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Executive Retention Bonus Agreement

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Exhibit 10.5

INSPIRE PHARMACEUTICALS, INC.

EXECUTIVE RETENTION BONUS AGREEMENT

This EXECUTIVE RETENTION BONUS AGREEMENT (this " Agreement" ) is effective as of March 22, 2011 (the " Effective Date" ), by and between Inspire Pharmaceuticals, Inc. (the " Company" ), and Joseph Spagnardi (the " Executive" ).

WHEREAS , the Company desires to provide to the Executive a Retention Bonus (as defined below) and Retention Enhancement Payment (as defined below) upon the terms and conditions set forth herein.

NOW, THEREFORE , in consideration of the promises and the mutual agreements contained herein, the Company and the Executive hereby agree as follows:

ARTICLE 1

DEFINITIONS

1.01 " Affiliate" means any person directly or indirectly controlling, controlled by, or under direct or indirect common control with the Company, as applicable. For the purposes of this definition, the term " control" when used with respect to any person means the power to direct or cause the direction of management or policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

1.02 " Board" means the Board of Directors of the Company.

1.03 " Bonus Payments" means the Retention Bonus and any Retention Enhancement Payment, collectively.

1.04 " Bonus Payment Date" means the first anniversary of the Effective Date.

1.05 " Cause" means any event which constitutes Cause as defined in the Executive' s Employment Agreement, or if there is no effective Employment Agreement between the Company and the Executive that defines " Cause" , then " Cause" means (i) the deliberate and continued failure by the Executive to devote substantially all of his business time and best efforts to the performance of the Executive' s duties after a demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Executive has not substantially performed such duties; (ii) the engaging by the Executive in gross misconduct which is injurious to the Company, monetarily or otherwise, including but not limited to, fraud or embezzlement by the Executive; or (iii) the Executive' s conviction (or entering into a plea bargain admitting guilt) of any felony.

1.06 " Code" means the Internal Revenue Code of 1986, as amended, from time to time.

1.07 " CD&L Event" means (i) the acquisition, sale or licensing of significant pharmaceutical products, development compounds, research and development assets and technologies, (ii) a significant strategic collaboration, joint venture, co-promotion, partnership, or other arrangement with a pharmaceutical, biotechnology, healthcare or related company, or (iii) a significant merger, acquisition, or asset sale, involving the Company, including, without limitation, the sale or merger of the Company or substantially all of the assets of the Company.

1

1.08 " Good Reason" means any event which constitutes Good Reason as defined in the Executive' s Employment Agreement, or if there is no effective Employment Agreement between the Company and the Executive that defines " Good Reason" , then " Good Reason" means the occurrence of any one of the following events without either (x) the Executive' s express prior written consent or (y) full cure within 30 days after the Executive gives written notice to the Company: (i) a reduction, other than a temporary one, in the Executive' s authority, duties, responsibilities, or reportin
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