Document:

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into
effective as of December 14, 2006 (the “Effective Date”), by and
between TorreyPines Therapeutics, Inc. (the “Parent”), Parent’s subsidiary,
TPTX, Inc. (“TPTX”) and Neil Kurtz (the “Executive”).  As used in this Agreement, references to the “Company” shall include the Parent
and TPTX, as appropriate.  The Company
and the Executive are hereinafter collectively referred to as the “Parties,” and
individually referred to as a “Party.”

RECITALS

A.            The
Company desires to retain the Executive’s experience, skills, abilities,
background and knowledge and is willing to engage the Executive’s services on
the terms and conditions set forth in this Agreement.

B.            The
Executive desires to be in the employ of the Company and is willing to accept
such employment on the terms and conditions set forth in this Agreement.

C.            The
Parties contemplate that Executive will be an employee of both the Parent and
TPTX, and all amounts required to be paid to Executive pursuant to this
Agreement will be paid by TPTX.

AGREEMENT

In consideration of the
foregoing Recitals and the mutual promises and covenants herein contained, and
for other good and valuable consideration, the Parties, intending to be legally
bound, agree as follows:

1.                                      EMPLOYMENT.

1.1          Title.  The Executive shall serve as the Parent’s
Chief Executive Officer and President
and shall serve in such other capacities as the Company may from time to time
prescribe.  The Executive shall report
solely and directly to the Parent’s Board of Directors (the “Board”).

1.2          Duties.  The Executive shall perform all
services and actions necessary or advisable to conduct the business of the
Company and which are normally associated with the position(s) the Executive
holds in a corporation of the size and nature of the Company.

1.3          Location.  Except as otherwise specifically permitted by
the Board, the Executive shall perform the
services required pursuant to this Agreement at the Company’s offices located
in San Diego, California; provided, however, that the Company may require the
Executive to travel temporarily to other locations in connection with the
Company’s business.

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2.                                      LOYAL AND
CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.

2.1          Loyalty.  Except as otherwise specifically permitted by
the Board, during the Executive’s employment with
the Company, the Executive shall devote the Executive’s full business energies,
interest, abilities and productive time to the proper and efficient performance
of the Executive’s duties under this Agreement; provided, however, that Executive may (a) devote a
reasonable amount of time and energies for personal investment and civic and
charitable duties, and (b) serve as a member of the boards of directors of
NeurogesX Inc. and Medidata Solutions, Inc.

3.                                      COMPENSATION
OF THE EXECUTIVE.

3.1          Base
Salary.  Effective October 4, 2006, the Company shall
pay the Executive a base salary of Four Hundred Thousand Dollars ($400,000) per
year, payable in regular periodic payments in accordance with Company
policy.  Such base salary shall be
prorated for any partial year of employment on the basis of a 365-day fiscal
year.

3.2          Annual
Incentive Bonus.   
In addition to the Executive’s base salary, the Executive will be
eligible to receive an annual performance bonus.  The bonus amount Executive may receive ̧ if
any, shall be based upon the Executive’s and the Company’s performance as
measured against agreed-upon targets during the previous year as evaluated by
the Board in its sole and absolute discretion. 
The bonus amount payable for performance that meets the targets shall be
a percentage of the Executive’s annual base salary (the “Target
Bonus Amount”).  For 2007,
the Executive’s Target Bonus Amount shall be forty percent (40%) of the Executive’s
annual base salary.  Annual performance
bonus pay will vary according to the Executive’s and the Company’s performance
against the targets and will be capped at one hundred fifty percent (150%) of the Target Bonus Amount. 
In the event the Company and the Executive do not agree upon the
performance targets, the Board shall establish the applicable performance
targets in its sole and absolute discretion.

3.3          Changes
to Compensation.  The Executive’s compensation shall be
reviewed from time to time by the Board or the Compensation Committee thereof
as it deems appropriate and may be increased at any time by the Board or the
Compensation Committee thereof or may be reduced only upon mutual written
agreement between the Executive and the Board or the Compensation Committee
thereof.

3.4          Employment
Taxes.  All of
the Executive’s compensation (in any form) shall be subject to all required
withholding taxes, employment taxes and other deductions required by law.

3.5          Equity
Compensation. 
The Compensation Committee of the Board will periodically evaluate the
equity position of Executive and determine changes, if any, at its annual
meeting addressing executive compensation in general.

3.6          Benefits.  The Executive shall, in accordance with
Company policy and the terms of the applicable plan documents, be eligible to
participate in benefits under any benefit plan or arrangement which may be in
effect from time to time and made available to the 

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Company’s employees. 
In addition, the Executive shall be eligible for paid vacation, in
accordance with Company policy as in effect from time to time.

4.                                      TERMINATION.

4.1          Termination By the Company.  The Executive’s employment with the Company
may be terminated under the following conditions:

4.1.1       Termination
for Death or Disability.  The Executive’s employment with the Company
shall terminate effective upon the date of the Executive’s death or Complete Disability (as defined
below).

4.1.2       Termination
by the Company For Cause.  The Company may terminate the Executive’s
employment under this Agreement for Cause (as defined below). A notice of
termination given pursuant to this Section 4.1.2 shall effect termination as of
the date specified, or, in the event no such date is specified, on the date
upon which the notice is given.

4.1.3       Termination
by the Company For Any Reason Other Than Cause.  The Executive’s employment by the Company
shall be “at will.”  The Company may
terminate the Executive’s employment under this Agreement at any time, for any
or no reason and with or without cause or advance notice.  This is the full and complete agreement
between the Executive and the Company on this term.  Although the Executive’s duties, title,
compensation and benefits may change, the “at will” nature of the Executive’s
employment relationship with the Company may only be modified in an express
written agreement signed by the Executive and the Board.

4.2          Termination
by Mutual Agreement of the Parties.  The Executive’s employment pursuant to this
Agreement may be terminated at any time upon the mutual written agreement of
the Parties.  Any such termination of
employment shall have the consequences specified in such writing.

4.3          Termination by the Executive.  The Executive’s employment by the Company
shall be “at will.”  The Executive shall
have the right to resign or terminate the Executive’s employment at any time,
with or without cause, notice or Good Reason.

4.4          Compensation
Upon Termination.

4.4.1       Termination
Payments.  Upon Executive’s
termination or resignation with Good Reason, the Company shall pay the
Executive’s base salary and any accrued and unused vacation benefits earned
through the date of such termination or resignation.  Except as expressly provided herein, the
Company shall thereafter have no further obligations to the Executive under
this Agreement.

4.4.2       Severance
Payments.  In
addition to the payments provided in Section 4.4.1, if the Executive’s
employment is terminated by the Company without Cause or if, within three
months before, or 12 months following, a Change in Control (as defined below),
the Executive resigns for Good Reason, then the Company shall provide the
following benefits:

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4.4.2.1          The
Company shall continue to pay the Executive’s base salary until the end of the
period following the termination of the Executive’s employment equal to
eighteen (18) months (the “Severance
Period”).   Such severance
payments shall be subject to standard deductions and withholdings and paid in
accordance with the Company’s regular payroll policies and practices.  For purposes of calculating the amount to be
paid pursuant this Section 4.4.2.1, the Company shall use the Executive’s base
compensation in effect on the date of such termination or resignation.

