Document:

First Amendment to Loan and Security Agreement

 EXHIBIT 10.3 
 FIRST AMENDMENT TO  
 LOAN AND SECURITY AGREEMENT 
 THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into
this 27th day of June, 2007, by and among MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc. (“Merrill Lynch”),
SILICON VALLEY BANK (“SVB”) (SVB and Merrill Lynch each individually a “Lender”, and collectively the “Lenders”), SVB in its capacity as agent for the Lenders (in such capacity, “Agent”), SVB and Merrill Lynch
in their capacities as joint lead arrangers (in such capacity, the “Arrangers”), and INSPIRE PHARMACEUTICALS, INC., a corporation organized and in good standing under the laws of the State of Delaware (“Borrower”), provides the
terms on which Lenders shall lend to Borrower and Borrower shall repay Lenders. 
 RECITALS 
 A. Agent, Lenders and Borrower have entered into that certain Loan and Security Agreement dated as of December 22, 2006, (as the same may
from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”). 
 B. Lenders have extended
credit to Borrower for the purposes permitted in the Loan Agreement. 
 C. Borrower has requested that Agent and Lenders amend the
Loan Agreement to (i) add a new term loan facility in the principal amount of Twenty Million Dollars ($20,000,000), (ii) revise certain financial covenants, and (iii) make certain other revisions to the Loan Agreement as more fully
set forth herein. 
 D. Agent and Lenders have agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in
accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below. 
 AGREEMENT 
 NOW, THEREFORE, in consideration of the foregoing recitals
and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 
 1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

 2. Amendments to Loan Agreement. 
 2.1 Section 2.1.2 (Supplemental Term Loan). The following provisions are added to the Loan Agreement immediately after Section 2.1.1 as Sections 2.1.2 and 2.1.3: 
  

 2.1.2 Supplemental Term Loan Facility. 
 (a) Availability. Subject to the terms and conditions of this Agreement, Lenders agree, severally and not jointly, to lend to
Borrower, prior to the expiration of the Supplemental Draw Period, advances (each a “Supplemental Term Loan Advance” and collectively, the “Supplemental Term Loan Advances”) in an aggregate amount equal to the Supplemental Term
Loan Commitment according to each Lender’s pro rata share of the Supplemental Term Loan Commitment (based upon the respective Commitment Percentage of each Lender). The Supplemental Term Loan Commitment shall be available during the
Supplemental Draw Period if at the time of the request for each such Supplemental Term Loan Advance no Default or Event of Default has occurred and is continuing. Each Supplemental Term Loan Advance shall be in a minimum amount of One Million
Dollars ($1,000,000). When repaid, a Supplemental Term Loan Advance may not be re-borrowed. 
 (b) Borrowing Procedure.
To obtain a Supplemental Term Loan Advance, unless otherwise agreed by Agent and Lenders, Borrower must notify Agent by facsimile by 12:00 p.m. Eastern Time three (3) Business Days prior to the date the Supplemental Term Loan Advance is to be
made by delivering to Agent a completed Payment Advance Form signed by two (2) Responsible Officers. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to Borrower’s deposit account with SVB, an amount equal to
its Commitment Percentage multiplied by the amount of the Supplemental Term Loan Advance. Each Lender may make the Supplemental Term Loan Advance under this Agreement based on instructions from two (2) Responsible Officers or his or her
designee or without instructions if the Supplemental Term Loan Advance is necessary to meet Obligations which have become due. Each Lender may rely on any facsimile notice given by a person whom such Lender believes is a Responsible Officer or
designee. Borrower shall indemnify each Lender and Agent for any loss Lender or Agent suffers due to such reliance. 
 2.1.3 Repayment of
Credit Extensions. 
 (a) Principal and Interest Payments on Supplemental Payment Dates. 
 Each Supplemental Term Loan Advance is payable in monthly installments of interest
only for six (6) months, commencing on the first (1st) Business Day of the first month after the Funding Date and continuing on the first (1st) Business Day of each month thereafter (each a “Supplemental Payment Date”) until the Supplemental Conversion Date. Commencing on the seventh
(7th) month after each Funding Date (the “Supplemental Conversion Date”), on each Supplemental Payment Date, Borrower shall repay the unpaid
principal amount of each Supplemental Term Loan Advance in equal monthly payments of principal and interest which would fully amortize the amount of such Supplemental Term Loan Advance from the Supplemental Conversion Date until the Maturity Date at
the applicable Supplemental Basic Rate. All unpaid principal and accrued interest is due and payable in full on the Maturity Date. A Supplemental Term Loan Advance may only be prepaid in accordance with Sections 2.1.3(d) and 2.1.3(e). Payments
received after 12:00 noon Eastern Time are considered received at the opening of business on the next Business Day. 
  

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 (b) Interest Rate. Borrower shall pay interest on each Supplemental Payment Date
on the unpaid principal amount of each Supplemental Term Loan Advance until the Supplemental Term Loan Advance has been paid in full, at the per annum rate of interest equal to the Supplemental Basic Rate determined by Agent as of the Funding Date
for each Supplemental Term Loan Advance in accordance with the definition of the Supplemental Basic Rate. Interest is computed on the basis of a 360 day year for the actual number of days elapsed. For the avoidance of doubt, subsections 2.3(b)(ii)
and 2.3(b) (iii) shall apply to interest on each Supplemental Term Loan Advance. 
 (c) Final Payment. On the
Maturity Date or at the time of any mandatory or permitted prepayment of any Supplemental Term Loan Advance, Borrower shall pay, in addition to the unpaid principal and accrued interest and all other amounts due on such date with respect to such
Supplemental Term Loan Advance, an amount equal to the Supplemental Final Payment. 
 (d) Mandatory Prepayment upon an
Acceleration. If the Supplemental Term Loan is accelerated following the occurrence of an Event of Default or otherwise, Borrower shall immediately pay to Lenders an amount equal to the sum of: (i) all payments of principal plus accrued
interest due and owing on such date and not yet paid, plus (ii) all remaining payments of principal, plus (iii) the Supplemental Final Payment, plus (iv) the Make Whole Premium, plus (v) all other sums, if any, that shall have
become due and payable, including interest at the Default Rate with respect to any past due amounts. 
 (e) Permitted
Prepayment of Loans. Borrower shall have the option to prepay Supplemental Term Loan Advances in whole or in part from time to time advanced by any Lender under this Agreement, without penalty or premium, in minimum incremental amounts of One
Million Dollars ($1,000,000), provided Borrower (i) provides written notice to Agent of its election to prepay Supplemental Term Loan Advances at least fifteen (15) days prior to such prepayment, and (ii) pays, on the date of such
prepayment (A) the principal amount of such prepayment, plus accrued interest due and owing thereon on such date, plus (B) the Supplemental Final Payment, plus (C) the Make Whole Premium, plus (D) all other sums, if any, that
shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. 
 2.2
Section 2.2 (Termination of Commitment to Lend). Section 2.2 of the Loan Agreement is amended and restated in its entirety as follows: 
 2.2 Termination of Commitment to Lend. 
 Without limiting Lenders’ other
rights hereunder, each Lender’s obligation to lend the undisbursed portion of the Term Loan Commitment and the Supplemental Term Loan Commitment shall terminate if, in such Lender’s good faith business judgment, there has been a Material
Adverse Change. 
  

