Exhibit 10.31
RELEASE
     Certain capitalized terms used in this Release are defined in the
Employment Agreement by and between Somaxon Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and Kenneth Cohen (“Executive”) dated as of
August 15, 2003 (as amended to date, the “Agreement”), which Executive has
previously executed and of which this Release is a part. This Release shall be
effective on the eighth (8th) day following Executive’s execution hereof (the
“Effective Date”).
     Pursuant to the Agreement, and in consideration of and as a condition
precedent to the payments and benefits provided under Section 7(d) of the
Agreement, Executive hereby furnishes the Company with this Release.
     1. Termination of Employment and Director Status. Executive’s employment by
the Company shall terminate effective as of December 31, 2007 (the “Termination
Date”). Executive hereby irrevocably resigns from his position as President and
Chief Executive Officer (and any other titles or officer positions he may hold)
of the Company (and any of its affiliates and subsidiaries) effective as of the
Termination Date, and as a member of the Board of Directors of the Company
effective as of the earlier of the date that the Company announces a new,
permanent Chief Executive Officer or the Company’s 2008 annual meeting of
stockholders. Executive shall execute any additional documentation necessary to
effectuate such resignations. Executive’s personnel file at the Company will
reflect that Executive voluntarily resigned. Notwithstanding the foregoing, the
Company shall not oppose Executive’s claim for unemployment benefits on the
grounds that he resigned and Executive’s termination shall be treated as
involuntary for all other purposes under the Agreement.
     2. Compensation Through Termination Date. On the Termination Date, the
Company shall issue Executive his final paycheck, reflecting (a) his earned but
unpaid base salary at the annualized rate of $350,000 per year through the
Termination Date, and (b) all accrued, unused vacation and sick leave due
Executive through the Termination Date. Subject to Section 4 below, Executive
acknowledges and agrees that with his final check, and the expense
reimbursements described in the following paragraph, Executive will have
received all monies, bonuses, commissions, expense reimbursement, vacation pay,
or other compensation he earned or was due during his employment by the Company.
Except as provided in Section 4 below, Executive’s entitlement to benefits from
the Company, and eligibility to participate in the benefit plans of the Company,
shall cease on the Termination Date.
     3. Expense Reimbursements. The Company, within thirty (30) days after the
Termination Date, will reimburse Employee for any and all reasonable and
necessary business expenses incurred by Employee in connection with the
performance of his job duties prior to the Termination Date, which expenses
shall be submitted to the Company with supporting receipts and/or documentation
no later than fifteen (15) days after the Termination Date.
     4. Severance Benefits.
          (a) Cash Severance and Medical Benefits. Contingent upon the
effectiveness of this Release, the Company shall provide to Executive the
following severance benefits, which shall be the exclusive severance benefits
payable to Executive:
               (i) A cash payment equal to $70,000, representing Executive’s
annual bonus for 2007, payable in a lump sum within ten (10) days following the
later of (A) the Termination Date, or (B) the Effective Date;

 

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               (ii) A cash payment equal to $345,937, representing an amount
equal to Executive’s annual base salary for the twelve (12) months prior to the
Termination Date, payable in a lump sum within ten (10) days following the later
of (A) the Termination Date, or (B) the Effective Date;
               (iii) The Company shall pay all costs which the Company would
otherwise have incurred to maintain all of Executive’s health, welfare and
retirement benefits (either on the same or substantially equivalent terms and
conditions) if Executive had continued to render services to the Company for
twelve (12) continuous months after the Termination Date; and
               (iv) Notwithstanding any provision to the contrary in Executive’s
options under the Option Plan or other plan (including, without limitation, the
expiration dates or vesting provisions thereof), the unvested portion, if any,
of Executive’s outstanding options (and any unvested shares issued upon the
exercise of such stock options) shall be deemed to have vested on the
Termination Date with respect to the number of shares that would have vested had
Executive remained employed by the Company through December 31, 2008, and,
subject to such acceleration of vesting, vesting of such options (and shares)
shall cease as of the Termination Date. Executive shall have 180 days from the
last day of Executive’s service on the Company’s Board of Directors. Subject to
the foregoing, as of the Termination Date, all of Executive’s unvested options
will terminate. Executive acknowledges that, to the extent he exercises any of
his incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended) more than ninety (90) days following the
Termination Date, such incentive stock options will become non-qualified stock
options and, upon exercise, such options will be taxed at exercise like
non-qualified stock options;
               (v) The Company shall pay to Executive a contingent cash payment
of $70,000, which payment will be payable only if the U.S. Food and Drug
Administration accepts the Company’s New Drug Application (“NDA”) for SILENORTM
(the “NDA Bonus”). The NDA bonus will not be payable if such acceptance does not
occur on or prior to December 31, 2009. In the event of a Change in Control
prior to acceptance of the NDA for SILENORTM, the NDA Bonus shall be paid upon
consummation of the Change in Control.
     5. Confirmation of Continuing Obligations. Executive hereby confirms his
obligations under Sections 8, 9 and 10 of the Agreement and the Company’s
proprietary information and inventions agreement.
     6. Release. On Executive’s own behalf and on behalf of Executive’s heirs,
estate and beneficiaries, Executive hereby waives, releases, acquits and forever
discharges the Company, and each of its Subsidiaries and affiliates, and each of
their respective past or present officers, directors, agents, servants,
employees, shareholders, predecessors, successors and assigns, and all persons
acting by, through, under, or in concert with them, or any of them, of and from
any and all suits, debts, liens, contracts, agreements, promises, claims,
liabilities, demands, causes of action, costs, expenses, attorneys’ fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, fixed or contingent, suspected and unsuspected,
disclosed and undisclosed (“Claims”), from the beginning of time to the date
hereof, including without limitation, Claims that arose as a consequence of
Executive’s employment with the Company, or arising out of the termination of
such employment relationship, or arising out of any act committed or omitted
during or after the existence of such employment relationship, all up through
and including the date on which this Release is executed, including, but not
limited to, Claims which were, could have been, or could be the subject of an
administrative or judicial proceeding filed by Executive or on Executive’s
behalf under federal, state or local law, whether by statute, regulation, in
contract or tort. This Release includes, but is not limited to: (1) Claims for
intentional and negligent infliction of emotional distress; (2) tort Claims for
personal injury; (3) Claims or demands related to salary, bonuses, commissions,
stock, stock options, or any other

