Inspire Pharmaceuticals, Inc. Change in Control Severance Benefit Plan

Exhibit 10.2

Inspire Pharmaceuticals, Inc.

Change in Control

Severance Benefit Plan

Effective January 28, 2005

(amended and restated as of July 8, 2009)

Preamble

Inspire Pharmaceuticals, Inc. (the “Company”) established the Inspire Pharmaceuticals, Inc. Change in Control Severance Benefit Plan (this “Plan”) for the purpose of providing severance benefits to certain Employees whose employment terminates following a Change in Control of the Company as provided herein. This Plan constitutes a formal employee welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

This Plan, as set forth herein, is intended to help retain qualified employees, maintain a stable work environment, and alleviate in part or in full financial hardships that may be experienced by certain of those Employees of the Company and its U.S. affiliated companies, whose employment is terminated for certain reasons. In essence, benefits under this Plan are intended to be supplemental unemployment benefits. This Plan is not intended to be included in the definitions of “employee pension benefit plan” and “pension plan” set forth under Section 3(2) of ERISA as a “severance pay arrangement” within the meaning of Section 3(2)(b)(i) of ERISA. Rather, this Plan is intended to meet the descriptive requirements of a plan constituting a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations , Section 2510.3-2(b). Accordingly, the benefits paid by this Plan are not deferred compensation and no employee shall have a vested right to such benefits.

This Plan shall continue until such time as it is amended or terminated in accordance with Article VI.

Table of Contents

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ARTICLE I

DEFINITIONS

When used herein, the following terms shall have the meanings set forth below.

Section 1.01 “Administrative Committee” means the Compensation Committee of the Board of Directors of the Company or its designee.

Section 1.02 “Annual Base Rate of Pay” means fifty-two (52) times the Employee’s highest Weekly Base Rate of Pay during the fifty-two (52) week period prior to his or her termination or, if greater, the Employee’s Weekly Base Rate of Pay in effect immediately prior to the last Change in Control preceding his or her termination.

Section 1.03 “Benefits” means the benefits that a Participant is eligible to receive pursuant to Article III of this Plan.

Section 1.04 “Change in Control” means the determination (which may be made effective as of a particular date specified by the Board of Directors of the Company) by the Board of Directors of the Company, 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 of Directors of the Company or whether or not the Board of Directors 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:

(a) Any Person (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:

(i) Thirty-five percent (35%) of the combined voting power of the Company’s then outstanding securities, with respect to all outstanding options and awards issued under any Company-sponsored equity compensation plan on or prior to July 8, 2009; or

(ii) Fifty percent (50%) of the combined voting power of the Company’s then outstanding securities, with respect to all options and awards issued under any Company-sponsored equity compensation plan following July 8, 2009; provided, however, in the event there is a Change in Control during the period from July 8, 2009 through July 8, 2010, the thirty-five percent (35%) threshold set forth in subsection 1.04(a)(i) above shall apply to the grants issued during the period from July 8, 2009 through July 8, 2010; or

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(b) 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 entity, 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.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Employee, if the Employee is part of a purchasing group which consummates the Change in Control transaction. The Employee shall be deemed “part of the purchasing group” for purposes of the preceding sentence if the Employee is an equity participant or has agreed to become an equity participant in the purchasing entity 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 non-employee continuing Directors of the Board of Directors of the Company).

Section 1.05 “Company” means Inspire Pharmaceuticals, Inc. and its successors and its or their U.S. affiliated companies.

Section 1.06 “Comparable Position” means employment with the Company or a successor employer in which the individual’s level of responsibilities would not constitute a Demotion. For this purpose, a position shall not be a Comparable Position if such position would require the Employee’s principal business location to be relocated more than fifty (50) miles from the Employee’s principal business location immediately prior to the Change in Control.

Section 1.07 “Demotion” means continued employment in a position that results in a reduction in the Employee’s base salary or Incentive Bonus, or a position that is one (1) or more levels lower on a Company-recognized career ladder, whether or not such employment is with the Company or a successor employer.

