Document:

exv10w18

 

Exhibit
10.18

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and
between Cadence Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and                     
(“Executive”), and shall be effective as of                     , 2007 (the “Effective Date”).

     WHEREAS, Executive and Company are parties to that certain Employment Agreement dated as of
                    , ___(the “Original Agreement”).

     WHEREAS, Executive and Company desire to amend and restate the Original Agreement on the terms
and conditions set forth herein.

     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 (i) the bonus awarded to Executive for the fiscal
year prior to the date of termination (which bonus shall be annualized to the extent Executive was
not employed for entire fiscal year prior to the date of termination), or (ii) if Executive has not
received a bonus because Executive was not employed by the Company for a sufficient period of time,
Executive’s target annual bonus for the fiscal year in which the date of termination occurs. 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 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:

               (i) a material diminution in Executive’s authority, duties or responsibilities;

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

               (iii) a material change in the geographic location at which Executive must perform his duties;
or

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               (iv) any other action or inaction that constitutes a material breach by the Company or any
successor or affiliate of its obligations to Executive under this Agreement.

          Executive must provide written notice to the Company of the occurrence of any of the foregoing
events or conditions without Executive’s written consent within ninety (90) days of the occurrence
of such event. The Company or any successor or affiliate shall have a period of thirty (30) days
to cure such event or condition after receipt of written notice of such event from Executive. Any
voluntary termination of Executive’s employment for “Good Reason” following such thirty (30) day
cure period must occur no later than the date that is six (6) months following the initial
occurrence of one of the foregoing events or conditions without Executive’s written consent and
such voluntary termination of Executive’s employment shall be treated as an involuntary termination
of employment.

          (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                      of the Company[, but
shall not perform policy-making functions for the Company or be designated an “officer” of the
Company, as such term is defined under Rule 16a-1(f) of the Securities Exchange Act of 1934, as
amended]. In the performance of such duties, Executive shall report directly to the
[Board][CEO][President][Chief Medical Officer (“CMO”)] and shall be subject to the direction of the
[Board][CEO][President][CMO] and to such limits upon Executive’s authority as the Board or the CEO
or [President][CMO] may from time to time impose. [In the event of the [President][CMO]’s
incapacity or unavailability, Executive shall report directly to the CEO [or President], or such
other officer of the Company as the CEO [or President] may designate, or be subject 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 [Board][CEO or President]. 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
[Board][CEO or President] from time to time. Executive shall also render services at such other
places within or outside the United States as the [Board][CEO][or President][or CMO] 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.

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          (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, 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 [Board][the CEO or the President]. 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 [Board][the CEO or the President].

     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                      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.

          (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, [and] (ii) Executive furnishing the
Company with evidence in the form of receipts satisfactory to the Company substantiating the
claimed expenditures[, (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.

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          (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) 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 Executive’s 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) 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)(iii), 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.

               (iv) The vesting pursuant to clauses (i), (ii) and (iii) 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.

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          (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 thirty (30) 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 thirty (30) 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 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 thirty (30) days following the
effective date of Executive’s Release (as defined below), but in no event later than two and
one-half (2 1/2) months following the last day of the calendar year in which Executive’s termination
of employment occurs, (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,
within thirty (30) days following the effective date of Executive’s Release (as defined below), but
in no event later than two and one-half (2 1/2) months following the last day of the calendar year in
which Executive’s termination of employment occurs, (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 following the effective date of Executive’s Release, but in no event
later than two and

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one-half (2 1/2) months following the last day of the calendar year in which the date of
Executive’s termination of employment occurs.

          (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 Executive’s Release (as defined below), but in no event
later than two and one-half (2 1/2) months following the last day of the calendar year in
which the date of Executive’s termination of employment occurs; 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 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 following the effective
date of Executive’s Release, but in no event later than two and one-half (2 1/2) months
following the last day of the calendar year in which the date of Executive’s termination of
employment occurs; and

               (D) 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, Executive shall be entitled to executive-level
outplacement services at the Company’s expense, not to exceed $15,000. Such

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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)(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 Executive’s Release, but in no event later than two and one-half (2 1/2)
months following the last day of the calendar year in which the date of Executive’s
termination of employment occurs (or, in the event the date of termination precedes the
consummation of a Change of Control, because the payment of Executive’s prorated Bonus
pursuant to clause (2) below shall not be administratively practicable by the foregoing date
because it will not yet be known whether a Change of Control will occur within three (3)
months following the date of termination, such prorated Bonus shall be paid within thirty
(30) days following the date of the Change in Control), 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 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

