EXHIBIT 10.1

 

INSPIRE PHARMACEUTICALS, INC.

 

AMENDED AND RESTATED

1995 STOCK PLAN, AS AMENDED

 

A. Inspire Pharmaceuticals, Inc. (the “Company”) heretofore established this
1995 Stock Plan (the “Plan”) to encourage ownership of Common Stock, $0.001 par
value (the “Stock”) of the Company by its directors, officers, employees and
consultants (“Participants”) through the grant of Incentive Stock Options,
Nonstatutory Stock Options (as such terms are defined in Section 3(a) below
(collectively, “Options”) and Restricted Stock (as such term is defined in
Section 8(a) below).

 

B. Pursuant to Section 11 of the Plan, the Company previously amended and
restated the Plan in order to clarify the right of the Board to amend existing
Options and Options granted hereafter and the consequences of any such
amendments.

 

C. Pursuant to Section 11 of the Plan, the Company now desires to amend and
restate the Plan in order to remove the ability to amend or modify an option or
substitute an option for another option on such terms that could result in a
“repricing” as described in FASB Interpretation No. 44, “Accounting for Certain
Transactions Involving Stock Compensation” (Interp. 44).

 

NOW THEREFORE, effective April 15, 2005, the Plan is hereby amended and restated
as follows:

 

1. Administration of the Plan.

 

The administration of the Plan shall be under the general supervision of the
Board of Directors of the Company or any committee of such board to which such
board delegates such administrative responsibility (the “Board”). The Board may
establish such rules as it deems necessary for the proper administration of the
Plan, make such determinations and interpretations with respect to the Plan and
Options and Restricted Stock granted under it as may be necessary or desirable
and include such further provisions or conditions in Options and Restricted
Stock granted under the Plan as it deems advisable. To the extent permitted by
law, the Board may delegate its authority under the Plan to a sub-committee of
the Board. Within the limits of the Plan, the Board shall determine:

 

(a) the individuals to whom, and the times at which, Options or Restricted Stock
shall be granted;

 

(b) in the case of Options, the type of Option to be granted, the duration of
each Option, the price at which Option Shares (as defined in Section 2(a) below)
may from time to time be purchased through exercise of an Option (“Strike
Price”) and method of payment for each Option, and the time or times within
which (during its term) all or portions of each Option may be exercised; and

 

(c) in the case of Restricted Stock, the repurchase provisions of such
Restricted Stock and the price and method of payment for such Restricted Stock.

 

2. Shares Subject to the Plan.

 

(a) Number and Type of Shares. The aggregate number of shares of Stock of the
Company which may be issued pursuant to Options (“Option Shares”) or Restricted
Stock granted under the Plan is 7,178,571 shares. In the event that the Board in
its discretion determines that any stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
affects the Stock such that adjustment is required in order to preserve the
benefits or potential benefits of the Plan or any Option granted under the Plan,
the

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maximum aggregate number and kind of shares or securities of the Company which
may be issued under the Plan and as to which Options then outstanding shall be
exercisable, and the Strike Price of such Options or the repurchase price of
Restricted Stock, shall be appropriately adjusted by the Board (whose
determination shall be conclusive) so that the proportionate number of Option
Shares or other securities as to which Options or Restricted Stock may be
granted and the proportionate interest of holders of outstanding Options shall
be maintained as before the occurrence of such event.

 

(b) Effect of Certain Transactions. In the event of a consolidation or merger of
the Company with another corporation, or the sale or exchange of all or
substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, each holder of an outstanding Option shall be
entitled to receive upon exercise and payment in accordance with the terms of
the Option the same shares, securities or property as he would have been
entitled to receive upon the occurrence of such event if he had been,
immediately prior to such event, the holder of the number of Option Shares;
provided, however, that in lieu of the foregoing the Board may upon written
notice to each holder of an outstanding Option provide that such Option shall
terminate on a date not less than twenty (20) days after the date of such notice
unless theretofore exercised. In connection with such notice, the Board may in
its discretion accelerate or waive any deferred exercise period.

 

(c) Restoration of Shares. If any Option expires or is terminated unexercised or
is forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, including without limitation the
surrender of shares in payment of the Strike Price or any tax obligation
thereon, or if any shares of Restricted Stock are repurchased by the Company
pursuant to the terms thereof, the shares subject to such Option or so
surrendered or repurchased, as the case may be, to the extent of such
expiration, termination, forfeiture, repurchase or decrease, shall again be
available for granting Options or Restricted Stock under the Plan, subject,
however, in the case of Incentive Stock Options, to any requirements under the
Internal Revenue Code of 1986, as amended (the “Code”).

