EXHIBIT 10.2
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT, dated as of September 18, 2006 by and between
NEUROCRINE BIOSCIENCES, INC., 12790 El Camino Real, San Diego, California 92130
(hereinafter the “Company”), and Timothy P. Coughlin, MBA, CPA (hereinafter
“Executive”).
R E C I T A L S
     WHEREAS, the Company and Executive wish to set forth in this Agreement the
terms and conditions under which Executive is to be employed by the Company on
and after the date hereof; and
     NOW, THEREFORE, the Company and Executive, in consideration of the mutual
promises set forth herein, agree as follows:
ARTICLE 1
TERM OF AGREEMENT
     1.1 Commencement Date. Executive’s fulltime employment with the Company
under this Agreement shall commence as of September 18, 2006 (“Commencement
Date”) and this Agreement shall expire after a period of three (3) years from
the Commencement Date, unless renewed in accordance with paragraph 1.2 or
terminated pursuant to Article 6.
     1.2 Renewal. The term of this Agreement shall be automatically renewed for
successive, additional three (3) year terms unless either party delivers written
notice to the other at least ninety (90) days prior to the end of any term of an
intention to terminate this Agreement or to renew it for a term of less than
three (3) years but not less than (1) year. If the term of this Agreement is
renewed for a term of less than three (3) years, then thereafter the term of
this Agreement shall be automatically renewed for successive, additional
identical terms unless either party delivers a written notice to the other of an
intention to terminate this Agreement or to renew it for a different term of not
less than one (1) year, such notice to be delivered at least ninety (90) days
prior to the end of any term. The Company’s failure to renew this Agreement at
the end of any term shall be considered a termination without Cause as set forth
in Section 6.4 below.
ARTICLE 2
EMPLOYMENT DUTIES
     2.1 Title/Responsibilities. Executive hereby accepts employment with the
Company pursuant to the terms and conditions hereof. Executive agrees to serve
the Company in the position of Vice President, Chief Financial Officer.
Executive shall have the powers and duties commensurate with such position,
including but not limited to hiring personnel necessary to carry

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out the responsibilities for such position as directed by the Chief Executive
Officer (the “Chief Executive Officer”).
     2.2 Full Time Attention. Executive shall devote his best efforts and his
full business time and attention to the performance of the services customarily
incident to such office and to such other services as directed by the Chief
Executive Officer. Executive shall discharge his responsibilities in a diligent
and faithful manner, consistent with sound business practices and in accordance
with the directives of the Chief Executive Officer.
     2.3 Other Activities. Except upon the prior written consent of the Chief
Executive Officer, Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether or not pursued
for pecuniary advantage) that is or may be competitive with, or that might place
him in a competing position to that of the Company or any other corporation or
entity that directly or indirectly controls, is controlled by, or is under
common control with the Company (an “Affiliated Company”), provided that
Executive may own less than two percent (2%) of the outstanding securities of
any such publicly traded competing corporation.
ARTICLE 3
COMPENSATION
     3.1 Base Salary. Executive shall receive a Base Salary at an annual rate of
two hundred seventy five thousand dollars ($275,000.00), payable semi-monthly in
equal installments in accordance with the Company’s normal payroll practices.
The Chief Executive Officer shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such increase in Base
Salary as the Compensation Committee of the Board and the Chief Executive
Officer may from time to time establish in their sole discretion.
     3.2 Incentive Bonus. In addition to any other bonus Executive shall be
awarded by the Company’s Board of Directors, the Company shall pay Executive an
annual bonus as determined by the Company’s Compensation Committee and the Chief
Executive Officer based upon achievement of Executive in meeting personal goals
approved by the Chief Executive Officer and achievement by the Company of
corporate goals approved by the Board of Directors annually. Executive’s
personal goals and the Company’s corporate goals will be set forth in writing by
the Chief Executive Officer, respectively, within ninety (90) days after the
start of the Company’s fiscal year. The Chief Executive Officer, in his sole
discretion, shall determine whether Executive’s personal goals have been
obtained. The Board of Directors shall, in its sole discretion, determine
whether the corporate goals have been obtained.
     3.3 Equity. Each year starting in 2007 and continuing for the term of this
Agreement, the Executive will be eligible to receive a Stock Equity award under
the Company’s 2003 Incentive Stock Option Plan as amended, with the number of
shares and exercise price as shall be determined by the Board of Directors.