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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 following the effective date of Executive’s Release, but in no event later than two and
one-half (2 1/2) months following the last day of the calendar year in which the date of
Executive’s termination of employment occurs; and

               (D) 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, 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. 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 (other than as a result of Executive’s death or Permanent Disability), 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

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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. If at the time of Executive’s termination of employment with the
Company Executive is a “specified employee” as defined in Section 409A of the Code, as determined
by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of
any payments or benefits otherwise payable hereunder as a result of such termination of employment
is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code,
then the Company will defer the commencement of the payment of any such payments or benefits
hereunder (without any reduction in such payments or benefits ultimately paid or provided to
Executive) until the date that is at least six (6) months following Executive’s termination of
employment with the Company (or the earliest date as is permitted under 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,
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

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statement certifying compliance with this Section 4(j) prior to the receipt of any
post-termination benefits described in this Agreement.

          (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

11

 

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.

          (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.

12

 

          (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, 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,
including the Original Agreement, between the Company and Executive, and may be modified only by a
written instrument duly executed by each party.

13

 

          (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:

Cadence Pharmaceuticals, Inc.

ATTN: Secretary

12481 High Bluff Drive, Suite 200

San Diego, CA 92130

     If to Executive:

At the address listed on the records of the Company

14

 

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.

          (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.

15

 

          (o) Code Section 409A Exempt. The compensation and benefits payable under this Agreement,
including without limitation the severance benefits described in Section 4, are not intended to
constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code. To
the extent applicable, this Agreement shall be interpreted in accordance with Code Section 409A and
Department of Treasury regulations and other interpretive guidance issued thereunder. If the
Company and Executive determine that any compensation or benefits payable under this may be or
become subject to Code Section 409A and related Department of Treasury guidance, the Company and
Executive agree to amend this Agreement or adopt other policies or procedures (including
amendments, policies and procedures with retroactive effect), or take such other actions as the
Company and Executive deem necessary or appropriate to (1) exempt the compensation and benefits
payable under this Agreement from Code Section 409A and/or preserve the intended tax treatment of
the compensation and benefits provided with respect to this Agreement, or (2) comply with the
requirements of Code Section 409A and related Department of Treasury guidance.

(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:
	 	Theodore R. Schroeder
	 

	 	Title:
	 	President and CEO
	 
	 	 	 	 
	 	 	[Name of Executive]

 1

 

 

RELEASE

     Certain capitalized terms used in this Release are defined in the Amended and Restated
Employment Agreement by and between Cadence Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), and                      (“Executive”) dated as of the ___day of                     , 2007 (the
“Agreement”) which Executive has previously executed and of which this Release is a part.

     Pursuant to the Agreement, and in consideration of and as a condition precedent to the
payments and benefits provided under the Agreement, Executive hereby furnishes the Company with
this Release.

     Executive hereby confirms his/her obligations under the Company’s proprietary information and
inventions agreement.

     On Executive’s own behalf and on behalf of Executive’s heirs, estate and beneficiaries,
Executive hereby waives, releases, acquits and forever discharges the Company, and each of its
subsidiaries and affiliates, and each of their respective past or present officers, directors,
agents, servants, employees, shareholders, predecessors, successors and assigns, and all persons
acting by, through, under, or in concert with them, or any of them, of and from any and all suits,
debts, liens, contracts, agreements, promises, claims, liabilities, demands, causes of action,
costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in
law, equity, or otherwise, known and unknown, fixed or contingent, suspected and unsuspected,
disclosed and undisclosed (“Claims”), from the beginning of time to the date hereof, including
without limitation, Claims that arose as a consequence of Executive’s employment with the Company,
or arising out of the termination of such employment relationship, or arising out of any act
committed or omitted during or after the existence of such employment relationship, all up through
and including the date on which this Release is executed, including, but not limited to, Claims
which were, could have been, or could be the subject of an administrative or judicial proceeding
filed by Executive or on Executive’s behalf under federal, state or local law, whether by statute,
regulation, in contract or tort. This Release includes, but is not limited to: (1) Claims for
intentional and negligent infliction of emotional distress; (2) tort Claims for personal injury;
(3) Claims or demands related to salary, bonuses, commissions, stock, stock options, or any other
ownership interest in the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, front pay, back pay or any other form of compensation; (4) Claims for breach of contract; (5)
Claims for any form of retaliation, harassment, or discrimination; (6) Claims pursuant to any
federal, state or local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended, the federal Age Discrimination in Employment Act of 1967, as
amended (“ADEA”), the federal Employee Retirement Income Security Act of 1974, as amended, the
federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as
amended, and the California Labor Code; and (7) all other Claims based on tort law, contract law,
statutory law, common law, wrongful discharge, constructive discharge, fraud, defamation, emotional
distress, pain and suffering, breach of the implied covenant of good faith and fair dealing,
compensatory or punitive damages, interest, attorneys’ fees, and reinstatement or re-employment.
If any court rules that Executive’s waiver of the right to file any administrative or judicial
charges or complaints is ineffective, Executive

