Document:

Exhibit 10.2

 

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between Cadence
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and [NAME]
(“Executive”), and shall be effective as of July 7, 2006 (the “Effective Date”).

     WHEREAS, the Company desires to employ Executive, and Executive desires to commence or
continue employment with the Company, on the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as
follows:

     1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:

          (a) Board. “Board” means the Board of Directors of the Company.

          (b) Bonus. “Bonus” means an amount equal to the average of the bonuses
awarded to Executive for each of the three (3) fiscal years prior to the date of termination, or
such lesser number of years as may be applicable if Executive has not been employed for three (3)
full years on the date of termination. For purposes of determining Executive’s “Bonus,” to the
extent Executive received no bonus in a year due to a failure to meet the applicable performance
objectives, such year will still be taken into account (using zero (0) as the applicable bonus) in
determining Executive’s “Bonus” for purposes of Section 4. If any portion of the bonuses awarded
to Executive consisted of securities or other property, the fair market value thereof shall be
determined in good faith by the Board.

          (c) Cause. “Cause” means any of the following:

               (i) the commission of an act of fraud, embezzlement or dishonesty by Executive that has a
material adverse impact on the Company or any successor or affiliate thereof;

               (ii) a conviction of, or plea of “guilty” or “no contest” to, a felony by Executive;

               (iii) any unauthorized use or disclosure by Executive of confidential information or trade
secrets of the Company or any successor or affiliate thereof that has a material adverse impact on
any such entity;

               (iv) Executive’s gross negligence, insubordination or material violation of any duty of
loyalty to the Company or any other material misconduct on the part of Executive;

               (v) Executive’s ongoing and repeated failure or refusal to perform or neglect of Executive’s
duties as required by this Agreement, which failure, refusal or neglect

 

 

continues for fifteen (15) days following Executive’s receipt of written notice from the Board
[ALL OFFICERS EXCEPT CEO: or the Company’s Chief Executive Officer (the “CEO”) or the
President] stating with specificity the nature of such failure, refusal or neglect; or

               (vi) Executive’s breach of any material provision of this Agreement; provided,
however, that prior to the determination that “Cause” under this Section 1(c) has occurred,
the Company shall (w) provide to Executive in writing, in reasonable detail, the reasons for the
determination that such “Cause” exists, (x) other than with respect to clause (v) above which
specifies the applicable period of time for Executive to remedy his or her breach, afford Executive
a reasonable opportunity to remedy any such breach, (y) provide the Executive an opportunity to be
heard prior to the final decision to terminate the Executive’s employment hereunder for such
“Cause” and (z) make any decision that such “Cause” exists in good faith.

          The foregoing definition shall not in any way preclude or restrict the right of the Company or
any successor or affiliate thereof to discharge or dismiss Executive for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of this Agreement, to
constitute grounds for termination for Cause.

          (d) Change of Control. “Change of Control” means (i) a merger or
consolidation of the Company with or into any other corporation or other entity or person or (ii) a
sale, lease, exchange or other transfer in one transaction or a series of related transactions of
all or substantially all of the Company’s outstanding securities or all or substantially all of the
Company’s assets; provided, however, that the following events shall not constitute
a “Change of Control”: (A) a merger or consolidation of the Company in which the holders of the
voting securities of the Company immediately prior to the merger or consolidation hold at least a
majority of the voting securities in the successor corporation immediately after the merger or
consolidation; (B) a sale, lease, exchange or other transaction in one transaction or a series of
related transactions of all or substantially all of the Company’s assets to a wholly-owned
subsidiary corporation; (C) a mere reincorporation of the Company; or (D) a transaction undertaken
for the sole purpose of creating a holding company that will be owned in substantially the same
proportion by the persons who held the Company’s securities immediately before such transaction.

          (e) Code. “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury Regulations and other interpretive guidance issued thereunder.

          (f) Good Reason. “Good Reason” means the occurrence of any of the following
events or conditions without Executive’s written consent and the failure of the Company or any
successor or affiliate to cure such event or condition within thirty (30) days after receipt of
written notice from Executive:

               (i) a change in Executive’s position or responsibilities[ALL OFFICERS EXCEPT CEO: other than a
change in Executive’s reporting relationship,] that, in Executive’s reasonable judgment, represents
a substantial and material reduction in the position or responsibilities as in effect immediately
prior thereto; the assignment to Executive of any duties or responsibilities [ALL OFFICERS EXCEPT
CEO: other than a change in Executive’s

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reporting relationship,] that, in Executive’s reasonable judgment, are materially inconsistent
with such position or responsibilities; or any removal of Executive from or failure to reappoint or
reelect Executive to any of such positions, except in connection with the termination of
Executive’s employment for Cause, as a result of his or her Permanent Disability or death, or by
Executive other than for Good Reason;

               (ii) a material reduction in Executive’s annual base salary, except in connection with a
general reduction in the compensation of the Company’s or any successor’s or affiliate’s personnel
with similar status and responsibilities;

               (iii) the Company’s or any successor’s or affiliate’s requiring Executive (without Executive’s
consent) to be based at any place outside a 50-mile radius of his or her place of employment as of
the Effective Date, except for reasonably required travel on the Company’s or any successor’s or
affiliate’s business that is not materially greater than such travel requirements prior to the
Effective Date;

               (iv) the Company’s or any successor’s or affiliate’s failure to provide Executive with
compensation and benefits substantially equivalent (in terms of benefit levels and/or reward
opportunities) to those provided for under each material employee benefit plan, program and
practice as in effect immediately prior to the Effective Date; or

               (v) any material breach by the Company or any successor or affiliate of its obligations to
Executive under this Agreement.