4.4.2.2          Each
month during the Severance Period, the Company shall pay the Executive an
amount equal to one-twelfth (1/12th)
of the greater of (i) the average of the three annual bonuses paid to the
Executive by the Company prior to the date of termination or resignation, (ii)
the last annual bonus paid to the Executive by the Company prior to the date of
termination or resignation, or (iii) if the termination occurs within the first
twelve 12 months following the Effective Date of this Agreement, then the
Target Bonus Amount.  Such payment shall
be subject to standard deductions and withholdings and paid in equal monthly
installments over the Severance Period in accordance with the Company’s regular
payroll policies and practices.

4.4.2.3          The
vesting of each Company equity award held by Executive shall accelerate on such
date of termination by the number of shares that would have vested had
Executive remained employed by the Company during the Severance Period, and,
during the Severance Period, Executive shall have continued exercisability of
each Company stock option and stock appreciation right held by the Executive
(if any). Notwithstanding the foregoing, if a stock option or stock appreciation right was held by the Executive
on the Effective Date and counsel for the Company has not advised the Company
that such continued stock option exercisability would not cause such stock
option to be treated as covered by Section 409A of the Code or would not cause
the Executive to become subject to the immediate taxation prior to the date of
exercise, additional tax and interest under Section 409A of the Code, then any
such stock option or stock appreciation right then held by Executive shall
remain exercisable until the earlier of (1) the end of the Severance Period or
(2) the later of the 15th day of the third month following
the date at which, or December 31 of the calendar year in which, the stock
option would otherwise have expired if the stock option had not been extended
pursuant to this Section 4.4.2.3 (based on the terms of the stock option at the
original grant date); provided, however,
that such stock options shall not be exercisable after the expiration of its
maximum term.   Nothing in this Section
4.4.2.3 prohibits the Company or a successor organization (or its parent) from
causing such awards to terminate in connection with a merger, consolidation or
other corporate transaction pursuant to the terms of the applicable equity plan
or award agreements.

4.4.2.4          Assuming
the Executive timely and accurately elects to continue his health insurance
benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company
shall pay the COBRA premiums for the Executive and his or her qualified
beneficiaries until the earliest of (i) the end of the Severance Period, (ii)
the expiration of the Executive’s continuation coverage under COBRA and any
applicable state COBRA-like statute that provides mandated continuation
coverage or (iii) the date the Executive becomes eligible for health insurance
benefits of a subsequent employer.

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4.4.2.5          In
the event the Executive resigns with Good Reason prior to a Change in Control,
the payments described in Sections 4.4.2.1, 4.4.2.2 and 4.4.2.4 will commence
as soon as administratively practicable following the Change in Control;
otherwise the payments will commence as soon administratively practicable
following the Executive’s termination or resignation.

4.4.3       Release.  Notwithstanding the foregoing, the Executive
shall not receive any of the severance payments or benefits set forth under
Section 4.4.2, unless upon Executive’s termination of employment the Executive
furnishes the Company with an effective waiver and release of claims (the “Release”) in a form acceptable to
the Parties and substantially as attached hereto as Exhibit A. If
a majority of the Board determines in good faith that the Executive has
breached any provision of this Agreement or the Release, the Company shall be
excused from the obligation to provide any severance payment under Section
4.4.2; provided, however, that the Company shall not be entitled to recovery of
any severance payment already provided to the Executive under Section 4.4.2.

4.4.4       Mitigation.   Any
amounts payable to the Executive under Section 4.4.2.1 and Section 4.4.2.2
shall be reduced by the amount of the Executive’s earnings from other
employment during the Severance Period, if applicable (which employment the
Executive shall have an affirmative duty to seek; provided, however, that the
Executive shall not be obligated to accept a new position which is not
reasonably comparable to his employment with the Company).

4.5          Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings:

4.5.1       Complete
Disability.  “Complete Disability” shall mean the inability of the
Executive to perform the Executive’s duties under this Agreement because the
Executive has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then in
force.  In the event the Company has no
policy of disability income insurance covering employees of the Company in
force when the Executive becomes disabled, the term “Complete
Disability” shall mean the inability of the Executive to perform the
Executive’s duties under this Agreement by reason of any incapacity, physical
or mental, which the Board, based upon medical advice or an opinion provided by
a licensed physician acceptable to the Board, determines to have incapacitated
the Executive from satisfactorily performing all of the Executive’s usual
services for the Company for a period of at least one hundred twenty (120) days
during any twelve (12) month period (whether or not consecutive).  Based upon such medical advice or opinion,
the determination of the Board shall be final and binding and the date such
determination is made shall be the date of such Complete Disability for
purposes of this Agreement.

4.5.2       Cause.  “Cause” for the Company to
terminate Executive’s employment
hereunder shall mean the occurrence of one or more of the following
events if such event results in a demonstrably harmful impact on the Company’s
business or reputation, or that of any of its subsidiaries, as reasonably
determined by the Board:

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(i)            Executive’s
conviction of, or plea of guilty or no contest to, any felony or any crime
involving fraud, dishonesty or moral turpitude under the laws of the United
States or any state thereof;

(ii)           Executive’s
commission of (or attempted commission of), or participation in, a fraud or act
of dishonesty against the Company;

(iii)         Executive’s
material violation of any statutory duty owed to the Company or material
violation of any policy or rule of the Company;

(iv)          Executive’s
unauthorized use or disclosure of the Company’s confidential information or
trade secrets;

(v)            Executive’s gross
misconduct; or

(vi)          Executive’s conduct
that constitutes gross insubordination or habitual neglect of duties that is
not cured within the reasonable period provided by the Board or a committee
designated by the Board in its written notice to Executive of such conduct.

The determination that a termination is for Cause
shall be made by the Board in good faith. 
Any determination that the Executive’s employment was terminated by
reason of dismissal without Cause for the purposes of this Agreement shall have
no effect upon any determination of the rights or obligations of the Company or
the Executive for any other purpose.

4.5.3       Good Reason. “Good Reason” means, with respect to the
Executive, the occurrence of one or more of the following, without the
Executive’s express written consent and for which the Executive has given the
Company express written notice within thirty (30) days following such
occurrence:

(i)            a
material breach of the employment agreement by the Company;

(ii)           a
material reduction in the Executive’s duties, position, current reporting,
authority or responsibilities relative to the duties, position, current
reporting, authority or responsibilities in effect immediately prior to such
reduction, or a failure of the Board or its Corporate Governance and Nominating
Committee, to nominate Executive to the Board;

(iii)         a
reduction in the Executive’s base salary, bonus or other cash incentive
compensation opportunity as in effect immediately prior to such reduction for
any reason other than in connection with, and proportionate to, a company-wide
pay reduction;

(iv)          a
material reduction in Executive’s long-term non-cash incentive opportunities
(the value of which is measured as of the date of grant using a reasonable
valuation methodology consistently applied), provided that the grant of a stock
award covering the same number of shares as a similar stock award granted in
the immediately preceding year shall not be deemed to be a material reduction
of the Executive’s long-term incentive opportunities;

(v)            the
failure of the Company to timely pay Executive any portion of Executive’s
compensation then due to Executive or the failure to pay or reimburse Executive
for 

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any business expenses incurred by Executive in
accordance with Company policy in a reasonably timely manner;

(vi)          an
increase in the Executive’s one-way driving distance from the  Executive’s principal personal residence to
the principal office or business location at which the Executive is required to
perform services of more than 25 miles, except for required travel for the
Company’s business to an extent substantially consistent with Executive’s prior
business travel obligations; and

(vii)         a
material reduction in Executive’s benefits for any reason other than in
connection with any change to the Company’s benefit programs applicable to all
Company employees generally made.

