Document:

Exhibit 10.12(a)

                                 LESLIE BERNHARD
                                  ADSTAR, INC.
                               4553 GLENCOE AVENUE
                            MARINA DEL REY, CA 90292

                                October 18, 2006

Board of Directors
Universal Power Group, Inc.
1720 Hayden Road
Carrollton, Texas

Dear Sirs:

This letter confirms my acceptance of your offer to join the Board of Directors
of Universal Power Group, Inc. immediately upon effectiveness of the company's
initial public offering.

                                               Very truly yours,

                                               /s/ Leslie BernhardExhibit 10.12(b)

                                 MARVIN I. HAAS
                              91 CENTRAL PARK WEST
                            NEW YORK, NEW YORK 10023

                                October 18, 2006

Board of Directors
Universal Power Group, Inc.
1720 Hayden Road
Carrollton, Texas 75006

Dear Sirs:

This letter confirms my acceptance of your offer to join the Board of Directors
of Universal Power Group, Inc. immediately upon effectiveness of the company's
initial public offering.

                                       Very truly yours,

                                       /s/ Marvin I. Haas

                                       Marvin I. HaasGARLAND P. ASHER 

    4001 Monticello Drive 

    Fort Worth, Texas 76107

October 19, 2006 

  Board of Directors 

  Universal Power Group, Inc. 

  1720 Hayden Road 

  Carrollton, Texas 

Dear Sirs: 

This letter confirms my acceptance of your offer to join the Board of Directors of Universal Power Group, Inc. immediately upon effectiveness of the company's initial public offering. 

Very truly yours, 

                                                                                                         /s/ Garland P. AsherROBERT M. GUTKOWSKI 

      20 Fox Hunt Lane 

      Cold Sprink Harbor, New York 11724 

   
    

October 25, 2006 

Board of Directors 

Universal Power Group, Inc. 

1720 Hayden Road 

Carrollton, Texas 

Dear Sirs: 

This letter confirms my acceptance of your offer to join the Board of Directors of Universal Power Group, Inc. immediately upon effectiveness of the company's initial public offering. 

Very truly yours, 

                                                                                                         /s/ Robert M. Gutkowskiexv10w3

 

EXHIBIT 10.3

CADENCE PHARMACEUTICALS, INC.

2004 EQUITY INCENTIVE AWARD PLAN

ARTICLE 1

PURPOSE

     1.1 General. The purpose of the Cadence Pharmaceuticals, Inc. 2004 Equity Incentive
Award Plan (the “Plan”) is to promote the success and enhance the value of Cadence Pharmaceuticals,
Inc. (the “Company”) by linking the personal interests of the members of the Board, employees,
consultants and other independent advisors, and officers of the Company and any Parent or
Subsidiary, to those of Company stockholders and by providing such individuals with an incentive
for outstanding performance to generate superior returns to Company stockholders. The Plan is
further intended to provide flexibility to the Company in its ability to motivate, attract, and
retain the services of members of the Board, employees, consultants and other independent advisors,
and officers of the Company upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

     2.1 Definitions. The following words and phrases shall have the following meanings:

          (a) “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a
Performance Share award, a Dividend Equivalents award, a Stock Payment award, a Restricted Stock
Unit award, or a Performance-Based Award granted to a Participant pursuant to the Plan.

          (b) “Award Agreement” means any written or electronic agreement, contract, or other instrument
or document evidencing an Award.

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

          (d) “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” means the Internal Revenue Code of 1986, as amended, and the regulations issued
thereunder.

          (f) “Committee” means the Board or a committee of the Board described in Article 12.

          (g) “Covered Employee” means an Employee who is, or could be, a “covered

 

 

employee” within the meaning of Section 162(m) of the Code.

          (h) “Disability” means a permanent and total disability within the meaning of Section 22(e)(3)
of the Code, as it may be amended from time to time.

          (i) “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to
receive the equivalent value (in cash or Stock) of dividends that otherwise would have been paid on
Stock which is subject to an Award.

          (j) “Employee” means any officer or other employee (as defined in accordance with Section
3401(c) of the Code) of the Company or any Parent or Subsidiary. A person shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, any Parent or Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. Neither service as a director nor
payment of a director’s fee by the Company shall be sufficient, by itself, to constitute
“employment” by the Company.

          (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (l) “Fair Market Value” shall mean, as of any date, the value of Stock determined as follows:

               (i) If the Stock is listed on any established stock exchange or a national market system,
including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the last market trading
day prior to the date of determination, as reported in The Wall Street Journal or such other source
as the Committee deems reliable;

               (ii) If the Stock is regularly quoted by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the
Stock on the date prior to the date of determination as reported in The Wall Street Journal or such
other source as the Committee deems reliable; or

               (iii) In the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Committee.

          (m) “Incentive Stock Option” means an Option that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.

          (n) “Misconduct” means the commission of any act of fraud, embezzlement or dishonesty by the
Participant, any unauthorized use or disclosure by such person of confidential information or trade
secrets of the Company (or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Company (or any Parent or Subsidiary) in
a material manner. The foregoing definition shall not in any way preclude or restrict the right of
the Company (or any Parent or Subsidiary) to discharge or dismiss any Participant or other person
in the service of the Company (or any Parent or Subsidiary) for any other acts or omissions, but
such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds
for termination for Misconduct.

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          (o) “Non-Employee Director” means a member of the Board who qualifies as a “Non-Employee
Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor definition adopted
by the Board under applicable law.

          (p) “Non-Qualified Stock Option” means an Option that is not intended to be or otherwise does
not qualify as an Incentive Stock Option.

          (q) “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to
purchase a specified number of shares of Stock at a specified price during specified time periods.
An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

          (r) “Parent” means any corporation in an unbroken chain of corporations ending with the
Company if each of the corporations other than the Company then owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain at the relevant time, including after the Effective Date (as defined in Section 13.1).

          (s) “Participant” means a person who, as a member of the Board, consultant to the Company or
any Parent or Subsidiary or Employee, has been granted an Award pursuant to the Plan.

          (t) “Performance-Based Award” means an Award granted to selected Covered Employees, but which
is subject to the terms and conditions set forth in Article 9.

          (u) “Performance Criteria” means the criteria that the Committee selects for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a Performance Period.
The Performance Criteria that will be used to establish Performance Goals are limited to the
following: net earnings (either before or after interest, taxes, depreciation and amortization),
net losses, sales or revenue, operating earnings, operating cash flow, return on net assets, return
on stockholders’ equity, return on assets, return on capital, stockholder returns, gross or net
profit margin, earnings per share, price per share of Stock, and market share, any of which may be
measured either in absolute terms or as compared to any incremental increase or as compared to
results of a peer group.

          (v) “Performance Goals” means, for a Performance Period, the goals established in writing by
the Committee for the Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit,
or an individual. The Committee, in its discretion, may adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution or enlargement of
the rights of Participants (i) in the event of, or in anticipation of, any unusual or extraordinary
corporate item, transaction, event, or development, or (ii) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the financial statements of
the Company, or in response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

          (w) “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s right to, and the
payment of, a Performance-Based Award.

          (x) “Performance Share” means a right granted to a Participant pursuant to Article 8, to
receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain
performance goals established by the Committee.

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          (y) “Plan” means this Cadence Pharmaceuticals, Inc. 2004 Equity Incentive Award Plan, as it
may be amended from time to time.

          (z) “Public Trading Date” means the first date upon which Stock is listed upon notice of
issuance on any securities exchange or designated upon notice of issuance as a national market
security on an interdealer quotation system.

          (aa) “Qualified Performance-Based Compensation” means any compensation that is intended to
qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the
Code.

          (bb) “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is
subject to certain restrictions and to risk of forfeiture.

          (cc) “Restricted Stock Unit” means a right to receive a share of Stock during specified time
periods pursuant to Article 8.

          (dd) “Securities Act” means the Securities Act of 1933, as amended.

          (ee) “Stock” means the common stock of the Company and such other securities of the Company
that may be substituted for Stock pursuant to Article 11.

          (ff) “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to
receive a payment equal to the excess of the Fair Market Value of a specified number of shares of
Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted
as set forth in the applicable Award Agreement.

          (gg) “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or
other right to purchase shares of Stock, as part of any bonus, deferred compensation or other
arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

          (hh) “Subsidiary” means any corporation or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly by the Company at the
relevant time, including after the Effective Date (as defined in Section 13.1).

ARTICLE 3

SHARES SUBJECT TO THE PLAN

     3.1 Number of Shares.

          (a) Subject to Article 11, the aggregate number of shares of Stock which may be issued or
transferred pursuant to Awards under the Plan shall be 2,875,000 shares.

          (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of
Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or
tax withholding obligation pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of
Stock issued in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Parent or Subsidiary shall not be counted
against shares of Stock available for grant pursuant to this Plan. If shares of Stock issued
pursuant to Awards are repurchased by

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the Company at no less than their original purchase price, such shares of Stock shall become
available for future grant under the Plan (unless the Plan has terminated).

          (c) Notwithstanding the provisions of this Section 3.1, no shares of Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to
qualify as an Incentive Stock Option under Code Section 422.

     3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or, on and after the Public
Trading Date, Stock purchased on the open market.

     3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision
in the Plan to the contrary, and subject to Article 11, on and after the Public Trading Date and
upon expiration of any transition period provided for under Section 162(m) of the Code, the maximum
number of shares of Stock with respect to one or more Awards that may be granted to any one
Participant during a calendar year shall be 562,500.

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

     4.1 Eligibility.

          (a) General. Persons eligible to participate in this Plan include all Employees, consultants
to the Company or any Parent or Subsidiary and all members of the Board, as determined by the
Committee.

          (b) Foreign Participants. In order to assure the viability of Awards granted to Participants
employed in foreign countries, the Committee may provide for such special terms, as it may consider
necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover,
the Committee may approve such supplements to, or amendments, restatements, or alternative versions
of, the Plan as it may consider necessary or appropriate for such purposes without thereby
affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions shall increase the share limitations
contained in Sections 3.1 and 3.3 of the Plan.

     4.2 Actual Participation. Subject to the provisions of the Plan, the Committee may,
from time to time, select from among all eligible individuals, those to whom Awards shall be
granted and shall determine the nature and amount of each Award. No individual shall have any
right to be granted an Award pursuant to this Plan.

ARTICLE 5

STOCK OPTIONS

     5.1 General. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

          (a) Exercise Price. The exercise price per share of Stock subject to an Option shall be
determined by the Committee and set forth in the Award Agreement; provided that the exercise price
for any Option shall not be less than par value of a share of Stock on the date of grant.

