DIRECTOR COMPENSATION POLICY

EXHIBIT 10.63

I NSPIRE P HARMACEUTICALS , I NC .

A MENDED AND R ESTATED

D IRECTOR C OMPENSATION P OLICY

All non-employee members (each, a “Director” and, collectively, the “Directors”) of the Inspire Pharmaceuticals, Inc. (the “Company”) Board of Directors (the “Board”) shall receive the following compensation pursuant to this Amended and Restated Director Compensation Policy (this “Policy”):

1. Each Director shall receive $30,000 annually to cover general availability and participation in meetings and conference calls of the Board;

2. Each Audit Committee member shall receive $10,000 annually to cover general availability and participation in Audit Committee conference calls and meetings;

3. Each Corporate Governance Committee member shall receive $10,000 annually to cover general availability and participation in Corporate Governance Committee conference calls and meetings;

4. Each Compensation Committee member shall receive $10,000 to cover general availability and participation in Compensation Committee conference calls and meetings;

5. Each Development Committee member shall receive $10,000 to cover general availability and participation in Development Committee conference calls and meetings;

6. The Chairman of the Board shall receive an additional $30,000 annually. The Chairman of each committee identified above shall receive an additional $10,000 annually; and

7. Each Director shall receive $3,500 per day, plus reasonable out-of-pocket travel expenses, to cover preparation for, attendance at and participation in the meetings, seminars and other events comprising the Company’s “Science Day”, including any follow-up discussions relating to the issues discussed at the Science Day (it being understood that such compensation shall be paid only to those Directors that attend a Science Day and that the events constituting a Science Day may take place over a period of time covering up to 48 hours).

1. A stock option grant in the amount of 50,000 shares will be granted to each Director upon initial election to the Board, which stock option will vest over three years commencing on the date of grant as follows: 20,000 shares in year one (1/4 ^th of such 20,000 shares per quarter), 15,000 shares in year two (1/4 ^th of such 15,000 shares per quarter) and 15,000 shares in year three (1/4 ^th of such 15,000 shares per quarter); provided , however , that all vesting will cease if the Director resigns from the Board or otherwise ceases to serve as Director, unless the Board determines that the circumstances warrant continuation of vesting;

2. A stock option grant in the amount of 30,000 shares shall be granted to each Director at the time of each annual meeting of the Board of Directors, which stock option will vest over the one year period commencing on the date of grant (1/4 ^th of such 30,000 shares per quarter); provided , however , that all vesting will cease if the Director resigns from the Board or otherwise ceases to serve as Director, unless the Board determines that the circumstances warrant continuation of vesting; and

3. A stock option grant in the amount of 10,000 shares shall be granted to the Chairman of the Board at the time of the annual meeting of the Board of Directors, which stock option grant will vest over the one year period commencing on the date of grant (1/4 ^th of such 10,000 shares per quarter); provided , however , that all vesting will cease if such person resigns from the position of Chairman of the Board, unless the Board determines that the circumstances warrant continuation of vesting.