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 2.3 Section 2.4 (Fees). Subsection 2.4(d) of the Loan Agreement is amended and
restated in its entirety as follows: 
 (d) Unused Commitment Fee. 
 On the Business Day the Draw Period expires, Borrower shall pay to Agent for the ratable benefit of the Lenders, a fee in an amount equal
to one percent (1.00%) of the unused portion of the Term Loan Commitment as determined by Agent. In addition, on the Business Day the Supplemental Draw Period expires, Borrower shall pay to Agent for the ratable benefit of the Lenders, a fee in
an amount equal to one percent (1.00%) of the unused portion of the Supplemental Term Loan Commitment as determined by Agent. 
 2.4 Section 6.6 (Primary Accounts). Section 6.6 of the Loan Agreement is amended and restated in its entirety as follows: 
 6.6 Primary Accounts. 
 (a) In order to permit Agent to monitor Borrower’s
financial performance and condition, Borrower, and all Borrower’s Subsidiaries, shall maintain Borrower’s, and such Subsidiaries’, primary depository and operating accounts and securities accounts with SVB or SVB’s Affiliates,
which accounts shall represent at least (i) fifty percent (50%) of Borrower’s unrestricted cash, cash equivalents and marketable securities (“Cash Balances”) held at any financial institution when Borrower’s total cash
and investments is greater than or equal to One Hundred Twenty Million Dollars ($120,000,000), (ii) sixty percent (60%) of Borrower’s Cash Balances held at any financial institution when Borrower’s total cash and investments is
greater than One Hundred Million Dollars ($100,000,000) but less than One Hundred Twenty Million Dollars ($120,000,000), (iii) seventy-five percent (75%) of Borrower’s Cash Balances held at any financial institution when
Borrower’s total cash and investments is greater than or equal to Eighty Million Dollars ($80,000,000), but less than One Hundred Million Dollars ($100,000,000), and (iv) eighty-five percent (85%) of Borrower’s Cash Balances held
at any financial institution when Borrower’s total cash and investments is less than Eighty Million Dollars ($80,000,000). All such accounts at SVB or SVB’s Affiliates shall constitute part of the Collateral. 
 (b) Borrower shall identify to Agent, in writing, any bank or securities account opened by Borrower or any Guarantor with any institution
other than Agent. In addition, for each such account that Borrower or any Guarantor at any time opens or maintains, Borrower shall, at Agent’s request, cause the depository bank or securities intermediary to agree that such account is the
Collateral of Agent, on behalf of Lenders, pursuant to the terms of a control agreement in form and substance reasonably acceptable to the Lenders, Agent and such depository bank or securities intermediary; provided, however,
(i) Agent shall not require a control agreement with respect to Borrower’s demand deposit account held at Wachovia Bank, National Association so long as the value of the cash and other assets in such account does not exceed Five Million
Dollars ($5,000,000), and Borrower is not in violation of the Liquidity Ratio covenant set forth in Section 6.8, and (ii) the provisions of this sentence shall not apply to deposit accounts 

  

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exclusively used for, and the balance in the Wachovia Bank, National Association deposit account referenced in clause (i) above shall be deemed to
exclude amounts allocated for, payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees. 
 2.5 Section 6.8 (Financial Covenant). Section 6.8 of the Loan Agreement is amended and restated in its entirety as follows: 
 6.8 Financial Covenant. 
 Borrower shall maintain at all times, a minimum Liquidity Ratio of not less than the following amounts during the following periods: 
  

			
	 Period
	  	Liquidity Ratio
	 June 27th, 2007 through December 31,
2007
	  	1.00:1.00
	 January 1, 2008 and thereafter
	  	1.35:1.00

 2.6 Consent to Additional Equity. Borrower has advised Agent and Lenders that it
contemplates closing on an equity round in an amount of up to Seventy Five Million Dollars ($75,000,000) of Borrower’s preferred stock (the “New Equity”), which may be entitled to an annual dividend in an amount not to exceed ten
percent (10%) of the purchase price of the New Equity (the “Dividend”). Borrower has requested that Agent, and each Lender, consent to the New Equity and the Dividend. Agent and each Lender consent to the New Equity and the Dividend
and agree that after giving effect to the consent in this Section 2.6 the New Equity and the Dividend shall not violate any of the terms of the Loan Agreement, subject to the following conditions: (a) at the time of the New Equity and
after giving effect to any Dividend, no Event of Default has occurred and is continuing (it being understood and agreed by the Agent and the Lenders that the payment of the Dividend shall not constitute a violation of Section 7.6(ii) of the
Loan Agreement), (b) the New Equity and the Dividend are on terms consistent with those described in this Section 2.6 and such other terms as may be expressly permitted under the Loan Agreement, and (c) the purchasers of the New
Equity are acceptable to Agent and each Lender in their reasonable discretion. 
 2.7 Section 13 (Definitions).