 

 

agrees not to seek or accept any money damages or any other relief upon the filing of any such
administrative or judicial charges or complaints.

     Executive acknowledge that he/she has read and understand Section 1542 of the California Civil
Code which reads as follows: “A general release does not extend to claims which the creditor does
not know or suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the debtor.”
Executive hereby expressly waives and relinquishes all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to his/her release of any unknown Claims
Executive may have against the Company.

     Notwithstanding the foregoing, nothing in this Release shall constitute a release by Executive
of any claims or damages based on any right Executive may have to enforce the Company’s executory
obligations under the Agreement, any right Executive may have to vested or earned compensation and
benefits, or Executive’s eligibility for indemnification under applicable law, Company governance
documents, Executive’s indemnification agreement with the Company, if any, or under any applicable
insurance policy with respect to Executive’s liability as an employee or officer of the Company.

     If Executive is 40 years of age or older at the time of the termination, Executive
acknowledges that he/she is knowingly and voluntarily waiving and releasing any rights he/she may
have under ADEA. Executive also acknowledges that the consideration given under the Agreement for
the Release is in addition to anything of value to which he/she was already entitled. Executive
further acknowledges that he/she has been advised by this writing, as required by the ADEA, that:
(A) his/her waiver and release do not apply to any rights or claims that may arise on or after the
date he/she executes this Release; (B) Executive has the right to consult with an attorney prior to
executing this Release; (C) Executive has 21 days to consider this Release (although he/she may
choose to voluntarily execute this Release earlier); (D) Executive has 7 days following the
execution of this Release to revoke the Release; and (E) this Release shall not be effective until
the date upon which the revocation period has expired, which shall be the 8th day after this
Release is executed by Executive, without Executive’s having given notice of revocation.

     Executive further acknowledges that Executive has carefully read this Release, and knows and
understands its contents and its binding legal effect. Executive acknowledges that by signing this
Release, Executive does so of Executive’s own free will, and that it is Executive’s intention that
Executive be legally bound by its terms.

Print Name:

Date:

 

 

Schedule to Exhibit 10.18: The Form of Amended and Restated Employment Agreement was entered
into with the following officers with their respective titles listed below:

	 	 	 
		 	 
	Name	 	Title
	Theodore R. Schroeder

	 	President and Chief Executive Officer
	James B. Breitmeyer, M.D., Ph.D.

	 	Executive Vice President, Development and Chief Medical
Officer
	Hazel M. Aker, J.D.

	 	Senior Vice President, General Counsel
	William S. Craig, Ph.D.

	 	Senior Vice President, Pharmaceutical Development and
Manufacturing
	Catherine J. Hardalo, M.D.

	 	Vice President, Clinical Development
	William R. LaRue

	 	Senior Vice President and Chief Financial Officer
	Malvina M. Laudicina

	 	Vice President, Regulatory Affairs and Quality Assurance
	David A. Socks

	 	Vice President, Business Developmentexv10w19

 

Exhibit 10.19

AMENDED AND RESTATED

CADENCE PHARMACEUTICALS, INC.

DIRECTOR COMPENSATION POLICY

Effective August 29, 2007

     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 $30,000 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 $17,500 for such service;

               (ii) members (other than the chairman) of the Audit Committee shall be eligible to receive an
additional annual retainer of $6,000 for such service;

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

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

               (iv) chairman of the Nominating/Corporate Governance Committee shall be eligible to receive an
annual retainer of $7,500 for such service; and

               (vi) members (other than the chairman) of the Nominating/Corporate Governance Committee shall
be eligible to receive an annual retainer of $3,000 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

1

 

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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