**Exhibit10.5**

**TRANSITIONAND SEVERANCE AGREEMENT**

This Transitionand 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,” andcollectively, the “Parties”).

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

# **1.****                                      TransitionPeriod Position and Responsibilities.** Effective as of March 1, 2007 (the “Transition Date”), O’Shea shallresign from his positions as President and Chief Operating Officer ofSepracor.  Beginning on the TransitionDate and ending on August 31, 2007, or earlier if O’Shea voluntarilyterminates his employment prior to August 31, 2007 (the “Transition Period”),O’Shea shall be employed by Sepracor as its Vice Chairman, reporting to TimothyBarberich, Sepracor’s Chief Executive Officer. During the Transition Period, O’Shea shall perform such dutiesconsistent with his position as are reasonably assigned to him byMr. Barberich.  The Parties furtheragree that O’Shea shall perform all work and provide all assistance hereunderat such times and locations as are reasonably determined by Mr. Barberich.

# **2.****                                      TransitionPeriod Compensation**.  During theTransition Period, the Company shall compensate O’Shea at the annual rate of$548,625, less applicable taxes and withholdings, (the “Base Salary”) to bepaid in accordance with the Company’s regular payroll practices.  In addition, provided O’Shea has notvoluntarily terminated his employment prior to August 31, 2007, he shall beentitled to an annual bonus for calendar year 2007 equal to $219,450, lessapplicable taxes and withholdings.  Thebonus 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 hecurrently enjoys under the Company’s plans and policies, under the same termsthat applied to him immediately prior to the Effective Date, subject to theterms of those plans and policies.

# **3.****                                      SeverancePeriod and Compensation**.  Effectiveon August 31, 2007 (the “Separation Date”), O’Shea’s employment with theCompany shall cease.  Thereafter,provided O’Shea has not voluntarily terminated his employment prior to August31, 2007 and executes, delivers and does not revoke a release of claims for thebenefit of the Company in a form provided by the Company, the Company shallcontinue to pay O’Shea the Base Salary for a period of 12 months (the“Severance Period”), in accordance with its regular payroll practices.

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

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

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# **4.****                                      StockOptions and Restricted Stock**.  TheParties acknowledge that O’Shea has been awarded options to purchase 700,000shares of the Company’s common stock, all of which options are fully vested, aswell as options to purchase an additional 25,700 shares of the Company’s stockwhich will vest prior to the Separation Date. The grant dates and exercise prices of such options are set forth inExhibit A hereto.  O’Shea shall have theright to exercise any or all of his options for a period of ninety (90) daysafter the Separation Date.  The optionsshall terminate at the close of business on the ninetieth (90th) day following the Separation Date.  In addition, the Parties acknowledge thatO’Shea is the owner of certain shares of restricted stock of the Company.  Of these shares, a total 6,850 shares will nolonger be subject to any restriction as of March 16, 2007, and may beretained or sold by O’Shea after that date in his discretion, subject to the Company’sinsider trading policy, the terms of the incentive stock plan and restrictedstock agreement under which such shares were granted and the federal securitieslaws.  Except where expressly modified bythis Agreement, the options and shares of restricted stock set forth in ExhibitA shall continue to be governed by the terms of the applicable stock optionagreements and restricted stock agreement executed by the Parties.

# **5.****                                      Cooperation. **From the Effective Date forward, O’Sheaagrees reasonably to cooperate with the Company in the defense or prosecutionof any threatened or actual claims or actions which may be brought by, againstor on behalf of the Company, its predecessors or any of its current or formerpartners, agents, employees, directors or affiliates and which relate to eventsor occurrences that transpired or are alleged to have transpired during hisemployment with the Company.  Suchcooperation shall include, without implication of limitation, being availableto meet with the Company’s counsel to prepare for discovery or trial and to testifytruthfully as a witness when reasonably requested by the Company at reasonabletimes and for reasonable time periods. In the event any such cooperation is required following the expirationof the Severance Period and requires more than *de minimis*time or effort, the Company agrees to compensate O’Shea at a reasonable hourlyrate for any cooperation provided under this section.

# **6.****                                      LegalFees. **Nothing contained in thisAgreement shall constitute a relinquishment or waiver by O’Shea of his right tobe indemnified by the Company pursuant to the terms of the Company’s RestatedCertificate of Incorporation, as amended (the “Indemnification Provisions”)with respect to conduct or events occurring during, or relating to, hisemployment by Sepracor, or of any right that he may have under, or with respectto, the Company’s Directors and Officers liability insurance policies.  The Company agrees that to the full extentallowed by applicable law and subject to the terms of the IndemnificationProvisions and any applicable Director and Officer liability insurance policy,it will continue to pay O’Shea’s reasonable legal fees relating to any matterthat occurred during, or that relates to O’Shea’s employment by the Company.

