Kenneth B. Lee, Jr.
Title:	Chairman, Board of Directors
EXECUTIVE:
/s/ Adrian Adams
Name: Adrian Adams
Address:	As provided in separate notice

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Exhibit A

FORM OF GENERAL RELEASE OF ALL CLAIMS

THIS GENERAL RELEASE OF ALL CLAIMS (this “General Release”), dated as of [                        ], is made by and between Adrian Adams (the “Executive”) and Inspire Pharmaceuticals, Inc. (the “Company”).

WHEREAS, the Company and Executive are parties to that certain Employment Agreement, dated as of February 18, 2010 (the “Employment Agreement”);

WHEREAS, Executive’s employment with the Company has been terminated and Executive is entitled to receive severance and other benefits, as set forth in Section 5 of the Employment Agreement subject to the execution of this General Release;

WHEREAS, in consideration for Executive’s signing of this General Release, the Company will provide Executive with such severance and benefits pursuant to the Employment Agreement; and

WHEREAS, except as otherwise expressly set forth herein, the parties hereto intend that this General Release shall effect a full satisfaction and release of the obligations described herein owed to Executive by the Company and to the Company by Executive.

NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby covenant and agree as follows:

1. Executive, for himself, Executive’s spouse, heirs, administrators, children, representatives, executors, successors, assigns, and all other individuals and entities claiming through Executive, if any (collectively, the “Executive Releasers”), does hereby release, waive, and forever discharge the Company and each of its respective agents, subsidiaries, parents, affiliates, related organizations, employees, officers, directors, attorneys, successors, and assigns in their capacities as such (collectively, the “Employer Releasees”) from, and does fully waive any obligations of Employer Releasees to Executive Releasers for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses (including attorneys’ fees and costs) of any kind whatsoever, whether known or unknown or contingent or absolute, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Executive Releasers in consequence of, arising out of, or in any way relating to: (a) Executive’s employment with the Company; (b) the termination of Executive’s employment with the Company; (c) the Employment Agreement; or (d) any events occurring on or prior to the date of this General Release. The foregoing release

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and discharge, waiver and covenant not to sue includes, but is not limited to, all waivable claims and any obligations or causes of action arising from such claims, under common law including wrongful or retaliatory discharge, breach of contract (including but not limited to any claims under the Employment Agreement other than claims for unpaid severance benefits, bonus or Base Salary earned thereunder) and any action arising in tort including libel, slander, defamation or intentional infliction of emotional distress, and claims under any federal, state or local statute including the Age Discrimination in Employment Act (“ADEA”), Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866 and 1871 (42 U.S.C. § 1981), the National Labor Relations Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, or the discrimination or employment laws of any state or municipality, and/or any claims under any express or implied contract which Executive Releasers may claim existed with Employer Releasees. This also includes a release of any claims for wrongful discharge and all claims for alleged physical or personal injury, emotional distress relating to or arising out of Executive’s employment with the Company or any of its subsidiaries or affiliates or the termination of that employment; and any claims under the WARN Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions. Notwithstanding anything contained in this Section 1 above to the contrary, nothing contained in herein shall constitute a release by any Executive Releaser of any of his, her or its rights or remedies available to him, her or it, at law or in equity, related to, on account of, in connection with or in any way pertaining to the enforcement of: (i) any right to indemnification, advancement of legal fees or directors and officers liability insurance coverage existing under the constituent documents of the Company or applicable state corporate, limited liability company and partnership statutes or pursuant to any agreement, plan or arrangement; (ii) any rights to the receipt of employee benefits which vested on or prior to the date of this General Release; (iii) the right to receive severance and other benefits under the Employment Agreement; (iv) the right to continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act; (v) any rights of Executive under the Employment Agreement with respect to (A) the gross-up protections set forth in Sections 6 and 8.2 of the Employment Agreement, (B) amounts due upon a Change in Control occurring after a termination of employment that occurs in anticipation of a Change in Control as set forth in Section 5.6, and (C) any equity rights; or (vi) this General Release or any of its terms or conditions.

2. Excluded from this General Release and waiver are any claims which cannot be waived by applicable law, including but not limited to the right to participate in an investigation conducted by certain government agencies. Executive does, however, waive Executive’s right to any monetary recovery should any government agency (such as the Equal Employment Opportunity Commission) pursue any claims on Executive’s behalf. Executive represents and warrants that Executive has not filed any complaint, charge, or lawsuit against the Employer Releasees with any government agency or any court.

3. Executive agrees never to seek personal recovery from any Employer Releasee in any forum for any claim covered by the above waiver and release language, except that Executive

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may bring a claim under the ADEA to challenge this General Release. If Executive violates this General Release by suing an Employer Releasee (excluding any claim by Executive under the ADEA or as otherwise set forth in Section 1 hereof), then Executive shall be liable to the Employer Releasee so sued for such Employer Releasee’s reasonable attorneys’ fees and other litigation costs incurred in defending against such a suit. Nothing in this General Release is intended to reflect any party’s belief that Executive’s waiver of claims under ADEA is invalid or unenforceable, it being the intent of the parties that such claims are waived.

4. Each party agrees that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by any party of any improper or unlawful conduct.

5. Each party acknowledges and recites that he or it has:

(a) executed this General Release knowingly and voluntarily;

(b) had a reasonable opportunity to consider this General Release;

(c) read and understands this General Release in its entirety;

(d) been advised and directed orally and in writing (and this subparagraph (d) constitutes such written direction) to seek legal counsel and any other advice such party wishes with respect to the terms of this General Release before executing it; and

(e) relied solely on such party’s own judgment, belief and knowledge, and such advice as such party may have received from such party’s legal counsel.

6. Section 13 of the Employment Agreement, which shall survive the expiration of the Employment Agreement for this purpose, shall apply to any dispute with regard to this release.

7. Executive acknowledges and agrees that (a) his execution of this General Release has not been forced by any employee or agent of the Company, and Executive has had an opportunity to negotiate the terms of this General Release and (b) he has been offered twenty-one (21) calendar days after receipt of this General Release to consider its terms before executing it.¹ Executive shall have seven (7) calendar days from the date he executes this General Release to revoke his or her waiver of any ADEA claims by providing written notice of the revocation to the Company, as provided in Section 11 of the Employment Agreement.

8. Capitalized terms used but not defined in this General Release have the meanings ascribed to such terms in the Employment Agreement.

¹ In the event the Company determines that Employee’s termination constitutes “an exit incentive or other employment termination program offered to a group or class of employees” under the ADEA, the Company will provide Employee with: (1) 45 days to consider the General Release; and (2) the disclosure schedules required for an effective release under the ADEA.

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9. This General Release may be executed by the parties in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same instrument. Each counterpart may be delivered by facsimile transmission or e-mail (as a .pdf, .tif or similar un-editable attachment), which transmission shall be deemed delivery of an originally executed counterpart hereof.

IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the day and year first above written.

INSPIRE PHARMACEUTICALS, INC.:

By:

Name:

Title:

EXECUTIVE:

Name:  Adrian Adams

Address:

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Exhibit B

PARACHUTE TAX INDEMNITY PROVISIONS

This Exhibit B sets forth the terms and provisions applicable to the Executive pursuant to the provisions of Section 6 of the Agreement. This Exhibit B shall be subject in all respects to the terms and conditions of the Agreement. Capitalized terms used without definition in this Exhibit B shall have the meanings set forth in the Agreement.

(A) In the event that Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the “nature of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, or any arrangement or agreement with any person whose actions result in a change of ownership or effective control or a change in the ownership of a substantial portion of the assets of the corporation covered by Code Section 280G(b)(2) (a “280G Change of Control”) or any person affiliated with the Company or such person) as a result of a 280G Change of Control (collectively the “Company Payments”), and such Company Payments will be subject to the tax (the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), the Company shall pay to Executive at the time specified below (i) an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Company Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-Up Payment in Executive’s adjusted gross income multiplied by Executive’s actual marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made.

(B) In the event that the Internal Revenue Service or court ultimately makes a determination that the excess parachute payments plus the base amount is an amount other than as determined initially, an appropriate adjustment shall be made with regard to the Gross-Up Payment as applicable to reflect the final determination.

(C) For purposes of determining whether any of the Company Payments and Gross-Up Payments (collectively the “Total Payments”) will be subject to the Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2), and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants or the Company (the “Accountants”) such Total Payments (in whole or in part) either do not constitute “parachute payments,” including giving effect to the recalculation of stock options in accordance with Treasury

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Regulation Section 1.280G-1, Q&A 33, represent reasonable compensation for services actually rendered within the meaning of Code Section 280G(b)(4) in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (ii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Code Section 280G. To the extent permitted under Revenue Procedure 2003-68, the value determination shall be recalculated to the extent it would be beneficial to Executive. In the event that the Accountants are serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint with the approval of the Company, which approval shall not be unreasonable or unreasonably delayed, another nationally recognized accounting firm to make the determinations hereunder (which accounting firm shall then be referred to as the “Accountants” hereunder). All determinations hereunder shall be made by the Accountants which shall provide detailed supporting calculations both to the Company and Executive at such time as it is requested by the Company or Executive supported by such opinions or other confirmations as will let the Company and the Executive rely therein for purposes of filing their tax returns. The determination of the Accountants shall be final and binding upon the Company and Executive.

