Exhibit 10.5

TRANSITION AND SEVERANCE AGREEMENT

This Transition and Severance Agreement (the “Agreement”) is entered into as of
March 1, 2007 (the “Effective Date”), by and between Sepracor Inc. (“Sepracor”
or the “Company”) and W. James O’Shea (“O’Shea”) (individually, a “Party,” and
collectively, the “Parties”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows:

1.                                      TRANSITION PERIOD POSITION AND
RESPONSIBILITIES.  EFFECTIVE AS OF MARCH 1, 2007 (THE “TRANSITION DATE”), O’SHEA
SHALL RESIGN FROM HIS POSITIONS AS PRESIDENT AND CHIEF OPERATING OFFICER OF
SEPRACOR.  BEGINNING ON THE TRANSITION DATE AND ENDING ON AUGUST 31, 2007, OR
EARLIER IF O’SHEA VOLUNTARILY TERMINATES HIS EMPLOYMENT PRIOR TO AUGUST 31, 2007
(THE “TRANSITION PERIOD”), O’SHEA SHALL BE EMPLOYED BY SEPRACOR AS ITS VICE
CHAIRMAN, REPORTING TO TIMOTHY BARBERICH, SEPRACOR’S CHIEF EXECUTIVE OFFICER. 
DURING THE TRANSITION PERIOD, O’SHEA SHALL PERFORM SUCH DUTIES CONSISTENT WITH
HIS POSITION AS ARE REASONABLY ASSIGNED TO HIM BY MR. BARBERICH.  THE PARTIES
FURTHER AGREE THAT O’SHEA SHALL PERFORM ALL WORK AND PROVIDE ALL ASSISTANCE
HEREUNDER AT SUCH TIMES AND LOCATIONS AS ARE REASONABLY DETERMINED BY MR.
BARBERICH.

2.                                      TRANSITION PERIOD COMPENSATION.  DURING
THE TRANSITION PERIOD, THE COMPANY SHALL COMPENSATE O’SHEA AT THE ANNUAL RATE OF
$548,625, LESS APPLICABLE TAXES AND WITHHOLDINGS, (THE “BASE SALARY”) TO BE PAID
IN ACCORDANCE WITH THE COMPANY’S REGULAR PAYROLL PRACTICES.  IN ADDITION,
PROVIDED O’SHEA HAS NOT VOLUNTARILY TERMINATED HIS EMPLOYMENT PRIOR TO AUGUST
31, 2007, HE SHALL BE ENTITLED TO AN ANNUAL BONUS FOR CALENDAR YEAR 2007 EQUAL
TO $219,450, LESS APPLICABLE TAXES AND WITHHOLDINGS.  THE BONUS SHALL BE PAID TO
O’SHEA IN A LUMP SUM, ON OR PRIOR TO MARCH 1, 2008.  FOR THE DURATION OF THE
TRANSITION PERIOD, THE COMPANY SHALL ALSO CONTINUE TO PROVIDE O’SHEA WITH THE
BENEFITS WHICH HE CURRENTLY ENJOYS UNDER THE COMPANY’S PLANS AND POLICIES, UNDER
THE SAME TERMS THAT APPLIED TO HIM IMMEDIATELY PRIOR TO THE EFFECTIVE DATE,
SUBJECT TO THE TERMS OF THOSE PLANS AND POLICIES.

3.                                      SEVERANCE PERIOD AND COMPENSATION. 
EFFECTIVE ON AUGUST 31, 2007 (THE “SEPARATION DATE”), O’SHEA’S EMPLOYMENT WITH
THE COMPANY SHALL CEASE.  THEREAFTER, PROVIDED O’SHEA HAS NOT VOLUNTARILY
TERMINATED HIS EMPLOYMENT PRIOR TO AUGUST 31, 2007 AND EXECUTES, DELIVERS AND
DOES NOT REVOKE A RELEASE OF CLAIMS FOR THE BENEFIT OF THE COMPANY IN A FORM
PROVIDED BY THE COMPANY, THE COMPANY SHALL CONTINUE TO PAY O’SHEA THE BASE
SALARY FOR A PERIOD OF 12 MONTHS (THE “SEVERANCE PERIOD”), IN ACCORDANCE WITH
ITS REGULAR PAYROLL PRACTICES.

For the duration of the Severance Period, if allowed under the Company’s life
insurance policy, the Company further agrees to provide O’Shea with life
insurance in the same amount the Company currently provides him, the full
premium of which shall be paid by the Company.

Following the Separation Date, any entitlement O’Shea has, might have, had, or
might have had to compensation, bonuses, wages or participation in any benefit
plan, policy, program, contract or practice of the Company, shall terminate,
except as required by federal or state law, by applicable plan terms or stock
option agreements, or by the express terms of this Agreement.