          (b) Time And Conditions Of Exercise. The Committee shall determine the time or

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times at which an Option may be exercised in whole or in part, provided that the term of any
Option granted under the Plan shall not exceed ten years. The Committee shall also determine the
performance or other conditions, if any, that must be satisfied before all or part of an Option may
be exercised.

          (c) Payment. The Committee shall determine the methods by which the exercise price of an
Option may be paid, the form of payment, including, without limitation:

               (1) cash,

               (2) on and after the Public Trading Date, shares of Stock held for longer than six months
having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the
Option or exercised portion thereof,

               (3) other property acceptable to the Committee, or

               (4) on and after the Public Trading Date, delivery of a notice that the Participant has placed
a market sell order with a broker with respect to shares of Stock then issuable upon exercise of
the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds
of the sale to the Company in satisfaction of the Option exercise price, provided that payment of
such proceeds is then made to the Company upon settlement of such sale).

     The Committee shall also determine the methods by which shares of Stock shall be delivered or
deemed to be delivered to Participants. The Committee may permit any Participant to pay the option
exercise price or the purchase price for shares of Stock under an Award by delivering a
full-recourse, interest bearing promissory note payable in one or more installments and secured by
the purchased shares, as long as the portion of the option exercise price or purchase price, as
applicable, which is equal to the par value of the shares purchased thereby is paid in cash or
other legal consideration permitted by applicable law. In no event, however, may the maximum
credit available to the Participant exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares (less the par value of those shares) plus (ii) any
Federal, state and local income and employment tax liability incurred by the Participant in
connection with the option exercise or share purchase; provided, however, that prior to the first
date on which the Company has filed a registration statement under the Securities Act to register
the public offering of securities of the Company under the Securities Act, then, to the extent that
any director or executive officer of the Company, as defined under Rule 3b-7 promulgated under the
Exchange Act, has outstanding a promissory note or other pending mode of payment for shares under
the Plan, and the Company has reasonably determined that to permit such promissory note or other
pending mode of payment to remain outstanding would be unlawful under the Exchange Act or any other
law, then such note or other pending mode of payment must be immediately paid to the Company in
full or replaced by a mode of payment provided for under the Plan that is acceptable to the Company
and reasonably determined by it to be lawful under the Exchange Act or any other applicable law.

          (d) Evidence Of Grant. All Options shall be evidenced by a written Award Agreement between
the Company and the Participant. The Award Agreement shall include such additional provisions as
may be specified by the Committee.

     5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
employees (as defined in accordance with Section 3401(c) of the Code) of the Company or a
Subsidiary which constitutes a “subsidiary corporation” of the Company within Section 424(f) of the
Code or a Parent which constitutes a “parent corporation” of the Company within the meaning of
Section 424(e) of the Code and the terms of any Incentive Stock Options granted pursuant to the
Plan must comply with the following additional provisions of this Section 5.2:

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          (a) Exercise Price. The exercise price per share of Stock shall be set by the Committee,
provided that the exercise price for any Incentive Stock Option shall not be less than 100% of the
Fair Market Value on the date of grant.

          (b) Expiration Of Option. An Incentive Stock Option may not be exercised to any extent by
anyone after the first to occur of the following events:

               (1) Ten years from the date it is granted, unless an earlier time is set in the Award
Agreement.

               (2) One year after the date of the Participant’s termination of employment or service on
account of Disability or death, unless in the case of death a shorter or longer period is
designated in the Award Agreement. Upon the Participant’s Disability or death, any Incentive Stock
Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s
legal representative or representatives, by the person or persons entitled to do so pursuant to the
Participant’s last will and testament, or, if the Participant fails to make testamentary
disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to
receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.

          (c) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time
the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are
first exercisable by a Participant in any calendar year may not exceed $100,000 or such other
limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent
that Incentive Stock Options are first exercisable by a Participant in excess of such limitation,
the excess shall be considered Non-Qualified Stock Options.

          (d) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at
the date of grant, owns stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any “subsidiary corporation” of the Company or “parent
corporation” of the Company (each within the meaning of Section 424 of the Code) only if such
Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant
and the Option is exercisable for no more than five years from the date of grant.

          (e) Transfer Restriction. The Participant shall give the Company prompt notice of any
disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (1) two
years from the date of grant of such Incentive Stock Option or (2) one year after the transfer of
such shares of Stock to the Participant.

          (f) Expiration Of Incentive Stock Options. No Award of an Incentive Stock Option may be made
pursuant to this Plan after the tenth anniversary of the Effective Date.

          (g) Right To Exercise. During a Participant’s lifetime, an Incentive Stock Option may be
exercised only by the Participant.

     5.3 Early Exercisability. The Committee may provide in the terms of a Participant’s
Award Agreement that the Participant may, at any time before the Participant’s status as an
Employee, member of the Board or consultant or other independent advisor to the Company terminates,
exercise the Option(s) granted to such Participant in whole or in part prior to the full vesting of
the Option(s); provided, however, shares of Stock acquired upon exercise of an Option which has not
fully vested may be subject to any forfeiture, transfer or other restrictions as the Committee may
determine in its sole discretion.

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ARTICLE 6

RESTRICTED STOCK AWARDS

     6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Participant selected by the Committee in such amounts and subject to such
terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be
evidenced by a Restricted Stock Award Agreement.

     6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at
the time of the grant of the Award or thereafter.

     6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may provide in any Restricted Stock Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part restrictions or forfeiture conditions relating to
Restricted Stock.

     6.4 Certificates For Restricted Stock. Restricted Stock granted pursuant to the Plan
may be evidenced in such manner as the Committee shall determine. If certificates representing
shares of Restricted Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.

ARTICLE 7

STOCK APPRECIATION RIGHTS

     7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to
any Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in
connection and simultaneously with the grant of an Option, (b) with respect to a previously granted
Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms
and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced
by an Award Agreement.

     7.2 Coupled Stock Appreciation Rights.

          (a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and
shall be exercisable only when and to the extent the related Option is exercisable.

          (b) A CSAR may be granted to a Participant for no more than the number of shares subject to
the simultaneously or previously granted Option to which it is coupled.

          (c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option
pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the
CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company

8

 

in exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of
exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have
been exercised, subject to any limitations the Committee may impose.

     7.3 Independent Stock Appreciation Rights.

          (a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and
shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the
Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may
determine. The exercise price per share of Stock subject to each ISAR shall be set by the
Committee; provided, however, that, the Committee in its sole and absolute discretion may provide
that the ISAR may be exercised subsequent to a termination of employment or service, as applicable,
or following a Change of Control of the Company, or because of the Participant’s retirement, death
or Disability, or otherwise.

          (b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR
pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then
exercisable pursuant to its terms) and to receive from the Company an amount determined by
multiplying the difference obtained by subtracting the exercise price per share of the ISAR from
the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of
shares of Stock with respect to which the ISAR shall have been exercised, subject to any
limitations the Committee may impose.

     7.4 Payment and Limitations on Exercise.

          Payment of the amounts determined under Section 7.2(c) and 7.3(b) above shall be in cash, in
Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or
a combination of both, as determined by the Committee.

ARTICLE 8

OTHER TYPES OF AWARDS

     8.1 Performance Share Awards. Any Participant selected by the Committee may be
granted one or more Performance Share awards which may be denominated in a number of shares of
Stock or in a dollar value of shares of Stock and which may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined appropriate by the
Committee, in each case on a specified date or dates or over any period or periods determined by
the Committee. In making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Participant.

     8.2 Dividend Equivalents.

          Any Participant selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on the shares of Stock that are subject to any Award, to be credited as of
dividend payment dates, during the period between the date the Award is granted and the date the
Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents
shall be converted to cash or additional shares of Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.

9

 

     8.3 Stock Payments. Any Participant selected by the Committee may receive Stock
Payments in the manner determined from time to time by the Committee. The number of shares shall
be determined by the Committee and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.

     8.4 Restricted Stock Units. Any Participant selected by the Committee may be granted
an award of Restricted Stock Units in the manner determined from time to time by the Committee.
The number of Restricted Stock Units shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or periods determined by
the Committee. Stock underlying a Restricted Stock Unit will not be issued until the Restricted
Stock Unit has vested, pursuant to a vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Participant awarded Restricted Stock Units shall
have no rights as a Company stockholder with respect to such Restricted Stock Units until such time
as the Restricted Stock Units have vested and the Stock underlying the Restricted Stock Units has
been issued.

     8.5 Term. The term of any Award of Performance Shares, Dividend Equivalents, Stock
Payments or Restricted Stock Units shall be set by the Committee in its discretion.

     8.6 Exercise or Purchase Price. The Committee may establish the exercise or purchase
price of any Award of Performance Shares, Restricted Stock Units or Stock Payments; provided,
however, that such price shall not be less than the par value of a share of Stock, unless otherwise
permitted by applicable state law.

     8.7 Exercise Upon Termination of Employment or Service. An Award of Performance
Shares, Dividend Equivalents, Restricted Stock Units and Stock Payments shall only be exercisable
or payable while the Participant is an Employee, consultant to the Company or a member of the
Board, as applicable; provided, however, that the Committee in its sole and absolute discretion may
provide in the Award Agreement or otherwise that an Award of Performance Shares, Dividend
Equivalents, Stock Payments or Restricted Stock Units may be exercised or paid subsequent to a
termination of employment or service, as applicable, upon or following a Change of Control of the
Company, or because of the Participant’s retirement, death, Disability, or otherwise.

     8.8 Form of Payment. Payments with respect to any Awards granted under this Article 8
shall be made in cash, in Stock or a combination of both, as determined by the Committee.

     8.9 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be evidenced by a written
Award Agreement.

ARTICLE 9

PERFORMANCE-BASED AWARDS

     9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to
qualify Awards as Qualified Performance-Based Compensation. If the Committee, in its discretion,
decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall
control over any contrary provision of the Plan; provided, however, that the Committee may in its
discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance
Goals but that do not satisfy the requirements of this Article 9.

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     9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards which are intended to be Qualified
Performance Based Compensation. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an Award for the
period. Moreover, designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in any other period.

     9.3 Procedures With Respect to Performance-Based Awards. To the extent necessary to
comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles 6 and 8 which may be granted to one or
more Covered Employees, no later than ninety days following the commencement of any fiscal year in
question or any other designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i)
designate one or more Covered Employees, (ii) select the Performance Criteria applicable to the
Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as
applicable, which may be earned for such Performance Period, and (iv) specify the relationship
between Performance Criteria and the Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Covered Employee for such Performance Period. Following the
completion of each Performance Period, the Committee shall certify in writing whether the
applicable Performance Goals have been achieved for such Performance Period. In determining the
amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but
not to increase) the amount payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.