 (a) The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the
following: 
 “Funding Date” shall mean any date on which a Term Loan Advance or Supplemental Term Loan
Advance, as applicable, is made to or on account of Borrower. 
 “Liquidity” shall mean Borrower’s
unrestricted cash, cash equivalents, interest and dividends accrued on Borrower’s Investments and marketable securities, plus eighty percent (80%) of Borrower’s Eligible Accounts. 
 (b) The following terms and their respective definitions are hereby added to Section 13.1 of the Loan Agreement: 
 “Liquidity Ratio” shall mean a ratio of (i) Borrower’s Liquidity to (ii) the sum of the outstanding Term
Loan Advance, plus up to Eight Million Dollars ($8,000,000) of outstanding Supplemental Term Loan Advances; provided, however, if Borrower closes on and has received proceeds from a Thirty Five Million Dollar ($35,000,000) round of new equity
financing then from and after January 1, 2008, all outstanding Supplemental Term Loan Advances will be excluded from the calculation of the Liquidity Ratio. 
  

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 “Make Whole
Premium” shall mean an amount equal to two percent (2.0%) of the amount of any prepayment of any Supplemental Term Loan Advance, if the prepayment is made on or before the second (2nd
) anniversary of the Funding Date of such Supplemental Term Loan Advance and if the prepayment is made on or after the second anniversary of the Funding Date of such Supplemental Term Loan Advance,
then the Make Whole Premium is zero percent (0.0%). 
 “Supplemental Basic Rate” shall mean, as of the
Funding Date the per annum rate of interest (based on a year of 360 days) equal to the sum of (a) U.S. Treasury note yield to maturity for a term equal to sixty (60) months as quoted in the Wall Street Journal on the Funding Date, plus
(b) four and one half percent (4.50%). 
 “Supplemental Conversion Date” shall have the meaning set
forth in Section 2.1.3(a). 
 “Supplemental Draw Period” shall mean the period of time from the Closing Date
through the earliest to occur of (a) December 31, 2007, (b) an Event of Default has occurred and is continuing, or (c) the existence of any Default. 
 “Supplemental Final Payment” shall mean a payment (in addition to and not in substitution for the regular monthly
payments of principal plus accrued interest) due on the Maturity Date or date of any mandatory or optional prepayment of any Supplemental Term Loan Advance, or part thereof, equal to the amount of such Supplemental Term Loan Advance subject to
payment multiplied by the Supplemental Final Payment Percentage. 
 “Supplemental Final Payment Percentage”
shall mean two percent (2.0%). 
 “Supplemental Payment Date” shall have the meaning set forth in
Section 2.1.3(a). 
 “Supplemental Term Loan” shall mean Supplemental Term Loan Advances in an aggregate
amount not to exceed Twenty Million Dollars ($20,000,000). 
 “Supplemental Term Loan Advance” or
“Supplemental Term Loan Advances” shall have the meaning set forth in Section 2.1.2(a). 
 “Supplemental Term Loan Commitment” shall mean with respect to each Lender, the total amount of the Supplemental Term Loan Advances which may be made under the Supplemental Term Loan. With respect to SVB this means an
amount of up to Ten Million Dollars ($10,000,000), with respect to Merrill Lynch this means an amount of up to Ten Million Dollars ($10,000,000). 
  

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 (c) The definition of “Unused Facility Fee” set forth in Section 13.1 is deleted in its
entirety. 
 2.8 Compliance Certificate. The Compliance Certificate attached to the Loan Agreement is replaced in its entirety
with the Compliance Certificate attached hereto as Exhibit C. 
 3. Limitation of Amendments. 
 3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Agent and any Lender may now have or may
have in the future under or in connection with any Loan Document. 
 3.2 This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

 4. Representations and Warranties. To induce Agent and each Lender to enter into this Amendment, Borrower hereby represents
and warrants to Agent and each Lender as follows: 
 4.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and
correct as of such date), and (b) no Event of Default has occurred and is continuing; 
 4.2 Borrower has the power and authority
to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment; 
 4.3
The organizational documents of Borrower delivered to Agent on December 20, 2006 remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; 
 4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as
amended by this Amendment, have been duly authorized; 
 4.5 The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene in any manner which reasonably could be expected 

  

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to cause a Material Adverse Change (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person
binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 
 4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as
amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding
on Borrower, except (a) as already has been obtained or made and (b) such orders, consents, approvals, licenses, authorizations, validations, filings, recordings, registrations, or exemptions the failure of which to obtain or make would
not be reasonably expected to cause a Material Adverse Change; and 
 4.7 This Amendment has been duly executed and delivered by
Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’ rights. 
 5. Counterparts. This
Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 
 6. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Agent and each Lender of this Amendment by each party hereto, (b) Borrower’s payment
of a non refundable amendment fee to the Agent for the ratable benefit of the Lenders in an amount equal to Fifty Thousand Dollars ($50,000), and (c) payment of Agent’s and each Lender’s legal fees and expenses in connection with the
negotiation and preparation of this Amendment. 
 [Signature page follows.] 
  

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 IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed and delivered as of the date first written above. 
  

			
	 BORROWER:

	
	 INSPIRE PHARMACEUTICALS, INC.

		
	 By:
	 	 /s/ Thomas R. Staab, II

	 Name:
	 	Thomas R. Staab, II
	 Title:
	 	CFO & Treasurer
		
	 AGENT:
	 	
	
	 SILICON VALLEY BANK

		
	 By:
	 	 /s/ Win Bear

	 Name:
	 	Win Bear
	 Title:
	 	Team Leader
	
	 LENDERS:

	
	MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc.
		
	 By:
	 	 /s/ Chris York

	 Name:
	 	Chris York
	 Title:
	 	VP
	
	 SILICON VALLEY BANK

		
	 By:
	 	 /s/ Win Bear

	 Name:
	 	Win Bear
	 Title:
	 	Team Leader

 EXHIBIT C 
 Compliance Certificate 
 TO: SILICON VALLEY BANK as Agent 
 FROM: INSPIRE PHARMACEUTICALS, INC. 
 The undersigned
authorized officer of Inspire Pharmaceuticals, Inc. certifies that under the terms and conditions of the Loan and Security Agreement among Borrower, Lenders and Agent (the “Agreement”), (i) Borrower is in compliance for the period
ending
                                        
with all required covenants except as noted below and no Default or Event of Default has occurred and is continuing and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date (except
for those representations and warranties expressly referring to a specific date, which were true and correct in all respects as of that date). Attached are the required documents supporting the certification. In addition, the undersigned certifies
that (1) Borrower has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP and (2) no liens have been levied or
claims made against Borrower relating to unpaid employee payroll or benefits which Borrower has not previously notified in writing to Agent. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. 
 Please
indicate compliance status by circling Yes/No under “Complies” column. 
  