4.5.4   Change
in Control.  “Change in Control” shall
mean a transaction (excluding in each case transactions in which securities are
purchased from the Company for the principal purpose of raising capital for the
Company) in which one of the following occurs:

(i)            any
person or related group of persons (other than the Parent or an affiliate of
the Parent) directly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities;

(ii)           the
composition of the Board changes over a period of twenty-four (24) consecutive
months or less in a way that results in a majority of the Board (rounded up to
the next whole number) ceasing, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of the period or (B) have
been elected or nominated for election as Board members during the period by at
least two-thirds of the Board members described in clause (A) who were still in
office at the time the election or nomination was approved by the Board;

(iii)         
(A) a merger or consolidation occurs in which the Parent is not the surviving
entity, or (B) any reverse merger occurs in which the Parent is the surviving
entity, or (C) any merger involving a subsidiary of the Parent occurs in which
the Parent is a surviving entity, but in each case in which holders of the
Parent’s outstanding voting securities immediately prior to such transaction,
as such, do not hold, immediately following such transaction, securities
possessing fifty percent (50%) or more of the total combined voting power of
the surviving entity’s outstanding securities (in the case of clause (A)) or
the Parent’s outstanding voting securities (in the case of clauses (B) and
(C)); or

(iv)          all
or substantially all of the Parent’s assets are sold of transferred other than
in connection with an internal reorganization of the Parent or the Parent’s
complete liquidation (other than a liquidation of the Parent into a
wholly-owned subsidiary).

4.6          Parachute Payments.  Anything in this Agreement to the contrary
notwithstanding, if any payment or benefit the Executive would receive from the
Company pursuant to this Agreement or otherwise (a “Payment”) would (i)
constitute a “parachute payment” within the meaning of Section 280G of the
Internal Revenue Code of 1986, as 

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amended (the “Code”), and (ii) but for this sentence, be
subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then
such Payment shall be equal to the Reduced Amount.  The “Reduced Amount” shall be either (x) the largest
portion of the Payment that would result in no portion of the Payment being
subject to the Excise Tax or (y) the largest portion of the Payment, up to and
including the total Payment, whichever amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results in
the Executive’s receipt, on an after-tax basis, of the greater amount of the
Payment notwithstanding that all or some portion of the Payment may be subject
to the Excise Tax. If a reduction in payments or benefits constituting “parachute
payments” is necessary so that the Payment equals the Reduced Amount, reduction
shall occur in the following order unless the Executive elects in writing a
different order (provided, however, that such
election shall be subject to Company approval if made on or after the date on
which the event that triggers the Payment occurs):  reduction of cash payments; cancellation of
accelerated vesting of stock awards; reduction of employee benefits.  If acceleration of vesting of stock award
compensation is to be reduced, such acceleration of vesting shall be cancelled
in the reverse order of the date of grant of the Executive’s stock awards
unless the Executive elects in writing a different order for cancellation.

The Company shall
appoint a nationally recognized independent accounting firm to make the
determinations required hereunder, which accounting firm shall not then be
serving as accountant or auditor for the individual, entity or group that
effected the Change in Control.  The
Company shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.

The accounting firm engaged to make the
determinations hereunder shall provide its calculations, together with detailed
supporting documentation, to the Company and the Executive within fifteen (15)
calendar days after the date on which the Executive’s right to a Payment is
triggered (if requested at that time by the Company or the Executive) or such
other time as requested by the Company or the Executive.  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish the Company and the
Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to such Payment.  The Company shall be entitled to rely upon
the accounting firm’s determinations, which shall be final and binding on all
persons.

4.7          Exclusive Remedy.  The
rights, remedies and payments set forth in this Section 4 shall be the
exclusive rights, remedies and payments available to the Executive upon
termination of this Agreement and the Executive’s employment hereunder.  Such rights remedies and payments shall
supersede and replace any and all rights and remedies under state or federal
law.  The Company may deduct any amounts
the Executive owes the Company at the time of the Executive’s termination of
employment from any severance payments.

4.8          Application
of Section 409A.  In
the event that any cash severance benefit or continued medical benefit under
this Section 4 shall fail to satisfy the distribution requirement of Section
409A(a)(2)(A) of the Code as a result of the application of Section
409A(a)(2)(B)(i) of the Code, then the payment of such benefits shall be
delayed to the minimum extent necessary so that such benefits are not subject
to the provisions of Section 409A(a)(1) of 

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the Code.  The
Board may attach conditions to or adjust the amounts paid pursuant to this
Section 4.8 to preserve, as closely as possible, the economic consequences that
would have applied in the absence of this Section 4.8; provided,
however, that no such condition or adjustment shall result in the
payments being subject to Section 409A(a)(1) of the Code.

4.9          Survival of Certain Sections.  Sections
3.4, 4.4, 4.5, 4.6, 4.7, 4.8 and 5 - 16 of this Agreement shall survive the
termination of this Agreement.

5.                                      CONFIDENTIAL
AND PROPRIETARY INFORMATION; NONSOLICITATION.

5.1          Proprietary Information and Inventions
Agreement.  As a
condition of employment, the Executive agrees to execute and abide by the
Proprietary Information and Inventions Agreement attached hereto as Exhibit B.

5.2          Non-Solicitation.  During
the Executive’s employment with the Company and any Severance Period and for
one (1) year after the termination of such periods, the Executive agrees that
in order to protect the confidential and proprietary information of the Company
and its subsidiaries from unauthorized use, the Executive shall not, either
directly or through others, solicit or attempt to solicit any employee,
consultant or independent contractor of the Company or its subsidiaries to
terminate his or her relationship with the Company (or the applicable
subsidiary) in order to become an employee, consultant or independent
contractor to or for any other person or business entity.

6.                                      ASSIGNMENT
AND BINDING EFFECT.

This Agreement shall be
binding upon and inure to the benefit of the Executive and the Executive’s
heirs, executors, personal representatives, assigns, administrators and legal
representatives.  Because of the unique
and personal nature of the Executive’s duties under this Agreement, neither
this Agreement nor any rights or obligations under this Agreement shall be
assignable by the Executive.  This
Agreement shall be binding upon and inure to the benefit of the Company and its
successors, assigns and legal representatives.

7.                                      CHOICE OF
LAW.

This Agreement is made
and intended to be performed primarily within the state of California.  This Agreement shall be construed and
interpreted in accordance with the internal laws of the state of California
(without giving effect to principles of conflicts of law).

8.                                      INTEGRATION.

Except as may otherwise
be provided herein, this Agreement, including Exhibit
A and Exhibit B, contains the complete, final and exclusive
agreement of the Parties relating to the terms and conditions of the Executive’s
employment and the termination of Executive’s employment, and supersedes all
prior and contemporaneous oral and written employment agreements or
arrangements between the Parties. To the extent this Agreement conflicts with
the Proprietary Information and Inventions Agreement attached as Exhibit B, the Proprietary Information
and Inventions Agreement controls.