     9.4 Payment of Performance-Based Awards. A Participant shall be eligible to receive
payment pursuant to a Performance-Based Award for a Performance Period only if the Performance
Goals for such period are achieved. In determining the amount earned under a Performance-Based
Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for
the Performance Period, if in its sole and absolute discretion, such reduction or elimination is
appropriate.

     9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended
to the extent necessary to conform to such requirements.

ARTICLE 10

PROVISIONS APPLICABLE TO AWARDS

     10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other Awards.

     10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements
that set forth the terms, conditions and limitations for each Award which may include the term of
an Award, the provisions applicable in the event the Participant’s employment or service
terminates, and the

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Company’s authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.

     10.3 Limits on Transfer. No right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Parent
or Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any
other party other than the Company or a Parent or Subsidiary. Except as otherwise provided by the
Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other
than by will or the laws of descent and distribution. The Committee by express provision in the
Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be
transferred to, exercised by and paid to certain persons or entities related to the Participant,
including but not limited to members of the Participant’s family, charitable institutions, or
trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s
family and/or charitable institutions, or to such other persons or entities as may be expressly
approved by the Committee, pursuant to such conditions and procedures as the Committee may
establish. Any permitted transfer may be subject to the condition that the Committee receive
evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes
(or to a “blind trust” in connection with the Participant’s termination of employment or service
with the Company or a Parent or Subsidiary to assume a position with a governmental, charitable,
educational or similar non-profit institution) and on a basis consistent with the Company’s lawful
issue of securities.

     10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is
married and resides in a community property state, a designation of a person other than the
Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest
in the Award shall not be effective without the prior written consent of the Participant’s spouse.
If no beneficiary has been designated or survives the Participant, payment shall be made to the
person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution.
Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at
any time provided the change or revocation is filed with the Committee.

     10.5 Stock Certificates; Book Entry Procedures.

          (a) The Company shall not be required to issue or deliver any certificates evidencing shares
of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with
advice of counsel, that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction,
securities or other laws, rules and regulations and the rules of any national securities exchange
or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may
place legends on any Stock certificate to reference restrictions applicable to the Stock. In
addition to the terms and conditions provided herein, the Board may require that a Participant make
such reasonable covenants, agreements, and representations as the Board, in its
discretion, deems advisable in order to comply with any such laws, regulations, or
requirements. The Committee shall have the right to require any Participant to comply with any
timing or other restrictions with respect to the settlement or exercise of any Award, including a
window-period limitation, as may be imposed in the discretion of the Committee.

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          (b) Notwithstanding any other provision of the Plan, unless otherwise determined by
the Committee or required by applicable law, rule or regulation, the Company shall not deliver to
any Participant certificates evidencing shares of Stock issued in connection with any Award or
exercise of any Award and instead such shares of Stock will be recorded in the books of the Company
(or as applicable, its transfer agent or stock plan administrator).

ARTICLE 11

CHANGES IN CAPITAL STRUCTURE

     11.1 Adjustments.

          (a) In the event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash
dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or
the share price of the Stock, the Committee shall make such proportionate adjustments, if any, as
the Committee in its discretion may deem appropriate to reflect such change with respect to (i) the
aggregate number and type of shares that may be issued under the Plan (including, but not limited
to, adjustments of the limitations in Sections 3.1 and 3.3); (ii) the terms and conditions of any
outstanding Awards (including, without limitation, any applicable performance targets or criteria
with respect thereto); and (iii) the grant or exercise price per share for any outstanding Awards
under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m) of the Code.

          (b) In the event of any transaction or event described in Section 11.1(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate (including without limitation any Change of
Control), or of changes in applicable laws, regulations or accounting principles, and whenever the
Committee determines that action is appropriate in order to prevent the dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan or with respect to
any Award under the Plan, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles, the Committee, in its sole discretion and on such terms
and conditions as it deems appropriate, either by amendment of the terms of any outstanding Awards
or by action taken prior to the occurrence of such transaction or event and either automatically or
upon the Participant’s request, is hereby authorized to take any one or more of the following
actions:

               (i) To provide for either (A) termination of any such Award in exchange for an amount of cash
and/or other property, if any, equal to the amount that would have been attained upon the exercise
of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of
the date of the occurrence of the transaction or event described in this Section 11.1(b) the
Committee determines in good faith that no amount would have been attained upon the exercise of
such Award or realization of the Participant’s rights, then such Award may be terminated by the
Company without payment) or (B) the replacement of such Award with other rights or property
selected by the Committee in its sole discretion;

               (ii) To provide that such Award be assumed by the successor or survivor corporation, or a
Parent or Subsidiary thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or a Parent or Subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and prices;

               (iii) To make adjustments in the number and type of shares of Stock (or other securities or
property) subject to outstanding Awards, and in the number and kind of outstanding

13

 

Restricted Stock
or Restricted Stock Units and/or in the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options, rights and awards and options, rights
and awards which may be granted in the future;

               (iv) To provide that such Award shall be exercisable or payable or fully vested with respect
to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the
applicable Award Agreement; and

               (v) To provide that the Award cannot vest, be exercised or become payable after such event.

     11.2 Acceleration Upon a Change of Control. Notwithstanding anything to the contrary
contained in Section 11.1, if a Change of Control occurs and a Participant’s Awards are not assumed
by the surviving or successor entity or its Parent or Subsidiary and such successor does not
substitute substantially similar awards for those outstanding under the Plan, such Awards shall
become fully exercisable and/or payable as applicable, and all forfeiture restrictions on such
Awards shall lapse. Upon, or in anticipation of, a Change of Control, the Committee may cause any
and all Awards outstanding hereunder to terminate at a specific time in the future and shall give
each Participant the right to exercise such Awards during a period of time as the Committee, in its
sole and absolute discretion, shall determine. The Committee shall have sole discretion to
determine whether an Award has been assumed by the surviving or successor entity or its Parent or
Subsidiary or whether such successor has substituted substantially similar awards for those
outstanding under the Plan in connection with a Change of Control.

     11.3 Outstanding Awards – Certain Mergers. Subject to any required action by the
stockholders of the Company, in the event that the Company shall be the surviving corporation in
any merger or consolidation (except a merger or consolidation as a result of which the holders of
shares of Stock receive securities of another corporation), each Award outstanding on the date of
such merger or consolidation shall pertain to and apply to the securities that a holder of the
number of shares of Stock subject to such Award would have received in such merger or consolidation
and the exercise price shall be appropriately adjusted.

     11.4 Outstanding Awards – Other Changes. In the event of any other change in the
capitalization of the Company or corporate change other than those specifically referred to in this
Article 11, the Committee may, in its absolute discretion, make such adjustments in the number and
class of shares subject to Awards outstanding on the date on which such change occurs and in the
per share grant or exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.

     11.5 No Other Rights. Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of stock of any class or
any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance by the Company of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.

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ARTICLE 12

ADMINISTRATION

     12.1 Committee. Unless and until the Board delegates administration to a committee as
set forth below, the Plan shall be administered by the Board. The Board may delegate
administration of the Plan to a Committee or Committees of one or more members of the Board, and
the term “Committee” shall apply to any person or persons whom at the time has the authority to
administer the Plan. If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. Notwithstanding the
foregoing, however, from and after the Public Trading Date, a Committee of the Board shall
administer the Plan and the Committee shall consist solely of two or more members of the Board each
of whom is both an “outside director,” within the meaning of Section 162(m) of the Code, and a
Non-Employee Director. Within the scope of such authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the Board who are not “outside directors,” within
the meaning of Section 162(m) of the Code the authority to grant awards under the Plan to eligible
persons who are either (1) not then “covered employees,” within the meaning of Section 162(m) of
the Code and are not expected to be “covered employees” at the time of recognition of income
resulting from such award or (2) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of one or more members of the Board
who are not Non-Employee Directors, the authority to grant awards under the Plan to eligible
persons who are not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and/or revest in the Board the administration of the Plan. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee members may resign
at any time by delivering written notice to the Board. Vacancies in the Committee may only be
filled by the Board. Notwithstanding anything to the contrary, the full Board shall conduct the
administration of the Plan with respect to Awards granted to directors and with respect to any
individual subject to Section 16 of the Exchange Act; provided, however, that the Board will have
only the right to ratify any grants with respect to Awards which are intended to be Qualified
Performance Based Compensation issued to individuals who are subject to Section 16 of the Exchange
Act in order to exempt such grants under the provisions of Rule 16b-3 of the Exchange Act.

     12.2 Action by the Committee. A majority of the Committee shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority of the Committee in lieu of a meeting shall be deemed the acts of
the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other employee of the
Company or any Parent or Subsidiary, the Company’s independent certified public accountants, or any
executive compensation consultant or other professional retained by the Company to assist in the
administration of the Plan.

     12.3 Authority of Committee. Subject to any specific designation in the Plan, the
Committee has the exclusive power, authority and discretion to:

          (a) Designate Participants to receive Awards;

          (b) Determine the type or types of Awards to be granted to each Participant;

          (c) Determine the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;

15

 

          (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any reload provision, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or waivers thereof, any
provisions related to non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines; provided, however, that the
Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any
Performance-Based Awards;

          (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other
property, or an Award may be canceled, forfeited, or surrendered;

          (f) Prescribe the form of each Award Agreement, which need not be identical for each
Participant;

          (g) Decide all other matters that must be determined in connection with an Award;

          (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

          (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and

          (j) Make all other decisions and determinations that may be required pursuant to the Plan or
as the Committee deems necessary or advisable to administer the Plan.

     12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the
Committee with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 13

EFFECTIVE AND EXPIRATION DATE

     13.1 Effective Date. The Plan will be submitted for the approval of the Company’s
stockholders within twelve months after the date of the Board’s initial adoption of the Plan (the
“Effective Date”). Awards may be granted or awarded prior to such stockholder approval, provided
that such Awards shall not be exercisable, shall not vest and the restrictions thereon shall not
lapse prior to the time when the Plan is approved by the stockholders, and provided further that if
such approval has not been obtained at the end of said twelve-month period, all Awards previously
granted or awarded under the Plan shall thereupon be canceled and become null and void.

     13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant
to the Plan after, the earlier of (A) the tenth anniversary of (i) the Effective Date or (ii) the
date this Plan is approved by the Company’s stockholders; (B) the date on which all
shares available for issuance under the Plan shall have been issued as vested shares; or (C) the
termination of all outstanding options in connection with a Change of Control. Any Awards that are
outstanding on the tenth anniversary of the Effective Date shall remain in force according to the
terms of the Plan and the applicable Award Agreement.