							
	Reporting Covenant	  	Required	  	Complies
	Monthly financial statements with Compliance Certificate.	  	Monthly within 30 days	  	Yes        	  	        No
				
	 Annual (CPA Audited)
	  	FYE within earlier of 120 days or 5 days after filing with SEC	  	Yes        	  	        No
				
	Financial Projections approved by Board	  	Annually at least 30 days prior to fiscal year end	  	Yes        	  	        No
			
	Financial Covenant	  	Required	  	Complies
	Unrestricted cash, cash equivalents and marketable securities with Agent	  	 50% when total cash and investments is greater than or equal to $120,000,000
  
 60% when total cash and investments greater than $100,000,000 but less than $120,000,000

 
 75% when total cash and investments greater than or equal to $80,000,000 but less than
$100,000,000
  
 85% when total cash and investments is less than
$80,000,000
	  	Yes        	  	        No
	 Liquidity Ratio
	  		  	Yes        	  	        No
	 June 30, 2007 through December 31, 2007
	  	1.00:1.00	  		  	
				
	 January 31, 2008 and thereafter
	  	1.35:1.00	  	Yes        	  	        No

					
	 Comments Regarding Exceptions: See Attached.
  
 Sincerely,
  
 Signature
  
 Title
  
 Date
	 		 	 BANK USE ONLY
  
 Received by:
                                        
                            
 AUTHORIZED SIGNER
  
 Date:
                                        
                                        
  
  
 Verified:
                                        
                                    
 AUTHORIZED SIGNER
  
 Date:
                                        
                                        
  
  
 Compliance
Status:                Yes  ̈                No  ̈

  

 2Amended & Restated 2005 Equity Compensation Plan

 EXHIBIT 10.4 
 INSPIRE PHARMACEUTICALS, INC. 
 AMENDED AND RESTATED 
 2005 EQUITY COMPENSATION PLAN 
 The purpose of the Inspire Pharmaceuticals, Inc. Amended and Restated 2005 Equity Compensation Plan (the “Plan”) is to provide (i) designated employees of Inspire Pharmaceuticals, Inc. (the “Company”) and its
parents and subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its parents or subsidiaries, and (iii) non-employee members of the Board of Directors of the Company (the “Board”) with the
opportunity to receive grants of incentive stock options, nonqualified stock options, stock awards, and stock appreciation rights. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the
Company, thereby benefiting the Company’s stockholders, and will align the economic interests of the participants with those of the stockholders. The Plan is effective as of the date it is ratified and approved by the Company’s
stockholders. 
 1. Administration 
 (a) Committee. The Plan shall be administered and interpreted by the members of the Compensation Committee of the Board (the “Committee”), which consists of “outside directors” as defined
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related Treasury regulations, and “non-employee directors” as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The Committee may delegate authority to one
(1) or more delegates as it deems appropriate. 
 (b) Committee Authority. The Committee or its delegate shall have the sole
authority to (i) determine the individuals to whom grants shall be made under the Plan; (ii) determine the type, size, and terms of the grants to be made to each such individual; (iii) determine the time when the grants will be made
and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability; (iv) amend the terms of any previously issued grant; and (v) deal with any other matters
arising under the Plan. Any delegation of any or all of the aforementioned authority with respect to the Inspire Pharmaceuticals, Inc. Amended and Restated 1995 Stock Plan, as amended (the “1995 Plan”), shall be effective with respect to
this Plan. Notwithstanding anything in this Plan to the contrary, but subject to adjustments as described in Section 3(b) below, in no event may the Board, the Committee or its or their delegate (A) amend or modify an Option (as defined
below) in a manner that would reduce the Exercise Price (as defined below) of such Option; (B) substitute an Option for another Option with a lower Exercise Price; (C) 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 (D) cancel an outstanding Option that is under water (i.e., for which the Fair Market Value, as defined below, of
the underlying Shares are less than the Option’s Exercise Price) for the purpose of granting a replacement Grant (as defined below) of a different type within six (6) months following the date of cancellation of the cancelled Option.

  

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 (c) Committee Determinations. The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements, and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion.
The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals.

 (d) Other Equity Awards. The terms of this Plan shall not impact or govern the administration by the Company or the rights of any
holders of an option or stock award granted pursuant to the 1995 Plan. Unless otherwise provided by the Company and agreed to by the recipient of an award under the 1995 Plan, all awards granted pursuant to the 1995 Plan shall continue to be
governed by the terms of the 1995 Plan. 
 2. Grants 
 (a) Awards under the Plan may consist of grants of incentive stock options as described in Section 5 below (“Incentive Stock Options”),
nonqualified stock options as described in Section 5 below (“Nonqualified Stock Options”) (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as “Options”), stock awards as described in
Section 6 below (“Stock Awards”) and stock appreciation rights described in Section 7 below (“SARs”) (hereinafter collectively referred to as “Grants”). All Grants shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with this Plan and as specified in the individual grant instrument or an amendment to the grant instrument (the “Grant Instrument”). All Grants shall be made conditional
upon the Grantee’s (as defined below) acknowledgement, in writing or by acceptance of the Grant, that all decisions and determination of the Company shall be final and binding on the Grantee, his or her beneficiaries and any other person having
or claiming an interest under such Grant. Grants under a particular Section of the Plan need not be uniform as among the Grantees. 
 3.
Shares Subject to the Plan 
 (a) Shares Authorized. Subject to adjustment as described in Section 3(d) below, the
maximum aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued or transferred under any form of Grant under the Plan is eight million (8,000,000) shares (the “Total Share Pool”, which
is comprised of the “Original Share Pool”, and the “New Share Pool”, as described in Sections 3(b) and 3(c) below). The maximum aggregate number of shares of Company Stock that may be granted as Incentive Stock Options under the
Plan is eight million (8,000,000) shares, and the maximum aggregate number of shares of Company Stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be three hundred thousand
(300,000) shares, subject to adjustment as described in Section 3(d) below. The shares may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open
market for purposes of the Plan. Any shares of Company Stock issued in connection with Grants shall reduce the Total Share Pool by one (1) for each Option or SAR and two (2) for 