          (g) Permanent Disability. Executive’s “Permanent Disability” shall be deemed
to have occurred if Executive shall become physically or mentally incapacitated or disabled or
otherwise unable fully to discharge his or her duties hereunder for a period of ninety (90)
consecutive calendar days or for one hundred twenty (120) calendar days in any one hundred eighty
(180) calendar-day period. The existence of Executive’s Permanent Disability shall be determined
by the Company on the advice of a physician chosen by the Company and the Company reserves the
right to have the Executive examined by a physician chosen by the Company at the Company’s expense.

          (h) Stock Awards. “Stock Awards” means all stock options, restricted stock
and such other awards granted pursuant to the Company’s stock option and equity incentive award
plans or agreements and any shares of stock issued upon exercise thereof.

     2. Services to Be Rendered.

          (a) Duties and Responsibilities. Executive shall serve as [TITLE] of the Company. In
the performance of such duties, Executive shall report directly to the [ ALL OFFICERS EXCEPT
CEO : CEO or President] [CEO ONLY: Board] and shall be subject to the direction of the
[ALL OFFICERS EXCEPT CEO : CEO or President] [CEO ONLY: Board] and to such limits upon
Executive’s authority as the Board or the CEO or President may from time to time impose. [ ALL
OFFICERS EXCEPT CEO : In the event of the CEO’s or President’s incapacity or unavailability,
Executive shall report directly to the CEO or be subject

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to the direction of the Board or its designee.] Executive hereby consents to serve as an
officer and/or director of the Company or any subsidiary or affiliate thereof without any
additional salary or compensation, if so requested by the [ ALL OFFICERS EXCEPT CEO : CEO
or President] [CEO ONLY: Board]. Executive shall be employed by the Company on a full time basis.
Executive’s primary place of work shall be the Company’s facility in San Diego, California, or such
other location within San Diego County as may be designated by the [ALL OFFICERS EXCEPT CEO: CEO or
President] [CEO ONLY: Board] from time to time. Executive shall also render services at such
other places within or outside the United States as the [ALL OFFICERS EXCEPT CEO: CEO or President]
[CEO ONLY: Board] may direct from time to time. Executive shall be subject to and comply with the
policies and procedures generally applicable to senior executives of the Company to the extent the
same are not inconsistent with any term of this Agreement.

          (b) Exclusive Services. Executive shall at all times faithfully, industriously and to
the best of his or her ability, experience and talent perform to the satisfaction of the Board,
[ALL OFFICERS EXCEPT CEO: the CEO and the President] all of the duties that may be assigned to
Executive hereunder and shall devote substantially all of his or her productive time and efforts to
the performance of such duties. Subject to the terms of the Employee Proprietary Information and
Inventions Agreement referred to in Section 5(b), this shall not preclude Executive from devoting
time to personal and family investments or serving on community and civic boards, or participating
in industry associations, provided such activities do not interfere with his or her duties to the
Company, as determined in good faith by the [ALL OFFICERS EXCEPT CEO: CEO or President] [CEO ONLY:
Board] . Executive agrees that he or she will not join any boards, other than community and civic
boards (which do not interfere with his or her duties to the Company), without the prior approval
of the [ALL OFFICERS EXCEPT CEO: CEO or President] [CEO ONLY: Board].

     3. Compensation and Benefits. The Company shall pay or provide, as the case may be,
to Executive the compensation and other benefits and rights set forth in this Section 3.

          (a) Base Salary. The Company shall pay to Executive a base salary of $[SALARY] per
year, payable in accordance with the Company’s usual pay practices (and in any event no less
frequently than monthly). Executive’s base salary shall be subject to review annually by and at
the sole discretion of the Compensation Committee of the Board or its designee.

          (b) Bonus. Executive shall participate in any bonus plan that the Board or its
designee may approve for the senior executives of the Company.

          (c) Benefits. Executive shall be entitled to participate in benefits under the
Company’s benefit plans and arrangements, including, without limitation, any employee benefit plan
or arrangement made available in the future by the Company to its senior executives, subject to and
on a basis consistent with the terms, conditions and overall administration of such plans and
arrangements. The Company shall have the right to amend or delete any such benefit plan or
arrangement made available by the Company to its senior executives and not otherwise specifically
provided for herein.

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          (d) Expenses. The Company shall reimburse Executive for reasonable out-of-pocket
business expenses incurred in connection with the performance of his or her duties hereunder,
subject to (i) such policies as the Company may from time to time establish, (ii) Executive
furnishing the Company with evidence in the form of receipts satisfactory to the Company
substantiating the claimed expenditures, [ALL OFFICERS EXCEPT CEO: (iii) Executive receiving
advance approval from the CEO or the President in the case of expenses for travel outside of North
America, and (iv) Executive receiving advance approval from the CEO or the President in the case of
expenses (or a series of related expenses) in excess of $10,000.]

          (e) Paid Time Off. Executive shall be entitled to such periods of paid time off
(“PTO”) each year as provided from time to time under the Company’s PTO guidelines;
provided that Executive shall be entitled to at least four (4) weeks of PTO per year.

          (f) Equity Plans. Executive shall be entitled to participate in any equity or other
employee benefit plan that is generally available to senior executive officers, as distinguished
from general management, of the Company. Except as otherwise provided in this Agreement,
Executive’s participation in and benefits under any such plan shall be on the terms and subject to
the conditions specified in the governing document of the particular plan.

          (g) Stock Award Acceleration.