 

(d) Reservation of Shares. The Company shall at all times while the Plan is in
force reserve such number of shares of Stock as will be sufficient to satisfy
the requirements of the Plan. Shares issued under the Plan may consist in whole
or in part of authorized but unissued shares or treasury shares.

 

3. Grant of Options, Eligible Persons.

 

(a) Types of Options. Options shall be granted under the Plan either as
incentive stock options (“Incentive Stock Options”), as defined in Code Section
422 or as Options which do not meet the requirements of Section 422
(“Nonstatutory Stock Options”). Options may be granted from time to time by the
Board, within the limits set forth in Sections 1 and 2 of the Plan, to all
employees of the Company or of any parent corporation or subsidiary corporation
of the Company (as claimed in Sections 424(e) and (f), respectively, of the
Code), and, with regard to Nonstatutory Stock Options, to all consultants and
directors of the Company.

 

(b) Date of Grant. The date of grant for each Option shall be the date on which
it is approved by the Board, or such later date as the Board may specify. No
Incentive Stock Options shall be granted hereunder after ten (10) years from the
date on which the Plan was approved by the Board.

 

(c) Automatic Awards. The Board may provide for the automatic award of an Option
upon the delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.

 

4. Form of Options.

 

Options granted hereunder shall be evidenced by a writing delivered to the
optionee specifying the terms and conditions thereof and containing such other
terms and conditions not inconsistent with the provisions of the Plan as the
Board considers necessary or advisable to achieve the purposes of the Plan or
comply with applicable tax and regulatory laws and accounting principles. The
form of such Options may vary among optionees.

 

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5. Option Strike Price.

 

(a) Incentive Stock Options. In the case of Incentive Stock Options, the Strike
Price shall be determined by the Board, provided that such price shall not be
less than the fair market value of the Stock on the date of granting (or the
date on which a modification of an existing Option is treated as the grant of a
new Option, pursuant to Section 6(e) of the Plan), as determined in good faith
by the Board; and provided further that no Incentive Stock Option shall be
granted to any individual who is ineligible to be granted an Incentive Stock
Option because his or her ownership of stock of the Company or its parent or
subsidiary corporations exceeds the limitations set forth in Code Section
422(b)(6) (a “Ten Percent Owner”) unless such Strike Price is at least 110% of
the fair market value of the Stock on the date of grant.

 

(b) Nonstatutory Stock Options. In the case of Nonstatutory Stock Options (and
Incentive Stock Options which have been converted by the Board to Nonstatutory
Stock Options pursuant to Section 6(e) of the Plan), the Strike Price shall be
determined by the Board.

 

(c) Payment Method. The Board may in its discretion permit the Strike Price to
be paid in whole or in part by a note or in installments or with shares of Stock
or such other lawful consideration as the Board may determine.

 

6. Term of Option and Dates of Exercise.

 

(a) Exercisability. The Board shall determine the term of all Options, the time
or times that Options are exercisable and whether they are exercisable in
installments; provided, however, that (i) the term of each Nonstatutory Stock
Option shall not exceed a period of eleven (11) years from its Date of Grant;
(ii) the term of each Incentive Stock Option granted to anyone who is not a Ten
Percent Owner shall not exceed a period of ten (10) years from its Date of
Grant; (iii) the term of each Incentive Stock Option granted to any Ten Percent
Owner shall not exceed a period of five (5) years from its Date of Grant.

 

(b) Effect of Disability, Death or Termination of Employment. The Board shall
determine the effect on an Option of the disability, death, retirement or other
termination of employment of an optionee and the extent to which, and during the
period which, the optionee’s estate, legal representative, guardian, or
beneficiary on death may exercise rights thereunder. Any beneficiary on death
shall be designated by the optionee, in the manner determined by the Board, to
exercise rights of the optionee in the case of the optionee’s death.

 

(c) Other Conditions. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.

 

(d) Withholding. The optionee shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of any Options under the Plan no later than the date of the
event creating the tax liability. In the Board’s discretion, such tax
obligations may be paid in whole or in part in shares of Stock, including shares
retained from the exercise of the Option creating the tax obligation, valued at
the fair market value of the Stock on the date of delivery to the Company as
determined in good faith by the Board. The Company and any parent corporation or
subsidiary corporation of the Company (as defined in Sections 424(e) and (f),
respectively, of the Code) may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the optionee.