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9.                                      AMENDMENT.

This Agreement cannot be
amended or modified except by a written agreement signed by the Executive and
the Board.

10.                               WAIVER.

No term, covenant or
condition of this Agreement or any breach thereof shall be deemed waived,
except with the written consent of the Party against whom the waiver is
claimed, and any waiver or any such term, covenant, condition or breach shall
not be deemed to be a waiver of any preceding or succeeding breach of the same
or any other term, covenant, condition or breach.

11.                               SEVERABILITY.

The finding by a court of
competent jurisdiction or other authorized body of the unenforceability,
invalidity or illegality of any provision of this Agreement shall not render
any other provision of this Agreement unenforceable, invalid or illegal.  The invalid or unenforceable term or
provision shall be modified or replaced with a valid and enforceable term or
provision which most accurately represents the Parties’
intention with respect to the invalid or unenforceable term or provision.

12.                               INTERPRETATION;
CONSTRUCTION.

The headings set forth in
this Agreement are for convenience of reference only and shall not be used in
interpreting this Agreement.  The
Executive has been encouraged to consult with, and has consulted with,
Executive’s own independent counsel and tax advisors with respect to the terms
of this Agreement.  The Parties
acknowledge that each Party and its counsel has reviewed and revised, or had an
opportunity to review and revise, this Agreement, and any rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement.

13.                               REPRESENTATIONS
AND WARRANTIES.

The Executive represents
and warrants that the Executive is not restricted or prohibited, contractually
or otherwise, from entering into and performing each of the terms and covenants
contained in this Agreement, and that the Executive’s execution and performance
of this Agreement shall not violate or breach any other agreements between the
Executive and any other person or entity.

14.                               COUNTERPARTS.

This Agreement may be
executed in two counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.

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15.                               ARBITRATION.

To ensure the rapid and
economical resolution of disputes that may arise in connection with the
Executive’s employment with the Company, the Executive and the Company agree
that any and all disputes, claims, or causes of action, in law or equity,
arising from or relating to Executive’s employment, or the termination of that
employment, will be resolved, to the fullest extent permitted by law, by final
binding arbitration in San Diego, California conducted by the Judicial
Arbitration and Mediation Services (“JAMS”), or its successors,
under the then current rules of JAMS for employment disputes; provided that the
arbitrator shall: (a) have the authority to compel adequate discovery for the
resolution of the dispute and to award such relief as would otherwise be
permitted by law and (b) issue a written arbitration decision including the
arbitrator’s essential findings and conclusions and a statement of the award.  Both the Executive and the Company shall be
entitled to all rights and remedies that either the Executive or the Company
would be entitled to pursue in a court of law. 
The Company shall pay all administrative fees associated with the
arbitration and the fees of the arbitrator. 
Nothing in this Agreement is intended to prevent either the Executive or
the Company from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration.  Notwithstanding the foregoing, the Executive
and the Company each have the right to resolve any and all issues or disputes
involving confidential information, proprietary information,  trade secrets or related information or
intellectual property rights by court action instead of arbitration.

16.                               TRADE
SECRETS OF OTHERS.

It is the understanding
of both the Company and the Executive that the Executive shall not divulge to
the Company and/or its subsidiaries any confidential information or trade
secrets belonging to others, including the Executive’s former employers, nor
shall the Company and/or its subsidiaries seek to elicit from the Executive any
such information.  Consistent with the
foregoing, the Executive shall not provide to the Company and/or its subsidiaries,
and the Company and/or its subsidiaries shall not request, any documents or
copies of documents containing such information.

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IN WITNESS
WHEREOF, the Parties have
executed this Agreement as of the date first shown above.

	
  TORREYPINES THERAPEUTICS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Jean Deleage

  	
   

  
	
  JEAN DELEAGE, PH.D.

  	
   

  
	
  CHAIRMAN OF THE BOARD OF DIRECTORS

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTIVE

  	
   

  
	
   

  	
   

  
	
  /s/ Neil Kurtz

  	
   

  
	
  NEIL M. KURTZ, M.D.

  	
   

  
	
  CHIEF EXECUTIVE OFFICER, PRESIDENT

  	
   

  

 

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EXHIBIT A

RELEASE
AND WAIVER OF CLAIMS

In consideration
of the payments and other benefits set forth in Section 4.4 of the Employment
Agreement dated December 14, 2006
(the “Employment Agreement”), to which
this form is attached, I, Neil Kurtz, hereby furnish TorreyPines Therapeutics,
Inc. (the “Company”),
with the following release and waiver (“Release and Waiver”):

In exchange for
the consideration provided to me by the Employment Agreement that I am not
otherwise entitled to receive, I hereby generally and completely release the
Company and its directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers,
affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring prior to my signing this Release and
Waiver.  This general release includes,
but is not limited to: (1) all claims arising out of or in any way related to
my employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership
interests in the Company, except to the extent that such claims cannot be
released pursuant to the California Labor Code, including, but not limited to,
sections 2802 and 206.5; (3) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing;
(4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy;
and (5) all federal, state, and local statutory claims, including, but not
limited to, claims for discrimination, harassment, retaliation, attorneys’
fees, or other claims arising under the federal Civil Rights Act of 1964 (as
amended), the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair
Employment and Housing Act (as amended).

I also acknowledge
that I have 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.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to any claims I may
have against the Company.

I acknowledge
that, among other rights, I am waiving and releasing any rights I may have
under ADEA, that this Release and Waiver is knowing and voluntary, and that the
consideration given for this Release and Waiver is in addition to anything of
value to which I was already entitled as an executive of the Company.  I further acknowledge that I have been
advised, as required by the Older Workers Benefit Protection Act, that:  (a) the release and waiver granted herein
does not relate to claims under the ADEA which may arise after this Release and
Waiver is executed; (b) I should consult with an attorney prior to executing
this Release and Waiver; (c) I have twenty-one (21) days in which to consider
this Release and Waiver (although I may choose voluntarily to execute this
Release and Waiver earlier); (d) I have seven (7) days following the execution
of this Release and Waiver to revoke my consent to this Release and

 

Waiver; and (e) this
Release and Waiver shall not be effective until the eighth day after I execute
this Release and Waiver and the revocation period has expired (the “Effective Date”).

I acknowledge and agree to my continuing obligations under my
Proprietary Information and Inventions Agreement, a copy of which is attached
to the Employment Agreement.  I
understand and agree that my right to the severance pay I am receiving in
exchange for my agreement to the terms of this Release and Waiver is contingent
upon my continued compliance with my Proprietary Information and Inventions
Agreement.

I represent that I have not filed any claims against the Company, and
agree that, except as such waiver may be prohibited by statute, I will not file
any claim against the Company or seek any compensation for any claim other than
the payments and benefits referenced herein. 
I agree to indemnify and hold the Company harmless from and against any
and all loss, cost, and expense, including, but not limited to court costs and
attorney’s fees, arising from or in connection with any action which may be
commenced, prosecuted, or threatened by me or for my benefit, upon my
initiative, or with my aid or approval, contrary to the provisions of this
Release and Waiver.