  

 -2- 

 
each Stock Award or Restricted Unit (as defined in Section 6(h)) issued in connection with such Grant or by which the Grant is valued by reference.
Shares of Company Stock issued in connection with Grants shall be issued from the Original Share Pool, and upon its depletion, shall be issued from the New Share Pool, in the manner described in Sections 3(b) and 3(c) below. 
 (b) Original Share Pool. The Original Share Pool contains a number of shares of Company Stock equal to all shares of Company Stock issued in
connection with Grants that are outstanding as of the date of ratification and approval of the Plan by the Company’s stockholders, to the extent those shares of Company Stock have not become available for reissuance under the Original Share
Pool, as described below. If and to the extent Grants originating from the Original Share Pool terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised or if any Stock Awards (including restricted Stock
Awards received upon the exercise of Options) or Restricted Units are forfeited, the shares subject to such Grants shall be available for Grants from the New Share Pool, and shall increase the New Share Pool (and consequently, the amount of shares
that are available under the Total Share Pool) by one (1) share of Company stock for each share of Company Stock issued in connection with such Grant or by which the Grant is valued by reference. 
 (c) New Share Pool. The New Share Pool contains the shares of Company Stock in the Total Share Pool which are not in the Original Share Pool. If
and to the extent Options or SARs originating from the New Share Pool terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised or if any Stock Awards (including restricted Stock Awards received upon the
exercise of Options) or Restricted Units are forfeited, the shares subject to such Grants shall again be available for Grants under the New Share Pool, and shall increase the New Share Pool (and consequently, the amount of shares that are available
under the Total Share Pool) by one (1) for each Option or SAR and two (2) for each Stock Award or Restricted Unit issued in connection with such Grant or by which the Grant is valued by reference. 
 (d) Adjustments. If there is any change in the number or kind of shares of 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 maximum number of shares of Company Stock available for Grants under both the Original Share Pool or the New Share Pool, the maximum number of shares of Company Stock that any
individual participating in the Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under the Plan, and the price per share of such Grants 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 such Grants; 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. 
  

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 4. Eligibility for Participation 
 (a) Eligible Persons. All employees of the Company and its parents or subsidiaries (“Employees”), including Employees who are officers or
members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”) shall be eligible to participate in the Plan. Consultants and advisors who perform services for the Company or any of its parents or
subsidiaries (“Key Advisors”) shall be eligible to participate in the Plan if the Key Advisors render bona fide services to the Company or its parents or subsidiaries, the services are not in connection with the offer and sale of
securities in a capital-raising transaction, and the Key Advisors do not directly or indirectly promote or maintain a market for the Company’s securities. 
 (b) Selection of Grantees. The Company shall select the Employees, Non-Employee Directors, and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular
Grant. Employees, Non-Employee Directors, and Key Advisors who receive Grants under this Plan shall hereinafter be referred to as “Grantees.” 
 5. Granting of Options 
 The Company may grant an Option to an Employee, Non-Employee Director,
or Key Advisor. The following provisions are applicable to Options. 
 (a) Number of Shares. The Company shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to Employees, Non-Employee Directors, and Key Advisors. 
 (b) Type
of Option and Price. 
 (i) Incentive Stock Options are intended to satisfy the requirements of Section 422 of the Code. Nonqualified
Stock Options are not intended to so qualify. Incentive Stock Options may be granted only to employees of the Company or its parents or subsidiaries, as defined in Section 424 of the Code. Nonqualified Stock Options may be granted to Employees,
Non-Employee Directors, and Key Advisors. 
 (ii) The purchase price (the “Exercise Price”) of Company Stock subject to an Option
may be equal to or greater than the Fair Market Value of a share of Company Stock on the date the Option is granted; provided, however, that (A) the Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market
Value of a share of Company Stock on the date the Incentive Stock Option is granted and (B) an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns or beneficially owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless the Exercise Price per share is not less than one hundred ten percent (110%) of the Fair Market Value of
Company Stock on the date of grant. 
 (iii) So long as the Company Stock is publicly traded, the Fair Market Value per share shall be
determined as follows: (A) if the principal trading market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale 

  

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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 (B) 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) Option Term. The term of any Option shall not exceed seven (7) years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns or
beneficially owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five (5) years from the
date of grant. 
 (d) Exercisability of Options. 
 (i) Options shall become exercisable in accordance with such terms and conditions of the Plan and specified in the Grant Instrument. The Company may accelerate the exercisability of any or all outstanding Options at
any time for any reason. 
 (ii) The Company may provide in a Grant Instrument that the Grantee may elect to exercise part or all of an
Option before it otherwise has become exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the
lesser of (A) the Exercise Price or (B) the Fair Market Value of such shares at the time of repurchase, and (C) any other restrictions determined by the Company. 
 (e) Grants to Non-Exempt Employees. Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as
amended, shall not be exercisable for at least six (6) months after the date of grant (except that such Options may become exercisable upon the Grantee’s death, Disability (as defined below) or retirement, or upon a Change in Control (as
defined below) or other circumstances permitted by applicable regulations). 
 (f) Termination of Employment, Disability, or Death.

 (i) Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Employer (as
defined below) as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by, or provide service to, the Employer for any reason other than Disability, death, termination for Misconduct (as defined below),
or as set forth in Section 5(f)(v) of this Plan, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within ninety (90) days after the date on which the Grantee ceases to be employed by, or provide
service to, 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. Except as otherwise provided, any of the Grantee’s Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date. 
  