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ARTICLE 14

AMENDMENT, MODIFICATION, AND TERMINATION

     14.1 Amendment, Modification, and Termination. With the approval of the Board, at any
time and from time to time, the Committee may terminate, amend or modify the Plan; provided,
however, that to the extent necessary and desirable to comply with any applicable law, regulation,
or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such
a manner and to such a degree as required. The Committee shall have the authority to effect, at
any time and from time to time, with the consent of the affected Option holders, the cancellation
of any or all outstanding Options under the Plan and to grant in substitution therefor new options
covering the same or different number of shares of Stock but with an exercise price per share based
on the Fair Market Value per share of Stock on the new option grant date.

     14.2 Awards Previously Granted. No termination, amendment, or modification of the
Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan
without the prior written consent of the Participant.

ARTICLE 15

GENERAL PROVISIONS

     15.1 No Rights to Awards. No Participant, employee, or other person shall have any
claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons uniformly.

     15.2 No Stockholders Rights. No Award gives the Participant any of the rights of a
stockholder of the Company unless and until shares of Stock are in fact issued to such person in
connection with such Award.

     15.3 Withholding. The Company or any Parent or Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s payroll,
social security or other tax obligations) required by law to be withheld with respect to any
taxable event concerning a Participant arising as a result of this Plan. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have
the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of
shares of Stock) having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of the Plan, the number of shares of Stock which may be
withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be
repurchased from the Participant of such Award within six months after such shares of Stock were
acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state,
local and foreign tax liabilities with respect to the issuance, vesting, exercise or payment of the
Award shall be limited to the number of shares which have a Fair Market Value on the date of
withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum
statutory withholding rates for federal, state, local and foreign tax purposes that are applicable
to such taxable income.

     15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Parent or Subsidiary to
terminate any Participant’s employment or services at any time, nor confer upon any Participant any
right to continue in the employ or service of the Company or any Parent or Subsidiary.

     15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan
for incentive compensation. With respect to any payments not yet made to a Participant pursuant to
an Award, nothing

17

 

contained in the Plan or any Award Agreement shall give the Participant any rights that are
greater than those of a general creditor of the Company or any Parent or Subsidiary.

     15.6 Indemnification. To the extent allowable pursuant to applicable law, each member
of the Committee or of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure to act pursuant to
the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her, provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled pursuant to
the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

     15.7 Relationship to Other Benefits. No payment pursuant to the Plan shall be taken
into account in determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any Parent or Subsidiary
except to the extent otherwise expressly provided in writing in such other plan or an agreement
thereunder.

     15.8 Expenses. The expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.

     15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the Plan, rather than
such titles or headings, shall control.

     15.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

     15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.
To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall
be deemed amended to the extent necessary to conform to such applicable exemptive rule.

     15.12 Government And Other Regulations. The obligation of the Company to make payment
of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations,
and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register pursuant to the Securities Act any of the shares of Stock paid pursuant to
the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act, the Company may restrict the transfer of such shares
in such manner as it deems advisable to ensure the availability of any such exemption.

     15.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California.

18

 

     15.14 Compliance with California Securities Laws. Prior to the Public Trading Date,
this Plan is intended to comply with Section 25102(o) of the California Corporations Code and the
regulations issued thereunder. If any of the provisions contained in this Plan are inconsistent
with such requirements, such provisions shall be deemed null and void. The invalidity of any
provision of this Plan shall not affect the validity or enforceability of any other provision of
this Plan, which shall remain in full force and effect.

     15.15 Appendices. The Committee may approve such supplements to, or amendments, or
appendices to, the Plan as it may consider necessary or appropriate for purposes of compliance with
applicable laws or otherwise and such supplements, amendments or appendices shall be considered a
part of the Plan; provided, however, that no such supplements, amendments or appendices shall
increase the share limitations contained in Sections 3.1 and 3.3 of the Plan.

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APPENDIX I

TO

CADENCE PHARMACEUTICALS, INC.

2004 EQUITY INCENTIVE AWARD PLAN

California State Securities Law Compliance

     Notwithstanding anything to the contrary contained in the Plan, the provisions set forth in
this Appendix shall apply to all Awards granted under the Cadence Pharmaceuticals, Inc. 2004 Equity
Incentive Award Plan (the “Plan”) prior to the Public Trading Date. This Appendix shall be of no
further force and effect on or after the Public Trading Date. Definitions as set out in Section 2
of the Plan are applicable to this Appendix.

     The purpose of this Appendix is to set forth those provisions of the Plan necessary to comply
with Section 25102(o) of the California Corporations Code and the regulations issued thereunder.
If any of the provisions contained in this Appendix are inconsistent with such requirements, such
provisions shall be deemed null and void. The invalidity of any provision of this Appendix shall
not affect the validity or enforceability of any other provision of this Appendix, which shall
remain in full force and effect.

     References to Articles set forth in this Appendix are to those Articles of the Plan.

     1.1 Term of Awards. The term of each Award shall be no more than ten years from the
date of grant thereof.

     2.1 Award Exercise or Purchase Price. Except as provided in Article 11, the per share
exercise or purchase price for the Stock to be issued upon exercise of an Award shall be such price
as is determined by the Administrator, but shall be subject to the following:

     In the case of an Award:

          (a) granted to a Participant who, at the time of grant of such Award, owns stock representing
more than 10% of the voting power of all classes of stock of the Company or any parent (as defined
in Section 175 of the California Corporations Code) or Subsidiary, the per share exercise or
purchase price shall be no less than 110% of the Fair Market Value per share on the date of the
grant (100% in the case of an Award other than an Option); and

          (b) granted to any other Participant, the per share exercise or purchase price shall be no
less than 85% of the Fair Market Value per share on the date of grant.

     Notwithstanding the foregoing, Awards may be granted with a per share exercise or purchase
price other than as required above pursuant to a merger or other corporate transaction.

     3.1 Exercisability. Except with regard to Awards granted to officers, members of the
Board, managers or consultants, in no event shall an Award granted hereunder become vested and
exercisable at a rate of less than 20% per year over five years from the date the Award is granted,
subject to reasonable conditions, such as continuing to be a service provider.

20

 

     4.1 Exercisability Following Termination of Relationship as a Service Provider.

          (a) Termination Other Than Death, Disability or Misconduct. If a Participant’s employment or
service terminates for any reason other than by reason of the Participant’s Disability, death or
Misconduct, such Participant may exercise his or her Award within such period of time as is
specified in the Award Agreement to the extent that the Award is vested on the date of termination;
provided, however, that prior to the Public Trading Date, such period of time shall not be less
than thirty days (but in no event later than the expiration of the term of the Award as set forth
in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option
shall remain exercisable for three months following the Participant’s termination for any reason
other than death, Disability or Misconduct.

          (b) Death. If a Participant’s employment or service terminates as a result of the
Participant’s death, the Award may be exercised within such period of time as is specified in the
Award Agreement; provided, however, that prior to the Public Trading Date, such period of time
shall not be less than six months (but in no event later than the expiration of the term of such
Award as set forth in the Notice of Grant), by the Participant’s estate or by a person who acquires
the right to exercise the Award by bequest or inheritance, but only to the extent that the Award is
vested on the date of death. In the absence of a specified time in the Award Agreement, the Award
shall remain exercisable for twelve months following the Participant’s termination for death.

          (c) Disability of Participant. If a Participant’s employment or service terminates as a
result of the Participant’s Disability, the Participant may exercise his or her Award within such
period of time as is specified in the Award Agreement to the extent the Award is vested on the date
of termination; provided, however, that prior to the Public Trading Date, such period of time shall
not be less than six months (but in no event later than the expiration of the term of such Award as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Award shall remain exercisable for twelve months following the Participant’s termination for
Disability.

          (d) Misconduct of Participant. If a Participant’s employment or service terminates as a
result of the Participant’s Misconduct or should Participant otherwise engage in Misconduct while
holding one or more outstanding Awards under the Plan, the Award shall terminate immediately and
cease to remain outstanding.

     5.1 Repurchase Provisions. In the event the Committee provides that the Company may
repurchase Stock acquired upon exercise of an Award upon the occurrence of certain specified
events, including, without limitation, termination of a Participant’s employment or service,
divorce, bankruptcy or insolvency, then any such repurchase right shall be set forth in the
applicable Award Agreement or in another agreement referred to in such agreement and, to the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of
Regulations (or any successor regulation), any such repurchase right set forth in an Award granted
prior to the Public Trading Date to a person who is not an officer, member of the Board, manager or
consultant shall be upon the following terms: (i) if the repurchase option gives the Company the
right to repurchase the shares upon the Participant’s termination of employment or service at not
less than the Fair Market Value of the shares to be purchased on the date of termination of
employment or service, then (A) the right to repurchase shall be exercised for cash or cancellation
of purchase money indebtedness for the shares within ninety days of termination of employment or
service (or in the case of shares issued upon exercise of Awards after such date of termination,
within ninety days after the date of the exercise) or such longer period as may be agreed to by the
Administrator and the Participant and (B) the right terminates on the Public Trading Date; and (ii)
if the repurchase option gives the Company the right to repurchase the Stock upon the Participant’s
termination of employment or service at the original purchase price for such Stock, then (A) the
right to

21

 

repurchase at the original purchase price shall lapse at the rate of at least 20% of the
shares per year over five (5) years from the date the Award is granted (without respect to the date
the Award was exercised or became exercisable) and (B) the right to repurchase shall be exercised
for cash or cancellation of purchase money indebtedness for the shares within ninety days of
termination of employment or service (or, in the case of shares issued upon exercise of Awards,
after such date of termination, within ninety days after the date of the exercise) or such longer
period as may be agreed to by the Company and the Participant.

     6.1 Information Rights. Prior to the Public Trading Date and to the extent required
by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall provide
to each Participant and to each individual who acquires Stock pursuant to the Plan, not less
frequently than annually during the period such Participant has one or more Awards outstanding,
and, in the case of an individual who acquires Stock pursuant to the Plan, during the period such
individual owns such Stock, copies of annual financial statements. Notwithstanding the preceding
sentence, the Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent information.

     7.1 Transferability. Prior to the Public Trading Date, no Award shall be assigned,
transferred, or otherwise disposed of by a Participant other than by will or the laws of descent
and distribution or, with respect to Awards other than Incentive Stock Options, as permitted by
Rule 701 of the Securities Act.