               (i) If Executive’s employment is terminated by the Company without Cause, by Executive for
Good Reason, or as a result of Executive’s death or Permanent Disability, the vesting and/or
exercisability of each of Executive’s outstanding Stock Awards shall be automatically accelerated
on the date of termination as to the number of Stock Awards that would vest over the twelve (12)
month period following the date of termination had Executive remained continuously employed by the
Company during such period.

               (ii) The vesting and exercisability of fifty percent (50%) of Executive’s outstanding Stock
Awards shall be automatically accelerated on the date of a Change of Control.

               (iii) With respect to Stock Awards granted prior to the Effective Date, if Executive’s
employment is terminated by the Company without Cause or by Executive for Good Reason within three
(3) months prior to or twelve (12) months following a Change of Control, the vesting and/or
exercisability of any outstanding unvested portions of such Stock Awards shall be automatically
accelerated on the later of (A) the date of termination or (B) the date of the Change of Control.

               (iv) With respect to Stock Awards granted on or after the Effective Date, if Executive’s
employment is terminated by the Company without Cause or by Executive for Good Reason within three
(3) months prior to or twelve (12) months following a Change of Control, the vesting and/or
exercisability of any outstanding unvested portions of such Stock Awards shall be automatically
accelerated on the later of (A) the date of termination or (B) the date of the Change of Control.
In addition, Executive’s Stock Awards may be exercised by Executive (or Executive’s guardian or
legal representative) until the latest of (A) three (3)

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months after the date of termination, (B) with respect to any portion of the Stock Awards that
become exercisable on the date of a Change of Control pursuant to this Section 3(g)(iv), three (3)
months after the date of the Change of Control, or (C) such longer period as may be specified in
the applicable Stock Award agreement; provided, however, that in no event shall any
Stock Award remain exercisable beyond the original outside expiration date of such Stock Award.

               (v) The vesting pursuant to clauses (i), (ii), (iii) and (iv) of this Section 3(g) shall be
cumulative. The foregoing provisions are hereby deemed to be a part of each Stock Award and to
supersede any less favorable provision in any agreement or plan regarding such Stock Award.

     4. Termination and Severance. Executive shall be entitled to receive benefits upon
termination of employment only as set forth in this Section 4:

          (a) At-Will Employment; Termination. The Company and Executive acknowledge that
Executive’s employment is and shall continue to be at-will, as defined under applicable law, and
that Executive’s employment with the Company may be terminated by either party at any time for any
or no reason, with or without notice. If Executive’s employment terminates for any reason,
Executive shall not be entitled to any payments, benefits, damages, awards or compensation other
than as provided in this Agreement. Executive’s employment under this Agreement shall be
terminated immediately on the death of Executive.

          (b) Termination by Death. If Executive’s employment is terminated by death,
Executive’s estate shall be entitled to receive (i) Executive’s fully earned but unpaid base
salary, through the date of death at the rate then in effect, plus all other amounts to which
Executive is entitled under any compensation plan or practice of the Company at the time of
Executive’s death, (ii) a lump sum cash payment equal to Executive’s annual base salary as in
effect immediately prior to the date of death, payable within sixty (60) days following the date of
Executive’s death, (iii) a lump sum cash payment equal to Executive’s Bonus for the year in which
Executive’s death occurs prorated for the period during such year Executive was employed prior to
his or her death, payable within sixty (60) days following the date of Executive’s death, and (iv)
for the period beginning on the date of death and ending on the date which is twelve (12) full
months following the date of death (or, if earlier, the date on which the applicable continuation
period under COBRA expires), the Company shall reimburse Executive’s eligible dependents for the
costs associated with continuation coverage for such eligible dependents pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)
(provided that Executive’s dependents shall be solely responsible for all matters relating
to such continuation of coverage pursuant to COBRA, including, without limitation, election of such
coverage and his or her timely payment of premiums).

          (c) Termination for Permanent Disability. If Executive’s employment is terminated by
the Company as a result of Executive’s Permanent Disability, Executive shall be entitled to receive
(i) Executive’s fully earned but unpaid base salary, through the date of termination at the rate
then in effect, plus all other amounts to which Executive is entitled under any compensation plan
or practice of the Company at the time such payments are due, (ii) subject

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to Executive’s continued compliance with Section 5, a lump sum cash payment equal to
Executive’s annual base salary as in effect immediately prior to the date of termination, payable
within sixty (60) days following the effective date of Executive’s Permanent Disability, (iii)
subject to Executive’s continued compliance with Section 5, a lump sum cash payment equal to
Executive’s Bonus for the year in which the date of termination occurs prorated for the period
during such year Executive was employed prior to the date of termination, payable within sixty (60)
days following the effective date of Executive’s Permanent Disability, (iv) subject to Executive’s
continued compliance with Section 5, for the period beginning on the date of termination and ending
on the date which is twelve (12) full months following the date of termination (or, if earlier, the
date on which the applicable continuation period under COBRA expires), the Company shall (A)
reimburse Executive for the costs associated with continuation coverage pursuant to COBRA for
Executive and his or her eligible dependents who were covered under the Company’s health plans as
of the date of Executive’s termination (provided that Executive shall be solely responsible
for all matters relating to his or her continuation of coverage pursuant to COBRA, including,
without limitation, his or her election of such coverage and his or her timely payment of
premiums), and (v) the Company shall pay for and provide Executive and such eligible dependents
with a lump sum payment sufficient to pay the premiums for life insurance benefits coverage for the
twelve (12) month period commencing on the date of termination to the extent such Executive and/or
such dependents were receiving such benefits prior to the date of Executive’s termination, which
payment shall be paid within thirty (30) days of the date of termination.