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     3.4 Withholdings. All compensation and benefits payable to Executive
hereunder and the Agreement shall be subject to all federal, state, local and
other withholdings and similar taxes and payments required by applicable law.
ARTICLE 4
EXPENSE ALLOWANCES AND FRINGE BENEFITS
     4.1 Vacation. Executive shall be entitled to the greater of four (4) weeks
of annual paid vacation or the amount of annual paid vacation to which Executive
may become entitled under the terms of Company’s vacation policy for employees
during the term of this Agreement.
     4.2 Benefits. During the term of this Agreement, the Company shall also
provide Executive with the usual health insurance benefits it generally provides
to its other senior management employees. As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall provide
Executive with the right to participate in and to receive benefit from life,
accident, disability, medical, pension, bonus, stock, profit-sharing and savings
plans and similar benefits made available generally to executives of the Company
as such plans and benefits may be adopted by the Company. The amount and extent
of benefits to which Executive is entitled shall be governed by the specific
benefit plan as it may be amended from time to time.
     4.3 Business Expense Reimbursement. During the term of this Agreement,
Executive shall be entitled to receive proper reimbursement for all reasonable
out-of-pocket expenses incurred by him (in accordance with the policies and
procedures established by the Company for its senior Executive Officers) in
performing services hereunder. Executive agrees to furnish to the Company
adequate records and other documentary evidence of such expense for which
Executive seeks reimbursement. Such expenses shall be reimbursed and accounted
for under the policies and procedure established by the Company.
ARTICLE 5
CONFIDENTIALITY
     5.1 Proprietary Information and Inventions Agreement. Executive represents
and warrants that she has previously executed and delivered to the Company the
Company’s standard Proprietary Information and Inventions Agreement in form
acceptable to the Company’s counsel.
     5.2 Return of Property. All documents, records, apparatus, equipment and
other physical property which is furnished to, or obtained by, Executive in the
course of his employment with the Company shall be and remain the sole property
of the Company. Executive agrees that, upon the termination of his employment,
she shall return all such property (whether or not it pertains to Proprietary
Information as defined in the Proprietary Information and Inventions Agreement),
and agrees not to make or retain copies, reproductions or summaries of any such
property.

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     5.3 No use of Prior Confidential Information. Executive will not
intentionally disclose to the Company or use on its behalf any confidential
information belonging to any of his former employers or any other third party.
ARTICLE 6
TERMINATION
     6.1 By Death. The period of employment shall terminate automatically upon
the death of Executive. In such event, all stock based awards held by Executive
at the time of termination will continue to vest for a period of six (6) months
following termination. All stock based awards held by Executive that are vested
at the time of termination or within six (6) months thereafter will be
exercisable in accordance with their terms for a period of one year following
termination. In addition, the Company shall pay to Executive’s beneficiaries or
his estate, as the case may be, any accrued Base Salary, any bonus compensation
to the extent earned, any vested deferred compensation (other than pension plan
or profit-sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of the Company in which Executive
is a participant to the full extent of Executive’s rights under such plans, any
accrued vacation pay and any appropriate business expenses incurred by Executive
in connection with his duties hereunder, all to the date of termination
(collectively Accrued Compensation), but no other compensation or reimbursement
of any kind, including, without limitation, severance compensation, and
thereafter, the Company’s obligations hereunder shall terminate.
     6.2 By Disability. If Executive is prevented from properly performing his
duties hereunder by reason of any physical or mental incapacity for a period of
one hundred twenty (120) consecutive days, or for one hundred eighty (180) days
in the aggregate in any three hundred and sixty-five (365) day period, then, to
the extent permitted by law, the Company may terminate the employment of
Executive at such time. In such event, all stock based awards held by Executive
at the time of termination will continue to vest for a period of six (6) months
following termination. All stock based awards held by Executive that are vested
at the time of termination or within six (6) months thereafter will be
exercisable in accordance with their terms for a period of one year following
termination. In addition, the Company shall pay to Executive all Accrued
Compensation, and shall continue to pay to Executive the Base Salary until such
time as Executive shall become entitled to receive disability insurance payments
under the disability insurance policy maintained by the Company, but no other
compensation or reimbursement of any kind, including without limitation,
severance compensation, and thereafter the Company’s obligations hereunder shall
terminate. Nothing in this Section shall affect Executive’s rights under any
disability plan in which she is a participant.
     6.3 By Company for Cause. The Company may terminate the Executive’s
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any kind, including
without limitation, severance compensation, and thereafter the Company’s
obligations hereunder shall terminate. Termination shall be for “Cause” in the
event of the occurrence of any of the following: (a) any intentional