# **7.****                                      BindingNature of Agreement. **This Agreementshall be binding upon and inure to the benefit of the Parties and theirrespective heirs, administrators, representatives, executors, successors andassigns.

# **8.****                                      Useof the Agreement as Evidence.**  ThisAgreement 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 thisAgreement or elects to use this Agreement as a defense to any claim.

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# **9.****                                      EntireAgreement; Modifications.**  With theexception of the stock option and restricted stock agreements applicable to thegrants set forth in Exhibit A hereto, the Company’s stock option and incentivestock plan under which such equity incentives were granted, the Invention,Non-Disclosure and Personal Conduct Agreement executed by O’Shea onOctober 1, 1999, and the Executive Retention Agreement dated February 1,2002, which will survive and remain in full force and effect, this Agreementcontains the entire agreement among the Parties hereto with respect to thematters covered hereby, and supersedes all prior and contemporaneouscommunications, e-mails, agreements, representations, understandings ornegotiations between O’Shea, the Company and/or their agents and attorneys,including but not limited to the offer letter signed by the Parties and bearingthe typed date September 10, 1999. This Agreement may be modified only by a written agreement signed by anauthorized representative of each of the Parties hereto.  No waiver of this Agreement or any provisionhereof shall be binding upon the Party against whom enforcement of such waiveris sought unless it is made in writing and signed by or on behalf of suchParty.

# **10.****                               Section409A**.                   Notwithstandinganything else to the contrary in this agreement, to the extent that any of thepayments that may be made hereunder constitute “nonqualified deferredcompensation”, within the meaning of Section 409A and you are a “specifiedemployee” upon your separation (as defined under Section 409A), the timing ofany such payment following the Separation Date shall be modified if, absentsuch modification, such payment would otherwise be subject to penalty underSection 409A.  In any event, the Companymakes no representation or warranty and shall have no liability to you or toany other person if any provisions of this agreement are determined toconstitute “nonqualified deferred compensation” subject to Section 409A but donot satisfy the requirements of that section.

# **11.****                               FurtherAssurances.**  The Parties agree toexecute, acknowledge (if reasonably requested), and deliver such documents,certificates or other instruments and take such other actions as may bereasonably required from time to time to carry out the intents and purposes ofthis Agreement, provided they do not impose any material additional obligationsupon either Party.

# **12.****                               Acknowledgmentsand Other Terms. **O’Shea agrees thathe 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 acknowledgesthat in executing this Agreement, he is not relying and has not relied upon anyrepresentation or statement made by the Company with regard to the subjectmatter, basis or effect of this Agreement.

# **13.****                               Interpretation. **The language of all parts of thisAgreement shall in all cases be construed as a whole, according to its fairmeaning, and not strictly for or against any of the Parties.  This Agreement shall be interpreted in such amanner as to be effective and valid under applicable law, but if any provisionhereof shall be prohibited or invalid under any such law, such provision shallbe ineffective to the extent of such prohibition or invalidity withoutinvalidating or nullifying the remainder of such provision or any otherprovisions of this Agreement.  Thecaptions of the sections of this Agreement are for convenience of referenceonly, and in no way define, limit or affect the scope or substance of anysection of this Agreement.

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# **14.****                               Counterparts. **This Agreement may be executed in anynumber of counterparts and may be delivered by facsimile, each of which shallbe deemed to be an original but all of which together shall constitute one andthe same instrument.

# **15.****                               GoverningLaw; Prevailing Party. **ThisAgreement shall take effect as an instrument under seal and shall be governedand construed in accordance with the laws of Massachusetts, without regard toits conflicts of laws principles.  In theevent either Party retains legal counsel in connection with the enforcement ofits rights under this Agreement and the other Party is found by a court havingcompetent jurisdiction to have breached its obligations hereunder, theprevailing Party shall be entitled to recover all reasonable legal fees andrelated reasonable charges and disbursements incurred by it in connection withsuch enforcement action and any negotiations leading up to it.

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IN WITNESSWHEREOF, the Parties hereto have executed this Agreement as an instrument underseal as of the Effective Date.

**SEPRACORINC.**
| 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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**ExhibitA**

**O’SheaStock 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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