(D) For purposes of determining the amount of the Gross-Up Payment, Executive’s actual U.S. federal income tax rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at Executive’s actual rate of taxation in the state and locality of Executive’s residence for the calendar year in which the Company Payment is to be made, net of the maximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year, shall be used. In the event that the Excise Tax is subsequently determined by the Accountants to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the prior Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Code Section 1274(b)(2)(B). Notwithstanding the foregoing, in the event any portion of the Gross-Up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to Executive, and interest payable to the Company shall not exceed the interest received or credited to Executive by such tax authority for the period it held such portion. Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if Executive’s claim for refund or credit is denied.

(E) In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional

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Gross-Up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined.

(F) The Gross-up Payment or portion thereof provided for above shall be paid not later than the sixtieth (60) day following a 280G Change of Control which subjects Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to Executive on such day an estimate, as determined in good faith by the Accountant, of the minimum amount of such payments and shall pay the remainder of such payments, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth (90th) day after the occurrence of the event subjecting Executive to the Excise Tax. Notwithstanding any other provision of this Agreement, all Gross-Up Payments under this Exhibit B shall be paid pursuant to Section 8 of the Agreement. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, subject to Paragraph (G) below, such excess shall constitute a loan by the Company to Executive, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Code Section 1274(b)(2)(B)).

(G) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, Executive shall permit the Company to control issues related to the Excise Tax (at its expense), but Executive shall control any other issues unrelated to the Excise Tax. In the event that the issues are interrelated, Executive and the Company shall in good faith cooperate. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, Executive shall permit the representative of the Company to accompany Executive, and Executive and his representative shall cooperate with the Company and its representative.

(G) The Company shall be responsible for all charges of the Accountant.

(I) The Company and Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this provision.

(G) Nothing in this Exhibit B is intended to violate the Sarbanes-Oxley Act and to the extent that any advance or repayment obligation hereunder would do so, such obligation shall be modified so as to make the advance a nonrefundable payment to Executive and the repayment obligation null and void.

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Exhibit C

EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT

AND NON-COMPETE AGREEMENT

THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE AGREEMENT (“Agreement”) is made as of the date set forth on the signature page below between Inspire Pharmaceuticals, Inc. (“Inspire”), and the person whose name is set forth on the signature page below as Employee (“Employee”).

In consideration of Employee’s employment or continued employment by Inspire, with the intention that this Agreement shall apply to the entire period of Employee’s employment with Inspire (including the period prior to the date of this Agreement), Employee hereby agrees as follows:

1. CONFIDENTIAL INFORMATION DEFINED. “Confidential Information” means trade secrets, proprietary information and materials, and confidential knowledge and information which includes, but is not limited to, matters of a technical nature (such as discoveries, ideas, concepts, designs, drawings, specifications, techniques, models, diagrams, test data, scientific methods and know-how, and materials such as reagents, substances, chemical compounds, subcellular constituents, cell or cell lines, organisms and progeny, and mutants, derivatives or replications derived from or relating to any of the foregoing materials), and matters of a business nature (such as the identity of customers and prospective customers, the nature of work being done for or discussed with customers or prospective customers, suppliers, marketing techniques and materials, marketing and development plans, pricing or pricing policies, financial information, plans for further development, and any other information of a similar nature not available to the public).

“Confidential Information” shall not include information that: (a) was in Employee’s possession or in the public domain before receipt from the Company, as evidenced by the then existing publication or other public dissemination of such information in written or other documentary form; (b) becomes available to the public through no fault of Employee; (c) is received in good faith by Employee from a third party who is known to the Employee to be not subject to an obligation of confidentiality to the Company or any other party; or (d) is required by a judicial or administrative authority or court having competent jurisdiction to be disclosed by Employee, provided that Employee shall promptly notify the Company and not attempt to prevent the Company from opposing or limiting such order.

2. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION OF INSPIRE. Employee acknowledges that, during the period of Employee’s employment with Inspire, Employee has had or will have access to Confidential Information of Inspire. Therefore, Employee agrees that both during and after the period of Employee’s employment with Inspire, Employee shall not, without the prior written approval of Inspire, directly or indirectly (a) reveal, report, publish, disclose or transfer any Confidential Information of Inspire to any person or entity, or (b) use any Confidential Information of Inspire for any purpose or for the benefit of any person or entity, except in the good faith performance of Employee’s work for Inspire.

3. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION OF OTHERS. Employee acknowledges that, during the period of Employee’s employment with Inspire, Employee may have had or will have access to Confidential Information of third parties who have given Inspire the right to use

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such Confidential Information, subject to a non-disclosure agreement between Inspire and such third party. Therefore, Employee agrees that both during and after the period of Employee’s employment with Inspire, Employee shall not, without the prior written approval of Inspire, directly or indirectly (a) reveal, report, publish, disclose or transfer any Confidential Information of such third parties to any person or entity, or (b) use any Confidential Information of such third parties for any purpose or for the benefit of any person or entity, except in the good faith performance of Employee’s work for Inspire or to comply with an order from any court of competent jurisdiction.

4. PROPERTY OF INSPIRE. Employee acknowledges and agrees that all Confidential Information of Inspire and all reports, drawings, blueprints, materials, data, code, notes and other documents and records (other than Employee’s personal address book), whether printed, typed, handwritten, videotaped, transmitted or transcribed on data files or on any other type of media, and whether or not labeled or identified as confidential or proprietary, made or compiled by Employee, or made available to Employee, during the period of Employee employment with Inspire (including the period prior to the date of this Agreement) concerning Inspire’s Confidential Information are and shall remain Inspire’s property and shall be delivered to Inspire within five (5) business days after the termination of such employment with Inspire or at any earlier time on request of Inspire. Employee shall not retain copies of such Confidential Information, documents and records.

5. PROPRIETARY NOTICES. Employee shall not, and shall not permit any other person to, remove any proprietary or other legends or restrictive notices contained in or included in any Confidential Information.

6. INVENTIONS.

(a) Employee shall promptly, from time to time, fully inform and disclose to Inspire in writing all inventions, copyrightable material, designs, improvements and discoveries of any kind which Employee now has made, conceived or developed (including prior to the date of this Agreement), or which Employee may later make, conceive or develop, during the period of Employee’s employment with Inspire, which pertain to or relate to Inspire’s business or any of the work or businesses carried on by Inspire (“Inventions”). This covenant applies to all such Inventions, whether or not they are eligible for patent, copyright, trademark, trade secret or other legal protection; and whether or not they are conceived and/or developed by Employee alone or with others; and whether or not they are conceived and/or developed during regular working hours; and whether or not they are conceived and/or developed at Inspire’s facility or not.

(b) Inventions shall not include any inventions made, conceived or developed by Employee prior to Employee’s employment with Inspire, a complete list of which is set forth on Schedule A attached.

(c) All Inventions shall be the sole and exclusive property of Inspire, and shall be deemed part of the Confidential Information of Inspire for purposes of this Agreement, whether or not fixed in a tangible medium of expression. Employee hereby assigns all Employee’s rights in all Inventions and in all related patents, copyrights and trademarks, trade secrets and other proprietary rights therein to Inspire. Without limiting the foregoing, Employee agrees that any copyrightable material shall be deemed to be “works made for hire” and that Inspire shall be deemed the author of such works under the United States Copyright Act, provided that in the event and to the extent such works are determined

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not to constitute “works made for hire”, Employee hereby irrevocably assigns and transfers to Inspire all right, title and interest in such works.

(d) Employee shall assist and cooperate with Inspire, both during and after the period of Employee’s employment with Inspire, at Inspire’s sole expense, to allow Inspire to obtain, maintain and enforce patent, copyright, trademark, trade secret and other legal protection for the Inventions. Employee shall sign such truthful documents, and do such things necessary, to obtain such protection and to vest Inspire with full and exclusive title in all Inventions against infringement by others. Employee hereby appoints the Secretary of Inspire as Employee’s attorney-in-fact to execute any truthful documents on Employee’s behalf for this purpose.

(e) Employee shall not be entitled to any additional compensation for any and all Inventions made during the period of Employee’s employment with Inspire.

7. COVENANT NOT TO COMPETE. If Employee is, at any time during Employee’s period of employment with Inspire, employed in the discovery or development areas of the Company in a non-clerical position, or as a director level or higher level senior manager of the Company, then this Section 7 shall apply. Employee and Inspire agree that the services rendered by the Employee are unique and irreplaceable, and that competitive use and knowledge of any Confidential Information would substantially and irreparably injure Inspire’s business, prospects and good will. Employee and Inspire also agree that Inspire’s business is global in nature due to the type of products and/or services being provided. Therefore, Employee agrees that during the period of Employee’s employment with Inspire and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, through any other person, firm, corporation or other entity (whether as an officer, director, employee, partner, consultant, holder of equity or debt investment, lender or in any other manner or capacity):

(a) develop, sell, market, offer to sell products and/or services anywhere in the world that have the same or similar technological approach or technology platform (e.g., same receptors (such as P2Y), same mechanism of action (such as mucociliary clearance)) and have the same indication as those being developed, offered or sold by Inspire on the date of the termination of Employee’s employment with Inspire for any reason, provided that the foregoing shall not be violated by Executive’s activities with an entity where the portion of the competitive business involved is less than 5% of the revenues of the portion of the entity that is under the Employee’s supervision;

(b) solicit, induce, encourage or attempt to induce or encourage any employee or consultant of Inspire to terminate his or her employment or consulting relationship with Inspire, or to breach any other obligation to Inspire (other than advertising not specifically targeted at the Company’s employees and serving as a reference upon request), however, notwithstanding the foregoing, Employee may engage in the activities described in this Section 7(b) with respect to one executive who worked with Employee in the past and joined the Company without it violating this provision; or

(c) interfere with, disrupt, alter or attempt to disrupt or alter the relationship, contractual or otherwise, between Inspire and any consultant, contractor, customer, potential customer, or supplier of Inspire.