          (d) Termination Without Cause or For Good Reason.

               (i) Termination Without Cause or For Good Reason. If Executive’s employment is
terminated by the Company without Cause or by Executive for Good Reason more than three (3) months
prior to a Change of Control or more than twelve (12) months following a Change of Control,
Executive shall be entitled to receive, in lieu of any severance benefits to which Executive may
otherwise be entitled under any severance plan or program of the Company (other than as provided in
Section 3(g) of this Agreement), the benefits provided below:

                    (A) the Company shall pay to Executive his or her fully earned but unpaid base salary,
when due, through the date of termination at the rate then in effect, plus all other amounts
to which Executive is entitled under any compensation plan or practice of the Company at the
time of termination;

                    (B) subject to Executive’s continued compliance with Section 5, Executive shall be
entitled to receive a lump sum cash payment equal to Executive’s annual base salary as in
effect immediately prior to the date of termination, payable within thirty (30) days
following the effective date of the Release (as defined below); plus

                    (C) subject to Executive’s continued compliance with Section 5, (1) for the period
beginning on the date of termination and ending on the date which is twelve (12) full months
following the date of termination (or, if earlier, the date on which the applicable
continuation period under COBRA expires), the Company shall reimburse Executive for the
costs associated with continuation coverage pursuant to COBRA for

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Executive and his or her eligible dependents who were covered under the Company’s
health plans as of the date of Executive’s termination (provided that Executive
shall be solely responsible for all matters relating to his or her continuation of coverage
pursuant to COBRA, including, without limitation, his or her election of such coverage and
his or her timely payment of premiums), and (2) the Company shall pay for and provide
Executive and such eligible dependents with a lump sum payment sufficient to pay the
premiums for life insurance benefits coverage for the twelve (12) month period commencing on
the date of termination to the extent such Executive and/or such dependents were receiving
such benefits prior to the date of Executive’s termination, which payment shall be paid
within thirty (30) days of the date of termination; and

                    (D) subject to Executive’s continued compliance with Section 5, Executive shall be
entitled to executive-level outplacement services at the Company’s expense, not to exceed
$15,000. Such services shall be provided by a firm selected by the Company.

                    (E) The payments and benefits provided for in this Section 4(d)(i) shall only be
payable in the event Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason more than three (3) months prior to a Change of Control or more
than twelve (12) months following a Change of Control. If Executive’s employment is
terminated by the Company without Cause or by Executive for Good Reason within three (3)
months prior to or twelve (12) months following a Change of Control, then Executive shall
receive the payments and benefits described in Section 4(d)(ii) in lieu of the payments and
benefits described in this Section 4(d)(i).

               (ii) Termination Without Cause or By Executive For Good Reason In Connection With a Change
of Control. If Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason within three (3) months prior to or twelve (12) months following a Change
of Control, Executive shall be entitled to receive, in lieu of any severance benefits to which
Executive may otherwise be entitled under any severance plan or program of the Company (other than
as provided in Section 3(g) of this Agreement), the benefits provided below:

                    (A) the Company shall pay to Executive his or her fully earned but unpaid base salary,
when due, through the date of termination at the rate then in effect, plus all other amounts
to which Executive is entitled under any compensation plan or practice of the Company at the
time of termination;

                    (B) subject to Executive’s continued compliance with Section 5, Executive shall be
entitled to receive a lump sum cash payment, payable within thirty (30) days following the
effective date of the Release, equal to the sum of:

                        (1) Executive’s annual base salary as in effect immediately prior to
the date of termination, plus

                        (2) an amount equal to Executive’s Bonus for

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the year in which the date of termination occurs prorated for the
period during such year Executive was employed prior to the date of
termination;

                    (C) subject to Executive’s continued compliance with Section 5, (1) for the period
beginning on the date of termination and ending on the date which is twelve (12) full months
following the date of termination (or, if earlier, the date on which the applicable
continuation period under COBRA expires), the Company shall reimburse Executive for the
costs associated with continuation coverage pursuant to COBRA for Executive and his or her
eligible dependents who were covered under the Company’s health plans as of the date of
Executive’s termination (provided that Executive shall be solely responsible for all
matters relating to his or her continuation of coverage pursuant to COBRA, including,
without limitation, his or her election of such coverage and his or her timely payment of
premiums), and (2) the Company shall pay for and provide Executive and such eligible
dependents with a lump sum payment sufficient to pay the premiums for life insurance
benefits coverage for the twelve (12) month period commencing on the date of termination to
the extent such Executive and/or such dependents were receiving such benefits prior to the
date of Executive’s termination, which payment shall be paid within thirty (30) days of the
date of termination; and

                    (D) subject to Executive’s continued compliance with Section 5, Executive shall be
entitled to executive-level outplacement services at the Company’s expense, not to exceed
$15,000. Such services shall be provided by a firm selected by Executive from a list
compiled by the Company.

                    (E) The payments and benefits provided for in this Section 4(d)(ii) shall only be
payable in the event Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason within three (3) months prior to or twelve (12) months following a
Change of Control. If Executive’s employment is terminated by the Company without Cause or
by Executive for Good Reason more than twelve (12) months following a Change of Control or
prior to a Change of Control and such Change of Control is not consummated within three (3)
months following such termination, then Executive shall receive the payments and benefits
described in Section 4(d)(i) and shall not be eligible to receive any of the payments and
benefits described in this Section 4(d)(ii).