     8.1 Limitation on Number of Shares. Prior to the Public Trading Date, at no time
shall the total number of shares of Stock issuable upon exercise of all outstanding Options under
the Plan and any shares of Stock provided for under any bonus or similar plan or agreement of the
Company exceed 30% of the then-outstanding shares of Stock of the Company, as calculated pursuant
to Section 260.140.45 of Title 10 of the California Code of Regulations (or any successor
regulation), unless a percentage higher than 30% is approved by at least two-thirds of the
outstanding securities of the Company entitled to vote. The number of shares of Stock which may be
issued or transferred pursuant to Awards under the Plan shall be reduced to the extent necessary to
comply with this provision.

22

 

CADENCE PHARMACEUTICALS, INC.

STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

UNDER THE 2004 EQUITY INCENTIVE AWARD PLAN

     Cadence Pharmaceuticals, Inc. (the “Company”), pursuant to its 2004 Equity Incentive
Award Plan (the “Plan”), hereby grants to the Optionee listed below (“Optionee”), an option to
purchase the number of shares of the Company’s Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Plan,
each of which are incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same meanings in this Stock Option Agreement.

	 	 	 
	Optionee:
	 	 
	 

	 	 
	 
	 	 
	Grant Date:
	 	 
	 

	 	 
	 
	 	 
	Vesting Commencement Date:
	 	 
	 

	 	 
	 
	 	 
	Exercise Price per Share:

	 	$                                         per share
	 
	 	 
	Total Number of Shares Granted:
	 	 
	 

	 	 
	 
	 	 
	Total Exercise Price:

	 	$                                        
	 
	 	 
	Expiration Date:
	 	 
	 

	 	 
	 
	 	 

	 	 	 
	Type of Option:

	 	o Incentive Stock Option      o Non-Qualified Stock Option
	 
	 	 
	Vesting Schedule:

	 	[25% of the shares of Stock subject to the Option (rounded down to the next whole number of shares) shall
vest one year after the Vesting Commencement Date, and 1/48th of the shares of Stock subject to
the Option (rounded down to the next whole number of shares) shall vest on the first day of each full month
thereafter, so that all of the shares subject to the Option shall be vested on the first day of the
48th month after the Vesting Commencement Date.]

     By his or her signature and the Company’s signature below, Optionee agrees to be bound by the
terms and conditions of the Plan and the Stock Option Agreement attached hereto. Optionee has
reviewed the Stock Option Agreement and the Plan in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this option and fully understands all provisions of
this Grant Notice, the Stock Option Agreement and the Plan. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the administrator of the Plan
upon any questions arising under the Plan or this option. Optionee further agrees to notify the
Company upon any change in the residence address indicated below.

	 	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC.:	 	OPTIONEE:
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	Print Name:	 	Print Name:
	Title:	 	 	 	 
	Address: 12730 High Bluff Drive, Suite 410	 	Address:
	               San Diego, CA 92130	 	 	 	 

 

 

CADENCE PHARMACEUTICALS, INC.

2004 EQUITY INCENTIVE AWARD PLAN

STOCK OPTION AGREEMENT

     Pursuant to the Stock Option Grant Notice (“Grant Notice”) to which this Stock Option
Agreement (this “Agreement”) is attached, Cadence Pharmaceuticals, Inc. (the “Company”) has granted
to the Optionee an option under the Company’s 2004 Equity Incentive Award Plan (the “Plan”) to
purchase the number of shares of Stock indicated in the Grant Notice at the exercise price
indicated in the Grant Notice.

ARTICLE I

GENERAL

     Capitalized terms not specifically defined herein shall have the meanings specified in the
Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein
by reference.

ARTICLE II

GRANT OF OPTION

     2.1 Grant of Option. In consideration of the Optionee’s agreement to remain in the
employ of the Company or its Parents or Subsidiaries and for other good and valuable consideration,
effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company
irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in
this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option
shall be an Incentive Stock Option to the maximum extent permitted by law.

     2.2 Purchase Price. The purchase price of the shares of Stock subject to the Option
per share shall be as set forth in the Grant Notice, without commission or other charge; provided,
however, that if this Option is designated as an Incentive Stock Option the price per share of the
shares subject to the Option shall not be less than the greater of (i) 100% of the Fair Market
Value of a share of Stock on the Grant Date, or (ii) 110% of the Fair Market Value of a share of
Stock on the Grant Date in the case of an Optionee then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the
Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company
(each within the meaning of Section 424 of the Code).

     2.3 Consideration to the Company. In consideration of the granting of the Option by
the Company, the Optionee agrees to render faithful and efficient services to the Company or any
Parent or Subsidiary, with such duties and responsibilities as the Company shall from time to time
prescribe. Nothing in the Plan or this Agreement shall confer upon the Optionee any right to (a)
continue in the employ of the Company or any Parent or Subsidiary or shall interfere with or
restrict in any way the rights of the Company and its Parents or Subsidiaries, which are hereby
expressly reserved, to discharge the Optionee, if the Optionee is an Employee, or (b) continue to
provide services to the Company or any Parent or Subsidiary or shall interfere with or restrict in
any way the rights of the Company or its Parents or Subsidiaries, which are hereby expressly
reserved, to terminate the services of Optionee, if the Optionee is a consultant, at any time for
any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in
a written agreement between the Company and the Optionee.

STOCK OPTION AGREEMENT PAGE 1

 

 

ARTICLE III

PERIOD OF EXERCISABILITY

     3.1 Commencement of Exercisability.

          (a) Subject to Sections 3.3 and 5.11, the Option shall become exercisable in such amounts and
at such times as are set forth in the Grant Notice.

          (b) No portion of the Option which has not become exercisable at Termination of Service (as
defined below) shall thereafter become exercisable, except as may be otherwise provided by the
Committee or as set forth in a written agreement between the Company and the Optionee.

     3.2 Duration of Exercisability. The installments provided for in the vesting schedule
set forth in the Grant Notice are cumulative. Each such installment which becomes exercisable
pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3.

     3.3 Expiration of Option. The Option may not be exercised to any extent by anyone
after the first to occur of the following events:

          (a) The expiration of ten years from the Grant Date; or

          (b) If this Option is designated as an Incentive Stock Option and the Optionee owned (within
the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of
the total combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each within the meaning of
Section 424 of the Code), the expiration of five years from the date the Option was granted; or

          (c) The expiration of ninety days following the date of the Optionee’s Termination of Service,
unless such Termination of Service occurs by reason of the Optionee’s death, Disability or
Misconduct or as set forth in a written agreement with the Company; or

          (d) The expiration of one year following the date of the Optionee’s Termination of Service by
reason of the Optionee’s death or Disability; or

          (e) The Optionee’s Termination of Service as a result of the Optionee’s Misconduct or in the
event the Optionee otherwise engages in Misconduct while the Option is outstanding.

          (f) For purposes of this Agreement, “Termination of Service” means the time when the service
relationship (whether as an Employee or a consultant) between the Optionee and the Company or any
Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or Misconduct; but
excluding (i) a termination where there is a simultaneous reemployment or continuing employment or
consultancy of the Optionee by the Company or any Subsidiary or Parent of the Company, (ii) at the
discretion of the Committee, a termination which results in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee, a termination which
is followed by the simultaneous establishment of a consulting relationship by the Company or a
Parent or Subsidiary with the former Employee. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of Service for the
purposes of this Agreement, including, but not by way of limitation, the question of whether, for
Optionees who are Employees of the Company or any of its Parents or Subsidiaries, a Termination of
Service resulted from a discharge for cause, and all questions of whether particular leaves of
absence for Optionees who are Employees of the Company or any of its

STOCK OPTION AGREEMENT PAGE 2

 

 

Parents or Subsidiaries constitute Terminations of Service; provided, however, that, if this
Option is designated as an Incentive Stock Option, unless otherwise determined by the Committee in
its discretion, a leave of absence, change in status from an Employee to an independent contractor
or other change in the employee-employer relationship shall constitute a Termination of Service if,
and to the extent that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of the Plan or this
Agreement, the Company or any Parent or Subsidiary has an absolute and unrestricted right to
terminate the Optionee’s employment and/or consultancy at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in a written agreement between
the Company and the Optionee.

     3.4 Special Tax Consequences. The Optionee acknowledges that, to the extent that the
aggregate Fair Market Value of Stock with respect to which Incentive Stock Options (but without
regard to Section 422(d) of the Code), including the Option, are exercisable for the first time by
the Optionee during any calendar year (under the Plan and all other incentive stock option plans of
the Company, any “subsidiary corporation” of the Company and any “parent corporation” of the
Company (each within the meaning of Section 424 of the Code)) exceeds $100,000, the Option and such
other options shall be treated as not qualifying under Section 422 of the Code but rather shall be
taxed as Non-Qualified Stock Options. The Optionee further acknowledges that the rule set forth in
the preceding sentence shall be applied by taking options into account in the order in which they
were granted. For purposes of these rules, the Fair Market Value of Stock shall be determined as of
the time the option with respect to such Stock is granted.

ARTICLE IV

EXERCISE OF OPTION

     4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b) and 5.2(c),
during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion
thereof. After the death of the Optionee, any exercisable portion of the Option may, prior to the
time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s
beneficiary designated in accordance with Section 10.4 of the Plan. If no beneficiary has been
designated or survives the Optionee, the Option may be exercised by the person entitled to such
exercise pursuant to the Optionee’s will or the laws of descent and distribution.

     4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior to the time when
the Option or portion thereof becomes unexercisable under Section 3.3.