Employee acknowledges that the foregoing geographic, activity and time limitations contained in this Section 7 are reasonable and properly required for the adequate protection of Inspire’s business. In

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the event that any such geographic, activity or time limitation is deemed to be unreasonable by a court, Employee shall submit to the reduction of either said activity or time limitation to such activity or period as the court shall deem reasonable. In the event that Employee is in violation of the aforementioned restrictive covenants, then the time limitation thereof shall be extended for a period of time equal to the pendency of such proceedings, including appeals.

8. DISCLOSURE OF THIS AGREEMENT. Employee hereby authorizes Inspire to notify others, including but not limited to customers of Inspire and any of Employee’s future employers, of the terms of this Agreement and Employee’s responsibilities under this Agreement.

9. SPECIFIC PERFORMANCE. Employee acknowledges that money damages alone would not adequately compensate Inspire in the event of a breach or threatened breach by Employee of this Agreement, and that, in addition to all other remedies available to Inspire at law or in equity, Inspire shall be entitled to injunctive relief for the enforcement of its rights and to an accounting of profits made during the period of such breach.

10. NO RIGHTS GRANTED. Employee understands that nothing in this Agreement shall be deemed to constitute, by implication or otherwise, the grant by Inspire to the employee of any license or other right under any patent, patent application or other intellectual property right or interest belonging to Inspire.

11. SEVERABILITY.

(a) Each of the covenants provided in this Agreement are separate and independent covenants. If any provision of this Agreement shall be determined to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and any such invalid or unenforceable provision shall be reformed so as to be valid and enforceable to the fullest extent permitted by law.

(b) It is not a defense to the enforcement of any provision of this Agreement that Inspire has breached or failed to perform any obligation or covenant hereunder or under any other agreement or understanding between Employee and Inspire.

12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without regard to conflict of law rules. All suits and claims shall be made only in state or federal courts located in North Carolina.

13. SUPERSEDES OTHER AGREEMENTS. This Agreement contains the entire agreement of the parties with respect to subject matter hereof and supersedes all previous agreements and understandings between the parties with respect to its subject matter.

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14. AMENDMENTS. This Agreement may not be changed, modified, released, discharged, abandoned or otherwise terminated in whole or in part except by an instrument in writing, agreed to and signed by the Employee and a duly authorized officer of Inspire.

15. ACKNOWLEDGEMENTS. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE OPPORTUNITY TO ASK QUESTIONS; (iii) THE EMPLOYEE HAS RECEIVED A COPY OF THIS AGREEMENT, THE ORIGINAL OF WHICH WILL BE RETAINED IN THE EMPLOYEE’S PERSONNEL FILE; AND (iv) THE EMPLOYEE’S OBLIGATIONS UNDER THIS AGREEMENT SURVIVE THE TERMINATION OF THE EMPLOYEE’S EMPLOYMENT WITH INSPIRE FOR ANY REASON.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth below.

INSPIRE PHARMACEUTICALS, INC.

4222 Emperor Boulevard

Durham, North Carolina 27703

By:	/s/ Kenneth B. Lee, Jr.
Title:	Chairman, Board of Directors
EMPLOYEE:	Adrian Adams
	(Print Name)
	/s/ Adrian Adams
	(Signature Here)
Date:	February 18, 2010
Address:	As provided in separate notice

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EX-10.2

Exhibit 10.2

STOCK OPTION AGREEMENT

THIS AGREEMENT (“Agreement”) is made effective this 22^nd day of February 2010 (the “Date of Grant”) by and between Inspire Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and Adrian Adams (the “Grantee” or “Executive”).

WHEREAS, in connection with the Executive Employment Agreement dated February 18, 2010 by and between the Company and the Grantee (the “Executive Employment Agreement”), the Company agreed to grant to the Grantee an option to purchase shares of common stock of the Company (the “Shares”) as an inducement to Grantee to accept employment with the Company as the Company’s President and Chief Executive Officer;

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Option. Subject to the terms and conditions set forth in this Agreement, the Company hereby grants to the Grantee a nonqualified stock option (the “Option”) to purchase 350,000 Shares at an exercise price of $6.35 per Share (the “Exercise Price”). The Option shall become exercisable according to Paragraph 2 below. Except as otherwise specifically defined herein, capitalized terms contained in this Agreement shall have the meaning given to them in the Executive Employment Agreement and shall survive the termination of the Executive Employment Agreement.

2. Vesting and Exercisability of Option.

(a) The Option shall become vested and exercisable in the manner provided below, if the Grantee is Employed by the Employer (as defined in Paragraph 8) on the applicable date. For this purpose, the term “Shares” refers to the number of shares underling that portion of the Option that vests in the manner described under Vest Type and Full Vest Date. The term “Vest Type” describes how the Option covering those shares will vest before the Full Vest Date. For example, if Vest Type is “monthly”, that Option will vest with respect to those shares on a pro rata basis on each monthly anniversary of the Date of Grant. The term “Full Vest Date” is the date on which that portion of the Option covering all of the corresponding shares set forth in the “Shares” column will be fully vested.

Shares	Vest Type	Full Vest Date
87,500	immediate	Date of Grant
262,500	monthly (commencing on the first day of the month after 1st anniversary of Date of Grant)	1st day of the month prior to the 4th  anniversary of Date of Grant

The portion of the Option that vests on the Grant Date shall not become exercisable prior to the date on which the shares underlying the Sign-On Option are registered on Form S-8. The remaining portion of the Option shall become exercisable upon the date that it becomes vested and non-forfeitable.

(b) The exercisability of the Option is cumulative, but shall not exceed one hundred percent (100%) of the Shares subject to the Option. If the foregoing schedule would produce fractional

Shares, the number of Shares for which the Option becomes exercisable shall be rounded down to the nearest whole Share.

(c) Adjustments. If there is any change in the number or kind of shares of common stock of the Company (“Company Stock”) outstanding (i) by reason of a stock dividend, spin-off, recapitalization, stock split, or combination or exchange of shares; (ii) by reason of a merger, reorganization or consolidation; (iii) by reason of a reclassification or change in par value; or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spin-off or the Company’s payment of an extraordinary dividend or distribution, the price per share of the Grant shall be appropriately adjusted by the Company to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Grant; provided, however, that any fractional shares resulting from such adjustment shall be rounded down to the nearest whole share. Any adjustments determined by the Company shall be final, binding, and conclusive.

3. Term of Option.

(a) The Option shall have a term of seven (7) years from the Date of Grant and shall terminate at the expiration of that period, unless it is terminated at an earlier date pursuant to the provisions of this Agreement.

(b) Unless a later termination date is provided for in the Executive Employment Agreement (the terms of which are deemed included herein and shall control in the event of any conflict), the Option shall automatically terminate upon the happening of the first of the following events:

(i) The expiration of the 90-day period after the Grantee ceases to be Employed by the Employer, if the termination is for voluntary resignation without Good Reason, except that such period shall be twenty-four months if the termination is upon or after expiration of his Executive Employment Agreement.

(ii) The expiration of the twenty-four (24) month period after the Grantee ceases to be employed by the Employer on account of the Grantee’s Disability.

(iii) The expiration of the twenty-four (24) month period after the Grantee ceases to be Employed by the Employer, if the Grantee dies (x) while Employed by the Employer or (y) within 90 days after the Grantee ceases to be so employed or provide such services on account of a termination described in subparagraph (i) above.

(iv) The expiration of the 30-day period after the date on which the Grantee ceases to be Employed by the Employer on account of a termination by the Employer for Cause.

(v) The expiration of the twenty-four (24) month period after the Grantee ceased to be employed by the Employer because the Grantee’s employment is terminated by the Company without Cause or by the Executive with Good Reason.

Notwithstanding the foregoing, in no event may the Option be exercised after the date that is immediately before the seventh (7^th) anniversary of the Date of Grant. Any portion of the Option that is not exercisable at the time the Grantee ceases to be Employed by the Employer shall immediately terminate.

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4. Exercise Procedures.

(a) Subject to the provisions of Paragraphs 2 and 3 above, the Grantee may exercise part or all of the exercisable Option by giving the Company written notice of intent to exercise in the manner provided in this Agreement, specifying the number of Shares as to which the Option is to be exercised. At such time as the Compensation Committee of the Board of Directors of the Company (the “Committee”) shall determine, the Grantee shall pay the exercise price (i) in cash, (ii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iii) to the extent not in violation of Internal Revenue Code Section 409A by “net exercise” in which the number of Shares that Grantee receives is reduced by the number of shares required to satisfy his obligation to pay his exercise price and minimum income tax withholding.

(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Company, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Grantee (or other person exercising the Option after the Grantee’s death) represent that the Grantee is purchasing Shares for the Grantee’s own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Company deems appropriate.