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 (ii) In the event the Grantee ceases to be
employed by, or provide service to, the Employer on account of a termination by the Employer for Misconduct, any Option held by the Grantee shall terminate as of the thirtieth (30th) day after the date on which the Grantee ceases to be employed by, or provide service to, the Employer or the date on which such Option would otherwise expire, if earlier. In addition, notwithstanding any other
provisions of this Section 5, if the Company determines that the Grantee has engaged in conduct that constitutes Misconduct at any time while the Grantee is employed by, or providing service to, the Employer or after the Grantee’s
termination of employment or service, any Option held by the Grantee shall terminate as of the thirtieth (30th) day after the date on which such
Misconduct first occurred, or the date on which such Option would otherwise expire, if earlier. Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding
resulting in a forfeiture. 
 (iii) In the event the Grantee ceases to be employed by, or provide service to, the Employer
because the Grantee is Disabled, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one (1) year after the date on which the Grantee ceases to be employed by, or provide service to, 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. Except as otherwise provided, any of the Grantee’s Options that are not otherwise exercisable as of
the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date. 
 (iv) If the
Grantee dies while employed by, or providing service to, the Employer, all of the unexercised outstanding Options of Grantee shall become immediately exercisable and remain exercisable for a period of one (1) year from his or her date of death,
but in no event later than the date of expiration of the Option term. If the Grantee dies within ninety (90) days after the date on which the Grantee ceases to be employed or provide service on account of a termination specified in
Section 5(f)(i) above (or within such other period of time as may be specified by the Company), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one (1) year after the date on which the
Grantee ceases to be employed by, or provide service to, 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. Except as otherwise provided, any of the
Grantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date. 
 (v) Notwithstanding anything herein to the contrary, 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 a Grantee’s Options under applicable circumstances than the exercise period that is provided for in this Section 5(f) 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 Section 5(f). 
  

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 (vi) For purposes of this Section 5(f) and Section 6 below: 
 (A) “Employer” shall mean the Company and its parent and subsidiary corporations or other entities, as determined by the Board. 
 (B) “Employed by, or provide service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so
that, for purposes of exercising Options or SARs and satisfying conditions with respect to Stock Awards, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor or member of
the Board). 
 (C) “Disability” shall mean a Grantee’s becoming disabled within the meaning of the Employer’s long-term
disability plan applicable to the Grantee, as determined in the sole discretion of the Committee or its delegate. 
 (D)
“Misconduct” means (i) willful and continued failure by the Grantee to substantially perform the Grantee’s duties with the Company (other than any such failure resulting from the Grantee’s incapacity due to physical or
mental illness) or (ii) the willful engaging by the Grantee in conduct which is demonstrably injurious to the Company, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Grantee’s part shall be
deemed “willful” unless done, or omitted to be done, by the Grantee not in good faith or without reasonable belief that the Grantee’s act, or failure to act, was in the best interest of the Company. 
 (g) Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to
the Company. The Grantee shall pay the Exercise Price for an Option as specified by the Company (i) in cash, (ii) 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 approve. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect
to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 8 below). 
 (h)
Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the Company Stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first
time by a Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds One Hundred Thousand Dollars ($100,000), then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an employee of the Company or a parent or subsidiary (within the meaning of Section 424(f) of the Code) of the Company. 
 6. Stock Awards 
 The Company
may transfer shares of Company Stock or cash to an Employee, Non-Employee Director, or Key Advisor under a Stock Award. The following provisions are applicable to Stock Awards. 
  

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 (a) General Requirements. Shares of Company Stock issued or transferred pursuant to Stock Awards
may be issued or transferred for consideration or for no consideration, and subject to restrictions or no restrictions. Restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as set forth in the Grant
Instrument. The period of time during which the Stock Award will remain subject to restrictions will be designated in the Grant Instrument as the “Restriction Period.” 
 (b) Number of Shares. The Grant Instrument shall set forth the number of shares of Company Stock to be issued or transferred pursuant to a Stock
Award and the restrictions applicable to such shares. 
 (c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Employer (as defined in Section 5(f) above) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as
to all shares covered by the Stock Award as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Company may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate. 
 (d) Restrictions on Transfer and Legend on Stock Certificate. During the Restriction Period, a
Grantee may not sell, assign, transfer, pledge, or otherwise dispose of the shares of the Stock Award except to a successor under Section 9(a) below. Each certificate for Stock Awards shall contain a legend giving appropriate notice of the
restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Company may determine that it will not
issue certificates for Stock Awards until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for Stock Awards until all restrictions on such shares have lapsed. 
 (e) Right to Vote and to Receive Dividends. During the Restriction Period, the Grantee shall not have the right to vote shares subject to Stock
Awards or to receive any dividends or other distributions paid on such shares. 
 (f) Lapse of Restrictions. All restrictions imposed
on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions. The Company may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any
Restriction Period. 
 (g) Designation as Qualified Performance-Based Compensation. The Committee may determine that Stock Awards
granted to an Employee shall be considered “qualified performance-based compensation” under Section 162(m) of the Code. The provisions of this paragraph (g) shall apply to Stock Awards that are to be considered “qualified
performance-based compensation” under Section 162(m) of the Code. 
 (i) Performance Goals. When Stock Awards that are to be
considered “qualified performance-based compensation” are granted, the Committee shall establish in writing (A) the objective performance goals that must be met, (B) the performance period during 

  