     4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or the Secretary’s office of all of
the following prior to the time when the Option or such portion thereof becomes unexercisable under
Section 3.3:

          (a) An exercise notice in writing signed by the Optionee or the other person then entitled to
exercise the Option or portion thereof, stating that the Option or portion thereof is thereby
exercised, such notice complying with all applicable rules established by the Committee. Such
notice shall be substantially in the form attached as Exhibit A (or such other form as is
prescribed by the Committee) (the “Exercise Notice”);

          (b) (i) Full payment (in cash or by check) for the shares with respect to which the
Option or portion thereof is exercised, to the extent permitted under applicable laws; or

STOCK OPTION AGREEMENT PAGE 3

 

 

        (ii) On and after the Public Trading Date, and with the consent of the Committee, such
payment may be made, in whole or in part, through the delivery of shares of Stock which have
been owned by the Optionee for at least six months, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; or

        (iii) On and after the Public Trading Date, and to the extent permitted under
applicable laws, through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise price, provided,
that payment of such proceeds is made to the Company upon settlement of such sale; or

        (iv) With the consent of the Committee, such payment may be made through the delivery
of a promissory note in accordance with the provisions of Section 4.3(f) below; or

        (v) With the consent of the Committee, any combination of the consideration provided in
the foregoing subparagraphs (i), (ii), (iii) and (iv); and

          (c) A bona fide written representation and agreement, in such form as is prescribed by the
Committee, signed by the Optionee or other person then entitled to exercise such Option or portion
thereof, stating that the shares of Stock are being acquired for the Optionee’s own account, for
investment and without any present intention of distributing or reselling said shares or any of
them except as may be permitted under the Securities Act and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above. The Committee may, in
its absolute discretion, take whatever additional actions it deems appropriate to ensure the
observance and performance of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or regulations. Without limiting the
generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise does not violate
the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates
evidencing Stock issued on exercise of the Option shall bear an appropriate legend referring to the
provisions of this subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall, however, not be required
if the shares to be issued pursuant to such exercise have been registered under the Securities Act,
and such registration is then effective in respect of such shares; and

          (d) Full payment to the Company (or other employer corporation) of all amounts which, under
federal, state or local tax law, it is required to withhold upon exercise of the Option. With the
consent of the Committee, (i) shares of Stock owned by the Optionee for at least six months duly
endorsed for transfer or (ii) shares of Stock issuable to the Optionee upon exercise of the Option,
having a Fair Market Value at the date of Option exercise equal to the statutory minimum sums
required to be withheld, may be used to make all or part of such payment; and

          (e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by
any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option.

STOCK OPTION AGREEMENT PAGE 4

 

 

          (f) The Committee may permit the Optionee to pay the option exercise price for the shares
with respect to which the Option or portion thereof is exercised by delivering a
full-recourse, interest bearing promissory note payable in one or more installments and secured by
the purchased shares, as long as the portion of the option exercise price which is equal to the par
value of the shares purchased thereby is paid in cash or other legal consideration permitted by
applicable law. In no event, however, may the maximum credit available to the Optionee exceed the
sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares
(less the par value of those shares) plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee in connection with the option exercise or share purchase;
provided, however, that prior to the first date on which the Company has filed a registration
statement under the Securities Act to register the public offering of securities of the Company
under the Securities Act, then, to the extent that the Optionee is a director or executive officer
of the Company, as defined under Rule 3b-7 promulgated under the Exchange Act, and has outstanding
a promissory note or other pending mode of payment for shares under the Plan, and the Company has
reasonably determined that to permit such promissory note or other pending mode of payment to
remain outstanding would be unlawful under the Exchange Act or any other law, then such note or
other pending mode of payment must be immediately paid to the Company in full or replaced by a mode
of payment provided for under the Plan that is acceptable to the Company and reasonably determined
by it to be lawful under the Exchange Act or any other applicable law.

     4.4 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable
upon the exercise of the Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue any shares of Stock
purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

          (a) The admission of such shares to listing on all stock exchanges on which such Stock is then
listed; and

          (b) The completion of any registration or other qualification of such shares under any state
or federal law or under rulings or regulations of the Securities and Exchange Commission or of any
other governmental regulatory body, which the Committee shall, in its absolute discretion, deem
necessary or advisable; and

          (c) The obtaining of any approval or other clearance from any state or federal governmental
agency which the Committee shall, in its absolute discretion, determine to be necessary or
advisable; and

          (d) The receipt by the Company of full payment for such shares, including payment of all
amounts which, under federal, state or local tax law, the Company (or other employer corporation)
is required to withhold upon exercise of the Option; and

          (e) The lapse of such reasonable period of time following the exercise of the Option as the
Committee may from time to time establish for reasons of administrative convenience.

     4.5 Rights as Stockholder; Book Entry Procedures. The holder of the Option shall not
be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until such shares shall
have been issued by the Company to such holder. Notwithstanding any other provision of the Plan or
this Agreement, unless otherwise determined by the Committee or required by applicable law, rule or
regulation, the Company shall not deliver to the Optionee certificates evidencing shares of Stock
issued in

STOCK OPTION AGREEMENT PAGE 5

 

 

connection with the exercise of this Option and instead such shares of Stock will be
recorded in the books of the Company (or as applicable, its transfer agent or stock plan
administrator).

ARTICLE V

OTHER PROVISIONS

     5.1 Administration. The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee in good faith shall be final
and binding upon the Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and duties of the Committee
under the Plan and this Agreement.

     5.2 Option Not Transferable.

          (a) Subject to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution unless and until the Option
has been exercised, or the shares underlying such Option have been issued, and all restrictions
applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall
be liable for the debts, contracts or engagements of the Optionee or his or her successors in
interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or
by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void
and of no effect, except to the extent that such disposition is permitted by the preceding
sentence.

          (b) Notwithstanding any other provision in this Agreement, with the consent of the Committee
and to the extent the Option is designated as a Non-Qualified Stock Option, the Option may be
transferred to, exercised by and paid to certain persons or entities related to the Optionee,
including but not limited to members of the Optionee’s family, charitable institutes or trusts or
other entities whose beneficiaries or beneficial owners are members of the Optionee’s family or to
such other persons or entities as may be expressly approved by the Committee (each a “Permitted
Transferee”), pursuant to such conditions and procedures as the Committee may require.

          (c) Unless transferred to a Permitted Transferee in accordance with Section 5.2(b), during the
lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof.
Subject to such conditions and procedures as the Committee may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Optionee’s lifetime. After the death of the
Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in
accordance with Section 10.4 of the Plan. If no beneficiary has been designated or survives the
Optionee, the Option may be exercised by the person entitled to such exercise pursuant to the
Optionee’s will or the laws of descent and distribution.

     5.3 Lock-Up Period. The Optionee hereby agrees that, if so requested by the Company
or any representative of the underwriters (the “Managing Underwriter”) in connection with any
registration of the offering of any securities of the Company under the Securities Act, the
Optionee shall not sell or otherwise transfer any shares of Stock or other securities of the
Company during such period as may be requested in writing by the Managing Underwriter and agreed to
in writing by the Company (which

STOCK OPTION AGREEMENT PAGE 6

 

 

period shall not be longer than one hundred eighty days) (the
“Market Standoff Period”) following the effective date of a registration statement of the Company
filed under the Securities Act; provided, however, that such restriction shall apply only to the
first registration statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act.

     5.4 Restrictive Legends and Stop-Transfer Orders.

          (a) The share certificate or certificates, if issued, evidencing the shares of Stock purchased
hereunder shall be endorsed with any legends that may be required by state or federal securities
laws.

          (b) The Optionee agrees that, in order to ensure compliance with the restrictions referred to
herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if
any, and that, if the Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.

          (c) The Company shall not be required: (i) to transfer on its books any shares of Stock that
have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or
(ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such shares shall have been so transferred.

     5.5 Shares to Be Reserved. The Company shall at all times during the term of the
Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy
the requirements of this Agreement.

     5.6 Notices. Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of the Secretary of the Company, and any notice to be
given to the Optionee shall be addressed to the Optionee at the address given beneath the
Optionee’s signature on the Grant Notice. By a notice given pursuant to this Section 5.6, either
party may hereafter designate a different address for notices to be given to that party. Any
notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be
given to the Optionee’s designated beneficiary if any, or the person otherwise entitled to exercise
his or her Option pursuant to Section 4.1 by written notice under this Section 5.6. Any notice
shall be deemed duly given when sent via email or enclosed in a properly sealed envelope or wrapper
addressed as aforesaid and deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

     5.7 Titles. Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

     5.8 Stockholder Approval. The Plan will be submitted for approval by the Company’s
stockholders within twelve months after the date the Plan was initially adopted by the Board. The
Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by
the stockholders, and if such approval has not been obtained by the end of said twelve month
period, the Option shall thereupon be canceled and become null and void.

     5.9 Notification of Disposition. If this Option is designated as an Incentive Stock
Option, the Optionee shall give prompt notice to the Company of any disposition or other transfer
of any shares of stock acquired under this Agreement if such disposition or transfer is made (a)
within two years from the Grant Date with respect to such shares or (b) within one year after the
transfer of such shares to him. Such notice shall specify the date of such disposition or other
transfer and the amount realized, in cash,

STOCK OPTION AGREEMENT PAGE 7

 

 

other property, assumption of indebtedness or other
consideration, by the Optionee in such disposition or other transfer.

     5.10 Construction. This Agreement shall be administered, interpreted and enforced
under the laws of the State of California without regard to conflicts of laws thereof.

     5.11 Conformity to Securities Laws. The Optionee acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the Securities Act and the
Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein
to the contrary, the Plan shall be administered, and the Option is granted and may be exercised,
only in such a manner as to conform to such laws, rules and regulations. To the extent permitted
by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

     5.12 Amendments. This Agreement may not be modified, amended or terminated except by
an instrument in writing, signed by the Optionee or such other person as may be permitted to
exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.

     5.13 Restrictions on Shares. Optionee hereby agrees that shares of Stock purchased
upon the exercise of the Option shall be subject to such terms and conditions as the Committee
shall determined in its sole discretion, including, without limitation , restrictions on the
transferability of shares of Stock, the right of the Company to repurchase shares of Stock, and a
right of first refusal in favor of the Company with respect to permitted transfers of shares of
Stock. Such terms and conditions may, in the Committee’s sole discretion, be contained in the
Exercise Notice with respect to the Option or in such other agreement as the Committee shall
determine and which the Optionee hereby agrees to enter into at the request of the Company.

STOCK OPTION AGREEMENT PAGE 8

 

 

EXHIBIT A

TO GRANT NOTICE AND STOCK OPTION AGREEMENT

FORM OF EXERCISE NOTICE

     Effective as of today,                     ,                     , the undersigned (“Optionee”) hereby elects to
exercise Optionee’s option to purchase
                     shares of the Common Stock (the “Shares”) of
Cadence Pharmaceuticals, Inc. (the “Company”) under and pursuant to the Cadence Pharmaceuticals,
Inc. 2004 Equity Incentive Award Plan (the “Plan”) and the Grant Notice and Stock Option Agreement
dated                     ,                     , (the “Option Agreement”). Capitalized terms used herein without
definition shall have the meanings given in the Option Agreement.

	 	 	 	 	 	 	 	 	 
	Grant Date:
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Number of Shares as to which Option is
Exercised:
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Exercise Price per Share:

	$	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Exercise Price:

	$	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Certificate
to be issued in name of:  
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Cash Payment delivered
herewith:  	$
            (Representing the full Exercise
Price for the Shares, as well as any
applicable withholding tax)

Type of Option:            ̈       Incentive Stock Option             ̈       Non-Qualified Stock Option

     1. Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement. Optionee agrees to abide by and be bound by
their terms and conditions.

