Document:

exv10w1

 

	 	 	 	 	 

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED
AND RESTATED EMPLOYMENT AGREEMENT (the
“Agreement”), dated as of September 18, 2006 (the
"Effective Date”) amends and restates the Amended and Restated Employment Agreement dated May 24,
2000 (the “Prior Agreement”) by and between NEUROCRINE BIOSCIENCES, INC., 12790 El Camino Real,
San Diego, California 92130 (hereinafter the “Company”), and Paul W. Hawran (hereinafter
"Executive”).

R E C I T A L S

     WHEREAS, the Company and Executive wish to amend and restate the terms and conditions under
which Executive is to be employed by the Company on and after the date hereof; and

     NOW, THEREFORE, the Company and Executive, in consideration of the mutual promises set forth
herein, agree as follows:

ARTICLE 1

TERM OF AGREEMENT

     1.1 Commencement Date. Executive’s employment with the Company under this Agreement
shall commence as of September 18, 2006 (“Commencement Date”) and terminate on April 1, 2007
(“Retirement Date’), unless terminated earlier pursuant to Article 4.

ARTICLE 2

EMPLOYMENT DUTIES

     2.1 Title/Responsibilities. Executive hereby accepts employment with the Company
pursuant to the terms and conditions hereof. Executive agrees to serve the Company in the position
of Senior Advisor. Executive shall have the powers and reasonable duties assigned to Executive by
the Chief Executive Officer of the Company. Executive shall not serve as a spokesman for the
Company and shall not make any statement or arrange meetings regarding the Company with securities
market professionals, with the exception of comments relating to his retirement, which comments
shall be pre-approved by the Company. In addition, the Company shall provide Executive with a
private office and access to an administrative assistant, a computer and technical support.
Executive will also have access to all Company communications systems as the Company deems
necessary. Executive shall be entitled to retain his current computer and other telecommunications
equipment.

     2.2 Attention. Executive shall devote his full business time and attention to the
performance of the services assigned to him by the Chief Executive Officer and without the prior
written consent of the Chief Executive Officer which consent shall not be unreasonably

 

 

withheld shall not engage in any other business activities during the term hereof. The
devotion of time by Executive to non-Company business activities or other activities, including,
without limitation, outside activities in which he presently engages, shall not be deemed a breach
of this Agreement, provided that such purposes or activities do not adversely affect Employee’s job
performance or interfere with the services required to be rendered to or on behalf of Employer
under this Agreement. Additionally, during the term of this Agreement and any period in which
compensation is being paid to Executive in accordance with Article 4 and/or Article 5, Executive
shall not (i) engage, directly or indirectly, in providing services to any other business program
or project that is competitive to a program or project being conducted by the Company or any other
corporation or entity that directly or indirectly controls, is controlled by, or is under common
control with the Company (provided that Executive may own less than two percent (2%) of the
outstanding securities of any publicly traded corporation), or (ii) hire, solicit, or attempt to
solicit on behalf of himself or any other party any employee or exclusive consultant of the
Company.

     2.3 Salary. From the Commencement Date until the Retirement Date, Executive shall
receive salary at an annual rate of three hundred sixty-five thousand dollars ($365,000.00),
payable semi-monthly in equal installments in accordance with the Company’s normal payroll
practices. Executive shall be eligible to earn a bonus for the year 2006 as determined pursuant to
the normal bonus procedures of the Company, but shall not eligible to receive any bonus for
employment in 2007.

     2.4 Benefits. During the term of this Agreement, the Company shall also provide
Executive with the health insurance benefits it provides generally to its other senior management
employees and upon the same terms and conditions. Executive is entitled in accordance with
criteria adopted by the Company, to participate in and to receive benefit from life, accident,
disability, medical, pension, profit-sharing and savings plans and similar benefits made available
generally to employees of the Company as such plans and benefits may be adopted by the Company.
The amount and extent of benefits to which Executive is entitled shall be governed by the specific
benefit plan as it may be amended from time to time. Executive acknowledges and agrees that he
shall not participate in or elect to exchange any options pursuant to the Company’s Offer to
Exchange Certain Outstanding Options to Purchase Common Stock under the 2003 Incentive Stock Plan,
as amended, and Amend Certain Outstanding Options to Purchase Common Stock under the 1992 Incentive
Stock Plan, as amended and 2001 Stock Option Plan, as amended or participate in any new equity or
incentive program made available to officers of the Company between the date hereof and his
Retirement Date. Any accrued and unused vacation days to which Executive is entitled at the date
hereof under the Prior Agreement, shall be carried forward as vacation under this Agreement.

     2.5 Business Expense Reimbursement. During the term of this Agreement, Executive
shall be entitled to receive proper reimbursement for all reasonable out-of-pocket expenses
incurred by him (in accordance with the policies and procedures established by the Company for its
senior executive officers) in performing services hereunder. Executive agrees to furnish to the
Company adequate records and other documentary evidence of such expense for which Executive seeks
reimbursement. Such expenses shall be reimbursed and accounted for in accordance with past
practice under the procedures established by the Company.

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     2.6 Withholding and Taxes. All compensation and benefits payable to Executive
hereunder and the Agreement shall be subject to all federal, state, local and other withholdings
and similar taxes and payments required by applicable law. Executive will be responsible for the
payment of all federal and state income taxes on all allowances accruing to Executive pursuant to
this Article 2.

     2.7 Release. Executive has executed the release attached hereto as Exhibit A
(the “First Release”) in connection with the execution of this Agreement. Executive and the
Company acknowledge that this Agreement is conditioned upon the effectiveness of the First Release
and that Executive has seven days to consider the First Release and to revoke the First Release.
Accordingly, in the event that Executive revokes the First Release or the First Release is
otherwise not effective, then this Agreement shall be null and void and the terms and conditions of
Executive’s employment with the Company shall continue to be governed by the Prior Agreement.

ARTICLE 3

CONFIDENTIALITY

     3.1 Proprietary Information. Executive represents and warrants that he has previously
executed and delivered to the Company the Company’s standard Proprietary Information and Inventions
Agreement in form acceptable to the Company’s counsel.

     3.2 Return of Property. All documents, records, apparatus, equipment and other
physical property which is furnished to or obtained by Executive in the course of his employment
with the Company shall be and remain the sole property of the Company. Executive agrees that, upon
the termination of his employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and Inventions Agreement), and
agrees not to make or retain copies, reproductions or summaries of any such property; provided,
however, Executive shall be permitted to retain the computer and telecommunications equipment
utilized by Executive at the date hereof.

     3.3 No Use of Prior Confidential Information. Executive will not intentionally
disclose to the Company or use on its behalf any confidential information belonging to any of his
former employers or any other third party.

ARTICLE 4

TERMINATION

     4.1 By Death. The period of employment shall terminate automatically upon the death
of Executive. In such event, all stock options held by Executive which would have vested by April
1, 2007 shall become vested and exercisable. All stock options held by Executive will be
exercisable in accordance with their terms. In addition, the Company shall pay to Executive’s
beneficiaries or his estate, as the case may be, any accrued salary the extent earned, any vested

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deferred compensation (other than pension plan or profit-sharing plan benefits which will be
paid in accordance with the applicable plan), any benefits under any plans of the Company in which
Executive is a participant to the full extent of Executive’s rights under such plans, any accrued
vacation pay and any appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination (collectively “Accrued Compensation”). In
addition, the Company shall pay to Executive as provided herein, as severance, the payments set
forth in Sections 5.1(a) and 5.1(b) but no other compensation or reimbursement of any kind,
including, without limitation, compensation under Article 4 or Article 5, and thereafter, the
Company’s obligations hereunder.