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action or intentional failure to act by Executive which was performed in bad
faith and to the material detriment of the Company; (b) Executive intentionally
refuses or intentionally fails to act in accordance with any lawful and proper
direction or order of the Chief Executive Officer; (c) Executive and habitually
neglects the duties of employment; or (d) Executive is convicted of a felony
crime involving moral turpitude, provided that in the event that an of the
foregoing events is capable of being cured, the Company shall provide written
notice to Executive describing the nature of such event and Executive shall
thereafter have ten (10) business days to cure such event.
     6.4 Termination Without Cause. At any time, the Company may terminate the
employment of Executive without liability other than as set forth below, for any
reason not specified in Section 6.3 above, by giving thirty (30) days advance
written notice to Executive. If the Company elects to terminate Executive
pursuant to this Section 6.4:
     (a) the Company shall pay to Executive all Accrued Compensation;
     (b) the Company shall continue to pay to Executive as provided herein
Executive’s Base Salary over the period equal to nine (9) months from the date
of such termination as severance compensation;
     (c) the Company shall make a lump sum payment to Executive in an amount
equal to a pro rata portion of the Executive’s annual actual cash incentive
bonus for Company’s fiscal year preceding the year of termination based on the
number of completed months of Executive’s employment in the fiscal year plus
nine (9);
     (d) the vesting of all outstanding stock based awards held by Executive
shall be accelerated so that the amount of shares vested under such awards shall
equal that number of shares which would have been vested if the Executive had
continued to render services to the Company for nine (9) continuous months after
the date of his termination of employment; and
     (e) the Company shall pay all costs which the Company would otherwise have
incurred to maintain all of Executive’s health and welfare, and retirement
benefits (either on the same or substantially equivalent terms and conditions)
if the Executive had continued to render services to the Company for nine
(9) continuous months after the date of his termination of employment.
The Company shall have no further obligations to Executive other than those set
forth in the preceding subparagraphs. During the period when such severance
compensation is being paid to Executive, Executive shall not (i) engage,
directly or indirectly, in providing services to any other business program or
project that is competitive to a program or project being conducted by the
Company or any Affiliated Company at the time of such employment termination
(provided that Executive may own less than two percent (2%) of the outstanding
securities of any publicly traded corporation), or (ii) hire, solicit, or
attempt to solicit on behalf of himself or any other party or any employee or
exclusive consultant of the Company. If the Company terminates this Agreement or
the employment of Executive with the Company other than pursuant to Section 6.1,
6.2 or 6.3, then this section 6.4 shall apply.