          (e) Termination for Cause, Voluntary Resignation Without Good Reason or Expiration of
Employment Period. If Executive’s employment is terminated by the Company for Cause or by
Executive without Good Reason (other than as a result of Executive’s death or Permanent
Disability), the Company shall not have any other or further obligations to Executive under this
Agreement (including any financial obligations) except that Executive shall be entitled to receive
(i) Executive’s fully earned but unpaid base salary, through the date of termination at the rate
then in effect, and (ii) all other amounts or benefits to which Executive is entitled under any
compensation, retirement or benefit plan or practice of the Company at the time of termination in
accordance with the terms of such plans or practices, including, without limitation, any
continuation of benefits required by COBRA or applicable law. In addition, if Executive’s
employment is terminated by the Company for Cause or by Executive without Good Reason

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(other than as a result of Executive’s death or Permanent Disability), or if the Employment
Period expires, all vesting of Executive’s unvested Stock Awards previously granted to him or her
by the Company shall cease and none of such unvested Stock Awards shall be exercisable following
the date of such termination. The foregoing shall be in addition to, and not in lieu of, any and
all other rights and remedies which may be available to the Company under the circumstances,
whether at law or in equity.

          (f) Delay of Payments. Notwithstanding anything to the contrary in this Section 4,
the parties acknowledge and agree that any payment to be made, or benefit provided, to Executive
pursuant to this Section 4 shall be delayed to the extent necessary for this Agreement and such
payment or benefit to comply with Section 409A of the Code.

          (g) Release. As a condition to Executive’s receipt of any post-termination benefits
described in this Agreement, Executive shall execute and not revoke a general release of
all claims in favor of the Company (the “Release”) substantially in the form attached
hereto.

          (h) Exclusive Remedy. Except as otherwise expressly required by law (e.g., COBRA) or
as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses
and other amounts hereunder (if any) accruing after the termination of Executive’s employment shall
cease upon such termination. In the event of a termination of Executive’s employment with the
Company, Executive’s sole remedy shall be to receive the payments and benefits described in this
Section 4. In addition, Executive acknowledges and agrees that he or she is not entitled to any
reimbursement by the Company for any taxes payable by Executive as a result of the payments and
benefits received by Executive pursuant to this Section 4, including, without limitation, any
excise tax imposed by Section 4999 of the Code.

          (i) No Mitigation. The amount of any payment or benefit provided for in this Section
4 shall not be reduced by any compensation earned by Executive as the result of employment by
another employer or self-employment or by retirement benefits and, as provided in Sections 4(b),
(c) or (d), Executive’s (or his or her dependents’) right to continued healthcare and life
insurance benefits following his or her termination of employment will terminate on the date on
which the applicable continuation period under COBRA expires. In addition, loans, advances or
other amounts owed by Executive to the Company may be offset by the Company against amounts payable
to Executive under this Section 4.

          (j) Return of the Company’s Property. If Executive’s employment is terminated for any
reason, or if the Employment Period expires, the Company shall have the right, at its option, to
require Executive to vacate his or her offices prior to or on the effective date of termination and
to cease all activities on the Company’s behalf. Upon the termination of his or her employment in
any manner, as a condition to the Executive’s receipt of any post-termination benefits described in
this Agreement, Executive shall immediately surrender to the Company all lists, books and records
of, or in connection with, the Company’s business, and all other property belonging to the Company,
it being distinctly understood that all such lists, books and records, and other documents, are the
property of the Company. Executive shall deliver to the Company a signed statement certifying
compliance with this Section 4(j) prior to the receipt of any post-termination benefits described
in this Agreement.

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          (k) Waiver of the Company’s Liability. Executive recognizes that his or her
employment is subject to termination with or without Cause for any reason and therefore Executive
agrees that Executive shall hold the Company harmless from and against any and all liabilities,
losses, damages, costs and expenses, including but not limited to, court costs and reasonable
attorneys’ fees, which Executive may incur as a result of the termination of Executive’s
employment. Executive further agrees that Executive shall bring no claim or cause of action
against the Company for damages or injunctive relief based on a wrongful termination of employment.
Executive agrees that the sole liability of the Company to Executive upon termination of this
Agreement shall be that determined by this Section 4. In the event this covenant is more
restrictive than permitted by laws of the jurisdiction in which the Company seeks enforcement
thereof, this covenant shall be limited to the extent permitted by law.

     5. Certain Covenants.

          (a) Noncompetition. Except as may otherwise be approved by the Board, during the term
of Executive’s employment, Executive shall not have any ownership interest (of record or
beneficial) in, or have any interest as an employee, salesman, consultant, officer or director in,
or otherwise aid or assist in any manner, any firm, corporation, partnership, proprietorship or
other business that engages in any county, city or part thereof in the United States and/or any
foreign country in a business which competes directly or indirectly (as determined by the Board)
with the Company’s business in such county, city or part thereof, so long as the Company, or any
successor in interest of the Company to the business and goodwill of the Company, remains engaged
in such business in such county, city or part thereof or continues to solicit customers or
potential customers therein; provided, however, that Executive may own, directly or
indirectly, solely as an investment, securities of any entity which are traded on any national
securities exchange if Executive (x) is not a controlling person of, or a member of a group which
controls, such entity; or (y) does not, directly or indirectly, own one percent (1%) or more of any
class of securities of any such entity.

          (b) Confidential Information. Executive and the Company have entered into the
Company’s standard employee proprietary information and inventions agreement (the “Employee
Proprietary Information and Inventions Agreement”). Executive agrees to perform each and every
obligation of Executive therein contained.