     4.2 By Disability. If Executive is determined to be disabled under the terms of the
Company’s long term disability plan, then, to the extent permitted by law, the Company may
terminate the employment of Executive at such time. In such event, all stock options held by
Executive at the time of termination which would have vested by April 1, 2007 shall vest and will
be exercisable in accordance with their terms. In addition, the Company shall pay to Executive all
Accrued Compensation, and shall continue to pay to Executive salary until the first to occur of (i)
Executive shall become entitled to receive disability insurance payments under the disability
insurance policy maintained by the Company or (ii) April 1, 2007. In addition, the Company shall
pay to Executive as provided herein, as severance, the payments set forth in Sections 5.1(a) and
5.1(b) (subject to the terms and conditions set forth in Article 5) but no other compensation or
reimbursement of any kind, including, without limitation, compensation under Article 4 or Article
5, and thereafter, the Company’s obligations hereunder shall terminate. Nothing in this Section
shall affect Executive’s rights under any disability plan in which he is a participant.

     4.3 By Company for Cause. The Company may terminate the Executive’s employment for
Cause (as defined below) without liability at any time with or without advance notice to Executive.
The Company shall pay Executive all Accrued Compensation, but no other compensation or
reimbursement of any kind, including without limitation, compensation under Article 4 or Article 5,
and thereafter the Company’s obligations hereunder shall terminate. Termination shall be for
"Cause” in the event of the occurrence of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in bad faith and to the material
detriment of the Company; (b) Executive intentionally refuses or intentionally fails to act in
accordance with any lawful and proper direction or order of the Chief Executive Officer; (c)
Executive breaches Section 2.2 hereof; (d) Executive is convicted of a felony crime involving moral
turpitude, provided that in the event that any of the foregoing events is capable of being cured,
the Company shall provide written notice to Executive describing the nature of such event and
Executive shall thereafter have ten (10) business days to cure such event; (e) Executive makes any
statements on behalf of the Company in violation of Section 2.1 hereof or (f) Executive otherwise
violates the terms and conditions set forth in this Agreement.

     4.5 Termination by Executive. At any time, Executive may terminate his employment by
giving thirty (30) days’ advance written notice to the Company. The Company shall pay Executive
all Accrued Compensation, but no other compensation or reimbursement of any kind, including without
limitation, compensation under Article 4 or Article 5, and thereafter the Company’s obligations
hereunder shall terminate.

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     4.6 Mitigation. Except as otherwise specifically provided herein, Executive shall not
be required to mitigate the amount of any payment provided under this Agreement by seeking other
employment or self-employment, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of employment by another
employer or through self-employment or by retirement benefits after the date of Executive’s
termination of employment from the Company.

     4.7 Coordination. If upon termination of employment, Executive becomes entitled to
rights under other plans, contracts or arrangements entered into by the Company, this Agreement
shall be coordinated with such other arrangements so that Executive’s rights under this Agreement
are not reduced, and that any payments under this Agreement offset the same types of payments
otherwise provided under such other arrangements, but do not otherwise reduce any payments or
benefits under such other arrangements to which Executive becomes entitled.

ARTICLE 5

SEPARATION PAY AND OTHER COVENANTS

     5.1 Separation Pay. Subject to the effectiveness of the release attached hereto as
Exhibit B and Executive’s compliance with this Agreement (and specifically Sections 2.2,
5.2 and 5.3) and provided this Agreement has not been terminated by Company or Executive, in
satisfaction of all obligations to the Executive, the Company will provide the following payments
and benefits to Executive on and after his Retirement Date in addition to any accrued and unpaid
salary and reimbursable expenses at such date:

     (a) a lump sum cash payment (less taxes and withholdings) equal to four hundred thousand
dollars ($400,000) within five (5) business days following his Retirement Date;

     (b) Eight hundred thousand dollars ($800,000) payable in accordance with the Company’s normal
payroll practices in substantially equal installments on the Company’s regular payroll dates over a
period commencing on the Retirement Date and ending on March 15, 2008;.

     (c) Upon the Retirement Date, Executive shall be entitled to continue participation in the
Company’s group health plan in accordance with Section 4980B of the Code, or any similar state law
(“COBRA”) and shall pay the full cost of COBRA coverage for the first six months of such coverage.
On the date that is six (6) months and one (1) day following the Retirement Date, the Company shall
reimburse the Executive in an amount equal to amount paid by the Executive for such coverage.
Thereafter, for a period of up to six (6) months, the Company shall pay the costs for such
coverage, so that the Company will provide Executive with up to twelve (12) months of coverage.
Executive shall be responsible for the costs of coverage for the remainder of the COBRA coverage
period. The Company’s obligations to reimburse Executive or pay any additional cost of coverage
under this Section 5.1(c) shall cease on the date Executive ceases to be eligible for COBRA
continuation coverage under the Company’s group health plan.

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     (d) After his Retirement Date, Executive shall be entitled to continue participation in the
Company’s life, disability and other welfare plans for a period of eighteen months and the Company
shall pay all costs which the Company would otherwise have incurred to maintain such benefits if
the Executive had remained an employee of the Company for such eighteen (18) month period.

     (e) Executive shall forfeit and agrees to cancel the stock options set forth on Exhibit
C attached hereto and made a part hereof.

     5.2 Cooperation. During the term of this Agreement and thereafter as reasonably
necessary, Executive agrees that upon the request of the Company’s Chief Executive Officer, Chief
Financial Officer or General Counsel, he will provide reasonable cooperation to the Company, its
subsidiaries, affiliates, officers, employees, directors, and their successors and assigns (the
"Neurocrine Parties”) at reasonably agreeable times and places in response to requests made by the
Company or their attorneys in matters relating to internal investigations, external investigations,
and/or judicial or administrative proceedings arising out of or relating in any way to any facts
known to Executive occurring prior to Effective Date, including but not limited to, reasonable
cooperation with the Company’s independent registered accounting firm in preparation of the
Company’s quarterly report on Form 10-Q for the third fiscal quarter of 2006 and annual report for
the fiscal year 2006, as well as reasonable participation in conferences and meetings, assisting
counsel, making himself available for interviews and depositions, providing documents or
information, aiding in the analysis of documents, testifying, or complying with any other
reasonable requests by the Neurocrine Parties. Executive agrees to maintain in confidence (except
to the extent required by subpoena or court order) any confidential information regarding past,
current or potential claims, governmental proceedings, investigations or administrative or judicial
litigation relating to the Neurocrine Parties. Executive agrees to provide notice of any motion,
subpoena, order or other correspondence relating to the Neurocrine Parties within a reasonable time
after his receipt of same, by forwarding such document to the Executive Vice President and General
Counsel of the Company; provided, however, that the foregoing shall not restrict or limit in any
way the testimony of Executive or a Neurocrine Party in connection with any judicial or
administrative proceeding. This cooperation is an integral part of this Agreement, and Executive
will not be compensated for such cooperation, other than reimbursement for any reasonable expenses
Executive may incur in connection with such cooperation; provided, however, in the event such
cooperation is required after full payment under this Agreement has been made, the Executive will
receive compensation for such services at such rate as shall be mutually agreed to by the Company
and Executive.