Section 1.08 “Decline to Relocate” means a termination of a Participant’s employment as a result of his or her rejection of an offer of continued employment in the same position or a Comparable Position that would require relocation of the Participant’s principal business location of more than fifty (50) miles.

Section 1.09 “Employee” means any regular full-time or regular part-time employee of the Company who is employed in the United States and as to whom the terms and conditions of employment are not covered by a collective bargaining agreement unless the collective

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bargaining agreement specifically provides for coverage under this Plan. For this purpose, a regular part-time employee shall be an employee who is regularly scheduled to work between twenty (20) to thirty (30) hours per week. The term “Employee” shall not include (i) temporary employees (including college co-ops, summer employees, high school coops, flexible workforce employees and any other such temporary classifications), (ii) any individual characterized by the Company as an “independent contractor” or as a “contract worker,” (iii) officers and other employees of the Company who are parties to employment agreements or transition agreements, (iv) officers or other employees of the Company who participate in any severance plan or agreement of the Company (other than this Plan) that provides for the payment of severance benefits in connection with a Change in Control of the Company and such individual qualifies for the payment of such benefits, or (v) any other individual who is not treated by the Company as an employee for purposes of withholding federal income taxes, regardless of any contrary Internal Revenue Service, governmental, or judicial determination relating to such employment status or tax withholding. In the event that an individual engaged in an independent contractor or similar non-employee capacity is subsequently reclassified by the Company, the Internal Revenue Service, or a court as an employee, such individual, for purposes of this Plan, shall be deemed an Employee from the actual (and not effective) date of such classification, unless expressly provided otherwise by the Company.

Section 1.10 “Employment Service Date” means the first day on which an individual became an Employee.

Section 1.11 “Employment Termination Date” means the date on which the employment of the Employee by the Company is terminated.

Section 1.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Section 1.13 “Incentive Bonus” means the greater of the maximum of the bonus opportunity range applicable to the Employee for the Plan Year immediately preceding his or her termination or the maximum of the bonus opportunity range applicable to the Employee for the Plan Year immediately preceding the Change in Control.

Section 1.14 “Misconduct” means (i) willful and continued failure by the Employee to substantially perform the Employee’s duties with the Company (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness) or (ii) the willful engaging by the employee 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 Employee’s part shall be deemed “willful” unless done, or omitted to be done, by the Employee not in good faith or without reasonable belief that the Employee’s act, or failure to act, was in the best interest of the Company.

Section 1.15 “Participant” means any Terminated Employee eligible for Benefits in accordance with Article II.

Section 1.16 “Person” shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended, as modified and used in Sections 13(d) and 14(d) thereof,

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except that such term shall not include (i) the Company or any of its subsidiaries; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company; or (v) an entity or entities which are eligible to file and have filed a Schedule 13G under Rule 13d-l(b) of the Securities Exchange Act of 1934, as amended, 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.

Section 1.17 “Plan” means this Change in Control Severance Benefit Plan, as set forth herein, and as the same may from time to time be amended.

Section 1.18 “Plan Year” means the period commencing on each January 1 during which this Plan is in effect and ending on the subsequent December 31.

Section 1.19 “Terminated Employee” means an Employee who has experienced an Employment Termination Date.

Section 1.20 “Termination Due to Change in Control” means a termination of a Participant’s employment by the Company within two (2) years following a Change in Control that is involuntary or that is as a result of his or her written rejection of an offer of continued employment with the Company or an affiliate if such employment is not a Comparable Position.

Section 1.21 “Voluntary Resignation” means a resignation that is a voluntary separation from employment initiated by the Employee.