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which the performance goals must be met (the “Performance Period”), (C) the threshold, target and maximum amounts that may be paid if the
performance goals are met, and (D) any other conditions that the Committee deems appropriate and consistent with the Plan and Section 162(m) of the Code. The performance goals may relate to the Employee’s business unit or the
performance of the Company and its parents and subsidiaries as a whole, or any combination of the foregoing. The Committee shall use objectively determinable performance goals based on one (1) or more of the following criteria: stock price,
earnings per share, net earnings, operating earnings, return on assets, stockholder return, return on equity, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one (1) or more objectives based on
meeting specified revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. 
 (ii) Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the Performance Period or during a period ending no later than the earlier of
(A) ninety (90) days after the beginning of the Performance Period or (B) the date on which twenty-five percent (25%) of the Performance Period has been completed, or such other date as may be required or permitted under
applicable regulations under Section 162(m) of the Code. The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially
uncertain at the time they are established and that the goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall
not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals. 
 (iii)
Maximum Payment. If Stock Awards, measured with respect to the Fair Market Value of Company Stock, are granted, not more than one hundred thousand (100,000) shares of Company Stock may be granted to an Employee under the Stock Award for
any Performance Period. 
 (iv) Announcement of Grants. The Committee shall certify and announce the results for each Performance
Period to all Grantees immediately following the announcement of the Company’s financial results for the Performance Period. If and to the extent that the Committee does not certify that the performance goals have been met, the grants of Stock
Awards for the Performance Period shall be forfeited or shall not be made, as applicable. 
 (v) Death, Disability or Other
Circumstances. The Committee may provide that Stock Awards shall be payable or restrictions on Stock Awards shall lapse, in whole or in part, in the event of the Grantee’s death or Disability during the Performance Period, or under other
circumstances consistent with the Treasury regulations and rulings under Section 162(m) of the Code. 
 (h) Restricted Stock
Units. The Committee or its delegate may grant restricted stock units (“Restricted Units”) to an Employee or Key Advisor. Each Restricted Unit shall represent the right of the Grantee to receive an amount in cash or Company Stock (as
determined by the Committee or its delegate) based on the value of the Restricted Unit, if performance goals established by the Committee are met or upon the lapse of a specified vesting period. A 

  

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Restricted Unit shall be based on the Fair Market Value of a share of Company Stock or on such other measurement base as the Committee or its delegate deems
appropriate. The Committee or its delegate shall determine the number of Restricted Units to be granted and the requirements applicable to such Restricted Units. 
 7. Stock Appreciation Rights 
 The Company may grant SARs to an Employee, Non-Employee
Director, or Key Advisor. The following provisions are applicable to SARs. 
 (a) General Requirements. The Company may grant SARs to
an Employee, Non-Employee Director or Key Advisor separately or in tandem with any Option (for all or a portion of the applicable Option). Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option
remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of the grant of the Incentive Stock Option. Unless otherwise specified in the Grant Instrument, the base amount of each SAR
shall be equal to the per share Exercise Price of the related Option or, if there is no related Option, the Fair Market Value of a share of Company Stock as of the date of grant of the SAR. 
 (b) Tandem SARs. In the case of tandem SARs, the number of SARs granted to a Grantee that shall be exercisable during a specified period shall not
exceed the number of shares of Company Stock that the Grantee may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Company Stock covered by such Option shall terminate.
Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Company Stock. 
 (c)
Exercisability. A SAR shall be exercisable during the period specified in the Grant Instrument and shall be subject to such vesting and other restrictions as may be specified. The Company may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised while the Grantee is employed by, or providing service to, the Employer or during the applicable period after termination of employment or service as described in
Section 5(f) above. A tandem SAR shall be exercisable only during the period when the Option to which it is related is also exercisable. The term of any SAR shall not exceed seven (7) years from the date of grant. 
 (d) Grants to Non-Exempt Employees. Notwithstanding the foregoing, SARs granted to persons who are non-exempt employees under the Fair Labor
Standards Act of 1938, as amended, shall have a base amount not less than one hundred percent (100%) of the Fair Market Value of the Company Stock on the date of grant, and may not be exercisable for at least six (6) months after the date
of grant (except that such SARs may become exercisable, as determined by the Committee, upon the Grantee’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations). 
 (e) Value of SARs. When a Grantee exercises SARs, the Grantee shall receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in Company Stock. The stock appreciation for a SAR is the amount 

  

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by which the Fair Market Value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in
Section 7(a) above. For purposes of calculating the number of shares of Company Stock to be received, shares of Company Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. Notwithstanding anything to the
contrary, the Company may pay the appreciation of a SAR in the form of cash, shares of Company Stock, or a combination of the two (2), so long as the ability to pay such amount in cash does not result in the Grantee incurring taxable income related
to the SAR prior to the Grantee’s exercise of the SAR. 
 (f) Number of SARs Authorized for Issuance. For purposes of
Section 3(a) of the Plan, SARs to be settled in shares of Company Stock shall be counted in full against the number of shares of Company Stock available for award under the Plan, regardless of the number of exercise gain shares issued upon the
settlement of the SAR. 
 8. Withholding of Taxes 
 (a) Required Withholding. All Grants under the Plan shall be subject to applicable federal (including FICA), state, and local tax withholding requirements. The Employer may require that the Grantee or other
person receiving or exercising Grants pay to the Employer the amount of any federal, state, or local taxes that the Employer is required to withhold with respect to such Grants, or the Employer may deduct from other wages paid by the Employer the
amount of any withholding taxes due with respect to such Grants. 
 (b) Election to Withhold Shares. If the Company so permits, a
Grantee may elect to satisfy the Employer’s income tax withholding obligation with respect to a Grant by having shares withheld up to an amount that does not exceed the Grantee’s minimum applicable withholding tax rate for federal
(including FICA), state, and local tax liabilities. The election must be in a form and manner prescribed by the Company. 
 9.
Transferability of Grants 
 (a) Nontransferability of Grants. Except as provided below, only the Grantee may exercise
rights under a Grant during the Grantee’s lifetime. A Grantee may not transfer those rights except (i) by will or by the laws of descent and distribution or (ii) with respect to SARs and Option grants other than Incentive Stock
Options, pursuant to a domestic relations order or otherwise as permitted by the Company. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee may exercise such rights. Any such successor
must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee’s will or under the applicable laws of descent and distribution. 
 (b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, the Grant Instrument may provide that a Grantee may transfer
Nonqualified Stock Options 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. 
  