     5.3 Promise to Maintain Confidentiality of the Company’s Confidential Information.
Executive acknowledges that due to the position Executive has occupied and the responsibilities
Executive has had at the Company, Executive has received confidential information concerning
Executive’s products, procedures, customers, sales, prices, contracts, and the like. Executive
hereby promises and agrees that, unless compelled by legal process, Executive will not disclose to
others and will keep confidential all information Executive has received while employed by the
Company concerning Executive’s products and procedures, the identities of the Company’s customers,
the Company’s sales, the Company’s prices, the terms

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of any of the Company’s contracts with third parties, and the like. Executive agrees that a
violation by Executive of the foregoing obligation to maintain the confidentiality of the Company’s
confidential information will constitute a material breach of this Agreement. Executive
specifically confirms that Executive will continue to comply with the terms of any confidentiality
or proprietary information agreements executed by Executive in favor of the Company.

     5.4 Non Disparagement. The Company, its officers and directors and its authorized
spokespersons and Executive agree not to make at any time any written or oral statements,
representations or other communications that disparage or otherwise damage the reputation of the
other, or any of its or his affiliates; provided, however, this provision shall not be deemed to
restrict, in any way, either party from compliance with any federal, state or local laws or from
testifying in any legal or administrative proceedings.

     5.5 Press Release. In response to any inquiry regarding the effective date hereof, or
the Executive’s change in status with the Company, the Company will state that the employment
relationship changed at the request of Executive. Executive has reviewed the press release and
approved of its content.

ARTICLE 6

GENERAL PROVISIONS

     6.1 Governing Law. The validity, interpretation, construction and performance of
this Agreement and the rights of the parties thereunder shall be interpreted and enforced under
California law without reference to principles of conflicts of laws. The parties hereby submit to
the exclusive jurisdiction and venue of California and federal courts of competent jurisdiction
sitting in San Diego, California. The parties agree that any dispute, claim or controversy
arising out of or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or applicability of
this agreement to arbitrate, shall be determined by arbitration in San Diego, California, before
an arbitrator. The arbitration shall be administered by JAMS pursuant to its Employment
Arbitration Rules and Procedure. Judgment on the award, if any, may be entered in any court
having jurisdiction. This Section 6.1 shall not preclude parties from seeking provisional
remedies in aid of arbitration from a court of appropriate jurisdiction. The arbitrator may, in
the award, allocate all or a part of the costs of the arbitration, including the fees of the
arbitrator and the reasonable attorneys’ fees of the prevailing party. Neither party to this
Agreement shall be prohibited from seeking injunctive relief in a judicial proceeding.

     6.2 Assignment; Successors Binding Agreement.

	 	(a)	 	Executive may not assign, pledge or encumber his interest in this Agreement or
any part thereof.
	 
	 	(b)	 	The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by operation of law or by agreement in form and
substance

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	 	 	 	reasonably satisfactory to Executive, to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
	 
	 	(c)	 	This Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributee, devisees and legatees. If Executive should die while any amount is at
such time payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to Executive’s devisee,
legates or other designee or, if there be no such designee, to his estate.

     6.3 Certain Reduction of Payments. In the event that any payment or benefit received
or to be received by Executive under this Agreement would result in all or a portion of such
payment to be subject to the excise tax on “golden parachute payments” under Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), then Executive’s payment shall be either
(a) the full payment or (b) such lesser amount which would result in no portion of the payment
being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable Federal, state and local employment taxes, income taxes, and the
excise tax imposed by Section 4999 of the Code, results in the receipt by Executive on an after-tax
basis, of the greatest amount of the payment notwithstanding that all or some portion of the
payment may be taxable under Section 4999 of the Code.

     6.4 Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

     To the Company:

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Attn.: Chief Executive Officer

     To Executive:

Paul W. Hawran

P.O. Box 1162

Rancho Santa Fe, California 92067

     6.5 Modification; Waiver; Entire Agreement. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Executive and such officer as may be specifically designated by the Board of the
Company. No waiver by either party hereto at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by such

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other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement.

     6.6 Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     6.7 Controlling Document. In case of conflict between any of the terms and condition
of this Agreement and the document herein referred to or agreement between Executive and the
Company, the terms and conditions of this Agreement shall control.

     6.8 Remedies.

	 	(a)	 	Injunctive Relief. The parties agree that the services to
be rendered by Executive hereunder are of a unique nature and that in the event
of any breach or threatened breach of any of the covenants contained herein, the
damage or imminent damage to the value and the goodwill of the Company’s business
will be irreparable and extremely difficult to estimate, making any remedy at law
or in damages inadequate. Accordingly, the parties agree that the Company shall
be entitled to injunctive relief against Executive in the event of any breach or
threatened breach of any such provisions by Executive, in addition to any other
relief (including damage) available to the Company under this Agreement or under
law.
	 
	 	(b)	 	Exclusive. Both parties agree that the remedy specified in
this Section 6.8 is not exclusive of any other remedy for the breach by Executive
of the terms hereof.

     6.9 Counterparts. This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same Agreement.

     6.10 Prevailing Party Expenses. In the event that any action or proceeding is
commenced to enforce the provisions of the Agreement, the court adjudicating such action or
proceeding shall award to the prevailing party all costs and expenses thereof, including, but not
limited to, all reasonable attorneys’ fees, court costs, and all other related expenses.

Executed by the parties as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	EXECUTIVE	 	NEUROCRINE BIOSCIENCES, INC	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Paul W. Hawran	 	By:	 	/s/ Gary A. Lyons 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Paul W. Hawran
	 	 	 	Name: Gary A. Lyons	 	 
	 

	 	 	 	 	 	Title: President and CEO 	 	 

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Exhibit A

GENERAL RELEASE

     This GENERAL RELEASE (hereinafter “Agreement”) is made and entered into by and between Paul W.
Hawran (hereinafter “Employee”) and Neurocrine Biosciences, Inc. (hereinafter “Employer”), and
inures to the benefit of each of Employer’s current, former and future subsidiaries, affiliates,
related entities, employee benefit plans and their fiduciaries, predecessors, successors, officers,
directors, shareholders, agents, employees and assigns.

RECITALS

     WHEREAS, Employee and Employer amended and restated Employee’s employment agreement on
September 18, 2006.

     WHEREAS, Employee and Employer wish permanently to resolve any and all disputes arising out of
the amendment and restatement of Employee’s employment agreement.

     NOW, THEREFORE, for and in consideration of the execution of this release and the mutual
covenants contained in the following paragraphs and those in the Amended and Restated Employment
Agreement, dated September 18, 2006 (the “Employment Agreement”), Employer and Employee agree as
follows:

1. Incorporation of Recitals. The Recitals and identification of the parties to, and
beneficiaries of, this Agreement are incorporated by references as though fully set forth herein.

2. No Admission of Liability. The parties agree that this Agreement, and performance of
the acts required by it, does not constitute an admission of liability, culpability, negligence or
wrongdoing on the part of anyone, and will not be construed for any purpose as an admission of
liability, culpability, negligence or wrongdoing by any party and/or by any party’s current, former
or future parents, subsidiaries, related entities, predecessors, successors, officers, directors,
shareholders, agents, employees and assigns. The parties specifically acknowledge and agree that
this Agreement is a compromise of disputed claims that Employer denies any liability for any matter
released herein and that Employer enters into this Agreement solely to avoid litigation and to buy
its peace.

3. Wages and Vacation Time Paid. Employee acknowledges that Employee has received payment
for all salary through the payment period immediately prior to the date hereof and accrued and used
vacation time through such date.