(c) All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable. Subject to Committee approval, the Grantee may elect, in a form and manner prescribed by the Company, to satisfy any tax withholding obligation of the Employer with respect to the Option by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.

5. Restrictions on Exercise. Except as the Company may otherwise permit, only the Grantee may exercise the Option during the Grantee’s lifetime and, after the Grantee’s death, the Option shall be exercisable solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement. Notwithstanding the foregoing, the Grantee may transfer the Option to family members, or one (1) or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

6. Termination of Employment, Disability, or Death.

(a) Except as provided below or in the Executive Employment Agreement, an Option may only be exercised while the Grantee is Employed by the Employer. In the event that the Grantee ceases to be Employed by the Employer for any reason other than Disability, death, termination for Cause, or as set forth in subparagraph (b), (c),(d), (e) or (f) below, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days (twenty-four months if the termination is upon or after expiration of his Executive Employment Agreement) after the date on which the Grantee ceases to be Employed by the Employer (or within such other longer period of time as may be specified by the Company), but in any event no later than the date of expiration of the Option term. Except as otherwise provided herein or in the Executive Employment Agreement, any of the Grantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases to be Employed by the Employer shall terminate as of such date.

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(b) In the event the Grantee ceases to be Employed by the Employer on account of a termination by the Employer for Cause, any Option held by the Grantee shall terminate as of the 30^th day after the date on which the Grantee ceases to be Employed by the Employer or the date on which such Option would otherwise expire, if earlier.

(c) In the event the Grantee ceases to be Employed by the Employer because the Grantee is Disabled, except as otherwise provided in the Executive Employment Agreement, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within twenty-four (24) months after the date on which the Grantee ceases to be Employed by the Employer (or within such other period of time as may be specified by the Company), but in any event no later than the date of expiration of the Option term.

(d) If the Grantee dies while Employed by the Employer, except as otherwise provided in the Executive Employment Agreement, all of the unexercised outstanding Options of the Grantee shall become immediately exercisable and remain exercisable for a period of twenty-four (24) months from his date of death, but in no event later than the date of expiration of the Option term. If the Grantee dies within 90 days after the date on which the Grantee ceases to be Employed by the Employer on account of a termination specified in subparagraph (a) above (or within such other period of time as may be specified in the Executive Employment ), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within the twenty-four (24) month period after the date on which the Grantee ceases to be Employed by the Employer (or within such other period of time as may be specified), but in any event no later than the date of expiration of the Option term.

(e) Notwithstanding anything herein to the contrary, in the event that the Executive’s employment is terminated by the Company without Cause or by the Executive with Good Reason, all of the unexercised outstanding Options of the Grantee shall become immediately exercisable and remain exercisable for a period of twenty-four (24) months from his termination of employment, but in no event later than the date of expiration of the Option term.

(f) To the extent that any Company-sponsored plan, policy or arrangement, or any agreement to which the Company is a party provides for a longer exercise period for the Grantee’s Options under applicable circumstances than the exercise period that is provided for in this Paragraph 6 under those circumstances, then the exercise period set forth in such plan, policy, arrangement or agreement applicable to such circumstances shall apply in lieu of the exercise period provided for in this Paragraph 6.

7. Requirements for Issuance or Transfer of Shares. No Company Stock shall be issued or transferred in connection with the Grant under this Agreement unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with. This Grant made shall be conditioned on the Grantee’s undertaking in writing to comply with such restrictions on his subsequent disposition of such shares of Company Stock, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued or transferred under this Agreement will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. Notwithstanding the forgoing, the Company shall register such shares on form S-8 in advance of the date on which they are required to be delivered hereunder.

8. Definitions.

(a) “Fair Market Value” per Share, or for the Company Stock, shall be determined as follows: (i) if the principal trading market for the Company Stock is a national securities exchange or the

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Nasdaq National Market, the last reported sale price thereof on the relevant date or, if there were no trades on that date, the latest preceding date upon which a sale was reported; or (ii) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Company determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Company.

(c) “Employed by the Employer” shall mean employment as an employee of the Employer (so that, for purposes of exercising Options, the Grantee shall not be considered to have terminated employment until the Grantee ceases to be an employee of the Employer).

(d) “Employer” shall mean the Company and its parent and subsidiary corporations, as determined by the Board of Directors of the Company (the “Board”).

9. Administration. The Committee shall have the authority to interpret and construe the terms of this Agreement in a manner consistent with the terms of the Executive Employment Agreement. Notwithstanding the foregoing, all determinations with regard to matters covered by the Executive Employment Agreement shall be resolved in accordance with the dispute resolution provisions provided therein and such resolutions shall be binding with regard to such matters for purposes of this Agreement.

10. Amendment of Agreement. This Agreement may only be modified or amended in a writing signed by both parties.

11. Waiver. Either party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.

12. Further Assurances. The Grantee agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement.

13. No Employment or Other Rights. The grant of the Option hereunder shall not confer upon the Grantee any right to be retained by, or to continue in, the employ of the Employer.

14. No Shareholder Rights. Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a shareholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option.

15. Assignment and Transfers. Except as otherwise provided herein or as the Committee may otherwise permit, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the

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Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company in connection with a sale of all or substantially all of the Company’s assets and to the Company’s parents, subsidiaries and affiliates.

16. Compliance with Law. The exercise of Options and the obligations of the Company to issue or transfer shares of Company Stock under the Grant shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. The Company may revoke the Grant if it is contrary to law or modify the Grant to bring it into compliance with any valid and mandatory government regulation.

17. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of North Carolina, without giving effect to the conflicts of laws provisions thereof.

18. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Committee at 4222 Emperor Boulevard, Suite 200, Durham, North Carolina, 27703-8466, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Employer, or to such other address as the Grantee may designate to the Employer in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

19. Headings. Paragraph headings are for reference only. In the event of a conflict between a title and the content of a Paragraph, the content of the Paragraph shall control.

20. Counterparts. This Agreement may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

[Signature page to follow]

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IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

INSPIRE PHARMACEUTICALS, INC.
By:	/s/ Kenneth B. Lee, Jr.
Name:	Kenneth B. Lee, Jr.
Title:	Chairman, Board of Directors

I hereby accept the Option described in this Agreement, and I agree to be bound by the terms of this Agreement.

	/s/ Adrian Adams
Grantee:	Adrian Adams
Date:	Feb. 18. 2010
Address:	As provided in separate notice

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EX-10.3

Exhibit 10.3

SEPARATION OF EMPLOYMENT

AND CONSULTING AGREEMENT

This Separation of Employment and Consulting Agreement (this “Agreement”) is made as of the 19th day of February 2010, by and between Inspire Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware and having a principal place of business of 4222 Emperor Boulevard, Suite 200, Durham, North Carolina 27703 (the “Corporation”) and Christy L. Shaffer (the “Executive”).

WHEREAS, the Corporation currently employs the Executive as the President and Chief Executive Officer of the Corporation;

WHEREAS, the Executive desires to resign from her position as President and Chief Executive Officer of the Corporation, as well as her position as a member of the Board of Directors of the Corporation (the “Board”), and simultaneously therewith to enter into this Agreement with the Corporation effective February 22, 2010 (the “Effective Date”);

WHEREAS, the Corporation desires to obtain from the Executive, and the Executive desires to provide to the Corporation, consulting services for a period of two (2) years following the Effective Date;

WHEREAS, the Executive and the Corporation mutually desire to: (i) establish the terms and conditions of the Executive’s post-employment consultancy, and (ii) amend, ratify and confirm the rights and obligations of the Corporation and the Executive as set forth in the Employee Confidentiality, Invention Assignment and Non-Compete Agreement, entered into by the Corporation and the Executive on February 10, 2000 (the “Non-Compete Agreement”), which is attached hereto as Exhibit A; and

WHEREAS, in consideration of the foregoing objectives, the Executive and the Corporation wish to enter into this Agreement.

IT IS HEREBY AGREED, by and between the Executive and the Corporation as follows:

1. Resignation. As of the Effective Date, Executive hereby resigns from her position as President and Chief Executive Officer of the Corporation, and from her position as a member of the Board and all Board committees.

2. Consultancy.

(a) For a period of twenty-four (24) months beginning simultaneously with and continuing uninterrupted immediately following the Effective Date (the “Consulting Period”), the Executive shall (i) perform consulting services reasonably requested by the Corporation (the “Services”) and as mutually agreed to by Executive and the Corporation and (ii) report directly to the Corporation’s Chief Executive Officer. In performing the Services, the Executive agrees to be available for meetings from time to time at the principal executive offices of the Corporation at such times as shall be mutually agreed by the parties.

(b) During the Consulting Period, the Executive shall be treated as an independent contractor and shall not be deemed to be an employee of the Corporation or any affiliate of the Corporation. The Corporation acknowledges that at all times during the Consulting Period, the Executive shall be a “Key Advisor” as such

term is defined in the Corporation’s 2005 Equity Compensation Plan (the “2005 Plan”)

(c) The obligations of the Corporation under this Agreement are subject to and contingent upon the Executive continuing to be willing to provide the Services in a consulting capacity to the Corporation from the date hereof until the expiration of the Consulting Period. The failure of the Corporation and Executive to mutually agree upon an action or event or other provision of this Agreement shall not be a cause for termination hereof.