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4.                                      STOCK OPTIONS AND RESTRICTED STOCK.  THE
PARTIES ACKNOWLEDGE THAT O’SHEA HAS BEEN AWARDED OPTIONS TO PURCHASE 700,000
SHARES OF THE COMPANY’S COMMON STOCK, ALL OF WHICH OPTIONS ARE FULLY VESTED, AS
WELL AS OPTIONS TO PURCHASE AN ADDITIONAL 25,700 SHARES OF THE COMPANY’S STOCK
WHICH WILL VEST PRIOR TO THE SEPARATION DATE.  THE GRANT DATES AND EXERCISE
PRICES OF SUCH OPTIONS ARE SET FORTH IN EXHIBIT A HERETO.  O’SHEA SHALL HAVE THE
RIGHT TO EXERCISE ANY OR ALL OF HIS OPTIONS FOR A PERIOD OF NINETY (90) DAYS
AFTER THE SEPARATION DATE.  THE OPTIONS SHALL TERMINATE AT THE CLOSE OF BUSINESS
ON THE NINETIETH (90TH) DAY FOLLOWING THE SEPARATION DATE.  IN ADDITION, THE
PARTIES ACKNOWLEDGE THAT O’SHEA IS THE OWNER OF CERTAIN SHARES OF RESTRICTED
STOCK OF THE COMPANY.  OF THESE SHARES, A TOTAL 6,850 SHARES WILL NO LONGER BE
SUBJECT TO ANY RESTRICTION AS OF MARCH 16, 2007, AND MAY BE RETAINED OR SOLD BY
O’SHEA AFTER THAT DATE IN HIS DISCRETION, SUBJECT TO THE COMPANY’S INSIDER
TRADING POLICY, THE TERMS OF THE INCENTIVE STOCK PLAN AND RESTRICTED STOCK
AGREEMENT UNDER WHICH SUCH SHARES WERE GRANTED AND THE FEDERAL SECURITIES LAWS. 
EXCEPT WHERE EXPRESSLY MODIFIED BY THIS AGREEMENT, THE OPTIONS AND SHARES OF
RESTRICTED STOCK SET FORTH IN EXHIBIT A SHALL CONTINUE TO BE GOVERNED BY THE
TERMS OF THE APPLICABLE STOCK OPTION AGREEMENTS AND RESTRICTED STOCK AGREEMENT
EXECUTED BY THE PARTIES.

5.                                      COOPERATION.  FROM THE EFFECTIVE DATE
FORWARD, O’SHEA AGREES REASONABLY TO COOPERATE WITH THE COMPANY IN THE DEFENSE
OR PROSECUTION OF ANY THREATENED OR ACTUAL CLAIMS OR ACTIONS WHICH MAY BE
BROUGHT BY, AGAINST OR ON BEHALF OF THE COMPANY, ITS PREDECESSORS OR ANY OF ITS
CURRENT OR FORMER PARTNERS, AGENTS, EMPLOYEES, DIRECTORS OR AFFILIATES AND WHICH
RELATE TO EVENTS OR OCCURRENCES THAT TRANSPIRED OR ARE ALLEGED TO HAVE
TRANSPIRED DURING HIS EMPLOYMENT WITH THE COMPANY.  SUCH COOPERATION SHALL
INCLUDE, WITHOUT IMPLICATION OF LIMITATION, BEING AVAILABLE TO MEET WITH THE
COMPANY’S COUNSEL TO PREPARE FOR DISCOVERY OR TRIAL AND TO TESTIFY TRUTHFULLY AS
A WITNESS WHEN REASONABLY REQUESTED BY THE COMPANY AT REASONABLE TIMES AND FOR
REASONABLE TIME PERIODS.  IN THE EVENT ANY SUCH COOPERATION IS REQUIRED
FOLLOWING THE EXPIRATION OF THE SEVERANCE PERIOD AND REQUIRES MORE THAN DE
MINIMIS TIME OR EFFORT, THE COMPANY AGREES TO COMPENSATE O’SHEA AT A REASONABLE
HOURLY RATE FOR ANY COOPERATION PROVIDED UNDER THIS SECTION.