4. General Release. Employee on behalf of Employee and Employee’s heirs, executors,
administrators, assigns and successors, fully and forever releases and discharges Employer and each
of its current, former and future subsidiaries, related entities, employee benefit plans and their
fiduciaries, predecessors, successors, officers, directors, shareholders, agents, employees and
assigns (collectively, “Releasees”), with respect to any and all claims, liabilities and causes of
action, of every nature, kind and description, in law, equity or otherwise, which have arisen,

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occurred or existed at any time prior to the signing of this Agreement, including, without
limitation, any and all claims, liabilities and causes of action arising out of or relating to
Employee’s employment with Employer or the amendment and restatement of Employee’s employment
agreement; provided, however, this Release is not and shall not be deemed a release or waiver of
Employee’s rights to indemnification as an officer or employee of the Company, or of any rights
under the Company’s stock option plans in which Executive participates as of the date hereof,
except as otherwise specifically provided in the Employment Agreement.

5. Knowing Waiver of All Employment-Related Claims. Employee understands and agrees that
Employee is waiving any and all rights Employee may have had, or now has, to pursue against any of
the Releasees any and all remedies available to Employee under any employment-related causes of
action, including without limitation, claims of wrongful discharge, breach of contract, breach of
the covenant of good faith and fair dealing, fraud, violation of public policy, defamation,
discrimination, personal injury, physical injury, emotional distress, claims under Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans With
Disabilities Act, the Federal Rehabilitation Act, the Family and Medical Leave Act, the California
Fair Employment and Housing Act, the California Family Rights Act, the Equal Pay Act of 1963, the
provisions of the California Labor Code and any other United States federal, state or local laws
and regulations relating to employment, conditions of employment (including wage and hour laws)
and/or employment discrimination.

6. Waiver of Civil Code § 1542. Employee expressly waives any and all rights and benefits
conferred upon Employee by Section 1542 of the Civil Code of the State of California, which states
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.”

Employee expressly agrees and understands that the release given by Employee pursuant to this
Agreement applies to all unknown, unsuspected and unanticipated claims, liabilities and causes of
action which Employee may have against Employer or any of the other Releasees as of the date of
this Release.

7. Severability of Release Provisions. Employee agrees that if any provision of the
release given by Employee under this Agreement is found to be unenforceable, it will not affect the
enforceability of the remaining provisions and the courts may enforce all remaining provisions to
the extent permitted by law.

8. Promise to Refrain from Suit or Administrative Action. Employee promises and agrees
that Employee will never sue Employer or any of the other Releasees, or otherwise institute or
participate in any legal or administrative proceedings against Employer or any of the other
Releasees, with respect to any claim covered by the release provisions of this Agreement, including
but not limited to claims arising out of Employee’s employment with

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Employer or the termination of that employment, unless Employee is compelled by legal process to do
so.

9. Integrated Agreement. The parties acknowledge and agree that the Employment Agreement
and this Agreement contains the entire agreement of the parties on the subject matter thereof. The
parties further acknowledge and agree that parole evidence shall not be required to interpret the
intent of the parties.

10. Voluntary Execution. The parties hereby acknowledge that they have read and understand
this Agreement and that they sign this Agreement voluntarily and without coercion.

11. Waiver, Amendment and Modification of Agreement. The parties agree that no waiver,
amendment or modification of any of the terms of this Agreement shall be effective unless in
writing and signed by all parties affected by the waiver, amendment or modification. No waiver of
any term, condition or default of any term of this Agreement shall be construed as a waiver of any
other term, condition or default.

12. Representation by Counsel. The parties understand that they have the right to have
been represented in negotiations for the preparation of this Agreement by counsel of their own
choosing, and that they have entered into this Agreement voluntarily, without coercion, and based
upon their own judgment and not in reliance upon any representations or promises made by the other
party or parties or any attorneys, other than those contained within this Agreement. The parties
further agree that if any of the facts or matters upon which they now rely in making this Agreement
hereafter prove to be otherwise, this Agreement will nonetheless remain in full force and effect.

13. Breach of Agreement. In the event Employee shall breach in a material way any of the
provisions of this Agreement, Employer shall have a right of action against Employee for all
amounts paid hereunder.

14. California Law. The parties agree that this Agreement and its terms shall be construed
under California law. The parties hereby submit to the jurisdiction and venue of California and
federal courts of competent jurisdiction sitting in San Diego, California.

15. Agreement to Arbitrate Claims Arising from Agreement. The parties agree that, claim or
controversy arising out of or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or applicability of
this agreement to arbitrate, shall be determined by arbitration in San Diego, California, before an
arbitrator. The arbitration shall be administered by JAMS pursuant to its Employment Arbitration
Rules and Procedure. Judgment on the award, if any, may be entered in any court having
jurisdiction. This Section 15 shall not preclude parties from seeking provisional remedies in aid
of arbitration from a court of appropriate jurisdiction. The arbitrator may, in the award,
allocate all or a part of the costs of the arbitration, including the fees of the arbitrator and
the reasonable attorneys’ fees of the prevailing party. Neither party to this Agreement shall be
prohibited from seeking injunctive relief in a judicial proceeding.

- 3 -

 

16. Drafting. The parties agree that this Agreement shall be construed without regard to
the drafter of the same and shall be construed as though each party to this Agreement participated
equally in the preparation and drafting of this Agreement.

17. Counterparts. This Agreement may be signed in counterparts and said counterparts shall
be treated as though signed as one document.

18. Period to Consider Terms of Agreement. Employee acknowledges that this Agreement was
presented to Employee on September 13, 2006, and that Employee is entitled to have twenty one (21)
days’ time in which to consider the Agreement. Employee acknowledges that Employee has had the
opportunity to obtain the advice and counsel from the legal representative of Employee’s choice and
executes this Agreement having had sufficient time within which to consider its terms. Employee
represents that if Employee executes this Agreement before twenty-one (21) days have elapsed,
Employee does so voluntarily and voluntarily waives any remaining consideration period.

19. Revocation of Agreement. Employee understands that after executing this Agreement,
Employee has the right to revoke it within seven (7) days after Employee’s execution of it.
Employee understands that this Agreement will not become effective and enforceable unless the seven
(7) day revocation period passes and Employee does not revoke the Agreement in writing. Employee
understands that this Agreement may not be revoked after the seven (7) day revocation period has
passed. Employee understands that any revocation of this Agreement must be made in writing and
delivered to Employer at 12790 El Camino Real, San Diego, California 92130, within the seven (7)
day period.

	 	 	 	 	 	 	 	 	 
	Dated:
	 	September 18, 2006 	 	/s/ Paul W. Hawran	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Paul W. Hawran	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	NEUROCRINE BIOSCIENCES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	September 18, 2006 	 	By:	 	 /s/  Gary A. Lyons	 	 
	 

	 	 
	 	 	 	 	 	 
	 	 	 	 	Name:  Gary A. Lyons	 	 

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Exhibit B

GENERAL RELEASE

     This GENERAL RELEASE (hereinafter “Agreement”) is made and entered into by and between Paul W.
Hawran (hereinafter “Employee”) and Neurocrine Biosciences, Inc. (hereinafter “Employer”), and
inures to the benefit of each of Employer’s current, former and future subsidiaries, affiliates,
related entities, employee benefit plans and their fiduciaries, predecessors, successors, officers,
directors, shareholders, agents, employees and assigns.

RECITALS

     WHEREAS, Employee was for a period of time an employee of Employer;

     WHEREAS, Employee’s employment with Employer was terminated effective April 1, 2007;

     WHEREAS, Employee and Employer wish permanently to resolve any and all disputes arising out of
Employee’s employment with Employer or the cessation of that employment.