          (c) Solicitation of Employees. Executive shall not during the term of Executive’s
employment and for the applicable severance period for which Executive receives severance benefits
following any termination hereof pursuant to Section 4(c) or (d) above (regardless of whether
Executive receives such severance benefits in a lump sum payment or over the length of the
severance period) (the “Restricted Period”), directly or indirectly, solicit or encourage
to leave the employment of the Company or any of its affiliates, any employee of the Company or any
of its affiliates.

          (d) Solicitation of Consultants. Executive shall not during the term of Executive’s
employment and for the Restricted Period, directly or indirectly, hire, solicit or encourage to
cease work with the Company or any of its affiliates any consultant then under contract with the
Company or any of its affiliates within one year of the termination of such consultant’s engagement
by the Company or any of its affiliates.

11

 

          (e) Rights and Remedies Upon Breach. If Executive breaches or threatens to commit a
breach of any of the provisions of this Section 5 (the “Restrictive Covenants”), the
Company shall have the following rights and remedies, each of which rights and remedies shall be
independent of the other and severally enforceable, and all of which rights and remedies shall be
in addition to, and not in lieu of, any other rights and remedies available to the Company under
law or in equity:

               (i) Specific Performance. The right and remedy to have the Restrictive Covenants
specifically enforced by any court having equity jurisdiction, all without the need to post a bond
or any other security or to prove any amount of actual damage or that money damages would not
provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Company and that money damages will not provide
adequate remedy to the Company; and

               (ii) Accounting and Indemnification. The right and remedy to require Executive (i) to
account for and pay over to the Company all compensation, profits, monies, accruals, increments or
other benefits derived or received by Executive or any associated party deriving such benefits as a
result of any such breach of the Restrictive Covenants; and (ii) to indemnify the Company against
any other losses, damages (including special and consequential damages), costs and expenses,
including actual attorneys’ fees and court costs, which may be incurred by them and which result
from or arise out of any such breach or threatened breach of the Restrictive Covenants.

          (f) Severability of Covenants/Blue Pencilling. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard
to the invalid portions. If any court determines that any of the Restrictive Covenants, or any
part thereof, are unenforceable because of the duration of such provision or the area covered
thereby, such court shall have the power to reduce the duration or area of such provision and, in
its reduced form, such provision shall then be enforceable and shall be enforced. Executive hereby
waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the
breadth of their geographic scope or the length of their term.

          (g) Enforceability in Jurisdictions. The Company and Executive intend to and do
hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction
within the geographical scope of such covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and Executive that such determination not
bar or in any way affect the right of the Company to the relief provided above in the courts of any
other jurisdiction within the geographical scope of such covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent covenants.

          (h) Definitions. For purposes of this Section 5, the term “Company” means not
only Cadence Pharmaceuticals, Inc., but also any company, partnership or entity which,

12

 

directly or indirectly, controls, is controlled by or is under common control with Cadence
Pharmaceuticals, Inc.

     6. Insurance. The Company shall have the right to take out life, health, accident,
“key-man” or other insurance covering Executive, in the name of the Company and at the Company’s
expense in any amount deemed appropriate by the Company. Executive shall assist the Company in
obtaining such insurance, including, without limitation, submitting to any required examinations
and providing information and data required by insurance companies.

     7. Arbitration. Any dispute, claim or controversy based on, arising out of or
relating to Executive’s employment or this Agreement shall be settled by final and binding
arbitration in San Diego, California, before a single neutral arbitrator in accordance with the
National Rules for the Resolution of Employment Disputes (the “Rules”) of the American
Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction. Arbitration may be compelled pursuant to the California Arbitration Act
(Code of Civil Procedure §§ 1280 et seq.). If the parties are unable to agree upon
an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall
pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected
with presenting its case; however, Executive and the Company agree that, to the extent
permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to
the prevailing party. Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other
fees and costs, shall be borne by the Company. This Section 7 is intended to be the exclusive
method for resolving any and all claims by the parties against each other for payment of damages
under this Agreement or relating to Executive’s employment; provided, however, that neither this
Agreement nor the submission to arbitration shall limit the parties’ right to seek provisional
relief, including without limitation injunctive relief, in any court of competent jurisdiction
pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable
jurisdiction. Seeking any such relief shall not be deemed to be a waiver of such party’s right to
compel arbitration. Both Executive and the Company expressly waive their right to a jury trial.

     8. General Relationship. Executive shall be considered an employee of the Company
within the meaning of all federal, state and local laws and regulations including, but not limited
to, laws and regulations governing unemployment insurance, workers’ compensation, industrial
accident, labor and taxes.

     9. Miscellaneous.

          (a) Modification; Prior Claims. This Agreement and the Employee Proprietary
Information and Inventions Agreement set forth the entire understanding of the parties with respect
to the subject matter hereof, supersede all existing agreements between them concerning such
subject matter [ALL OFFICERS EXCEPT CEO AND VICE PRESIDENT, BUSINESS DEVELOPMENT: including that
certain offer letter dated [OFFER LETTER DATE] between the Company and Executive], and may be
modified only by a written instrument duly executed by each party. [VICE PRESIDENT, CLINICAL
DEVELOPMENT ONLY: Notwithstanding the foregoing, this Agreement does not supersede

13

 

the third paragraph of the Offer Letter that relates to Executive’s relocation benefits, which
paragraph shall remain in effect during Executive’s employment with the Company.]