This Release and Waiver, including any referenced
documents, constitutes the complete, final and exclusive embodiment of the
entire agreement between the Company and me with regard to the subject matter
hereof.  I am not relying on any promise
or representation by the Company that is not expressly stated herein.  This Release and Waiver may only be modified
by a writing signed by both me and a member of the Board of Directors of the
Company.

 

 

	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  NEIL M. KURTZ

  

 

 

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EXHIBIT B

[PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT]

 1Exhibit 10.2

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into
effective as of December 14, 2006 (the “Effective Date”), by and
between TorreyPines Therapeutics, Inc. (the “Parent”), Parent’s subsidiary,
TPTX, Inc. (“TPTX”) and Evelyn Graham
(the “Executive”).  As used in this Agreement, references to the “Company” shall include the Parent
and TPTX, as appropriate.  The Company
and the Executive are hereinafter collectively referred to as the “Parties,” and
individually referred to as a “Party.”

RECITALS

A.            The
Company desires to retain the Executive’s experience, skills, abilities,
background and knowledge and is willing to engage the Executive’s services on
the terms and conditions set forth in this Agreement.

B.            The
Executive desires to be in the employ of the Company and is willing to accept
such employment on the terms and conditions set forth in this Agreement.

C.            The
Parties contemplate that Executive will be an employee of both the Parent and
TPTX and all amounts required to be paid to Executive pursuant to this
Agreement will be paid by TPTX.

AGREEMENT

In consideration of the
foregoing Recitals and the mutual promises and covenants herein contained, and
for other good and valuable consideration, the Parties, intending to be legally
bound, agree as follows:

1.                                      EMPLOYMENT.

1.1          Title.  The Executive shall serve as the Parent’s
Chief Operating Officer and shall serve in such other capacities as the Company
may from time to time prescribe.  The
Executive shall report solely and directly to the Company’s Chief Executive
Officer.

1.2          Duties.  The Executive shall perform all
services and actions necessary or advisable to conduct the business of the
Company and which are normally associated with the position(s) the Executive
holds in a corporation of the size and nature of the Company.

1.3          Location.   Except as otherwise specifically permitted
by the Parent’s Board of Directors (the “Board”), the Executive shall continue to perform the services
required pursuant to this Agreement by telecommuting from her residence in
Connecticut, provided, that if and to the extent requested by the Company’s
Chief Executive Officer, she will work at least 80 hours per month at the
Company’s headquarters in San Diego, California, and provided, 

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further that the Company may require the Executive to
travel temporarily to other locations in connection with the Company’s
business.

2.                                      LOYAL AND
CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.

2.1          Loyalty.  Except as otherwise specifically permitted by
the Board, during the Executive’s employment with
the Company, the Executive shall devote the Executive’s full business energies,
interest, abilities and productive time to the proper and efficient performance
of the Executive’s duties under this Agreement; provided, however, that Executive may devote a reasonable
amount of time and energies for personal investment and civic and charitable
duties.

3.                                      COMPENSATION
OF THE EXECUTIVE.

3.1          Base
Salary.  Effective October 4, 2006, the Company shall
pay the Executive a base salary of Two Hundred Sixty Thousand Dollars
($260,000) per year, payable in regular periodic payments in accordance with
Company policy.  Such base salary shall
be prorated for any partial year of employment on the basis of a 365-day fiscal
year.

3.2          Annual
Incentive Bonus.   
In addition to the Executive’s base salary, the Executive will be
eligible to receive an annual performance bonus.  The bonus amount Executive may receive ̧ if
any, shall be based upon the Executive’s and the Company’s performance as
measured against agreed-upon targets during the previous year as evaluated by
the Board in its sole and absolute discretion. 
The bonus amount payable for performance that meets the targets shall be
a percentage of the Executive’s annual base salary (the “Target
Bonus Amount”).  For 2007,
the Executive’s Target Bonus Amount shall be thirty percent (30%) of the
Executive’s annual base salary.  Annual
performance bonus pay will vary according to the Executive’s and the Company’s
performance against the targets and will be capped at one hundred fifty percent
(150%) of the Target Bonus Amount.  In the event the Company and the Executive do
not agree upon the performance targets, the Board shall establish the
applicable performance targets in its sole and absolute discretion.

3.3          Changes
to Compensation.  The Executive’s compensation shall be
reviewed from time to time by the Board or the Compensation Committee thereof
as it deems appropriate and may be increased at any time by the Board or the
Compensation Committee thereof or may be reduced only upon mutual written
agreement between the Executive and the Board or the Compensation Committee
thereof.

3.4          Employment
Taxes.  All of
the Executive’s compensation (in any form) shall be subject to all required
withholding taxes, employment taxes and other deductions required by law.

3.5          Benefits.  The Executive shall, in accordance with
Company policy and the terms of the applicable plan documents, be eligible to
participate in benefits under any benefit plan or arrangement which may be in
effect from time to time and made available to the Company’s employees.  In addition, the Executive shall be eligible
for paid vacation, in accordance with Company policy as in effect from time to
time.

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3.6          Equity
Compensation. 
The Compensation Committee of the Board will periodically evaluate the
equity position of Executive and determine changes, if any, at its annual
meeting addressing executive compensation in general.

4.                                      TERMINATION.

4.1          Termination By the Company.  The Executive’s employment with the Company
may be terminated under the following conditions:

4.1.1   Termination
for Death or Disability.  The Executive’s employment with the Company
shall terminate effective upon the date of the Executive’s death or Complete Disability (as defined
below).

4.1.2   Termination
by the Company For Cause.  The Company may terminate the Executive’s
employment under this Agreement for Cause (as defined below). A notice of
termination given pursuant to this Section 4.1.2 shall effect termination as of
the date specified, or, in the event no such date is specified, on the date
upon which the notice is given.

4.1.3   Termination
by the Company For Any Reason Other Than Cause.  The Executive’s employment by the Company
shall be “at will.”  The Company may
terminate the Executive’s employment under this Agreement at any time, for any
or no reason and with or without cause or advance notice.  This is the full and complete agreement
between the Executive and the Company on this term.  Although the Executive’s duties, title,
compensation and benefits may change, the “at will” nature of the Executive’s
employment relationship with the Company may only be modified in an express
written agreement signed by the Executive and the Board.

4.2          Termination
by Mutual Agreement of the Parties.  The Executive’s employment pursuant to this
Agreement may be terminated at any time upon the mutual written agreement of
the Parties.  Any such termination of
employment shall have the consequences specified in such writing.

4.3          Termination by the Executive.  The Executive’s employment by the Company
shall be “at will.”  The Executive shall
have the right to resign or terminate the Executive’s employment at any time,
with or without cause, notice or Good Reason.

4.4          Compensation
Upon Termination.

4.4.1   Termination
Payments.  Upon Executive’s
termination or resignation with Good Reason, the Company shall pay the
Executive’s base salary and any accrued and unused vacation benefits earned
through the date of such termination or resignation.  Except as expressly provided herein, the
Company shall thereafter have no further obligations to the Executive under
this Agreement.

4.4.2   Severance
Payments.  In
addition to the payments provided in Section 4.4.1, if the Executive’s
employment is terminated by the Company without Cause, or if, within three
months before, or 12 months following, a Change in Control (as defined below),
the Executive resigns for Good Reason, then the Company shall provide the
following benefits:

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4.4.2.1          The
Company shall continue to pay the Executive’s base salary until the end of the
period following the termination or resignation of the Executive equal to nine
(9) months (the “Compensation Severance Period”).   Such severance payments shall be subject to
standard deductions and withholdings and paid in accordance with the Company’s
regular payroll policies and practices. 
For purposes of calculating the amount to be paid pursuant this Section
4.4.2.1, the Company shall use the Executive’s base compensation in effect on
the date of such termination or resignation.