     NOW, THEREFORE, for and in consideration of the execution of this Agreement and the mutual
covenants contained in the following paragraphs and those in the Amended and Restated Employment
Agreement, dated September 18, 2006 (the “Employment Agreement”), Employer and Employee agree as
follows:

1. Incorporation of Recitals. The Recitals and identification of the parties to, and
beneficiaries of, this Agreement are incorporated by references as though fully set forth herein.

2. No Admission of Liability. The parties agree that this Agreement, and performance of
the acts required by it, does not constitute an admission of liability, culpability, negligence or
wrongdoing on the part of anyone, and will not be construed for any purpose as an admission of
liability, culpability, negligence or wrongdoing by any party and/or by any party’s current, former
or future parents, subsidiaries, related entities, predecessors, successors, officers, directors,
shareholders, agents, employees and assigns. The parties specifically acknowledge and agree that
this Agreement is a compromise of disputed claims that Employer denies any liability for any matter
released herein and that Employer enters into this Agreement solely to avoid litigation and to buy
its peace.

3. Wages and Vacation Time Paid. Employee acknowledges that Employee has received payment
for all salary and accrued and unused vacation time and reimbursable expenses.

4. General Release. Employee on behalf of Employee and Employee’s heirs, executors,
administrators, assigns and successors, fully and forever releases and discharges Employer and each
of its current, former and future subsidiaries, related entities, employee benefit plans and

- 1 -

 

their fiduciaries, predecessors, successors, officers, directors, shareholders, agents, employees
and assigns (collectively, “Releasees”), with respect to any and all claims, liabilities and causes
of action, of every nature, kind and description, in law, equity or otherwise, which have arisen,
occurred or existed at any time prior to the signing of this Agreement, including, without
limitation, any and all claims, liabilities and causes of action arising out of or relating to
Employee’s employment with Employer or the cessation of that employment; provided, however,. this
Release is not and shall not be deemed a release or waiver of Employee’s rights to indemnification
as an officer or employee of the Company or of any rights under the Company’s stock option plans in
which Executive participates at the date hereof, except as otherwise specifically provided in the
Employment Agreement.

5. Knowing Waiver of All Employment-Related Claims. Employee understands and agrees that
Employee is waiving any and all rights Employee may have had, now has, or in the future may have,
to pursue against any of the Releasees any and all remedies available to Employee under any
employment-related causes of action, including without limitation, claims of wrongful discharge,
breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of
public policy, defamation, discrimination, personal injury, physical injury, emotional distress,
claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in
Employment Act, the Americans With Disabilities Act, the Federal Rehabilitation Act, the Family and
Medical Leave Act, the California Fair Employment and Housing Act, the California Family Rights
Act, the Equal Pay Act of 1963, the provisions of the California Labor Code and any other United
States federal, state or local laws and regulations relating to employment, conditions of
employment (including wage and hour laws) and/or employment discrimination.

6. Waiver of Civil Code § 1542. Employee expressly waives any and all rights and benefits
conferred upon Employee by Section 1542 of the Civil Code of the State of California, which states
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.”

Employee expressly agrees and understands that the Release given by Employee pursuant to this
Agreement applies to all unknown, unsuspected and unanticipated claims, liabilities and causes of
action which Employee may have against Employer or any of the other Releasees as of the date of
this Release.

7. Severability of Release Provisions. Employee agrees that if any provision of the
release given by Employee under this Agreement is found to be unenforceable, it will not affect the
enforceability of the remaining provisions and the courts may enforce all remaining provisions to
the extent permitted by law.

8. Promise to Refrain from Suit or Administrative Action. Employee promises and agrees
that Employee will never sue Employer or any of the other Releasees, or otherwise institute or
participate in any legal or administrative proceedings against Employer or any of the other
Releasees, with respect to any claim covered by the release provisions of this

- 2 -

 

Agreement, including but not limited to claims arising out of Employee’s employment with Employer
or the termination of that employment, unless Employee is compelled by legal process to do so.

9. Promise to Maintain Confidentiality of Employer’s Confidential Information. Employee
acknowledges that due to the position Employee has occupied and the responsibilities Employee has
had at Employer, Employee has received confidential information concerning Employer’s products,
procedures, customers, sales, prices, contracts, and the like. Employee hereby promises and agrees
that, unless compelled by legal process, Employee will not disclose to others and will keep
confidential all information Employee has received while employed by Employer concerning Employer’s
products and procedures, the identities of Employer’s customers, Employer’s sales, Employer’s
prices, the terms of any of Employer’s contracts with third parties, and the like. Employee agrees
that a violation by Employee of the foregoing obligation to maintain the confidentiality of
Employer’s confidential information will constitute a material breach of this Agreement. Employee
specifically confirms that Employee will continue to comply with the terms of any confidentiality
or proprietary information agreements executed by Employee in favor of Employer.

10. Integrated Agreement. The parties acknowledge and agree that the Employment Agreement
and this Agreement contains the entire agreement of the parties on the subject matter thereof. The
parties further acknowledge and agree that parole evidence shall not be required to interpret the
intent of the parties.

11. Voluntary Execution. The parties hereby acknowledge that they have read and understand
this Agreement and that they sign this Agreement voluntarily and without coercion.

12. Waiver, Amendment and Modification of Agreement. The parties agree that no waiver,
amendment or modification of any of the terms of this Agreement shall be effective unless in
writing and signed by all parties affected by the waiver, amendment or modification. No waiver of
any term, condition or default of any term of this Agreement shall be construed as a waiver of any
other term, condition or default.

13. Representation by Counsel. The parties understand that they have the right to have
been represented in negotiations for the preparation of this Agreement by counsel of their own
choosing, and that they have entered into this Agreement voluntarily, without coercion, and based
upon their own judgment and not in reliance upon any representations or promises made by the other
party or parties or any attorneys, other than those contained within this Agreement. The parties
further agree that if any of the facts or matters upon which they now rely in making this Agreement
hereafter prove to be otherwise, this Agreement will nonetheless remain in full force and effect.

14. Breach of Agreement. In the event Employee shall breach in a material way any of the
provisions of this Agreement, Employer shall have a right of action against Employee for all
amounts paid hereunder.

- 3 -

 

15. California Law. The parties agree that this Agreement and its terms shall be construed
under California law. The Parties hereby submit to the jurisdiction and venue of California and
federal courts of competent jurisdiction sitting in San Diego, California.

16. Agreement to Arbitrate Claims Arising from Agreement. The parties agree that any
dispute, claim or controversy arising out of ore relating to this Agreement or the breach,
termination, enforcement, interpretation or validity thereof, including the determination of the
scope or applicability of this agreement to arbitrate, shall be determined by arbitration in San
Diego, California, before an arbitrator. The arbitration shall be administered by JAMS pursuant to
its Employment Arbitration Rules and Procedure. Judgment on the award, if any, may be entered in
any court having jurisdiction. This Section 16 shall not preclude parties from seeking provisional
remedies in aid of arbitration from a court of appropriate jurisdiction. The arbitrator may, in
the award, allocate all or a part of the costs of the arbitration, including the fees of the
arbitrator and the reasonable attorneys’ fees of the prevailing party. Neither party to this
Agreement shall be prohibited from seeking injunctive relief in a judicial proceeding.

17. Drafting. The parties agree that this Agreement shall be construed without regard to
the drafter of the same and shall be construed as though each party to this Agreement participated
equally in the preparation and drafting of this Agreement.

18. Counterparts. This Agreement may be signed in counterparts and said counterparts shall
be treated as though signed as one document.

