INSPIRE PHARMACEUTICALS, INC. 1995 STOCK PLAN NONQUALIFIED STOCK OPTION

Exhibit 10.4

INSPIRE PHARMACEUTICALS, INC.

1995 STOCK PLAN

NONQUALIFIED STOCK OPTION

Inspire Pharmaceuticals, Inc. (the “Company”) has granted to you a Nonqualified Stock Option (the “Option”) under the Inspire Pharmaceuticals, Inc. 1995 Stock Plan, as amended (the “Plan”). The terms of the Option are set forth in the Nonqualified Stock Option Grant Agreement provided to you (the “Agreement”). The following provides a summary of the key terms of the Option; however, you should read the entire Agreement, along with the terms of the Plan, to fully understand the Option.

SUMMARY OF NONQUALIFIED OPTION GRANT

No.         

INSPIRE PHARMACEUTICALS, INC.

1995 STOCK PLAN

NONQUALIFIED STOCK OPTION GRANT AGREEMENT

This NONQUALIFIED STOCK OPTION GRANT AGREEMENT (the “Agreement”), dated as of                      (the “Date of Grant”), is delivered by Inspire Pharmaceuticals, Inc. (the “Company”) to                      (the “Grantee”).

RECITALS

A. The Inspire Pharmaceuticals, Inc. 1995 Stock Plan, as amended (the “Plan”) provides for the grant of options to purchase shares of common stock of the Company. The Company has decided to make a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders.

B. The Board of Directors of the Company (the “Board”) has delegated its authority to administer the Plan to the Compensation Committee (the “Committee”).

NOW, THEREFORE , the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Option . Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee a Nonqualified Stock Option (the “Option”) to purchase                      shares of common stock of the Company (“Shares”) at an exercise price of                      per Share (the “Exercise Price”). The Option shall become exercisable according to Paragraph 2 below.

2. Exercisability of Option . The Option shall become exercisable in the manner provided below, if the Grantee is Employed by, or Providing Service to, the Employer (as defined below) on the applicable date. For this purpose, the term “Shares” refers to the number of shares underlying that portion of the Option that vests in the manner described under Vest Type and Full Vest Date. The term “Vest Type” describes how the Option covering those shares will vest before the Full Vest Date. For example, if Vest Type is “monthly”, that Option will vest with respect to those shares on a pro rata basis on each monthly anniversary of the Date of Grant. The term “Full Vest Date” is the date on which that portion of the Option covering all of the corresponding shares set forth in the “Shares” column will be fully vested.

The exercisability of the Option is cumulative, but shall not exceed one hundred percent (100%) of the Shares subject to the Option. If the foregoing schedule would produce fractional Shares, the number of Shares for which the Option becomes exercisable shall be rounded down to the nearest whole Share.

If the Grantee dies while Employed by, or Providing Service to, the Employer, all of the unexercised Shares shall become immediately exercisable. If the Grantee becomes disabled

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within the meaning of the Employer’s long-term disability plan applicable to the Grantee while employed by the Employer, all of the unexercised Shares shall become immediately exercisable.

3. Term of Option .

(a) The Option shall have a term of      years from the Date of Grant and shall terminate at the expiration of that period, unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan.

(b) Unless otherwise determined by the Committee (as provided in Sections 6(b) and (c) of the Plan), the Option shall automatically terminate upon the happening of the first of the following events:

(i) The expiration of the ninety (90) day period after the Grantee ceases to be Employed by, or Provide Service to, the Employer (as defined below), if the termination is for any reason other than Disability (as defined below), death or Misconduct (as defined below).

(ii) The expiration of the one (1) year period after the Grantee ceases to be Employed by, or Provide Service to, the Employer on account of the Grantee’s Disability.

(iii) The expiration of the one (1) year period after the Grantee ceases to be Employed by, or Provide Service to, the Employer, if the Grantee dies (x) while Employed by, or Providing Service to, the Employer or (y) within ninety (90) days after the Grantee ceases to be so employed or provide such services on account of a termination described in subparagraph (i) above.

(iv) The expiration of the thirty (30) day period after the date on which the Grantee ceases to be Employed by, or Provide Service to, the Employer on account of a termination by the Employer for Misconduct. In addition, notwithstanding the prior provisions of this Paragraph 3, if the Employer 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, the Option shall terminate as of the thirtieth (30 ^th ) day after the date on which such Misconduct first occurred.

(v) For purposes of this Agreement:

(1) The term “Employer” shall mean the Company and its parent and subsidiary corporations or other entities, as determined by the Committee.

(2) “Employed by, or Provide Service to, the Employer” shall mean employment or service as an Employee, Key Advisor (as defined below) or member of the Board (so that, for purposes of exercising Options, 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). “Key Advisor” means consultants and advisors who perform services for the Company or any of its parents or subsidiaries.

(3) “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.

(4) “Misconduct” means (i) willful and continued failure by the Grantee to substantially perform the Grantee’s duties with the Employer (other than any such

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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 Employer, 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 Employer.

Notwithstanding the foregoing, in no event may the Option be exercised after the date that is immediately before the      anniversary of the Date of Grant. Any portion of the Option that is not exercisable at the time the Grantee ceases to be Employed by, or Provide Service to, the Employer shall immediately terminate.

4. Exercise Procedures .

(a) Subject to the provisions of Paragraphs 2 and 3 above, the Grantee may exercise part or all of the exercisable Option by giving the Company written notice of intent to exe