          (b) Assignment; Assumption by Successor. The rights of the Company under this
Agreement may, without the consent of Executive, be assigned by the Company, in its sole and
unfettered discretion, to any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all
of the assets or business of the Company. The Company will require any successor (whether direct
or indirect, by purchase, merger or otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and to 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; provided, however, that no such assumption shall relieve the Company
of its obligations hereunder. As used in this Agreement, the “Company” shall mean the
Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.

          (c) Survival. The covenants, agreements, representations and warranties contained in
or made in Sections 4, 5, 7 and 9 of this Agreement shall survive any termination of Executive’s
employment.

          (d) Third-Party Beneficiaries. This Agreement does not create, and shall not be
construed as creating, any rights enforceable by any person not a party to this Agreement.

          (e) Waiver. The failure of either party hereto at any time to enforce performance by
the other party of any provision of this Agreement shall in no way affect such party’s rights
thereafter to enforce the same, nor shall the waiver by either party of any breach of any provision
hereof be deemed to be a waiver by such party of any other breach of the same or any other
provision hereof.

          (f) Section Headings. The headings of the several sections in this Agreement are
inserted solely for the convenience of the parties and are not a part of and are not intended to
govern, limit or aid in the construction of any term or provision hereof.

          (g) Notices. All notices, requests and other communications hereunder shall be in
writing and shall be delivered by courier or other means of personal service (including by means of
a nationally recognized courier service or professional messenger service), or sent by telex or
telecopy or mailed first class, postage prepaid, by certified mail, return receipt requested, in
all cases, addressed to:

     If to the Company or the Board prior to September 15, 2006:

Cadence Pharmaceuticals, Inc.

12730 High Bluff Drive, Suite 410

San Diego, CA 92130

Attention: Secretary

     If to the Company or the Board on or after September 15, 2006:

14

 

Cadence Pharmaceuticals, Inc.

12481 High Bluff Drive, Suite 200

San Diego, CA 92130

Attention: Secretary

     If to Executive:

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	 	 	 

All notices, requests and other communications shall be deemed given on the date of actual receipt
or delivery as evidenced by written receipt, acknowledgement or other evidence of actual receipt or
delivery to the address. In case of service by telecopy, a copy of such notice shall be personally
delivered or sent by registered or certified mail, in the manner set forth above, within three
business days thereafter. Any party hereto may from time to time by notice in writing served as
set forth above designate a different address or a different or additional person to which all such
notices or communications thereafter are to be given.

          (h) Severability. All Sections, clauses and covenants contained in this Agreement are
severable, and in the event any of them shall be held to be invalid by any court, this Agreement
shall be interpreted as if such invalid Sections, clauses or covenants were not contained herein.

          (i) Governing Law and Venue. This Agreement is to be governed by and construed in
accordance with the laws of the State of California applicable to contracts made and to be
performed wholly within such State, and without regard to the conflicts of laws principles thereof.
Except as provided in Sections 5 and 7, any suit brought hereon shall be brought in the state or
federal courts sitting in San Diego, California, the parties hereto hereby waiving any claim or
defense that such forum is not convenient or proper. Each party hereby agrees that any such court
shall have in personam jurisdiction over it and consents to service of process in any manner
authorized by California law.

          (j) Non-transferability of Interest. None of the rights of Executive to receive any
form of compensation payable pursuant to this Agreement shall be assignable or transferable except
through a testamentary disposition or by the laws of descent and distribution upon the death of
Executive. Any attempted assignment, transfer, conveyance, or other disposition (other than as
aforesaid) of any interest in the rights of Executive to receive any form of compensation to be
made by the Company pursuant to this Agreement shall be void.

          (k) Gender. Where the context so requires, the use of the masculine gender shall
include the feminine and/or neuter genders and the singular shall include the plural, and vice
versa, and the word “person” shall include any corporation, firm, partnership or other form of
association.

15

 

          (l) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
Agreement.

          (m) Construction. The language in all parts of this Agreement shall in all cases be
construed simply, according to its fair meaning, and not strictly for or against any of the parties
hereto. Without limitation, there shall be no presumption against any party on the ground that
such party was responsible for drafting this Agreement or any part thereof.

          (n) Withholding and other Deductions. All compensation payable to Executive hereunder
shall be subject to such deductions as the Company is from time to time required to make pursuant
to law, governmental regulation or order.

          (o) Code Section 409A. This Agreement shall be interpreted, construed and
administered in a manner that satisfies the requirements of Sections 409A of the Code.
Notwithstanding any provision of this Agreement to the contrary, the Company may adopt such
amendments to this Agreement or adopt other policies and procedures (including amendments, policies
and procedures with retroactive effect), or take any other actions, that the Company determines are
necessary to comply with the requirements of Section 409A of the Code.

(Signature Page Follows)

16

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth
above.

	 	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[Name of Executive]	 	 

SIGNATURE PAGE TO EMPLOYMENT AGREEMENT

 

 

     Schedule to Exhibit 10.2: The Form of Employment Agreement was entered into with the following
executive officers with their respective titles, addresses, salaries and original offer letter
dates listed below:

	 	 	 	 	 	 	 	 	 
	Name	 	Title	 	Salary	 	 	Offer Letter Date
	Theodore R. Schroeder
	 	President and Chief Executive Officer	 	$	300,000	 	 	None
	James B. Breitmeyer, M.D., Ph.D.
	 	Executive Vice President, Development and Chief Medical Officer	 	$	330,000	 	 	July 31, 2006
	William S. Craig, Ph.D.
	 	Senior Vice President, Pharmaceutical Development and Manufacturing	 	$	231,000	 	 	October 7, 2004
	Kenneth R. Heilbrunn, M.D.
	 	Senior Vice President, Clinical Development	 	$	315,000	 	 	March 17, 2005
	William R. LaRue
	 	Senior Vice President and Chief Financial Officer	 	$	265,000	 	 	April 7, 2006
	Richard E. Lowenthal
	 	Vice President, Regulatory Affairs and Quality Assurance	 	$	231,000	 	 	November 4, 2004
	Mike A. Royal, M.D., J.D.
	 	Vice President, Clinical Development	 	$	275,000	 	 	April 17, 2006
	David A. Socks
	 	Vice President, Business Development	 	$	200,000	 	 	NoneEXHIBIT 10.4

 

EXHIBIT
10.4

CADENCE PHARMACEUTICALS, INC.