19. Period to Consider Terms of Agreement. Employee acknowledges that this Agreement was
presented to Employee on March 10, 2007 and that Employee is entitled to have twenty one (21) days’
time in which to consider the Agreement. Employee acknowledges that Employee has had the
opportunity to obtain the advice and counsel from the legal representative of Employee’s choice and
executes this Agreement having had sufficient time within which to consider its terms. Employee
represents that if Employee executes this Agreement before twenty-one (21) days have elapsed,
Employee does so voluntarily and voluntarily waives any remaining consideration period.

- 4 -

 

20. Revocation of Agreement. Employee understands that after executing this Agreement,
Employee has the right to revoke it within seven (7) days after Employee’s execution of it.
Employee understands that this Agreement will not become effective and enforceable unless the seven
(7) day revocation period passes and Employee does not revoke the Agreement in writing. Employee
understands that this Agreement may not be revoked after the seven (7) day revocation period has
passed. Employee understands that any revocation of this Agreement must be made in writing and
delivered to Employer at 12790 El Camino Real, San Diego, California 92130, within the seven (7)
day period.

	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Paul W. Hawran	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	NEUROCRINE BIOSCIENCES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 

- 5 -

 

EXHIBIT C

STOCK OPTION RETURN

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Grant Date	 	Grant Expiration	 	Grant Price	 	Exercisable Shares
	02/07/02
	 	 	02/07/12	 	 	 	36.790	 	 	 	35,615	 
	02/07/02
	 	 	02/07/12	 	 	 	36.790	 	 	 	4,385	 
	05/22/03
	 	 	05/22/13	 	 	 	48.510	 	 	 	32,142	 
	05/22/03
	 	 	05/22/13	 	 	 	48.510	 	 	 	2,858	 
	05/26/04
	 	 	05/26/14	 	 	 	57.510	 	 	 	25,000	 
	02/18/05
	 	 	02/18/15	 	 	 	40.390	 	 	 	21,482	 
	02/18/05
	 	 	02/18/15	 	 	 	40.390	 	 	 	3,518	 
	01/19/06
	 	 	01/19/13	 	 	 	60.950	 	 	 	18,634	 
	01/19/06
	 	 	01/19/13	 	 	 	60.950	 	 	 	1,366	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	145,000exv10w2

 

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT, dated as of September 18, 2006 by and between NEUROCRINE
BIOSCIENCES, INC., 12790 El Camino Real, San Diego, California 92130 (hereinafter the “Company”),
and Timothy P. Coughlin, MBA, CPA (hereinafter “Executive”).

R E C I T A L S

     WHEREAS, the Company and Executive wish to set forth in this Agreement the terms and
conditions under which Executive is to be employed by the Company on and after the date hereof; and

     NOW, THEREFORE, the Company and Executive, in consideration of the mutual promises set forth
herein, agree as follows:

ARTICLE 1

TERM OF AGREEMENT

     1.1 Commencement Date. Executive’s fulltime employment with the Company under this
Agreement shall commence as of September 18, 2006 (“Commencement Date”) and this Agreement shall
expire after a period of three (3) years from the Commencement Date, unless renewed in accordance
with paragraph 1.2 or terminated pursuant to Article 6.

     1.2 Renewal. The term of this Agreement shall be automatically renewed for successive,
additional three (3) year terms unless either party delivers written notice to the other at least
ninety (90) days prior to the end of any term of an intention to terminate this Agreement or to
renew it for a term of less than three (3) years but not less than (1) year. If the term of this
Agreement is renewed for a term of less than three (3) years, then thereafter the term of this
Agreement shall be automatically renewed for successive, additional identical terms unless either
party delivers a written notice to the other of an intention to terminate this Agreement or to
renew it for a different term of not less than one (1) year, such notice to be delivered at least
ninety (90) days prior to the end of any term. The Company’s failure to renew this Agreement at
the end of any term shall be considered a termination without Cause as set forth in Section 6.4
below.

ARTICLE 2

EMPLOYMENT DUTIES

     2.1 Title/Responsibilities. Executive hereby accepts employment with the Company
pursuant to the terms and conditions hereof. Executive agrees to serve the Company in the position
of Vice President, Chief Financial Officer. Executive shall have the powers and duties commensurate
with such position, including but not limited to hiring personnel necessary to carry

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out the responsibilities for such position as directed by the Chief Executive Officer (the
“Chief Executive Officer”).

     2.2 Full Time Attention. Executive shall devote his best efforts and his full
business time and attention to the performance of the services customarily incident to such office
and to such other services as directed by the Chief Executive Officer. Executive shall discharge
his responsibilities in a diligent and faithful manner, consistent with sound business practices
and in accordance with the directives of the Chief Executive Officer.

     2.3 Other Activities. Except upon the prior written consent of the Chief Executive
Officer, Executive shall not during the period of employment engage, directly or indirectly, in any
other business activity (whether or not pursued for pecuniary advantage) that is or may be
competitive with, or that might place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls, is controlled by, or is under
common control with the Company (an “Affiliated Company”), provided that Executive may own less
than two percent (2%) of the outstanding securities of any such publicly traded competing
corporation.

ARTICLE 3

COMPENSATION

     3.1 Base Salary. Executive shall receive a Base Salary at an annual rate of two
hundred seventy five thousand dollars ($275,000.00), payable semi-monthly in equal installments in
accordance with the Company’s normal payroll practices. The Chief Executive Officer shall provide
Executive with annual performance reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Compensation Committee of the Board and the Chief Executive Officer
may from time to time establish in their sole discretion.

     3.2 Incentive Bonus. In addition to any other bonus Executive shall be awarded by the
Company’s Board of Directors, the Company shall pay Executive an annual bonus as determined by the
Company’s Compensation Committee and the Chief Executive Officer based upon achievement of
Executive in meeting personal goals approved by the Chief Executive Officer and achievement by the
Company of corporate goals approved by the Board of Directors annually. Executive’s personal
goals and the Company’s corporate goals will be set forth in writing by the Chief Executive
Officer, respectively, within ninety (90) days after the start of the Company’s fiscal year. The
Chief Executive Officer, in his sole discretion, shall determine whether Executive’s personal goals
have been obtained. The Board of Directors shall, in its sole discretion, determine whether the
corporate goals have been obtained.

     3.3 Equity. Each year starting in 2007 and continuing for the term of this Agreement,
the Executive will be eligible to receive a Stock Equity award under the Company’s 2003 Incentive
Stock Option Plan as amended, with the number of shares and exercise price as shall be determined
by the Board of Directors.

Page 2 of
10

 

     3.4 Withholdings. All compensation and benefits payable to Executive hereunder and
the Agreement shall be subject to all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.

ARTICLE 4

EXPENSE ALLOWANCES AND FRINGE BENEFITS

     4.1
Vacation. Executive shall be entitled to the
greater of four (4) weeks of annual
paid vacation or the amount of annual paid vacation to which Executive may become entitled under
the terms of Company’s vacation policy for employees during the term of this Agreement.

     4.2 Benefits. During the term of this Agreement, the Company shall also provide
Executive with the usual health insurance benefits it generally provides to its other senior
management employees. As Executive becomes eligible in accordance with criteria to be adopted by
the Company, the Company shall provide Executive with the right to participate in and to receive
benefit from life, accident, disability, medical, pension, bonus, stock, profit-sharing and savings
plans and similar benefits made available generally to executives of the Company as such plans and
benefits may be adopted by the Company. The amount and extent of benefits to which Executive is
entitled shall be governed by the specific benefit plan as it may be amended from time to time.