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ownership interest in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, front pay, back pay or any other form of
compensation; (4) Claims for breach of contract; (5) Claims for any form of
retaliation, harassment, or discrimination; (6) Claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended, the federal Age Discrimination in
Employment Act of 1967, as amended (“ADEA”), the federal Employee Retirement
Income Security Act of 1974, as amended, the federal Americans with Disabilities
Act of 1990, the California Fair Employment and Housing Act, as amended, and the
California Labor Code; and (7) all other Claims based on tort law, contract law,
statutory law, common law, wrongful discharge, constructive discharge, fraud,
defamation, emotional distress, pain and suffering, breach of the implied
covenant of good faith and fair dealing, compensatory or punitive damages,
interest, attorneys’ fees, and reinstatement or re-employment. If any court
rules that Executive’s waiver of the right to file any administrative or
judicial charges or complaints is ineffective, Executive agrees not to seek or
accept any money damages or any other relief upon the filing of any such
administrative or judicial charges or complaints.
     Executive acknowledges that he has read and understand Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend
to claims which the creditor does not know or suspect to exist in his or her
favor at the time of executing the release, which if known by him or her must
have materially affected his or her settlement with the debtor.” Executive
hereby expressly waives and relinquishes all rights and benefits under that
section and any law of any jurisdiction of similar effect with respect to his
release of any unknown Claims Executive may have against the Company.
     Notwithstanding the foregoing, nothing in this Release shall constitute a
release by Executive of any claims or damages based on any right Executive may
have to enforce the Company’s executory obligations under the Agreement, any
right Executive may have to vested or earned compensation and benefits, or
Executive’s eligibility for indemnification under applicable law, Company
governance documents, Executive’s indemnification agreement with the Company or
under any applicable insurance policy with respect to Executive’s liability as
an employee or officer of the Company.
     If Executive is forty (40) years of age or older, Executive acknowledges
that he is knowingly and voluntarily waiving and releasing any rights he may
have under ADEA. Executive also acknowledges that the consideration given under
the Agreement for the Release is in addition to anything of value to which he
was already entitled. Executive further acknowledges that he has been advised by
this writing, as required by the ADEA, that: (A) his waiver and release do not
apply to any rights or claims that may arise on or after the date he executes
this Release; (B) Executive has the right to consult with an attorney prior to
executing this Release; (C) Executive has twenty-one (21) days to consider this
Release (although he may choose to voluntarily execute this Release earlier);
(D) Executive has seven (7) days following the execution of this Release to
revoke the Release; and (E) this Release shall not be effective until the date
upon which the revocation period has expired, which shall be the 8th day after
this Release is executed by Executive, without Executive’s having given notice
of revocation.
     Executive further acknowledges that Executive has carefully read this
Release, and knows and understands its contents and its binding legal effect.
Executive acknowledges that by signing this Release, Executive does so of
Executive’s own free will, and that it is Executive’s intention that Executive
be legally bound by its terms. Executive further acknowledges that if he does
not sign this release within fifty (50) days following the Termination Date, or
revokes this Release within the foregoing revocation period, if applicable,
Executive shall not be entitled to the payments and benefits provided under
Sections 7(d) of the Agreement.

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     7. Section 409A of the Code.
          (a) The Agreement and this Release are not intended to provide for any
deferral of compensation subject to Section 409A of the Code, and, accordingly,
the severance payments payable under Section 7(d) of the Agreement shall be paid
no later than the later of: (i) the fifteenth (15th) day of the third month
following Executive’s first taxable year in which such severance benefit is no
longer subject to a substantial risk of forfeiture, and (ii) the fifteenth
(15th) day of the third month following first taxable year of the Company in
which such severance benefit is no longer subject to substantial risk of
forfeiture, as determined in accordance with Code Section 409A and any Treasury
Regulations and other guidance issued thereunder. To the extent applicable, this
Agreement shall be interpreted in accordance with Code Section 409A and
Department of Treasury regulations and other interpretive guidance issued
thereunder.
          (b) As provided in Internal Revenue Notice 2006-79, notwithstanding
any other provision of this Agreement, with respect to an election or amendment
to change a time and form of payment under this Agreement made on or after
January 1, 2007 and on or before December 31, 2007, the election or amendment
may apply only to amounts that would not otherwise be payable in 2007 and may
not cause an amount to be paid in 2007 that would not otherwise be payable in
2007.

         
 
  /s/ Kenneth M. Cohen    
 
       
 
  Kenneth M. Cohen    
 
       
 
  Date: December 6, 2007    

          ACCEPTED AND AGREED:    
 
        SOMAXON PHARMACEUTICALS, INC.    
 
       
By:
  /s/ David F. Hale    
 
       
Name:
  David F. Hale    
Title:
  Chairman of the Board of Directors    

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