     2. Rights as Stockholder. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder shall exist
with respect to Shares subject to the Option, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Article 11 of the Plan.

     Optionee shall enjoy rights as a stockholder until such time as Optionee disposes of the
Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon
such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except
the right to receive payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s), if any issued, evidencing the
Shares so purchased to be surrendered to the Company for transfer or cancellation.

EXERCISE NOTICE PAGE 1

 

     3. Optionee’s Rights to Transfer Shares.

          (a) Company’s Right of First Refusal. Before any Shares held by Optionee or any
permitted transferee (each, a “Holder”) may be sold, pledged, assigned, hypothecated, transferred,
or otherwise disposed of (each, a “Transfer”), the Company or its assignee(s) shall have a right of
first refusal to purchase the Shares proposed to be Transferred on the terms and conditions set
forth in this Section (the “Right of First Refusal”). In the event that the Company’s Bylaws
contain a right of first refusal with respect to the Shares, such right of first refusal shall
apply to the Shares to the extent such provisions are more restrictive than the Right of First
Refusal set forth in this Section.

          (b) Notice of Proposed Transfer. In the event any Holder desires to Transfer any
Shares, the Holder shall deliver to the Company a written notice (the “Notice”) stating: (i) the
Holder’s bona fide intention to sell or otherwise Transfer such Shares; (ii) the name of each
proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be
Transferred to each Proposed Transferee; and (iv) the price for which the Holder proposes to
Transfer the Shares (the “Offered Price”), and the Holder shall offer such Shares at the Offered
Price to the Company or its assignee(s).

          (c) Exercise of Right of First Refusal. Within twenty-five days after receipt of the
Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than
all, of the Shares proposed to be Transferred to any one or more of the Proposed Transferees by
delivery of a written exercise notice to the Holder (a “Company Notice”). The purchase price will
be determined in accordance with subsection (d) below.

          (d) Purchase Price. The purchase price (“Purchase Price”) for the Shares repurchased
under this Section shall be the Offered Price.

          (e) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within five days after delivery of the
Company Notice or in the manner and at the times mutually agreed to by the Company and the Holder.
Should the Offered Price specified in the Notice be payable in property other than cash, the
Company shall have the right to pay the purchase price in the form of cash equal in amount to the
value of such property. If the Holder and the Company cannot agree on such cash value within ten
days after the Company’s receipt of the Notice, the valuation shall be made by the Board. The
payment of the purchase price shall then be held on the later of (i) five days following delivery
of the Company Notice or (ii) five days after such valuation shall have been made.

          (f) Holder’s Right to Transfer. If all or a portion of the Shares proposed in the
Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in
this Section, then the Holder may sell or otherwise Transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is
consummated within sixty days after the date of the Notice and provided further that any such sale
or other Transfer is effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not
Transferred to the Proposed Transferee within such sixty-day period, a new Notice shall be given to
the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal
as provided herein before any Shares held by the Holder may be sold or otherwise Transferred.

          (g) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section notwithstanding, the Transfer of any or all of the Shares during the Optionee’s
lifetime or

EXERCISE NOTICE PAGE 2

 

upon the Optionee’s death by will or intestacy to the Optionee’s Immediate Family or a trust for
the benefit of the Optionee’s Immediate Family shall be exempt from the Right of First Refusal. As
used herein, “Immediate Family” shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister or stepchild (whether or not adopted). In such case, the transferee or other
recipient shall receive and hold the Shares so Transferred subject to the provisions of this
Section (including the Right of First Refusal) and the Restricted Stock Purchase Agreement, if
applicable, and there shall be no further Transfer of such Shares except in accordance with the
terms of this Section.

          (h) Termination of Right of First Refusal. The Right of First Refusal shall terminate
as to all Shares upon the Public Trading Date.

          (i) Transfer Restrictions. Any transfer or sale of the Shares is subject to
restrictions on transfer imposed by any applicable state and federal securities laws. Any Transfer
or attempted Transfer of any of the Shares not in accordance with the terms of this Agreement shall
be void and the Company may enforce the terms of this Agreement by stop transfer instructions or
similar actions by the Company and its agents or designees.

     4. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     5. Restrictive Legends and Stop-Transfer Orders.

          (a) Legends. Optionee understands and agrees that the Company shall cause any
certificates issued evidencing the Shares shall have the legends set forth below or legends
substantially equivalent thereto, together with any other legends that may be required by state or
federal securities laws:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO
TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION
STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER
IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE
ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND
WITH APPLICABLE STATE SECURITIES LAWS.

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE
SHARES.

EXERCISE NOTICE PAGE 3

 

          (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

          (c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

     6. Optionee Representations. Optionee hereby makes the following certifications and
representations with respect to the Shares listed above:

          (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Optionee is acquiring these Shares for investment for Optionee’s own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.

          (b) Optionee acknowledges and understands that the Shares constitute “restricted securities”
under the Securities Act and have not been registered under the Securities Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee’s investment intent as expressed herein. Optionee understands that the Shares
must be held indefinitely unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Shares. Optionee understands that the
certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of
the Shares unless they are registered or such registration is not required in the opinion of
counsel satisfactory to the Company and any other legend required under applicable state securities
laws.

          (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer
period as any market stand-off agreement may require) the securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including:
(i) the resale being made through a broker in an unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined under the Exchange Act); and, in
the case of an affiliate, (ii) the availability of certain public information about the Company,
(iii) the amount of securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (iv) the timely filing of a Form 144, if applicable.

          (d) In the event that the Company does not qualify under Rule 701 at the time of grant of the
Option, then the securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than one year after the later
of the date the securities were sold by the Company or the date the securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the
securities by an affiliate,

EXERCISE NOTICE PAGE 4

 

or by a non-affiliate who subsequently holds the securities less than two years, the
satisfaction of the conditions set forth in sections (i), (ii), (iii) and (iv) of paragraph (c)
above.

          (e) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

     7. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

     8. Interpretation. Any dispute regarding the interpretation of this Agreement shall
be submitted by Optionee or by the Company forthwith to the Committee, which shall review such
dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Optionee.

     9. Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the State of California excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     10. Notices. Any notice required or permitted hereunder shall be given in accordance
with the provisions set forth in Section 5.6 of the Option Agreement.

     11. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

     12. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of
the parties and supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof.

(Signature Page Follows)

EXERCISE NOTICE PAGE 5

 

	 	 	 	 	 	 	 	 	 
	ACCEPTED BY:	 	 	 	SUBMITTED BY:	 	 
	 
	 	 	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC.	 	 	 	OPTIONEE	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	Name:

	 	 

	 	 
	 	 

Optionee
	 	 
	Its:

	 	 

	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

EXERCISE NOTICE PAGE 6

 

CADENCE PHARMACEUTICALS, INC.

STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

UNDER THE 2004 EQUITY INCENTIVE AWARD PLAN

     Cadence Pharmaceuticals, Inc. (the “Company”), pursuant to its 2004 Equity Incentive
Award Plan (the “Plan”), hereby grants to the Optionee listed below (“Optionee”), an option to
purchase the number of shares of the Company’s Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Plan,
each of which are incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same meanings in this Stock Option Agreement.

	 	 	 	 	 	 	 	 	 
	Optionee:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Grant Date:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Vesting Commencement Date:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Exercise Price per Share:

	 	 	$	 	 	                                         per share	 	 
	 
	 	 	 	 	 	 	 	 
	Total Number of Shares Granted:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Exercise Price:

	 	 	$	 	 	                                        	 	 
	 
	 	 	 	 	 	 	 	 
	Expiration Date:
	 	 	 	 	 	 	 	 
	 	 	 	 	 

	 	 	 
	Type of Option:

	 	 ̈ Incentive Stock Option           ̈ Non-Qualified Stock Option
	 
	 	 
	Exercise Schedule:

	 	þ Early Exercise Permitted
	 
	 	 
	Vesting Schedule:

	 	This Option is exercisable immediately, in whole or in part, at such times as are established by the
Committee, conditioned upon Optionee entering into a Restricted Stock Purchase Agreement with respect to any
unvested shares of Stock. The shares subject to this Option shall vest and/or be released from the
Company’s Repurchase Option, as set forth in the Restricted Stock Purchase Agreement attached hereto as
Exhibit B (the “Restricted Stock Purchase Agreement”), according to the following schedule:
	 
	 	 
	 

	 	[25% of the shares of Stock subject to the Option (rounded down to the next whole number of shares) shall
vest one year after the Vesting Commencement Date, and 1/48th of the shares of Stock subject to
the Option (rounded down to the next whole number of shares) shall vest on the first day of each full month
thereafter, so that all of the shares subject to the Option shall be vested on the first day of the
48th month after the Vesting Commencement Date.]

     By his or her signature and the Company’s signature below, Optionee agrees to be bound by the
terms and conditions of the Plan and the Stock Option Agreement attached hereto. Optionee has
reviewed the Stock Option Agreement and the Plan in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this option and fully understands all provisions of
this Grant Notice, the Stock Option Agreement and the Plan. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the administrator of the Plan
upon any questions arising under the Plan or this option. Optionee further agrees to notify the
Company upon any change in the residence address indicated below.

	 	 	 	 	 	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC.:	 	 	 	OPTIONEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 
	Print Name:	 	 	 	Print Name:	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	Address:

	 	12730 High Bluff Drive, Suite 410
San Diego, CA 92130
	 	 	 	Address:	 	 	 	 

 

 

CADENCE PHARMACEUTICALS, INC.

2004 EQUITY INCENTIVE AWARD PLAN

STOCK OPTION AGREEMENT

     Pursuant to the Stock Option Grant Notice (“Grant Notice”) to which this Stock Option
Agreement (this “Agreement”) is attached, Cadence Pharmaceuticals, Inc. (the “Company”) has granted
to the Optionee an option under the Company’s 2004 Equity Incentive Award Plan (the “Plan”) to
purchase the number of shares of Stock indicated in the Grant Notice at the exercise price
indicated in the Grant Notice.

ARTICLE I

GENERAL

     Capitalized terms not specifically defined herein shall have the meanings specified in the
Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein
by reference.

ARTICLE II

GRANT OF OPTION

     2.1 Grant of Option. In consideration of the Optionee’s agreement to remain in the
employ of the Company or its Parents or Subsidiaries and for other good and valuable consideration,
effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company
irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in
this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option
shall be an Incentive Stock Option to the maximum extent permitted by law.