     4.3 Business Expense Reimbursement. During the term of this Agreement, Executive
shall be entitled to receive proper reimbursement for all reasonable out-of-pocket expenses
incurred by him (in accordance with the policies and procedures established by the Company for its
senior Executive Officers) in performing services hereunder. Executive agrees to furnish to the
Company adequate records and other documentary evidence of such expense for which Executive seeks
reimbursement. Such expenses shall be reimbursed and accounted for under the policies and
procedure established by the Company.

ARTICLE 5

CONFIDENTIALITY

     5.1 Proprietary Information and Inventions Agreement. Executive represents and
warrants that she has previously executed and delivered to the Company the Company’s standard
Proprietary Information and Inventions Agreement in form acceptable to the Company’s counsel.

     5.2 Return of Property. All documents, records, apparatus, equipment and other
physical property which is furnished to, or obtained by, Executive in the course of his employment
with the Company shall be and remain the sole property of the Company. Executive agrees that, upon
the termination of his employment, she shall return all such property (whether or not it pertains
to Proprietary Information as defined in the Proprietary Information and Inventions Agreement), and
agrees not to make or retain copies, reproductions or summaries of any such property.

Page 3 of
10

 

     5.3 No use of Prior Confidential Information. Executive will not intentionally
disclose to the Company or use on its behalf any confidential information belonging to any of his
former employers or any other third party.

ARTICLE 6

TERMINATION

     6.1 By Death. The period of employment shall terminate automatically upon the death
of Executive. In such event, all stock based awards held by Executive at the time of termination will
continue to vest for a period of six (6) months following
termination. All stock based awards held by
Executive that are vested at the time of termination or within six (6) months thereafter will be
exercisable in accordance with their terms for a period of one year following termination. In
addition, the Company shall pay to Executive’s beneficiaries or his estate, as the case may be, any
accrued Base Salary, any bonus compensation to the extent earned, any vested deferred compensation
(other than pension plan or profit-sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of the Company in which Executive is a participant
to the full extent of Executive’s rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his duties hereunder, all to
the date of termination (collectively Accrued Compensation), but no other compensation or
reimbursement of any kind, including, without limitation, severance compensation, and thereafter,
the Company’s obligations hereunder shall terminate.

     6.2 By Disability. If Executive is prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity for a period of one hundred twenty (120)
consecutive days, or for one hundred eighty (180) days in the aggregate in any three hundred and
sixty-five (365) day period, then, to the extent permitted by law, the Company may terminate the
employment of Executive at such time. In such event, all stock based
awards held by Executive at the
time of termination will continue to vest for a period of six (6) months following termination.
All stock based awards held by Executive that are vested at the time of termination or within six (6)
months thereafter will be exercisable in accordance with their terms for a period of one year
following termination. In addition, the Company shall pay to Executive all Accrued Compensation,
and shall continue to pay to Executive the Base Salary until such time as Executive shall become
entitled to receive disability insurance payments under the disability insurance policy maintained
by the Company, but no other compensation or reimbursement of any kind, including without
limitation, severance compensation, and thereafter the Company’s obligations hereunder shall
terminate. Nothing in this Section shall affect Executive’s rights under any disability plan in
which she is a participant.

     6.3 By Company for Cause. The Company may terminate the Executive’s employment for
Cause (as defined below) without liability at any time with or without advance notice to Executive.
The Company shall pay Executive all Accrued Compensation, but no other compensation or
reimbursement of any kind, including without limitation, severance compensation, and thereafter the
Company’s obligations hereunder shall terminate. Termination shall be for “Cause” in the event of
the occurrence of any of the following: (a) any intentional

Page 4 of
10

 

action or intentional failure to act by Executive which was performed in bad faith and to the
material detriment of the Company; (b) Executive intentionally refuses or intentionally fails to
act in accordance with any lawful and proper direction or order of the Chief Executive Officer; (c)
Executive and habitually neglects the duties of employment; or (d) Executive is convicted of a
felony crime involving moral turpitude, provided that in the event that an of the foregoing events
is capable of being cured, the Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10) business days to cure such event.

     6.4 Termination Without Cause. At any time, the Company may terminate the employment
of Executive without liability other than as set forth below, for any reason not specified in
Section 6.3 above, by giving thirty (30) days advance written notice to Executive. If the Company
elects to terminate Executive pursuant to this Section 6.4:

     (a) the Company shall pay to Executive all Accrued Compensation;

     (b) the Company shall continue to pay to Executive as provided herein Executive’s Base
Salary over the period equal to nine (9) months from the date of such termination as
severance compensation;

     (c) the Company shall make a lump sum payment to Executive in an amount equal to a pro
rata portion of the Executive’s annual actual cash incentive bonus for Company’s fiscal year
preceding the year of termination based on the number of completed months of Executive’s
employment in the fiscal year plus nine (9);

     (d)
the vesting of all outstanding stock based awards held by Executive shall be accelerated
so that the amount of shares vested under such awards shall equal that number of shares
which would have been vested if the Executive had continued to render services to the
Company for nine (9) continuous months after the date of his termination of employment; and

     (e) the Company shall pay all costs which the Company would otherwise have incurred to
maintain all of Executive’s health and welfare, and retirement benefits (either on the same
or substantially equivalent terms and conditions) if the Executive had continued to render
services to the Company for nine (9) continuous months after the date of his termination of
employment.

The Company shall have no further obligations to Executive other than those set forth in the
preceding subparagraphs. During the period when such severance compensation is being paid to
Executive, Executive shall not (i) engage, directly or indirectly, in providing services to any
other business program or project that is competitive to a program or project being conducted by
the Company or any Affiliated Company at the time of such employment termination (provided that
Executive may own less than two percent (2%) of the outstanding securities of any publicly traded
corporation), or (ii) hire, solicit, or attempt to solicit on behalf of himself or any other party
or any employee or exclusive consultant of the Company. If the Company terminates this
Agreement or the employment of Executive with the Company other than pursuant to Section 6.1, 6.2
or 6.3, then this section 6.4 shall apply.

Page 5 of
10

 

     6.5 Constructive Termination A Constructive Termination shall be deemed to be a
termination of employment of Executive without cause pursuant to Section 6.4. For Purposes of this
Agreement, a “Constructive Termination” means that the Executive voluntarily terminates his
employment except in connection with the termination of his employment for death, disability,
retirement, fraud, misappropriation, embezzlement (or any other occurrence which constitutes
“Cause” under section 6.3) or any other voluntary termination of employment by Executive other than
a Constructive Termination after any of the following are undertaken without Executive’s express
written consent:

     (a) the assignment to Executive of any duties or responsibilities which result in any
diminution of position as judged against the duties and responsibilities assigned to
executives with Executive’s position in the Company’s peer group of companies and shall not
include (i) duties and responsibilities assigned to Executive with the understanding that as
the Company grows and management staff increases in number, such duties and responsibilities
will eventually be reassigned in a manner consistent with the Company’s peer group of
companies, (ii) change in reporting relationship that does not change in any material way
the Executive’s duties and responsibilities or (iii) any change in duties or
responsibilities or reporting relationships that Executive does not identify as Constructive
Termination to the Chief Executive Officer in writing within 15 days following the Chief
Executive Officer’s proposal of such change to Executive;

     (b) a reduction by the Company in Executive’s annual Base Salary by greater than five
percent (5%);

     (c) a relocation of Executive or the Company’s principal executive offices if
Executive’s principal office is at such offices, to a location more than forty (40) miles
from the location at which Executive is then performing his duties, except for an
opportunity to relocate which is accepted by Executive in writing;

     (d) any material breach by the Company of any provision of this Agreement; or

     (e) any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company.