4.4.2.2          Each
month during the Compensation Severance Period, the Company shall pay the
Executive an amount equal to one-twelfth (1/12th) of the greater of (i) the average of
the three annual bonuses paid to the Executive by the Company prior to the date
of termination or resignation, (ii) the last annual bonus paid to the Executive
by the Company prior to the date of termination or resignation, or (iii) if the
termination occurs within the first twelve 12 months following the Effective
Date of this Agreement, then the Target Bonus Amount. Such payment shall be
subject to standard deductions and withholdings and paid in equal monthly
installments over the Compensation Severance Period in accordance with the Company’s
regular payroll policies and practices.

4.4.2.3          The
vesting of each Company equity award held by Executive shall accelerate on such
date of termination by the number of shares that would have vested had
Executive remained employed by the Company until the end of the period
following the termination or resignation of the Executive equal to twelve (12)
months (the “Benefit Severance Period”),
and, during the Benefit Severance Period, Executive shall have continued
exercisability of each Company stock option and stock appreciation right held
by the Executive (if any). Notwithstanding the foregoing, if a stock option or stock appreciation right
was held by the Executive on the Effective Date and counsel for the Company has
not advised the Company that such continued stock option exercisability would
not cause such stock option to be treated as covered by Section 409A of the
Code or would not cause the Executive to become subject to the immediate
taxation prior to the date of exercise, additional tax and interest under
Section 409A of the Code, then any such stock option or stock appreciation
right then held by Executive shall remain exercisable until the earlier of (1)
the end of the Benefit Severance Period or (2) the later of the 15th day of
the third month following the date at which, or December 31 of the calendar
year in which, the stock option would otherwise have expired if the stock
option had not been extended pursuant to this Section 4.4.2.3 (based on the
terms of the stock option at the original grant date); provided, however, that such stock options
shall not be exercisable after the expiration of its maximum term.   Nothing in this Section 4.4.2.3 prohibits
the Company or a successor organization (or its parent) from causing such awards
to terminate in connection with a merger, consolidation or other corporate
transaction pursuant to the terms of the applicable equity plan or award
agreements.

4.4.2.4          Assuming
the Executive timely and accurately elects to continue his health insurance
benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company
shall pay the COBRA premiums for the Executive and his or her qualified
beneficiaries until the earliest of (i) the end of the Benefit Severance
Period, (ii) the expiration of the Executive’s continuation coverage under
COBRA and any applicable state COBRA-like statute that provides mandated
continuation coverage or (iii) the date the Executive becomes eligible for
health insurance benefits of a subsequent employer.

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4.4.2.5          In
the event the Executive resigns with Good Reason prior to a Change in Control,
the payments described in Sections 4.4.2.1, 4.4.2.2 and 4.4.2.4 will commence
as soon as administratively practicable following the Change in Control;
otherwise the payments will commence as soon administratively practicable
following the Executive’s termination or resignation.

4.4.3   Release.  Notwithstanding the foregoing, the Executive
shall not receive any of the severance payments or benefits set forth under
Section 4.4.2, unless upon Executive’s termination of employment the Executive
furnishes the Company with an effective waiver and release of claims (the “Release”) in a form acceptable to
the Parties and substantially as attached hereto as Exhibit A. If a majority of the Board determines in good
faith that the Executive has breached any provision of this Agreement or the
Release, the Company shall be excused from the obligation to provide any
severance payment under Section 4.4.2; provided, however, that the Company shall
not be entitled to recovery of any severance payment already provided to the
Executive under Section 4.4.2.

4.4.4   No Mitigation.   Amounts
payable to the Executive under Section 4.4.2.1 and Section 4.4.2.2 shall not be
reduced by any amount of the Executive’s earnings from other employment during
the Benefit Severance Period, if applicable, and, during the Benefit Severance
Period, the Executive shall not have an affirmative duty to seek other
employment or otherwise mitigate the amount of any payment contemplated by this
Agreement.

4.5          Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings:

4.5.1   Complete
Disability.  “Complete Disability” shall mean the inability of the
Executive to perform the Executive’s duties under this Agreement because the
Executive has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then in
force.  In the event the Company has no
policy of disability income insurance covering employees of the Company in
force when the Executive becomes disabled, the term “Complete
Disability” shall mean the inability of the Executive to perform the
Executive’s duties under this Agreement by reason of any incapacity, physical
or mental, which the Board, based upon medical advice or an opinion provided by
a licensed physician acceptable to the Board, determines to have incapacitated
the Executive from satisfactorily performing all of the Executive’s usual
services for the Company for a period of at least one hundred twenty (120) days
during any twelve (12) month period (whether or not consecutive).  Based upon such medical advice or opinion,
the determination of the Board shall be final and binding and the date such
determination is made shall be the date of such Complete Disability for
purposes of this Agreement.

4.5.2   Cause.  “Cause” for the Company to
terminate Executive’s employment
hereunder shall mean the occurrence of one or more of the following
events if such event results in a demonstrably harmful impact on the Company’s
business or reputation, or that of any of its subsidiaries, as reasonably
determined by the Board:

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(i)            Executive’s
conviction of, or plea of guilty or no contest to, any felony or any crime
involving fraud, dishonesty or moral turpitude under the laws of the United
States or any state thereof;

(ii)           Executive’s
commission of (or attempted commission of), or participation in, a fraud or act
of dishonesty against the Company;

(iii)         Executive’s
material violation of any statutory duty owed to the Company or material
violation of any policy or rule of the Company;

(iv)          Executive’s
unauthorized use or disclosure of the Company’s confidential information or
trade secrets;

(v)            Executive’s gross
misconduct; or

(vi)          Executive’s conduct
that constitutes gross insubordination or habitual neglect of duties that is
not cured within the reasonable period provided by the Board or a committee
designated by the Board in its written notice to Executive of such conduct.

The determination that a termination is for Cause
shall be made by the Board in good faith. 
Any determination that the Executive’s employment was terminated by
reason of dismissal without Cause for the purposes of this Agreement shall have
no effect upon any determination of the rights or obligations of the Company or
the Executive for any other purpose.

4.5.3   Good Reason. “Good Reason” means, with respect to the
Executive, the occurrence of one or more of the following, without the
Executive’s express written consent and for which the Executive has given the
Company express written notice within thirty (30) days following such
occurrence:

(i)            a
material breach of the employment agreement by the Company;

(ii)           a
material reduction in the Executive’s duties, position, authority or
responsibilities relative to the duties, position, authority or
responsibilities in effect immediately prior to such reduction;

(iii)         a
reduction in the Executive’s base salary, bonus or other cash incentive
compensation opportunity as in effect immediately prior to such reduction for
any reason other than in connection with, and proportionate to, a company-wide
pay reduction;

(iv)          a
material reduction in Executive’s long-term non-cash incentive opportunities
(the value of which is measured as of the date of grant using a reasonable
valuation methodology consistently applied), provided that the grant of a stock
award covering the same number of shares as a similar stock award granted in
the immediately preceding year shall not be deemed to be a material reduction
of the Executive’s long-term incentive opportunities;

(v)            the
failure of the Company to timely pay Executive any portion of Executive’s
compensation then due to Executive or the failure to pay or reimburse Executive
for 

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any business expenses incurred by Executive in
accordance with Company policy in a reasonably timely manner; and

(vi)          a
material reduction in Executive’s benefits for any reason other than in
connection with any change to the Company’s benefit programs applicable to all
Company employees generally made.