3. Compensation. In consideration of the Executive’s execution of this Agreement, and her agreement to be legally bound by its terms, the Corporation will provide Executive the following compensation:

(a) Consulting Payments; Reimbursement. The Executive shall be paid as follows during the Consulting Period for the provision of the Services (collectively, the “Consulting Payments”): (i) Forty Nine Thousand Three Hundred Ninety Three dollars and Ninety Eight cents ($49,393.98) for the period ending on March 31, 2010, (ii) One Hundred Sixteen Thousand Nine Hundred Eighty-Five dollars and seventy-five cents ($116,985.75) for each of the seven calendar quarters commencing with the fiscal quarter ending June 30, 2010 and finishing with the fiscal quarter ending December 31, 2011, and (iii) Sixty Seven Thousand Five Hundred Ninety One dollars and Seventy Seven cents ($67,591.77) for the period ending on February 21, 2012. Each such Consulting Payment shall be made no later than the 30^th day following the end of the applicable fiscal quarter (including, for purposes of clarity, the final payment, which shall be paid no later than April 30, 2012). In addition, the Corporation will reimburse the Executive for necessary and reasonable out-of-pocket business expenses incurred in connection with the performance of Services. All such expenses shall be supported by receipts. Upon receipt by Corporation of all such receipts, Corporation shall promptly reimburse Executive.

(b) Separation Payment. The Executive shall be paid nine hundred eighty-two thousand six hundred eighty dollars ($982,680) (the “Separation Payment”). The Separation Payment shall be paid to the Executive in a lump sum on the first business day following the expiration of the Revocation Period (as defined below).

(c) Stock Award. The Corporation shall grant to the Executive a stock award pursuant to the terms of the 2005 Plan for 100,000 shares of the Corporation’s common stock (the “Stock Award”). The Stock Award shall be made under a separate Stock Award Grant Agreement, substantially in the form attached hereto as Exhibit B. The Stock Award shall be granted on the first business day following the expiration of the Revocation Period and be fully vested upon the grant date.

(d) Option Award. The Corporation shall grant to the Executive an option to purchase 100,000 shares of the Corporation’s common stock pursuant to the terms of the 2005 Plan (the “Option”). The Option shall be made under a separate Option Award Grant Agreement, substantially in the form attached hereto as Exhibit C. The Option shall be issued on the first business day following the expiration of the Revocation Period. The Option shall be fully vested and exercisable on the date of grant and shall expire on the third anniversary of the grant date. The Corporation and the Committee, as defined under the 2005 Plan, acknowledge

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that no lapse in service or termination of employment has occurred under the 2005 Plan and no time has expired between the Executive’s employment term and the term of this Agreement. The Corporation and the Committee further acknowledge that Executive’s service under this Agreement qualifies Executive as a Key Advisor under the 2005 Plan.

(e) Acceleration. The outstanding unvested stock options granted to the Executive as set forth on Exhibit D shall become fully vested and exercisable as of the first business day following the expiration of the Revocation Period (such options being referred to as the “Modified Options”). The outstanding unvested restricted stock units awarded to the Executive set forth on Exhibit E shall become fully vested simultaneously with the expiration of the Revocation Period (such restricted stock units being referred to as the “Modified RSUs”). The Corporation and the Committee acknowledge that no termination of employment as defined under the Plan has occurred and shall not occur until the expiration or termination of this Agreement or any extensions hereof. The post-termination exercise period for (i) each Modified Option and (ii) all other outstanding vested stock options granted to the Executive (such options being referred to as the “Vested Options”) as of the date of this Agreement shall be extended to the earlier of (x) the third anniversary of the Effective Date, and (y) the date of expiration of the respective option. This Agreement shall be deemed to be an amendment to each of the Modified Options and Modified RSUs. Except as specifically provided for in this Agreement, all other terms of the Modified Options, Modified RSUs and Vested Options shall remain unchanged. Notwithstanding the foregoing, the Executive acknowledges and agrees that all outstanding stock options granted to the executive prior to the date hereof that are not Modified Options, as set forth on Exhibit F, shall be terminated as of the Effective Date.

(f) Other Reimbursement of Expenses. The Executive shall be paid any unpaid business-related expenses incurred by the Executive and substantiated to Corporation, but not reimbursed to the Executive as of the Effective Date.

(g) Payments After Revocation Period. Notwithstanding anything to the contrary, (i) no amount of the Consulting Payments or the Separation Payment shall be paid, (ii) neither the Option nor the Stock Award shall be granted, and (iii) the changes to the Modified Options, the Modified RSUs or the Vested Options shall become effective prior to the expiration of the Revocation Period without revocation.

(h) No Additional Consideration. Except as set forth in this Agreement, it is expressly agreed and understood that Releasees (as defined below) do not have, and will not have, any obligation to provide the Executive at any time in the future with any payments, benefits or considerations other than those recited in this Agreement, or those required by law, other than under the terms of any benefit plans which provide benefits or payments to former employees according to their terms and other than the Release Exclusions (as defined below). The Executive further agrees and acknowledges that she is owed no additional payments from the Corporation beyond what is due to her under this Agreement.

(i) Taxes. The Executive shall be responsible for all federal, state, and local taxes for the payments and benefits for the Consulting Payments provided pursuant to this Agreement. For purposes of the Consulting Payments, the Executive certifies that the Social Security Number that the Company has on file is correct and acknowledges that the Corporation shall rely upon the foregoing certification in filing certain documents and instruments required by law in connection with the

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Consulting Payments, including when applicable, a Form 1099. With regard to payments other than the Consulting Payments, the Corporation may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Corporation is required by any law or regulation of any governmental authority, whether Federal, state or local, to withhold in connection with any benefits under this Agreement other than the Consulting Payments, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Executive.

4. Release of Claims.

(a) In consideration of the promises of the Corporation set forth herein, the Executive, and her heirs, executors and administrators, intending to be legally bound, hereby permanently and irrevocably agrees that the Executive’s employment with the Corporation will terminate on the Effective Date and hereby REMISE, RELEASE and FOREVER DISCHARGE Corporation and any individual or organization related to the Corporation and against whom or which the Executive could assert a claim, including any and all affiliates, and their officers, directors, shareholders, partners, employees and agents, and their respective successors and assigns, heirs, executors and administrators (hereinafter referred to collectively as “Releasees”), of and from any and all causes of action, suits, debts, claims and demands whatsoever, which she had, has, or may have against Releasees from the beginning of the Executive’s employment or other service with the Corporation or the Executive’s ownership of Corporation common stock to the Effective Date arising from or relating in any way to the Executive’s relationship to the Corporation as an employee, other service provider or shareholder and the termination of her employment relationship with the Corporation, other than the Release Exclusions (as hereinafter defined), including without limitation claims under the North Carolina Equal Employment Practices Act, N.C.G.S.A. § 143 et. seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., the Employee Retirement Income Security Act 29 U.S.C. § 1001 et seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. § 621 et seq. (the “ADEA”), any other claim under any Federal, state, or local common law, statutory or regulatory provision, now or hereafter recognized, and all claims for counsel fees and costs. The Executive agrees and covenants that should any other person, organization, or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceeding arising from or relating in any way to the Executive’s relationship to the Corporation as an employee and the termination of her employment relationship with the Corporation, the Executive will not seek or accept any personal relief in such civil action, suit or legal proceeding. This release does not give up the Executive’s rights, if any, to the following claims that the Executive has or may have (the “Release Exclusions”): (i) to seek indemnification pursuant to applicable state law and the Corporation’s By Laws; (ii) to seek coverage under directors’ and officers’ liability insurance policies maintained or required to be maintained by the Corporation (iii) any action by the Executive unrelated to her employment and the termination thereof; and (iv) to enforce any rights under this Agreement, particularly with respect to the payment of any amount to the Executive described in Section 3 of this Agreement.

(b) The Corporation and its officers, directors, shareholders, partners, employees and agents, their respective successors and assigns, heirs, executors and administrators (hereinafter collectively included within the term the “Corporation Releasing

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Parties”), for and in consideration of the release of the Executive under subpart (a) of this Section 4 of this Agreement, and other good and valuable consideration, does hereby REMISE, RELEASE, AND FOREVER DISCHARGE the Executive, her assigns, heirs, executors and administrators (hereinafter, collectively included in the term, “Executive”), acting in any capacity whatsoever, of and from any and all manner of actions and causes of actions, suits, debts, claims and demands whatsoever in law or in equity, which it ever had, now have, or hereafter may have, by reason of any matter, cause or thing whatsoever from the beginning of the Executive’s employment or other service with the Corporation or the Executive’s ownership of Corporation common stock to the Effective Date arising from or relating in any way to the Executive’s relationship to the Corporation as an employee, other service provider or shareholder and the termination of her employment relationship with the Corporation, including but not limited to, any claims which have been asserted, could have been asserted, or could be asserted now or in the future under any federal, state or local laws, any contracts between the Corporation and the Executive and any common law claims now or hereafter recognized and all claims for counsel fees and costs, but in no event shall this release apply to (i) any action by the Executive outside the scope of her employment or (ii) any breach by the Executive of this Agreement or (iii) any breach of the Non-Compete Agreement

(c) The Executive also agrees that the payments in Section 2 of this Agreement are in full satisfaction of any liability or obligation of the Corporation to the Executive.