Section 1.22 “Weekly Base Rate of Pay” means:

(a) for a regular full-time Employee paid on a monthly basis, the Employee’s rate of pay for one (1) payroll period multiplied by twelve-fifty-seconds (  ¹² / 52 );

(b) for a regular full-time Employee paid on a weekly payroll period basis, the Employee’s rate of pay for one (1) payroll period;

(c) for a regular full-time Employee paid on a bi-monthly payroll period basis, the Employee’s rate of pay for one (1) payroll period multiplied by twenty –four-fifty-seconds (  ²⁴ / 52 ); or

(d) for a regular part-time Employee paid on any hourly basis, the Employee’s highest base hourly rate during the last twelve (12) months multiplied by the average number of weekly hours worked during that twelve (12)-month period.

Section 1.23 “Years of Service” means the total number of Participant’s full years of active service with the Company subject to the following rules:

(a) For purposes of determining a Participant’s number of Years of Service, a full year of active service is any consecutive twelve (12)-month period of service occurring after

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the Participant’s most recent break in service lasting one (1) year or more. For example, a Participant whose Employment Service Date is June 21, 2003 will be credited with one (1) Year of Service at the end of the business day June 20, 2004 provided that he or she has been continuously employed by the Company through that date.

(b) For purposes of determining a Participant’s number of Years of Service, such Participant shall be treated as if his Employment Termination Date was December 31 of the calendar year in which his or her actual Employment Termination Date occurs.

(c) Any break in a Participant’s active service for a period of less than one (1) year shall be disregarded for purposes of calculating a Participant’s number of Years of Service. For example, a Participant who was hired on June 1, 2000, was terminated on February 3, 2002, rehired on December 18, 2002, and terminated again on March 3, 2003 shall have three (3) Years of Service under the Plan.

ARTICLE II

PARTICIPATION AND ELIGIBILITY FOR BENEFITS

Section 2.01 Eligibility .

(a) Subject to Sections 2.01(b), 2.02, and 2.03, any Terminated Employee (other than an employee who is employed in Puerto Rico) who has experienced a Termination Due to Change in Control shall become a Participant and shall be eligible for Benefits in accordance with the provisions of this Plan.

(b) Notwithstanding anything herein to the contrary, a Terminated Employee shall not be considered to have incurred a Termination Due to Change in Control for the purposes of this Plan, if his or her employment is discontinued due to (i) a Voluntary Resignation; (ii) a rejection of an offer of a Comparable Position that is not a Decline to Relocate; or (iii) discharge for Misconduct.

(c) Notwithstanding anything herein to the contrary, if, at the time of his or her termination of employment, an Employee or former employee is receiving or entitled to benefits pursuant to an agreement with the Company, another Company-sponsored severance or separation benefit plan or program, or a Company-sponsored long-term disability plan, then such Employee or former employee shall not be eligible for Benefits under this Plan.

Section 2.02 Termination of Eligibility for Benefits . A Participant shall cease to participate in this Plan, and all Benefits shall cease (other than those Benefits that have vested or been triggered hereunder) upon the occurrence of the earliest of:

(a) Termination of this Plan prior to, or more than (2) two years following, a Change in Control;

(b) Completion of payment to the Participant of the Benefits for which the Participant is eligible; and

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(c) The occurrence of the Employee’s Misconduct on or before Employee’s Employment Termination Date.

Section 2.03 General Release . Notwithstanding anything in this Plan to the contrary, unless determined otherwise by the Administrative Committee in its sole discretion, no Benefits shall be due or paid under this Plan to any Employee, unless the Employee executes (and does not rescind) a written general release, in the form attached hereto as Exhibit B .

ARTICLE III

BENEFITS

Section 3.01 Amount of Severance Pay . The amount of severance pay payable to a Participant shall be equal to the number of weeks of severance pay that corresponds to the Participant’s Annual Base Rate of Pay on the table included on Exhibit A to this Plan multiplied by the sum of (i) the Participant’s Weekly Base Rate of Pay; and (ii) one-fifty-second (  ¹ / 52 ) of the Participant’s Incentive Bonus, if any.

Section 3.02 Health and Welfare Benefits . For a period of time immediately following the Date of Termination equal to the applicable number of weeks of severance pay to which the Participant is entitled under Section 3.01 of this Plan, the Company shall arrange to provide the Participant (which includes the Participant’s eligible dependents for