     6.6 Termination Following Change in Control. In the event of a termination Without
Cause or Constructive Termination within six (6) months after a Change in Control (as defined
below) or Executive’s voluntary termination within thirty (30) days following the six (6) month
anniversary of a Change in Control, the Company shall pay to Executive a lump sum severance payment
in an amount equal to one (1) times Executive’s then Base Salary plus annual actual
cash incentive bonus for Company’s fiscal year preceding the year of termination. In
addition, the Executive will receive at Executive’s option
(i) accelerated vesting of all stock based
awards held

Page 6 of
10

 

by
Executive by reason of the assumption or substitution of successor
corporation stock based
awards for the Executive’s unvested Company stock based awards at the time of the Change in Control
pursuant to the terms of the Company’s equity incentive plans, as applicable, or (ii) a cash
payment equal to the cash value of all unvested Company stock based awards held by Executive at the time
of the Change in Control. In addition, the Executive will be reimbursed for the increase in
federal and state income taxes payable by Executive by reason of the benefits provided under this
Section 6.6.

     6.7 Change in Control. For purposes of this Agreement, a “Change in Control” shall
have occurred if at any time during the term of Executive’s employment hereunder, any of the
following events shall occur:

     (a) The Company is merged, or consolidated. or reorganized into or with another
corporation or other legal person, and as a result of such merger, consolidation or
reorganization less than fifty percent (50%) of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such transaction
are held in the aggregate by the holders of voting securities of the Company immediately
prior to such transaction;

     (b) The Company sells all or substantially all of its assets or any other corporation
or other legal person and thereafter, less than fifty percent (50%) of the combined voting
power of the then-outstanding voting securities of the acquiring or consolidated entity are
held in the aggregate by the holders of voting securities of the Company immediately prior
to such sale;

     (c) There is a report filed after the date of this Agreement on Schedule 13 D or
schedule 14 D-1 (or any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of l934 (the “Exchange Act”) disclosing that any person (as the
term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the exchange Act) has
become the beneficial owner (as the term beneficial owner is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) representing fifty percent
(50%) or more of the combined voting power of the then-outstanding voting securities of the
Company;

     (d) The Company shall file a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to item 1 of Form 8-X
thereunder or Item 5(f) of Schedule 14 A thereunder (or any successor schedule, form or
report or item therein) that the change in control of the Company has or may have occurred
or will or may occur in the future pursuant to any then-existing contract or transaction; or

     (e) During any period of two (2) consecutive years, individuals who at the beginning of
any such period constitute the directors of the Company cease for any reason to constitute
at least a majority thereof unless the election to the nomination for

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election by the
Company’s shareholders of each director of the Company first elected during such period was
approved by a vote of at least two-thirds of the directors of the Company then still in
office who were directors of the Company at the beginning of such period.

     6.8 Termination by Executive. At any time, Executive may terminate his employment by
giving thirty (30) days advance written notice to the Company. The Company shall pay Executive all
Accrued Compensation, but no other compensation or reimbursement of any kind, including without
limitation, severance compensation, and thereafter the Company’s obligations hereunder shall
terminate.

     6.9 Mitigation. Except as otherwise specifically provided herein, Executive shall not
be required to mitigate the amount of any payment provided under this Agreement by seeking other
employment or self-employment, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of employment by another
employer or through self-employment or by retirement benefits after the date of Executive’s
termination of employment from the Company.

     6.10 Coordination. If upon termination of employment, Executive becomes entitled to
rights under other plans, contracts or arrangements entered into by the Company, this Agreement
shall be coordinated with such other arrangements so that Executive’s rights under this Agreement
are not reduced, and that any payments under this Agreement offset the same types of payments
otherwise provided under such other arrangements, but do not otherwise reduce any payments or
benefits under such other arrangements to which Executive becomes entitled.

ARTICLE 7

GENERAL PROVISIONS

     7.1 Governing Law. The validity, interpretation, construction and performance of this
Agreement and the rights of the parties thereunder shall be interpreted and enforced under
California law without reference to principles of conflicts of laws. The parties expressly agree
that inasmuch as the Company’s headquarters and principal place of business are located in
California, it is appropriate that California law govern this Agreement.

     7.2 Assignment; Successors Binding Agreement.

     (a) Executive may not assign, pledge or encumber his interest in this Agreement or any
part thereof.

     (b) The Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by operation of law or by agreement in form and substance
reasonably satisfactory to Executive, to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform it if
no such succession had taken place.

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     (c) This Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributee, devisees and legatees. If Executive should die while any amount is at such
time payable to his hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive’s devisee, legates or other
designee or, if there be no such designee, to his estate.

     7.3 Certain Reduction of Payments. In the event that any payment or benefit received
or to be received by Executive under this Agreement would result in all or a portion of such
payment to be subject to the excise tax on “golden parachute payments” under Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), then Executive’s payment shall be either
(a) the full payment or (b) such lesser amount which would result in no portion of the payment
being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable Federal, state and local employment taxes, income taxes, and the
excise tax imposed by Section 4999 of the Code, results in the receipt by Executive on an after-tax
basis, of the greatest amount of the payment notwithstanding that all or some portion of the
payment may be taxable under Section 4999 of the Code.

     7.4 Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

To the Company:

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Attn.: President & Chief Executive Officer

To Executive:

Timothy P. Coughlin, MBA, CPA

     7.5 Modification; Waiver; Entire Agreement. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Executive and such officer as may be specifically designated by the Board of the
Company. No waiver by either party hereto at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior
or subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.

     7.6 Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

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     7.7 Controlling Document. Except to the extent described in Section 6.l0, in case of
conflict between any of the terms and condition of this Agreement and the document herein referred
to, the terms and conditions of this Agreement shall control.

     7.8 Executive Acknowledgment. Executive acknowledges (a) that she has consulted with
or has had the opportunity to consult with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b) that she has read and understands
the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own
judgment.

     7.9 Remedies.

     (a) Injunctive Relief. The parties agree that the services to be rendered by
Executive hereunder are of a unique nature and that in the event of any breach or threatened
breach of any of the covenants contained herein, the damage or imminent damage to the value
and the goodwill of the Company’s business will be irreparable and extremely difficult to
estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree
that the Company shall be entitled to injunctive relief against Executive in the event of
any breach or threatened breach of any such provisions by Executive, in addition to any
other relief (including damage) available to the Company under this Agreement or under law.

     (b) Exclusive. Both parties agree that the remedy specified in Section 7.9(a)
above is not exclusive of any other remedy for the breach by Executive of the terms hereof.

     7.10 Counterparts. This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same Agreement.

     7.11 Prevailing Party Expenses. In the event that any action or proceeding is
commenced to enforce the provisions of the Agreement, the court adjudicating such action or
proceeding shall award to the prevailing party all costs and expenses thereof, including, but not
limited to, all reasonable attorneys’ fees, court costs, and all other related expenses.

Executed by the parties as of the day and year first above written.

	 	 	 	 	 	 	 
	TIMOTHY P. COUGHLIN	 	NEUROCRINE BIOSCIENCES, INC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Gary A. Lyons	 	 
	/s/ Timothy P. Coughlin 

	 	 	 	 

Gary A. Lyons
	 	 
	 

	 	 	 	President & Chief Executive Officer	 	 

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