5. Confidentiality, Invention Assignment and Non-Competition Agreement.

(a) The Executive acknowledges her continuing legal obligations under Section 1 through 6 and 7(b) through 7(d) of the Non-Compete Agreement, the terms of which are incorporated herein by reference.

(b) In addition to the Executive’s ongoing legal obligations under Sections 1 through 6 and 7(b) through 7(d) of the Non-Compete Agreement, and in connection with this Agreement, during the Consulting Period, the Executive shall not directly or indirectly, through any other person, firm, corporation, or other entity (whether as an officer, director, employee, partner, consultant, holder of more than two percent of the outstanding equity or debt of the entity, lender, or in any other manner or capacity) engage in or participate in any business that develops, sells, markets, offers to sell (i) Ophthalmic products that would directly compete with the Corporation’s products and product candidates (including without limitation topical ocular antibiotic products, and product candidates for dry eye and blepharitis); and/or (ii) Cystic Fibrosis products that would directly compete with the Corporation’s products and product candidates (including without limitation ion-channel modulators, and agents that hydrate or clear airways) anywhere in the World. Notwithstanding the foregoing, nothing in this Agreement or in the Non-Compete Agreement shall restrict the Executive from engaging in or participating in non-profit organizations involved in such areas, subject to in all cases, Executive’s continuing compliance with any confidentiality provisions contained in the Non-Compete Agreement. The terms of this Section 5(b) shall supersede any provisions of the Non-Compete Agreement which are in conflict with the provisions hereof.

(c) In addition to the obligations arising under the Non-Compete Agreement with respect to matters arising during the Executive’s period of employment with the Corporation, during the Consulting Period, the Executive agrees to abide by the

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requirements under Sections 1 through 6 of the Non-Compete Agreement in relation to all Confidential Information and Inventions (as defined in the Non-Compete Agreement) as to such matters that arise during the Consulting Period, as if such terms and conditions of the Non-Compete Agreement (excepting Section 7(a)) were included herein in their entirety.

6. Termination.

(a) The Corporation and the Executive acknowledge that the performances of the promises of each are expressly contingent upon the fulfillment and satisfaction in all material respects of the obligations of the other party as set forth in this Agreement.

(b) The Corporation shall notify Executive of the Board’s good faith and unanimous determination that the Executive has breached or failed to comply with any material term of this Agreement or upon Executive’s material breach or non-compliance with any surviving terms of the Non-Compete Agreement in either case which would have a material adverse effect on the Corporation taking its operations as a whole. If Executive disputes such allegation, the parties shall submit the controversy to a three person panel, one member selected by Executive and one Member selected by the Corporation and a third member selected by the other two members of the panel. No termination of this Agreement shall be permitted without approval of a majority of the members of the panel. The Corporation and the Executive shall have thirty (30) days to establish the panel and the panel shall have thirty (30) days to make its determination. Notwithstanding the above, in any instance in which any such alleged breach or noncompliance is capable of cure, Executive shall be entitled to notice from the panel of such breach or noncompliance, and Executive shall be provided a thirty (30) day period in which to cure same. Upon cure within such thirty (30) day period, no breach or noncompliance shall be deemed to exist.

7. Revocation. The Executive has the right to revoke this Agreement for a period of seven days (the “Revocation Period”) following her execution of this Agreement by giving written notice to the Corporation.

8. Notice. Except as otherwise specifically provided herein, any notice, consent, demand or other communication to be given under or in connection with this Agreement shall be in writing and shall be deemed duly given when delivered personally, when transmitted by facsimile transmission, one (1) day after being deposited with Federal Express or other nationally recognized overnight delivery service or three (3) days after being mailed by first class mail, charges or postage prepaid, properly addressed, if to the Corporation, at its principal office, and, if to the Executive, at the address set forth following her signature below. Either party may change such address from time to time by notice to the other.

9. D&O Insurance Policy. To the extent reasonably practicable, the Corporation shall for a period of not less than six (6) years maintain directors’ and officers’ liability insurance policies as necessary to ensure that the Executive remains covered as a former officer and director under such policies with respect to her services as an officer and director of the Corporation. The Corporation hereby agrees that Executive shall, for such six (6) year period, continue to be eligible for any and all reimbursement of expense provisions and advancement of expense provisions under the Corporation’s Certificate of Incorporation, Bylaws and any

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directors’ and officers’ liability policy as if she were a sitting member of the Corporation’s Board of Directors.

10. Acknowledgements.

(a) The Corporation and the Executive agree and acknowledge that this Agreement is not and shall not be construed to be an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by either party.

(b) The Executive represents that any and all documents containing confidential information of the Corporation will be returned to the Corporation upon the expiration or termination of the Consulting Period.

(c) The Executive hereby certifies that she (i) has read the terms of this Agreement, (ii) has been advised by the Corporation to consult with an attorney of her own choice prior to executing this Agreement, (iii) has had an opportunity to do so, and (iv) understands this Agreement’s terms and effects.

(d) The Executive hereby certifies that neither Releasees nor any representative of Releasees has made any representations to the Executive concerning this Agreement other than those contained herein.

(e) The Executive acknowledges that she (i) has been informed that this Agreement includes a waiver of claims under the ADEA, and (ii) has the right to consider this Agreement for a period of twenty-one (21) days.

(f) Executive understands that she has the right to revoke this Agreement for a period of seven (7) days following her execution of this Agreement by giving written notice to the Corporation.

(g) The Board of Directors of the Corporation has authorized the payments and grants hereunder and the fulfillment of each of the payment, stock grant, option grant and acceleration provisions of this Agreement require no additional action on the part of the Board of Directors or any committee thereof. Appropriate officers of the Corporation have been authorized to finalize any and all documentation required in connection with each of the terms and conditions of this Agreement.

11. Successors and Assigns. This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estate, executors, administrators, heirs and beneficiaries. In the event of the Executive’s death, any amounts accrued and unpaid through the date of death shall be paid to the Executive’s estate, heirs and representatives in accordance with the terms of the Agreement. The Executive may not assign this Agreement or any rights, interests, or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

12. Legal Fees. The Corporation hereby agrees to pay the reasonable and customary legal fees of Executive’s counsel in relation to the review of this Agreement.

13. Entire Agreement.

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(a) This Agreement, the Stock Award Grant Agreement, the Option Award Grant Agreement and the Non-Compete Agreement constitute the complete and entire understanding between the Corporation and the Executive with respect to the matters covered hereunder, and supersede any and all prior agreements and understandings between the Corporation and the Executive to the extent they are inconsistent with this Agreement.

(b) If any provision of this Agreement is deemed invalid, the remaining provisions shall not be affected.

14. Amendment. This Agreement may be amended or modified at any time by a written instrument executed by both the Corporation and the Executive.

15. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

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

17. Headings and Construction. The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section.

18. Choice of Law. The provisions of this Agreement shall be governed by the laws of the State of North Carolina, without regard to any choice of law provisions.

[Signature Page to Follow]

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IN WITNESS WHEREOF, and intending to be legally bound hereby, the Corporation and the Executive have executed the foregoing Agreement on the dates indicated below.

EXECUTIVE

/s/ Christy L. Shaffer

Christy L. Shaffer

INSPIRE PHARMACEUTICALS, INC.
By:	/s/ Kenneth B. Lee, Jr.
Name:	Kenneth B. Lee, Jr.
Title:	Chairman of the Board

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EXHIBIT A

EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND

NON-COMPETE AGREEMENT

(See Attached)

A-1

EXHIBIT B

INSPIRE PHARMACEUTICALS, INC.

2005 EQUITY COMPENSATION PLAN

STOCK AWARD

Inspire Pharmaceuticals, Inc. (the “Company”) has granted to you a Stock Award under the Inspire Pharmaceuticals, Inc. 2005 Equity Compensation Plan, as amended (the “Plan”). The terms of the grant are set forth in the Stock Award Grant Agreement provided to you (the “Agreement”). The following provides a summary of the key terms of the grant; however, you should read the entire Agreement, along with the terms of the Plan, to fully understand the grant.

SUMMARY OF STOCK AWARD GRANT

Grantee:	Christy L. Shaffer, Ph.D.
Date of Grant:	[1st day of business following the expiration of the revocation period]
Purchase Price Per Share	$0.00
Vesting Schedule:	100% Vest Upon Date of Grant
Total Number of Shares Granted:	100,000

B-1

INSPIRE PHARMACEUTICALS, INC.

2005 EQUITY COMPENSATION PLAN

STOCK AWARD GRANT AGREEMENT

This STOCK AWARD GRANT AGREEMENT (this “Agreement”), dated as of                 , 2010 (the “Date of Grant”), is delivered by Inspire Pharmaceuticals, Inc. (the “Company”), to Christy L. Shaffer, Ph.D. (the “Grantee”).

RECITALS

A. The Inspire Pharmaceuticals, Inc. 2005 Equity Compensation Plan, as amended (the “Plan”) provides for stock awards in accordance with the terms and conditions of the Plan. The Company has decided to make a stock award to the Grantee.

B. The Plan is administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Stock Grant. Subject to the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Grantee 100,000 shares of common stock of the Company, subject to any restrictions set forth below and in the Plan (the “Stock Award”).