4.5.4   Change
in Control.  “Change in Control” shall
mean a transaction (excluding in each case transactions in which securities are
purchased from the Company for the principal purpose of raising capital for the
Company) in which one of the following occurs:

(i)            any
person or related group of persons (other than the Parent or an affiliate of
the Parent) directly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities;

(ii)           the
composition of the Board changes over a period of twenty-four (24) consecutive
months or less in a way that results in a majority of the Board (rounded up to
the next whole number) ceasing, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of the period or (B) have
been elected or nominated for election as Board members during the period by at
least two-thirds of the Board members described in clause (A) who were still in
office at the time the election or nomination was approved by the Board;

(iii)         
(A) a merger or consolidation occurs in which the Parent is not the surviving
entity, or (B) any reverse merger occurs in which the Parent is the surviving
entity, or (C) any merger involving a subsidiary of the Parent occurs in which
the Parent is a surviving entity, but in each case in which holders of the
Parent’s outstanding voting securities immediately prior to such transaction,
as such, do not hold, immediately following such transaction, securities
possessing fifty percent (50%) or more of the total combined voting power of
the surviving entity’s outstanding securities (in the case of clause (A)) or
the Parent’s outstanding voting securities (in the case of clauses (B) and
(C)); or

(iv)          all
or substantially all of the Parent’s assets are sold of transferred other than
in connection with an internal reorganization of the Parent or the Parent’s
complete liquidation (other than a liquidation of the Parent into a
wholly-owned subsidiary).

4.6          Parachute Payments.  Anything in this Agreement to the contrary notwithstanding,
if any payment or benefit the Executive would receive from the Company pursuant
to this Agreement or otherwise (a “Payment”) would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”),
and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the “Excise
Tax”), then such Payment shall be equal to the Reduced
Amount.  The “Reduced Amount” shall
be either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest
portion of the Payment, up to and including the total Payment, whichever
amount, after taking 

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into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in the Executive’s receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless the Executive elects in writing a different order (provided,
however, that such election shall be subject to Company approval if
made on or after the date on which the event that triggers the Payment
occurs):  reduction of cash payments;
cancellation of accelerated vesting of stock awards; reduction of employee
benefits.  If acceleration of vesting of
stock award compensation is to be reduced, such acceleration of vesting shall
be cancelled in the reverse order of the date of grant of the Executive’s stock
awards unless the Executive elects in writing a different order for
cancellation.

The Company shall
appoint a nationally recognized independent accounting firm to make the
determinations required hereunder, which accounting firm shall not then be
serving as accountant or auditor for the individual, entity or group that
effected the Change in Control.  The
Company shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.

The accounting firm engaged to make the
determinations hereunder shall provide its calculations, together with detailed
supporting documentation, to the Company and the Executive within fifteen (15)
calendar days after the date on which the Executive’s right to a Payment is
triggered (if requested at that time by the Company or the Executive) or such
other time as requested by the Company or the Executive.  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish the Company and the
Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to such Payment.  The Company shall be entitled to rely upon
the accounting firm’s determinations, which shall be final and binding on all
persons.

4.7          Exclusive Remedy.  The
rights, remedies and payments set forth in this Section 4 shall be the
exclusive rights, remedies and payments available to the Executive upon
termination of this Agreement and the Executive’s employment hereunder.  Such rights remedies and payments shall
supersede and replace any and all rights and remedies under state or federal
law.  The Company may deduct any amounts
the Executive owes the Company at the time of the Executive’s termination of
employment from any severance payments.

4.8          Application
of Section 409A.  In
the event that any cash severance benefit or continued medical benefit under
this Section 4 shall fail to satisfy the distribution requirement of Section
409A(a)(2)(A) of the Code as a result of the application of Section
409A(a)(2)(B)(i) of the Code, then the payment of such benefits shall be
delayed to the minimum extent necessary so that such benefits are not subject
to the provisions of Section 409A(a)(1) of the Code.  The Board may attach conditions to or adjust
the amounts paid pursuant to this Section 4.8 to preserve, as closely as
possible, the economic consequences that would have applied in the absence of
this Section 4.8; provided, however, that no such
condition or adjustment shall result in the payments being subject to Section
409A(a)(1) of the Code.

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4.9          Survival of Certain Sections.  Sections
3.4, 4.4, 4.5, 4.6, 4.7, 4.8 and 5 - 16 of this Agreement shall survive the
termination of this Agreement.

5.                                      CONFIDENTIAL
AND PROPRIETARY INFORMATION; NONSOLICITATION.

5.1          Proprietary Information and Inventions
Agreement.  As a
condition of employment, the Executive agrees to execute and abide by the
Proprietary Information and Inventions Agreement attached hereto as Exhibit B.

5.2          Non-Solicitation.  During
the Executive’s employment with the Company and the Benefit Severance Period
and for one (1) year after the termination of such periods, the Executive
agrees that in order to protect the confidential and proprietary information of
the Company and its subsidiaries from unauthorized use, the Executive shall
not, either directly or through others, solicit or attempt to solicit any
employee, consultant or independent contractor of the Company or its
subsidiaries to terminate his or her relationship with the Company (or the
applicable subsidiary) in order to become an employee, consultant or
independent contractor to or for any other person or business entity.

6.                                      ASSIGNMENT
AND BINDING EFFECT.

This Agreement shall be
binding upon and inure to the benefit of the Executive and the Executive’s
heirs, executors, personal representatives, assigns, administrators and legal
representatives.  Because of the unique
and personal nature of the Executive’s duties under this Agreement, neither
this Agreement nor any rights or obligations under this Agreement shall be
assignable by the Executive.  This
Agreement shall be binding upon and inure to the benefit of the Company and its
successors, assigns and legal representatives.

7.                                      CHOICE OF
LAW.

This Agreement is made
and intended to be performed primarily within the state of California.  This Agreement shall be construed and
interpreted in accordance with the internal laws of the state of California
(without giving effect to principles of conflicts of law).

8.                                      INTEGRATION.

Except as may otherwise
be provided herein, this Agreement, including Exhibit
A and Exhibit B, contains the complete, final and exclusive
agreement of the Parties relating to the terms and conditions of the Executive’s
employment and the termination of Executive’s employment, and supersedes all
prior and contemporaneous oral and written employment agreements or
arrangements between the Parties. To the extent this Agreement conflicts with
the Proprietary Information and Inventions Agreement attached as Exhibit B, the Proprietary Information
and Inventions Agreement controls.

9.                                      AMENDMENT.

This Agreement cannot be
amended or modified except by a written agreement signed by the Executive and
the Board.

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10.                               WAIVER.