 

(e) Amendment or Termination of Existing Options. The Board may amend, modify,
or terminate any outstanding Option, (for example, changing the date of exercise
or realization and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the optionee’s consent (which consent may be withheld for
any reason) shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely
affect the optionee. Any such amendment which results in a

 

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“modification” of an existing option (as defined under Section 1.425-1(e) (2) of
the proposed Income Tax Regulations for purposes of Code Section 421 and 424)
shall be treated as a grant of a new option if the Board determines that such
option should continue to qualify as an “incentive stock option” (as defined in
Code Section 422). Notwithstanding the foregoing, but subject to adjustments as
described in Section 2(a) of the Plan, in no event may the Board (i) amend or
modify an Option in a manner that would reduce the exercise price of such
Option; (ii) substitute an Option for another Option with a lower exercise
price; (iii) cancel an Option and issue a new Option with a lower exercise price
to the holder of the cancelled Option within six (6) months following the date
of the cancellation of the cancelled Option; or (iv) cancel an outstanding
Option that is under water (i.e., for which the fair market value of the
underlying Stock are less than the Option’s exercise price) for the purpose of
granting a replacement award of a different type within six (6) months following
the date of the cancellation of the cancelled Option.

 

7. Non-transferability of Options.

 

(a) Incentive Stock Options granted under the Plan shall not be transferable by
the holder thereof otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the holder’s lifetime, only by
him or her.

 

(b) Nonstatutory Stock Options granted under the Plan shall not be transferable
by the holder thereof, except as expressly provided by the applicable Option
Agreement.

 

8. Restricted Stock.

 

(a) Subject to the provisions of the Plan, the Committee may award shares of
Stock subject to the Company’s right to repurchase such shares (“Restricted
Stock”). The Committee shall determine the duration of the period of time (the
“Restricted Period”) during which, and the price at which and other the
conditions under which, the shares may be repurchased by the Company and other
terms and conditions of such grants. Shares of Restricted Stock may be issued
without cash consideration or for such consideration as may be determined by the
Committee.

 

(b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered, except as permitted by the Committee, during the
Restricted Period. Shares of Restricted Stock shall be evidenced in such manner
as the Committee may determine. Any certificates issued in respect of shares of
Restricted Stock shall be registered in the name of the holder and if requested
by the Committee, shall be deposited by the holder, together with a stock power
endorsed in blank, with the Company. At the expiration of the Restricted Period,
the Company shall deliver such certificates to the Participant or if the
Participant has died, to the Participant’s designated beneficiary.

 

(c) Each recipient of Restricted Stock shall enter into a Restricted Stock
Purchase Agreement with the Company which shall specify the terms and conditions
of such grant of Restricted Stock and shall contain such other terms and
conditions not inconsistent with the provisions of this Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or comply
with applicable tax and regulatory laws and accounting principles. The form of
such Restricted Stock Purchase Agreement may vary among Participants.

 

9. No Right to Employment.

 

No persons shall have any claim or right to be granted an Option or Restricted
Stock, and the grant of an Option or Restricted Stock shall not be construed as
giving an optionee the right to continued employment. The Company expressly
reserves the right at any time to dismiss a Participant free from any liability
or claim under the Plan, except as specifically provided in the applicable
Option or Restricted Stock Purchase Agreement.

 

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10. No Rights as a Shareholder.

 

Subject to the provisions of the applicable Option or Restricted Stock Purchase
Agreement, no optionee or any person claiming through an optionee shall have any
rights as a shareholder with respect to any shares of Stock to be distributed
under the Plan until he or she becomes the holder thereof.

 

11. Amendment or Termination.

 

The Board may amend or terminate the Plan at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement, including
any requirement for exemptive relief under Section 16(b) of the Securities
Exchange Act of 1934, or any successor provision.

 

12. Stockholder Approval.

 

The Plan is subject to approval by the stockholders of the Company by the
affirmative vote of the holders of a majority of the shares of capital stock of
the Company entitled to vote thereon and present or represented at a meeting
duly held in accordance with the laws of the State of Delaware, or by any other
action that would be given the same effect under the laws of such jurisdiction,
which action in either case shall be taken within twelve (12) months from the
date the Plan was adopted by the Board. In the event such approval is not
obtained, all Options granted under the Plan shall be void and without effect.

 

13. Governing Law.

 

The provisions of the Plan shall be governed by and interpreted in accordance
with the laws of Delaware.

 

Adopted by the Board of Directors on March 30, 2004, as amended through April
15, 2005.

 

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