DIRECTOR COMPENSATION POLICY

     Non-employee members of the board of directors (the “Board”) of Cadence Pharmaceuticals, Inc.
(the “Company”) shall be eligible to receive cash and equity compensation commencing on the first
date upon which the Company is subject to the reporting requirements of Section 13 or 15(d)(2) of
the Exchange Act (the “Public Trading Date”) as set forth in this Director Compensation Policy.
The cash compensation and option grants described in this Director Compensation Policy shall be
paid or be made, as applicable, automatically and without further action of the Board, to each
member of the Board who is not an employee of the Company or any parent or subsidiary of the
Company (each, an “Independent Director”) who may be eligible to receive such cash compensation or
options, unless such Independent Director declines the receipt of such cash compensation or options
by written notice to the Company. This Director Compensation Policy shall remain in effect until
it is revised or rescinded by further action of the Board. All share numbers set forth in this
policy give effect to the reverse stock split to be implemented by the Company in connection with
its initial public offering.

     1. Cash Compensation.

          Each Independent Director shall be eligible to receive an annual retainer of $25,000 for
service on the Board. In addition, an Independent Director serving as:

               (i) chairman of the Audit Committee shall be eligible to receive an additional annual retainer
of $10,000 for such service;

               (ii) members (other than the chairman) of the Audit Committee shall be eligible to receive an
additional annual retainer of $5,000 for such service;

               (iii) chairman of the Compensation Committee or the Nominating/Corporate Governance Committee
shall be eligible to receive an additional annual retainer of $4,000 for such service; and

               (iv) members (other than the chairman) of the Compensation Committee or the
Nominating/Corporate Governance Committee shall be eligible to receive an additional annual
retainer of $2,000 for such service.

          The annual retainers shall be paid by the Company in quarterly installments or more frequently
as deemed advisable by the officers of the Company for administrative or other reasons.

     2. Equity Compensation. The options described below shall be granted under and shall
be subject to the terms and provisions of the Company’s 2006 Equity Incentive Award Plan (the “2006
Plan”) and shall be granted subject to the execution and delivery of option agreements, including
attached exhibits, in substantially the same forms previously approved by the Board, setting forth
the vesting schedule applicable to such options and such other terms as may be required by the 2006
Plan.

          (a) Initial Options. A person who was initially elected or appointed to the Board
less than twelve (12) months prior to the Public Trading Date or who is initially elected or
appointed to the Board following the Public Trading Date, and who was or is an Independent Director
at the time of such initial election or appointment, shall be eligible to receive a non-qualified
stock option to purchase 25,000 shares of common stock (subject to adjustment as provided in the
2006 Plan) on the later of the Public Trading Date and the date of such initial election or
appointment (each, an “Initial Option”).

 

 

          (b) Subsequent Options. A person who is an Independent Director automatically shall
be eligible to receive a non-qualified stock option to purchase 12,500 shares of common stock
(subject to adjustment as provided in the 2006 Plan) on the date of each annual meeting of the
Company’s stockholders after the Public Trading Date. An Independent Director elected for the
first time to the Board at an annual meeting of stockholders shall only receive an Initial Option
in connection with such election, and shall not receive a Subsequent Option on the date of such
meeting as well. The option grants described in this clause shall be referred to as “Subsequent
Options.”

          (c) Termination of Employment of Employee Directors. Members of the Board who are
employees of the Company or any parent or subsidiary of the Company who subsequently terminate
their employment with the Company and any parent or subsidiary of the Company and remain on the
Board will not receive an Initial Option grant pursuant to clause 2(a) above, but to the extent
that they are otherwise eligible, will be eligible to receive, after termination from employment
with the Company and any parent or subsidiary of the Company, Subsequent Options as described in
clause 2(b) above.

          (d) Terms of Options Granted to Independent Directors.

               (i) Exercise Price. The per share exercise price of each option granted to an
Independent Director shall equal 100% of the Fair Market Value (as defined in the 2006 Plan) of a
share of common stock on the date the option is granted.

               (ii) Vesting. Initial Options granted to Independent Directors shall become
exercisable in thirty-six equal monthly installments of 1/36 of the shares subject to such option
on the first day of each calendar month following the date of the Initial Option grant, such that
each Initial Option shall be 100% vested on the first day of the 36th month following
the date of grant, subject to the director’s continuing service on the Board through such dates.
Subsequent Options granted to Independent Directors shall become vested in twelve equal monthly
installments of 1/12 of the shares subject to such option on the first day of each calendar month
following the date of the Subsequent Option Grant, subject to a director’s continuing service on
the Board through such dates. The term of each option granted to an Independent Director shall be
ten years from the date the option is granted. No portion of an option which is unexercisable at
the time of an Independent Director’s termination of membership on the Board shall thereafter
become exercisable.

2

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