No term, covenant or
condition of this Agreement or any breach thereof shall be deemed waived,
except with the written consent of the Party against whom the waiver is
claimed, and any waiver or any such term, covenant, condition or breach shall
not be deemed to be a waiver of any preceding or succeeding breach of the same
or any other term, covenant, condition or breach.

11.                               SEVERABILITY.

The finding by a court of
competent jurisdiction or other authorized body of the unenforceability,
invalidity or illegality of any provision of this Agreement shall not render
any other provision of this Agreement unenforceable, invalid or illegal.  The invalid or unenforceable term or
provision shall be modified or replaced with a valid and enforceable term or
provision which most accurately represents the Parties’
intention with respect to the invalid or unenforceable term or provision.

12.                               INTERPRETATION;
CONSTRUCTION.

The headings set forth in
this Agreement are for convenience of reference only and shall not be used in
interpreting this Agreement.  The
Executive has been encouraged to consult with, and has consulted with,
Executive’s own independent counsel and tax advisors with respect to the terms
of this Agreement.  The Parties
acknowledge that each Party and its counsel has reviewed and revised, or had an
opportunity to review and revise, this Agreement, and any rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement.

13.                               REPRESENTATIONS
AND WARRANTIES.

The Executive represents
and warrants that the Executive is not restricted or prohibited, contractually
or otherwise, from entering into and performing each of the terms and covenants
contained in this Agreement, and that the Executive’s execution and performance
of this Agreement shall not violate or breach any other agreements between the
Executive and any other person or entity.

14.                               COUNTERPARTS.

This Agreement may be
executed in two counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.

15.                               ARBITRATION.

To ensure the rapid and
economical resolution of disputes that may arise in connection with the
Executive’s employment with the Company, the Executive and the Company agree
that any and all disputes, claims, or causes of action, in law or equity,
arising from or relating to Executive’s employment, or the termination of that
employment, will be resolved, to the fullest extent permitted by law, by final
binding arbitration in San Diego, California conducted by the Judicial
Arbitration and Mediation Services (“JAMS”), or its 

 10
 

 

successors, under the then current rules of JAMS for
employment disputes; provided that the arbitrator shall: (a) have the authority
to compel adequate discovery for the resolution of the dispute and to award
such relief as would otherwise be permitted by law and (b) issue a written
arbitration decision including the arbitrator’s essential findings and
conclusions and a statement of the award.  Both the Executive and the Company shall be
entitled to all rights and remedies that either the Executive or the Company
would be entitled to pursue in a court of law. 
The Company shall pay all administrative fees associated with the
arbitration and the fees of the arbitrator. 
Nothing in this Agreement is intended to prevent either the Executive or
the Company from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration.  Notwithstanding the foregoing, the Executive
and the Company each have the right to resolve any and all issues or disputes
involving confidential information, proprietary information,  trade secrets or related information or
intellectual property rights by court action instead of arbitration.

16.                               TRADE
SECRETS OF OTHERS.

It is the understanding
of both the Company and the Executive that the Executive shall not divulge to
the Company and/or its subsidiaries any confidential information or trade
secrets belonging to others, including the Executive’s former employers, nor
shall the Company and/or its subsidiaries seek to elicit from the Executive any
such information.  Consistent with the
foregoing, the Executive shall not provide to the Company and/or its subsidiaries,
and the Company and/or its subsidiaries shall not request, any documents or
copies of documents containing such information.

 11
 

 

IN WITNESS
WHEREOF, the Parties have
executed this Agreement as of the date first shown above.

	
  TORREYPINES THERAPEUTICS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Neil Kurtz

  	
   

  
	
  NEIL
  M. KURTZ, M.D.

  	
   

  
	
  CHIEF EXECUTIVE OFFICER AND PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTIVE

  	
   

  
	
   

  	
   

  
	
  /s/ Evelyn Graham

  	
   

  
	
  EVELYN GRAHAM 

  	
   

  
	
  CHIEF OPERATING OFFICER

  	
   

  

 

 12

EXHIBIT A

RELEASE
AND WAIVER OF CLAIMS

In consideration
of the payments and other benefits set forth in Section 4.4 of the Employment
Agreement dated December 14, 2006 (the “Employment Agreement”),
to which this form is attached, I, Evelyn Graham, hereby furnish TorreyPines
Therapeutics, Inc. (the “Company”), with the following
release and waiver (“Release and Waiver”):

In exchange for
the consideration provided to me by the Employment Agreement that I am not
otherwise entitled to receive, I hereby generally and completely release the
Company and its directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent and subsidiary entities, insurers,
affiliates, and assigns from any and all claims, liabilities and obligations,
both known and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring prior to my signing this Release and
Waiver.  This general release includes,
but is not limited to: (1) all claims arising out of or in any way related to
my employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership
interests in the Company, except to the extent that such claims cannot be
released pursuant to the California Labor Code, including, but not limited to,
sections 2802 and 206.5; (3) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing;
(4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy;
and (5) all federal, state, and local statutory claims, including, but not
limited to, claims for discrimination, harassment, retaliation, attorneys’
fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended),
the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair
Employment and Housing Act (as amended).

I also acknowledge
that I have 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.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to any claims I may
have against the Company.

I acknowledge
that, among other rights, I am waiving and releasing any rights I may have
under ADEA, that this Release and Waiver is knowing and voluntary, and that the
consideration given for this Release and Waiver is in addition to anything of
value to which I was already entitled as an executive of the Company.  I further acknowledge that I have been
advised, as required by the Older Workers Benefit Protection Act, that:  (a) the release and waiver granted herein
does not relate to claims under the ADEA which may arise after this Release and
Waiver is executed; (b) I should consult with an attorney prior to executing
this Release and Waiver; (c) I have twenty-one (21) days in which to consider
this Release and 

 

Waiver (although I may choose voluntarily to execute
this Release and Waiver earlier); (d) I have seven (7) days following the
execution of this Release and Waiver to revoke my consent to this Release and
Waiver; and (e) this Release and Waiver shall not be effective until the eighth
day after I execute this Release and Waiver and the revocation period has
expired (the “Effective
Date”).

I acknowledge and agree to my continuing obligations under my
Proprietary Information and Inventions Agreement, a copy of which is attached
to the Employment Agreement.  I
understand and agree that my right to the severance pay I am receiving in
exchange for my agreement to the terms of this Release and Waiver is contingent
upon my continued compliance with my Proprietary Information and Inventions
Agreement.

I represent that I have not filed any claims against the Company, and
agree that, except as such waiver may be prohibited by statute, I will not file
any claim against the Company or seek any compensation for any claim other than
the payments and benefits referenced herein. 
I agree to indemnify and hold the Company harmless from and against any
and all loss, cost, and expense, including, but not limited to court costs and
attorney’s fees, arising from or in connection with any action which may be
commenced, prosecuted, or threatened by me or for my benefit, upon my
initiative, or with my aid or approval, contrary to the provisions of this
Release and Waiver.

This Release and Waiver, including any referenced
documents, constitutes the complete, final and exclusive embodiment of the
entire agreement between the Company and me with regard to the subject matter
hereof.  I am not relying on any promise
or representation by the Company that is not expressly stated herein.  This Release and Waiver may only be modified
by a writing signed by both me and a member of the Board of Directors of the
Company.

 

 

	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  EVELYN GRAHAM

  

 

 2

 

EXHIBIT B

[PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT]

 1

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