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 10. Change in Control of the Company 
 (a) “Change in Control” means the determination (which may be made effective as of a particular date specified by the Board) by the Board, made
by a majority vote that a change in control has occurred, or is about to occur. Such a change shall not include, however, 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. Regardless of the vote of the Board or whether or not the Board votes, a Change in Control will be deemed to have occurred as of the first day any one (1) or more of the following subsections shall
have been satisfied: 
 (b) Any Person (as defined below) (other than the Person in control of the Company as of the date of this Plan, or
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a company owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock
of the Company), becomes the beneficial owner, directly or indirectly, of securities of the Company representing more than thirty-five percent (35%) of the combined voting power of the Company’s then outstanding securities; or 

(c) The stockholders of the Company approve: 
 (i) A plan of complete liquidation of the Company; 
 (ii) An agreement for the sale or disposition of all or substantially all of
the Company’s assets; or 
 (iii) A merger, consolidation or reorganization of the Company with or involving any other company, other
than a merger, consolidation or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization. 
 (d) However, in no event shall a Change in Control be deemed to have occurred, with respect to a Grantee, if the Grantee is part of a purchasing group
which consummates the Change in Control transaction. A Grantee shall be deemed “part of the purchasing group” for purposes of the preceding sentence if the Grantee is an equity participant or has agreed to become an equity participant in
the purchasing company or group (except for (i) passive ownership of less than five percent (5%) of the voting securities of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is
otherwise deemed not to be significant, as determined prior to the Change in Control by a majority of the continuing Non-Employee Directors). 
  

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 (e) For purposes of this Section 10: 
 (i) The term “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (A) the Company or any of its subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering of such securities; (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the
Company; or (E) an entity or entities which are eligible to file and have filed a Schedule 13G under Rule 13d-l(b) of the Exchange Act, which Schedule indicates beneficial ownership of fifteen percent (15%) or more of the outstanding
shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities. 
 11.
Consequences of a Change in Control 
 (a) Notice and Acceleration. Upon a Change in Control, unless the Company
determines otherwise, (i) the Company shall provide each Grantee with outstanding Grants written notice of such Change in Control, (ii) all outstanding Options and SARs shall automatically accelerate and become fully exercisable, and
(iii) the restrictions and conditions on all outstanding Stock Awards shall immediately lapse. 
 (b) Assumption of Grants. Upon
a Change in Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), each Grantee shall have the right to elect within thirty (30) days of receiving the notice described in paragraph
(a) immediately above one (1) of the following methods of treating his or her outstanding Options, SARs, and Stock Awards: (i) all outstanding Options and SARs that are not exercised shall be assumed by, or replaced with comparable
options or stock appreciation rights by, the surviving corporation (or a parent or subsidiary of the surviving corporation), and outstanding Stock Awards shall be converted to comparable stock awards of the surviving corporation (or a parent or
subsidiary of the surviving corporation); or (ii) each Grantee may surrender his or her outstanding Options, SARs, or Stock Awards in exchange for a payment by the Company, in cash or Company Stock (as elected by the Grantee) in an amount equal
to the amount by which the then Fair Market Value of the shares of Company Stock underlying the Option or SAR exceeds the Exercise Price of the Grantee’s unexercised Options or the base amount of the Grantee’s unexercised SARs or for the
then Fair Market Value of shares of Company Stock underlying the Grantee’s Stock Awards. 
 12. Requirements for Issuance or
Transfer of Shares 
 (a) Limitations on Issuance or Transfer of Shares. No Company Stock shall be issued or transferred in
connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with. Any Grant made shall be conditioned on the Grantee’s undertaking in writing to
comply with such restrictions on his or her 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 the Plan 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. 
  

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 (b) Lock-Up Period. If so requested by the Company or any representative of the underwriters (the
“Managing Underwriter”) in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended (the “Securities Act”), a Grantee (including any successor or assigns) shall not sell
or otherwise transfer any shares or other securities of the Company during the thirty (30) day period preceding and the one hundred eighty (180)-day period following the effective date of a registration statement of the Company filed under the
Securities Act for such underwriting (or such shorter period as may be requested by the Managing Underwriter and agreed to by the Company) (the “Market Standoff Period”). The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market Standoff Period. 
 13. Amendment and Termination of the
Plan 
 (a) Amendment. The Board or its delegate may amend or terminate the Plan at any time; provided, however, that neither
the Board nor its delegate shall have the authority to amend the Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable laws, or to comply with applicable stock exchange requirements.

 (b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth (10th) anniversary of its effective date, unless the Plan is terminated earlier by the Company or is extended by the Company with
the approval of the stockholders. 
 (c) Termination and Amendment of Outstanding Grants. A termination or amendment of the
Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Company acts under Section 19(b) below. The termination of the Plan shall not impair the power and authority of
the Company with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 19(b) below or may be amended by agreement of the Company and the Grantee consistent with
the Plan. 
 (d) Governing Document. The Plan shall be the controlling document. No other statements, representations, explanatory
materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. 
 14. Funding of the Plan 
 This
Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any
Grant, including unpaid installments of Grants. 
  

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 15. Rights of Participants 
 Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key Advisor, or other person to any claim or right to be granted a Grant under
this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights. 
 16. No Fractional Shares 
 No
fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Company shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 
 17. Headings 
 Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall
control. 
 18. Effective Date of the Plan 
 The Plan shall be effective on June 10, 2005. 
 19. Miscellaneous 
 (a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right
of the Company to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who
become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Company may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company, the parent or any of their subsidiaries in substitution for a stock
option or stock award grant made by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Company shall prescribe the
provisions of the substitute grants. 
 (b) Compliance with Law. The Plan, the exercise of Options and SARs, and the obligations of
the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to Section 16 of the
Exchange Act it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that the Plan
and applicable Grants under the Plan comply with the applicable provisions of Section 162(m) of the Code and Section 422 of the Code. To the extent that any legal requirement of Section 16 of the Exchange Act or Section 162(m) or
Section 422 of the 

  

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Code as set forth in the Plan ceases to be required under Section 16 of the Exchange Act or Section 162(m) or Section 422 of the Code, that
Plan provision shall cease to apply. The Company may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Company may also adopt rules regarding the
withholding of taxes on payments to Grantees. The Company may, in its sole discretion, agree to limit its authority under this Section 19(b). 
 (c) Employees Subject to Taxation Outside the United States. With respect to Grantees who are subject to taxation in countries other than the United States, Grants may be made on such terms and conditions as the Company deems
appropriate to comply with the laws of the applicable countries, and the Company may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws. 
 (d) Governing Law. The validity, construction, interpretation, and effect of the Plan and Grant Instruments issued under the Plan shall be
governed and construed by and determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof. 
  

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