6.                                      LEGAL FEES.  NOTHING CONTAINED IN THIS
AGREEMENT SHALL CONSTITUTE A RELINQUISHMENT OR WAIVER BY O’SHEA OF HIS RIGHT TO
BE INDEMNIFIED BY THE COMPANY PURSUANT TO THE TERMS OF THE COMPANY’S RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED (THE “INDEMNIFICATION PROVISIONS”) WITH
RESPECT TO CONDUCT OR EVENTS OCCURRING DURING, OR RELATING TO, HIS EMPLOYMENT BY
SEPRACOR, OR OF ANY RIGHT THAT HE MAY HAVE UNDER, OR WITH RESPECT TO, THE
COMPANY’S DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICIES.  THE COMPANY
AGREES THAT TO THE FULL EXTENT ALLOWED BY APPLICABLE LAW AND SUBJECT TO THE
TERMS OF THE INDEMNIFICATION PROVISIONS AND ANY APPLICABLE DIRECTOR AND OFFICER
LIABILITY INSURANCE POLICY, IT WILL CONTINUE TO PAY O’SHEA’S REASONABLE LEGAL
FEES RELATING TO ANY MATTER THAT OCCURRED DURING, OR THAT RELATES TO O’SHEA’S
EMPLOYMENT BY THE COMPANY.

7.                                      BINDING NATURE OF AGREEMENT.  THIS
AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES AND
THEIR RESPECTIVE HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS
AND ASSIGNS.

8.                                      USE OF THE AGREEMENT AS EVIDENCE.  THIS
AGREEMENT MAY NOT BE USED AS EVIDENCE IN ANY SUBSEQUENT PROCEEDING OF ANY KIND,
EXCEPT ONE IN WHICH EITHER PARTY ALLEGES A BREACH OF THE TERMS OF THIS AGREEMENT
OR ELECTS TO USE THIS AGREEMENT AS A DEFENSE TO ANY CLAIM.

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9.                                      ENTIRE AGREEMENT; MODIFICATIONS.  WITH
THE EXCEPTION OF THE STOCK OPTION AND RESTRICTED STOCK AGREEMENTS APPLICABLE TO
THE GRANTS SET FORTH IN EXHIBIT A HERETO, THE COMPANY’S STOCK OPTION AND
INCENTIVE STOCK PLAN UNDER WHICH SUCH EQUITY INCENTIVES WERE GRANTED, THE
INVENTION, NON-DISCLOSURE AND PERSONAL CONDUCT AGREEMENT EXECUTED BY O’SHEA ON
OCTOBER 1, 1999, AND THE EXECUTIVE RETENTION AGREEMENT DATED FEBRUARY 1, 2002,
WHICH WILL SURVIVE AND REMAIN IN FULL FORCE AND EFFECT, THIS AGREEMENT CONTAINS
THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS
COVERED HEREBY, AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS COMMUNICATIONS,
E-MAILS, AGREEMENTS, REPRESENTATIONS, UNDERSTANDINGS OR NEGOTIATIONS BETWEEN
O’SHEA, THE COMPANY AND/OR THEIR AGENTS AND ATTORNEYS, INCLUDING BUT NOT LIMITED
TO THE OFFER LETTER SIGNED BY THE PARTIES AND BEARING THE TYPED DATE
SEPTEMBER 10, 1999.  THIS AGREEMENT MAY BE MODIFIED ONLY BY A WRITTEN AGREEMENT
SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH OF THE PARTIES HERETO.  NO WAIVER
OF THIS AGREEMENT OR ANY PROVISION HEREOF SHALL BE BINDING UPON THE PARTY
AGAINST WHOM ENFORCEMENT OF SUCH WAIVER IS SOUGHT UNLESS IT IS MADE IN WRITING
AND SIGNED BY OR ON BEHALF OF SUCH PARTY.

10.                               SECTION 409A.                  
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY IN THIS AGREEMENT, TO THE EXTENT
THAT ANY OF THE PAYMENTS THAT MAY BE MADE HEREUNDER CONSTITUTE “NONQUALIFIED
DEFERRED COMPENSATION”, WITHIN THE MEANING OF SECTION 409A AND YOU ARE A
“SPECIFIED EMPLOYEE” UPON YOUR SEPARATION (AS DEFINED UNDER SECTION 409A), THE
TIMING OF ANY SUCH PAYMENT FOLLOWING THE SEPARATION DATE SHALL BE MODIFIED IF,
ABSENT SUCH MODIFICATION, SUCH PAYMENT WOULD OTHERWISE BE SUBJECT TO PENALTY
UNDER SECTION 409A.  IN ANY EVENT, THE COMPANY MAKES NO REPRESENTATION OR
WARRANTY AND SHALL HAVE NO LIABILITY TO YOU OR TO ANY OTHER PERSON IF ANY
PROVISIONS OF THIS AGREEMENT ARE DETERMINED TO CONSTITUTE “NONQUALIFIED DEFERRED
COMPENSATION” SUBJECT TO SECTION 409A BUT DO NOT SATISFY THE REQUIREMENTS OF
THAT SECTION.