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     6.5 Constructive Termination A Constructive Termination shall be deemed to
be a termination of employment of Executive without cause pursuant to
Section 6.4. For Purposes of this Agreement, a “Constructive Termination” means
that the Executive voluntarily terminates his employment except in connection
with the termination of his employment for death, disability, retirement, fraud,
misappropriation, embezzlement (or any other occurrence which constitutes
“Cause” under section 6.3) or any other voluntary termination of employment by
Executive other than a Constructive Termination after any of the following are
undertaken without Executive’s express written consent:
     (a) the assignment to Executive of any duties or responsibilities which
result in any diminution of position as judged against the duties and
responsibilities assigned to executives with Executive’s position in the
Company’s peer group of companies and shall not include (i) duties and
responsibilities assigned to Executive with the understanding that as the
Company grows and management staff increases in number, such duties and
responsibilities will eventually be reassigned in a manner consistent with the
Company’s peer group of companies, (ii) change in reporting relationship that
does not change in any material way the Executive’s duties and responsibilities
or (iii) any change in duties or responsibilities or reporting relationships
that Executive does not identify as Constructive Termination to the Chief
Executive Officer in writing within 15 days following the Chief Executive
Officer’s proposal of such change to Executive;
     (b) a reduction by the Company in Executive’s annual Base Salary by greater
than five percent (5%);
     (c) a relocation of Executive or the Company’s principal executive offices
if Executive’s principal office is at such offices, to a location more than
forty (40) miles from the location at which Executive is then performing his
duties, except for an opportunity to relocate which is accepted by Executive in
writing;
     (d) any material breach by the Company of any provision of this Agreement;
or
     (e) any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company.
     6.6 Termination Following Change in Control. In the event of a termination
Without Cause or Constructive Termination within six (6) months after a Change
in Control (as defined below) or Executive’s voluntary termination within thirty
(30) days following the six (6) month anniversary of a Change in Control, the
Company shall pay to Executive a lump sum severance payment in an amount equal
to one (1) times Executive’s then Base Salary plus annual actual cash incentive
bonus for Company’s fiscal year preceding the year of termination. In addition,
the Executive will receive at Executive’s option (i) accelerated vesting of all
stock based awards held

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by Executive by reason of the assumption or substitution of successor
corporation stock based awards for the Executive’s unvested Company stock based
awards at the time of the Change in Control pursuant to the terms of the
Company’s equity incentive plans, as applicable, or (ii) a cash payment equal to
the cash value of all unvested Company stock based awards held by Executive at
the time of the Change in Control. In addition, the Executive will be reimbursed
for the increase in federal and state income taxes payable by Executive by
reason of the benefits provided under this Section 6.6.
     6.7 Change in Control. For purposes of this Agreement, a “Change in
Control” shall have occurred if at any time during the term of Executive’s
employment hereunder, any of the following events shall occur:
     (a) The Company is merged, or consolidated. or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than fifty percent (50%) of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
voting securities of the Company immediately prior to such transaction;
     (b) The Company sells all or substantially all of its assets or any other
corporation or other legal person and thereafter, less than fifty percent (50%)
of the combined voting power of the then-outstanding voting securities of the
acquiring or consolidated entity are held in the aggregate by the holders of
voting securities of the Company immediately prior to such sale;
     (c) There is a report filed after the date of this Agreement on Schedule 13
D or schedule 14 D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of l934 (the “Exchange Act”)
disclosing that any person (as the term “person” is used in Section 13(d)(3) or
Section 14(d)(2) of the exchange Act) has become the beneficial owner (as the
term beneficial owner is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) representing fifty percent (50%)
or more of the combined voting power of the then-outstanding voting securities
of the Company;
     (d) The Company shall file a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
item 1 of Form 8-X thereunder or Item 5(f) of Schedule 14 A thereunder (or any
successor schedule, form or report or item therein) that the change in control
of the Company has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction; or
     (e) During any period of two (2) consecutive years, individuals who at the
beginning of any such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election to the
nomination for