2. Vesting. The Stock Award is fully vested upon the Date of Grant.

3. Issuance of Shares.

(a) At the request of the Grantee, the Company shall either issue non-certificated shares or a stock certificate representing the Stock Award, in each case as soon as practicable following the date of this Agreement.

(b) The obligation of the Company to deliver shares shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriately to comply with relevant securities laws and regulations.

4. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant is subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the shares, (iii) changes in capitalization of the Company, and (iv) other requirements of applicable law. The Committee shall have the authority to interpret and construe the grant pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

B-2

5. Withholding. The Grantee shall be required to pay to the Company, or make other arrangements satisfactory to the Company to provide for the payment of, any federal, state, local or other taxes that the Employer is required to withhold with respect to the grant of the Stock Award. Subject to Committee approval, the Grantee may elect to satisfy any tax withholding obligation of the Employer with respect to the Stock Award by having shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state, local and other tax liabilities.

6. No Employment or Other Rights. This grant shall not confer upon the Grantee any right to be retained by or in the employ or service of the Employer and shall not interfere in any way with the right of the Employer to terminate the Grantee’s employment or service at any time. The right of the Employer to terminate at will the Grantee’s employment or service at any time for any reason is specifically reserved.

7. Assignment by Company. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

8. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof.

9. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Compensation Committee at 4222 Emperor Boulevard, Suite 200, Durham, North Carolina, 27703-8466, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Employer, or to such other address as the Grantee may designate to the Employer in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, and the Grantee has placed his or her signature hereon, effective as of the Date of Grant.

INSPIRE PHARMACEUTICALS, INC.

By:

Name:

Title:

I hereby accept the grant of Stock described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Christy L. Shaffer

Grantee

Date

B-4

EXHIBIT C

INSPIRE PHARMACEUTICALS, INC.

2005 EQUITY COMPENSATION PLAN

NONQUALIFIED STOCK OPTION

Inspire Pharmaceuticals, Inc. (the “Company”) has granted you a Nonqualified Stock Option (the “Option”) under the Inspire Pharmaceuticals, Inc. 2005 Equity Compensation Plan, as amended (the “Plan”). The terms of the Option are set forth in the Nonqualified Stock Option Grant Agreement provided to you (the “Agreement”). The following provides a summary of the key terms of the Option; however, you should read the entire Agreement, along with the terms of the Plan, to fully understand the Option.

SUMMARY OF NONQUALIFIED STOCK OPTION GRANT

Option Number:
Grantee:	Christy L. Shaffer
Date of Grant:	, 2010
Vesting Schedule:	100% on Date of Grant
Exercise Price Per Share:
Total Number of Options Granted:	100,000
Term/Expiration Date:	Third Anniversary Of Date of Grant

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No.           

INSPIRE PHARMACEUTICALS, INC.

2005 EQUITY COMPENSATION PLAN

NONQUALIFIED STOCK OPTION GRANT AGREEMENT

This NONQUALIFIED STOCK OPTION GRANT AGREEMENT (this “Agreement”), dated as of                      (the “Date of Grant”), is delivered by Inspire Pharmaceuticals, Inc. (the “Company”) to Christy L. Shaffer (the “Grantee”).

RECITALS

A. The Inspire Pharmaceuticals, Inc. 2005 Equity Compensation Plan, as amended (the “Plan”) provides for the grant of options to purchase shares of common stock of the Company. The Company has decided to make a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders.

B. The Plan is administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Option. Subject to the terms and conditions set forth in this Agreement, the Company hereby grants to the Grantee a nonqualified stock option (the “Option”) to purchase 100,000 Shares at an exercise price of $[        ] per Share (the “Exercise Price”). The Option shall become exercisable according to Paragraph 2 below.

2. Exercisability of Option. The Option shall be fully vested and exercisable on the Grant Date.

3. Term of Option. The Option shall have a term of three (3) years from the Date of Grant and shall terminate on the date immediately prior to the third anniversary of the Date of Grant. Notwithstanding the preceding sentence, the Option shall immediately terminate upon a termination of the Consulting Period in accordance with Section 6(b) of the Separation of Employment and Consulting Agreement between the Company and the Grantee dated February [    ], 2010.

4. Exercise Procedures.

(a) Subject to the provisions of Paragraphs 2 and 3 above, the Grantee may exercise part or all of the exercisable Option by giving the Company written notice of intent to exercise in the manner provided in this Agreement, specifying the number of Shares as to which the Option is to be exercised. At such time as the Board shall determine, the Grantee shall pay the exercise price (i) in cash, (ii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iii) by such other method as the Company may

C-2

approve. The Company may impose from time to time such limitations as it deems appropriate on the use of Shares of the Company to exercise the Option.

(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Company, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Grantee (or other person exercising the Option after the Grantee’s death) represent that the Grantee is purchasing Shares for the Grantee’s own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Company deems appropriate.

(c) All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable. Subject to Committee approval, the Grantee may elect, in a form and manner prescribed by the Company, to satisfy any tax withholding obligation of the Company with respect to the Option by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.

5. Change in Control. The provisions of the Plan applicable to a Change in Control (as defined in the Plan) shall apply to the Option.

6. Restrictions on Exercise. Except as the Company may otherwise permit, only the Grantee may exercise the Option during the Grantee’s lifetime and, after the Grantee’s death, the Option shall be exercisable solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement.

7. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and exercise of the Option are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the Shares, (iii) changes in capitalization of the Company and (iv) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Option pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

8. No Employment or Other Rights. The grant of the Option hereunder shall not confer upon the Grantee any right to be retained by, or to continue in, the employ of or provide services to the Company.

9. No Shareholder Rights. Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a shareholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option.

10. Assignment and Transfers. Except as the Committee may otherwise permit, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or

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otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries and affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

11. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of North Carolina, without giving effect to the conflicts of laws provisions thereof.

12. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Committee at 4222 Emperor Boulevard, Suite 200, Durham, North Carolina, 27703-8466, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company, or to such other address as the Grantee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

INSPIRE PHARMACEUTICALS, INC.

By:

Name:

Title:

I hereby accept the Option described in this Agreement, and I agree to be bound by the terms of this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:	Christy L. Shaffer
Address:

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EXHIBIT D

MODIFIED OPTIONS

Inspire Pharmaceuticals, Inc.

Shares Outstanding as of 2/22/2010

Number	Option Date	Expiration Date	Exercise Price		Shares Outstanding
NQ000051	6/4/2002	6/4/2012	$	2.76	30,000
NQ000054	6/4/2002	6/4/2012	$	2.76	100,000
00002574	5/15/2008	5/14/2015	$	3.49	3,313
00002575	5/15/2008	5/14/2015	$	3.49	26,187
00003036	11/4/2008	11/3/2015	$	3.78	6,761
00003037	11/4/2008	11/3/2015	$	3.78	22,739
00003250	3/18/2009	3/17/2016	$	3.79	9,219
00003251	3/18/2009	3/17/2016	$	3.79	20,281
00003455	5/14/2009	5/13/2016	$	3.84	4,790
00003456	5/14/2009	5/13/2016	$	3.84	24,710
00002395	3/20/2008	3/19/2015	$	3.98	9,219
00002396	3/20/2008	3/19/2015	$	3.98	20,281
00002804	8/14/2008	8/13/2015	$	4.44	4,917
00002805	8/14/2008	8/13/2015	$	4.44	24,583
00003694	8/11/2009	8/10/2016	$	4.55	4,917
00003695	8/11/2009	8/10/2016	$	4.55	24,583
00001417	8/30/2006	8/29/2013	$	5.00	26,208
00001418	8/30/2006	8/29/2013	$	5.00	32,792
00003927	11/11/2009	11/10/2016	$	5.10	6,761
00003928	11/11/2009	11/10/2016	$	5.10	22,739
00001216	1/19/2006	1/18/2013	$	5.25	42,485
00001217	1/19/2006	1/18/2013	$	5.25	2,515
00002015	8/15/2007	8/14/2014	$	5.81	12,292
00002016	8/15/2007	8/14/2014	$	5.81	17,208
00002207	11/13/2007	11/12/2014	$	6.10	7,262
00002208	11/13/2007	11/12/2014	$	6.10	22,238
00001598	3/22/2007	3/21/2014	$	6.30	29,500
00001766	5/15/2007	5/14/2014	$	6.35	29,500
AM001030	7/13/2005	7/12/2012	$	9.42	10,615
AM001031	7/13/2005	7/12/2012	$	9.42	79,385

D-1

EXHIBIT E

MODIFIED RSUs

Name	Number	Grant Date	Price		Shares Granted	Shares Vested
Shaffer, Christy L	A00005	7/21/2006	$	0.00	50,000	30,000

E-1

EXHIBIT F

TERMINATED OPTIONS

Number	Option Date	Expiration Date	Option Price		Shares Outstanding
AM000590	3/15/2004	3/15/2014	$	12.80	32,812
AM000589	3/15/2004	3/15/2014	$	12.80	2,188
00000147	6/1/2001	6/1/2011	$	13.65	5,000
AM000637	9/28/2004	9/28/2014	$	15.65	4,600
AM000638	9/28/2004	9/28/2014	$	15.65	30,400
AM000408	10/15/2003	10/15/2013	$	20.30	8,658
AM000409	10/15/2003	10/15/2013	$	20.30	26,342

F-1

EX-99.1

Exhibit 99.1

For Immediate Release

Investor Contact: Inspire Pharmaceuticals, Inc. Jenny Kobin VP, Investor Relations and Corporate Communications (919) 941-9777, Extension 219 Media Contact: Inspire Pharmaceuticals, Inc. Cara Amoroso Manager, Corporate Communications (919) 941-9777, Extension 266

INSPIRE NAMES ADRIAN ADAMS AS PRESIDENT AND CHIEF EXECUTIVE OFFICER

-Former President and CEO of Kos Pharmaceuticals, Inc. and Sepracor Inc. Joins Inspire-

DURHAM, NC - February 19, 2010 - Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today it has named Adrian Adams as President and Chief Executive Officer (CEO) of Inspire, and elected Mr. Adams to its Board of Directors, both effective February 22, 2010.