11.                               FURTHER ASSURANCES.  THE PARTIES AGREE TO
EXECUTE, ACKNOWLEDGE (IF REASONABLY REQUESTED), AND DELIVER SUCH DOCUMENTS,
CERTIFICATES OR OTHER INSTRUMENTS AND TAKE SUCH OTHER ACTIONS AS MAY BE
REASONABLY REQUIRED FROM TIME TO TIME TO CARRY OUT THE INTENTS AND PURPOSES OF
THIS AGREEMENT, PROVIDED THEY DO NOT IMPOSE ANY MATERIAL ADDITIONAL OBLIGATIONS
UPON EITHER PARTY.

12.                               ACKNOWLEDGMENTS AND OTHER TERMS.  O’SHEA
AGREES THAT HE HAS CAREFULLY READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS
AGREEMENT, THAT HE HAS BEEN ADVISED TO CONSULT WITH AND HAS CONSULTED WITH AN
ATTORNEY, AND THAT HE IS VOLUNTARILY ENTERING THIS AGREEMENT.  O’SHEA FURTHER
REPRESENTS AND ACKNOWLEDGES THAT IN EXECUTING THIS AGREEMENT, HE IS NOT RELYING
AND HAS NOT RELIED UPON ANY REPRESENTATION OR STATEMENT MADE BY THE COMPANY WITH
REGARD TO THE SUBJECT MATTER, BASIS OR EFFECT OF THIS AGREEMENT.

13.                               INTERPRETATION.  THE LANGUAGE OF ALL PARTS OF
THIS AGREEMENT SHALL IN ALL CASES BE CONSTRUED AS A WHOLE, ACCORDING TO ITS FAIR
MEANING, AND NOT STRICTLY FOR OR AGAINST ANY OF THE PARTIES.  THIS AGREEMENT
SHALL BE INTERPRETED IN SUCH A MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION HEREOF SHALL BE PROHIBITED OR INVALID UNDER
ANY SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH
PROHIBITION OR INVALIDITY WITHOUT INVALIDATING OR NULLIFYING THE REMAINDER OF
SUCH PROVISION OR ANY OTHER PROVISIONS OF THIS AGREEMENT.  THE CAPTIONS OF THE
SECTIONS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY, AND IN NO WAY
DEFINE, LIMIT OR AFFECT THE SCOPE OR SUBSTANCE OF ANY SECTION OF THIS AGREEMENT.

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14.                               COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED
IN ANY NUMBER OF COUNTERPARTS AND MAY BE DELIVERED BY FACSIMILE, EACH OF WHICH
SHALL BE DEEMED TO BE AN ORIGINAL BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE
AND THE SAME INSTRUMENT.

15.                               GOVERNING LAW; PREVAILING PARTY.  THIS
AGREEMENT SHALL TAKE EFFECT AS AN INSTRUMENT UNDER SEAL AND SHALL BE GOVERNED
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF MASSACHUSETTS, WITHOUT REGARD TO
ITS CONFLICTS OF LAWS PRINCIPLES.  IN THE EVENT EITHER PARTY RETAINS LEGAL
COUNSEL IN CONNECTION WITH THE ENFORCEMENT OF ITS RIGHTS UNDER THIS AGREEMENT
AND THE OTHER PARTY IS FOUND BY A COURT HAVING COMPETENT JURISDICTION TO HAVE
BREACHED ITS OBLIGATIONS HEREUNDER, THE PREVAILING PARTY SHALL BE ENTITLED TO
RECOVER ALL REASONABLE LEGAL FEES AND RELATED REASONABLE CHARGES AND
DISBURSEMENTS INCURRED BY IT IN CONNECTION WITH SUCH ENFORCEMENT ACTION AND ANY
NEGOTIATIONS LEADING UP TO IT.

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as an
instrument under seal as of the Effective Date.

SEPRACOR INC.

By:

 /s/ Timothy J. Barberich

 

 

 

 

Name and Title:

Timothy J. Barberich, Chairman and CEO

 

 

 

 

 

/s/ W. James O’Shea

 

W. JAMES O’SHEA

 

 

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Exhibit A

O’Shea Stock Option Grants

 

 

 

 

 

 

 

 

Total Vesting

 

 

 

Options

 

 

 

Total Currently

 

Prior to

 

Grant Date

 

Outstanding

 

Price

 

Vested

 

Separation Date

 

 

 

 

 

 

 

 

 

 

 

10/21/99

 

200,000

 

$

35.75

 

200,000

 

200,000

 

10/21/99

 

11,814

 

$

35.75

 

11,184

 

11,184

 

10/21/99

 

468,816

 

$

35.75

 

468,816

 

468,816

 

2/24/05

 

7,750

 

$

64.50

 

1,550

 

3,100

 

2/24/05

 

92,250

 

$

64.50

 

18,450

 

36,900

 

3/16/06

 

1,800

 

$

55.54

 

0

 

0

 

3/16/06

 

26,700

 

$

55.54

 

0

 

5,700

 

 

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