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election by the Company’s shareholders of each director of the Company first
elected during such period was approved by a vote of at least two-thirds of the
directors of the Company then still in office who were directors of the Company
at the beginning of such period.
     6.8 Termination by Executive. At any time, Executive may terminate his
employment by giving thirty (30) days advance written notice to the Company. The
Company shall pay Executive all Accrued Compensation, but no other compensation
or reimbursement of any kind, including without limitation, severance
compensation, and thereafter the Company’s obligations hereunder shall
terminate.
     6.9 Mitigation. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate the amount of any payment provided under this
Agreement by seeking other employment or self-employment, nor shall the amount
of any payment provided for under this Agreement be reduced by any compensation
earned by Executive as a result of employment by another employer or through
self-employment or by retirement benefits after the date of Executive’s
termination of employment from the Company.
     6.10 Coordination. If upon termination of employment, Executive becomes
entitled to rights under other plans, contracts or arrangements entered into by
the Company, this Agreement shall be coordinated with such other arrangements so
that Executive’s rights under this Agreement are not reduced, and that any
payments under this Agreement offset the same types of payments otherwise
provided under such other arrangements, but do not otherwise reduce any payments
or benefits under such other arrangements to which Executive becomes entitled.
ARTICLE 7
GENERAL PROVISIONS
     7.1 Governing Law. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall be
interpreted and enforced under California law without reference to principles of
conflicts of laws. The parties expressly agree that inasmuch as the Company’s
headquarters and principal place of business are located in California, it is
appropriate that California law govern this Agreement.
     7.2 Assignment; Successors Binding Agreement.
     (a) Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.
     (b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.

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     (c) This Agreement shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees. If Executive should die
while any amount is at such time payable to his hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive’s devisee, legates or other designee or, if there be
no such designee, to his estate.
     7.3 Certain Reduction of Payments. In the event that any payment or benefit
received or to be received by Executive under this Agreement would result in all
or a portion of such payment to be subject to the excise tax on “golden
parachute payments” under Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), then Executive’s payment shall be either (a) the full
payment or (b) such lesser amount which would result in no portion of the
payment being subject to excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable Federal, state and
local employment taxes, income taxes, and the excise tax imposed by Section 4999
of the Code, results in the receipt by Executive on an after-tax basis, of the
greatest amount of the payment notwithstanding that all or some portion of the
payment may be taxable under Section 4999 of the Code.
     7.4 Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
To the Company:
Neurocrine Biosciences, Inc.
12790 El Camino Real
San Diego, CA 92130
Attn.: President & Chief Executive Officer
To Executive:
Timothy P. Coughlin, MBA, CPA
     7.5 Modification; Waiver; Entire Agreement. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer as may be
specifically designated by the Board of the Company. No waiver by either party
hereto at any time of any breach by the other party of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
     7.6 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

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     7.7 Controlling Document. Except to the extent described in Section 6.l0,
in case of conflict between any of the terms and condition of this Agreement and
the document herein referred to, the terms and conditions of this Agreement
shall control.
     7.8 Executive Acknowledgment. Executive acknowledges (a) that she has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement, and has been advised to do so by the
Company, and (b) that she has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
     7.9 Remedies.
     (a) Injunctive Relief. The parties agree that the services to be rendered
by Executive hereunder are of a unique nature and that in the event of any
breach or threatened breach of any of the covenants contained herein, the damage
or imminent damage to the value and the goodwill of the Company’s business will
be irreparable and extremely difficult to estimate, making any remedy at law or
in damages inadequate. Accordingly, the parties agree that the Company shall be
entitled to injunctive relief against Executive in the event of any breach or
threatened breach of any such provisions by Executive, in addition to any other
relief (including damage) available to the Company under this Agreement or under
law.
     (b) Exclusive. Both parties agree that the remedy specified in
Section 7.9(a) above is not exclusive of any other remedy for the breach by
Executive of the terms hereof.
     7.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
     7.11 Prevailing Party Expenses. In the event that any action or proceeding
is commenced to enforce the provisions of the Agreement, the court adjudicating
such action or proceeding shall award to the prevailing party all costs and
expenses thereof, including, but not limited to, all reasonable attorneys’ fees,
court costs, and all other related expenses.
Executed by the parties as of the day and year first above written.

              TIMOTHY P. COUGHLIN   NEUROCRINE BIOSCIENCES, INC    
 
           
 
  By:   /s/ Gary A. Lyons     /s/ Timothy P. Coughlin
 
     
 
Gary A. Lyons    
 
      President & Chief Executive Officer    

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