Mr. Adams, age 59, is a highly qualified pharmaceutical executive who most recently successfully led the growth and corporate development of two publicly traded companies. He brings strong skills in commercialization, business development and global partnerships, including experience in licensing and developing respiratory products, and an excellent understanding of the evolving specialty pharmaceutical market.

Mr. Adams stated, “I am delighted to be joining Inspire at such an exciting and pivotal stage of its corporate development and feel privileged to be given the opportunity to continue to build the Company from the excellent platform that has been created by Christy Shaffer and her focused and talented employee base. I believe that Inspire has tremendous potential and I look forward to working with the Board as it moves towards achieving its goal of taking the Company through profitability and creating success and sustainable shareholder value.”

Mr. Adams served as President and CEO of Sepracor Inc. (“Sepracor”) since 2007. Under Mr. Adams’ leadership, Sepracor conducted multiple strategic business development activities, including the in-licensing of seven products and out-licensing deals with two major pharmaceutical companies. Sepracor was recently acquired by Dainippon Sumitomo Pharma Co. for approximately $2.6 billion. Prior to joining Sepracor, Mr. Adams was President and Chief Executive Officer of Kos Pharmaceuticals, Inc. (“Kos”) from 2002 until the acquisition of the company by Abbott Laboratories in December 2006 for approximately $3.7 billion. During his tenure he increased revenues ten-fold and led the transformation of Kos into a fully integrated and profitable pharmaceutical company with annual revenues approaching one billion dollars. Mr. Adams has over 30 years of experience in both specialty and large pharmaceutical organizations that, in addition to Kos and Sepracor, included careers with ICI, SmithKline Beecham and Novartis. Mr. Adams has a broad background encompassing research and development, sales, international and national product marketing, business development and

4222 Emperor Boulevard, Suite 200 — Durham, North Carolina 27703

Telephone 919.941.9777 — Fax 919.941.9797

extensive general management experience. Mr. Adams holds a Bachelor of Science degree in Chemistry from Salford University in the U.K.

Kenneth B. Lee, Jr., Chairman of the Board of Directors, stated, “Adrian has a successful track record of leading two publicly traded companies in the face of the rapidly changing healthcare environment and he brings extensive global experience launching and commercializing innovative pharmaceutical products. His experience in leveraging commercial operations and corporate partnerships is extremely important as we focus on key opportunities in late-stage clinical development.”

Inspire previously announced that Christy L. Shaffer, Ph.D., would step down as President and CEO when her successor joins Inspire. Dr. Shaffer has also resigned from the Board of Directors, and will serve as a consultant to Inspire.

“Christy became Inspire’s CEO in 1999 and has led with distinction for over a decade. We especially want to recognize Christy’s extra efforts during this period of transition. All of the management team and Board of Directors want to thank Christy for her many years of dedication,” Mr. Lee concluded.

About Inspire

Inspire is a biopharmaceutical company focused on researching, developing and commercializing prescription pharmaceutical products for ophthalmic and pulmonary diseases. Inspire’s goal is to build and commercialize a sustainable portfolio of innovative new products based on its technical and scientific expertise. The most advanced compounds in Inspire’s clinical pipeline are PROLACRIA™ (diquafosol tetrasodium ophthalmic solution) 2% for dry eye and denufosol tetrasodium for cystic fibrosis, which are both in Phase 3 development, and AZASITE^® (azithromycin ophthalmic solution) 1% for blepharitis, which is in Phase 2 development. Inspire receives revenues related to the promotion of AZASITE for bacterial conjunctivitis, the co-promotion of ELESTAT^® (epinastine HCl ophthalmic solution) 0.05% for allergic conjunctivitis and royalties based on net sales of RESTASIS^® (cyclosporine ophthalmic emulsion) 0.05% for dry eye. For more information, visit www.inspirepharm.com.

Forward-Looking Statements

The forward-looking statements in this news release relating to management's expectations and beliefs are based on preliminary information and management assumptions. Specifically, no assurances can be made with respect to: Inspire's future profitability or success, or its ability to create sustainable shareholder value. Such forward-looking statements are subject to a wide range of risks and uncertainties that could cause results to differ in material respects, including those relating to product development, revenue, expense and earnings expectations, the seasonality of ELESTAT, intellectual property rights, competitive products, results and timing of clinical trials, success of marketing efforts, the need for additional research and testing, delays in manufacturing, funding, and the timing and content of decisions made by regulatory authorities, including the U.S. Food and Drug Administration. Further information regarding factors that could affect Inspire's results is included in Inspire's filings with the SEC. Inspire undertakes no

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4222 Emperor Boulevard, Suite 200 — Durham, North Carolina 27703

Telephone 919.941.9777 — Fax 919.941.9797

obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof.

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4222 Emperor Boulevard, Suite 200 — Durham, North Carolina 27703

Telephone 919.941.9777 — Fax 919.941.9797

EX-99.2

Exhibit 99.2

For Immediate Release

Investor Contact: Inspire Pharmaceuticals, Inc. Jenny Kobin VP, Investor Relations and Corporate Communications (919) 941-9777, Extension 219 Media Contact: Inspire Pharmaceuticals, Inc. Cara Amoroso Manager, Corporate Communications (919) 941-9777, Extension 266

INSPIRE ANNOUNCES GRANTS UNDER NASDAQ MARKETPLACE RULE 5635

DURHAM, NC - February 23, 2010 - Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) announced today the approval of non-qualified stock option (“Options”) and restricted stock unit (“RSUs”) grants to Inspire’s President and CEO, Adrian Adams, pursuant to NASDAQ Marketplace Rule 5635(c)(4).

On February 22, 2010, Inspire granted Mr. Adams the Options to purchase 350,000 shares of Inspire’s common stock. The Options have an exercise price of $6.35, which was the closing price of Inspire’s common stock on the NASDAQ Global Market on the day of the grant.

In addition, Inspire has agreed to grant 650,000 RSUs to Mr. Adams as soon as practicable following registration of the shares of common stock underlying such RSUs.

Twenty-five percent of the shares of common stock subject to the Options vested and became exercisable on February 22, 2010 and 25 percent of the RSUs will immediately vest and be non-forfeitable on the date of issuance. 2.0833% of the shares of common stock subject to the Options and 2.0833% of the RSUs will vest and become exercisable and non-forfeitable, as applicable, on the first day of each of the first thirty-six calendar months that begins after February 22, 2011. The grants are outside Inspire’s equity incentive plans and were awarded to Mr. Adams in accordance with his acceptance of employment with Inspire.

About Inspire

Inspire is a biopharmaceutical company focused on researching, developing and commercializing prescription pharmaceutical products for ophthalmic and pulmonary diseases. Inspire’s goal is to build and commercialize a sustainable portfolio of innovative new products based on its technical and scientific expertise. The most advanced compounds in Inspire’s clinical pipeline are denufosol tetrasodium for cystic fibrosis and PROLACRIA^™ (diquafosol tetrasodium ophthalmic solution) 2% for dry eye, which are both in Phase 3 development, and AZASITE^® (azithromycin ophthalmic solution) 1% for blepharitis, which is in Phase 2 development. Inspire receives revenues related to the promotion of AZASITE for bacterial conjunctivitis, the co-promotion of ELESTAT^® (epinastine HCl ophthalmic solution) 0.05% for allergic conjunctivitis and royalties based on net sales of RESTASIS^® (cyclosporine ophthalmic emulsion) 0.05% for dry eye. For more information, visit www.inspirepharm.com.

4222 Emperor Boulevard, Suite 200    —    Durham, North Carolina 27703

Telephone 919.941.9777    —    Fax 919.941.9797

Forward-Looking Statements

The forward-looking statements in this news release relating to management’s expectations and beliefs are based on preliminary information and management assumptions. Specifically, no assurances can be made with respect to the timing of above referenced RSU grant and the registration of the shares of common stock underlying the above referenced grants. Such forward-looking statements are subject to a wide range of risks and uncertainties that could cause results to differ in material respects, including those relating to product development, revenue, expense and earnings expectations, the seasonality of ELESTAT, intellectual property rights, competitive products, results and timing of clinical trials, success of marketing efforts, the need for additional research and testing, delays in manufacturing, funding, and the timing and content of decisions made by regulatory authorities, including the U.S. Food and Drug Administration. Further information regarding factors that could affect Inspire’s results is included in Inspire’s filings with the SEC. Inspire undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof.

###

4222 Emperor Boulevard, Suite 200    —    Durham, North Carolina 27703

Telephone 919.941.9777    —    Fax 919.941.9797

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