     2.2 Purchase Price. The purchase price of the shares of Stock subject to the Option
per share shall be as set forth in the Grant Notice, without commission or other charge; provided,
however, that if this Option is designated as an Incentive Stock Option the price per share of the
shares subject to the Option shall not be less than the greater of (i) 100% of the Fair Market
Value of a share of Stock on the Grant Date, or (ii) 110% of the Fair Market Value of a share of
Stock on the Grant Date in the case of an Optionee then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the
Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company
(each within the meaning of Section 424 of the Code).

     2.3 Consideration to the Company. In consideration of the granting of the Option by
the Company, the Optionee agrees to render faithful and efficient services to the Company or any
Parent or Subsidiary, with such duties and responsibilities as the Company shall from time to time
prescribe. Nothing in the Plan or this Agreement shall confer upon the Optionee any right to (a)
continue in the employ of the Company or any Parent or Subsidiary or shall interfere with or
restrict in any way the rights of the Company and its Parents or Subsidiaries, which are hereby
expressly reserved, to discharge the Optionee, if the Optionee is an Employee, or (b) continue to
provide services to the Company or any Parent or Subsidiary or shall interfere with or restrict in
any way the rights of the Company or its Parents or Subsidiaries, which are hereby expressly
reserved, to terminate the services of Optionee, if the Optionee is a consultant, at any time for
any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in
a written agreement between the Company and the Optionee.

 STOCK OPTION AGREEMENT PAGE 1

 

ARTICLE III

PERIOD OF EXERCISABILITY

     3.1 Commencement of Exercisability.

          (a) Subject to Sections 3.3 and 5.11, the Option shall become exercisable in such amounts and
at such times as are set forth in the Grant Notice. Alternatively, at the election of the
Optionee, this Option may be exercised in whole or in part at such times as are established by the
Committee as to shares of Stock which have not yet vested. Vested shares shall not be subject to
the Company’s Repurchase Option (as set forth in the Restricted Stock Purchase Agreement). As a
condition to exercising this Option for unvested shares of Stock, the Optionee shall execute the
Restricted Stock Purchase Agreement.

          (b) No portion of the Option which has not become exercisable at Termination of Service (as
defined below) shall thereafter become exercisable, except as may be otherwise provided by the
Committee or as set forth in a written agreement between the Company and the Optionee.

     3.2 Duration of Exercisability. The installments provided for in the vesting schedule
set forth in the Grant Notice are cumulative. Each such installment which becomes exercisable
pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3.

     3.3 Expiration of Option. The Option may not be exercised to any extent by anyone
after the first to occur of the following events:

          (a) The expiration of ten years from the Grant Date; or

          (b) If this Option is designated as an Incentive Stock Option and the Optionee owned (within
the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of
the total combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each within the meaning of
Section 424 of the Code), the expiration of five years from the date the Option was granted; or

          (c) The expiration of ninety days following the date of the Optionee’s Termination of Service,
unless such Termination of Service occurs by reason of the Optionee’s death, Disability, Misconduct
or as set forth in a written agreement with the Company;

          (d) The expiration of one year following the date of the Optionee’s Termination of Service by
reason of the Optionee’s death or Disability; or

          (e) The Optionee’s Termination of Service as a result of the Optionee’s Misconduct or in the
event the Optionee otherwise engages in Misconduct while the Option is outstanding.

          (f) For purposes of this Agreement, “Termination of Service” means the time when the service
relationship (whether as an Employee or a consultant) between the Optionee and the Company or any
Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or Misconduct; but
excluding (i) a termination where there is a simultaneous reemployment or continuing employment or
consultancy of the Optionee by the Company or any Parent or Subsidiary of the Company, (ii) at the
discretion of the Committee, a termination which results in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee, a termination which
is followed by the simultaneous establishment of a consulting relationship by the Company or a
Parent or Subsidiary with the former

 STOCK OPTION AGREEMENT PAGE 2

 

Employee. The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Service for the purposes of this Agreement,
including, but not by way of limitation, the question of whether, for Optionees who are Employees
of the Company or any of its Parents or Subsidiaries, a Termination of Service resulted from a
discharge for cause, and all questions of whether particular leaves of absence for Optionees who
are Employees of the Company or any of its Parents or Subsidiaries constitute Terminations of
Service; provided, however, that, if this Option is designated as an Incentive Stock Option, unless
otherwise determined by the Committee in its discretion, a leave of absence, change in status from
an Employee to an independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Service if, and to the extent that, such leave of absence, change
in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code
and the then applicable regulations and revenue rulings under said Section. Notwithstanding any
other provision of the Plan or this Agreement, the Company or any Parent or Subsidiary has an
absolute and unrestricted right to terminate the Optionee’s employment and/or consultancy at any
time for any reason whatsoever, with or without cause, except to the extent expressly provided
otherwise in a written agreement between the Company and the Optionee.

     3.4 Special Tax Consequences. The Optionee acknowledges that, to the extent that the
aggregate Fair Market Value of Stock with respect to which Incentive Stock Options (but without
regard to Section 422(d) of the Code), including the Option, are exercisable for the first time by
the Optionee during any calendar year (under the Plan and all other incentive stock option plans of
the Company, any “subsidiary corporation” of the Company and any “parent corporation” of the
Company (each within the meaning of Section 424 of the Code)) exceeds $100,000, the Option and such
other options shall be treated as not qualifying under Section 422 of the Code but rather shall be
taxed as Non-Qualified Stock Options. The Optionee further acknowledges that the rule set forth in
the preceding sentence shall be applied by taking options into account in the order in which they
were granted. For purposes of these rules, the Fair Market Value of Stock shall be determined as of
the time the option with respect to such Stock is granted.

ARTICLE IV

EXERCISE OF OPTION

     4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b) and 5.2(c),
during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion
thereof. After the death of the Optionee, any exercisable portion of the Option may, prior to the
time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s
beneficiary designated in accordance with Section 10.4 of the Plan. If no beneficiary has been
designated or survives the Optionee, the Option may be exercised by the person entitled to such
exercise pursuant to the Optionee’s will or the laws of descent and distribution.

     4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior to the time when
the Option or portion thereof becomes unexercisable under Section 3.3.

     4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or the Secretary’s office of all of
the following prior to the time when the Option or such portion thereof becomes unexercisable under
Section 3.3:

          (a) An exercise notice in writing signed by the Optionee or the other person then entitled to
exercise the Option or portion thereof, stating that the Option or portion thereof is thereby
exercised, such notice complying with all applicable rules established by the Committee. Such
notice

 STOCK OPTION AGREEMENT PAGE 3

 

shall be substantially in the form attached as Exhibit A (or such other form as is
prescribed by the Committee) (the “Exercise Notice”);

          (b) A Restricted Stock Purchase Agreement, if applicable, substantially in the form attached
as Exhibit B;

          (c) (i) Full payment (in cash or by check) for the shares with respect to which the Option or
portion thereof is exercised, to the extent permitted under applicable laws; or

          (ii) On and after the Public Trading Date, and with the consent of the Committee, such
payment may be made, in whole or in part, through the delivery of shares of Stock which have
been owned by the Optionee for at least six months, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; or

          (iii) On and after the Public Trading Date, and to the extent permitted under
applicable laws, through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise price, provided,
that payment of such proceeds is made to the Company upon settlement of such sale;

          (iv) With the consent of the Committee, such payment may be made through the delivery
of a promissory note in accordance with the provisions of Section 4.3(g) below; or

          (v) With the consent of the Committee, any combination of the consideration provided in
the foregoing subparagraphs (i), (ii), (iii) and (iv); and

          (d) A bona fide written representation and agreement, in such form as is prescribed by the
Committee, signed by the Optionee or other person then entitled to exercise such Option or portion
thereof, stating that the shares of Stock are being acquired for the Optionee’s own account, for
investment and without any present intention of distributing or reselling said shares or any of
them except as may be permitted under the Securities Act and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above. The Committee may, in
its absolute discretion, take whatever additional actions it deems appropriate to ensure the
observance and performance of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or regulations. Without limiting the
generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise does not violate
the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates
evidencing Stock issued on exercise of the Option shall bear an appropriate legend referring to the
provisions of this subsection (d) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (d) shall, however, not be required
if the shares to be issued pursuant to such exercise have been registered under the Securities Act,
and such registration is then effective in respect of such shares; and

          (e) Full payment to the Company (or other employer corporation) of all amounts which, under
federal, state or local tax law, it is required to withhold upon exercise of the Option. With the
consent of the Committee, (i) shares of Stock owned by the Optionee for at least six months duly

 STOCK OPTION AGREEMENT PAGE 4

 

endorsed for transfer or (ii) shares of Stock issuable to the Optionee upon exercise of the
Option, having a Fair Market Value at the date of Option exercise equal to the statutory minimum
sums required to be withheld, may be used to make all or part of such payment; and

          (f) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by
any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option.

          (g) The Committee may permit the Optionee to pay the option exercise price for the shares with
respect to which the Option or portion thereof is exercised by delivering a full-recourse, interest
bearing promissory note payable in one or more installments and secured by the purchased shares, as
long as the portion of the option exercise price which is equal to the par value of the shares
purchased thereby is paid in cash or other legal consideration permitted by applicable law. In no
event, however, may the maximum credit available to the Optionee exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased shares (less the par
value of those shares) plus (ii) any Federal, state and local income and employment tax liability
incurred by the Optionee in connection with the option exercise or share purchase; provided,
however, that prior to the first date on which the Company has filed a registration statement under
the Securities Act to register the public offering of securities of the Company under the
Securities Act, then, to the extent that the Optionee is a director or executive officer of the
Company, as defined under Rule 3b-7 promulgated under the Exchange Act, and has outstanding a
promissory note or other pending mode of payment for shares under the Plan, and the Company has
reasonably determined that to permit such promissory note or other pending mode of payment to
remain outstanding would be unlawful under the Exchange Act or any other law, then such note or
other pending mode of payment must be immediately paid to the Company in full or replaced by a mode
of payment provided for under the Plan that is acceptable to the Company and reasonably determined
by it to be lawful under the Exchange Act or any other applicable law.

     4.4 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable
upon the exercise of the Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue any shares of Stock
purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

          (a) The admission of such shares to listing on all stock exchanges on which such Stock is then
listed; and

          (b) The completion of any registration or other qualification of such shares under any state
or federal law or under rulings or regulations of the Securities and Exchange Commission or of any
other governmental regulatory body, which the Committee shall, in its absolute discretion, deem
necessary or advisable; and

          (c) The obtaining of any approval or other clearance from any state or federal governmental
agency which the Committee shall, in its absolute discretion, determine to be necessary or
advisable; and

          (d) The receipt by the Company of full payment for such shares, including payment of all
amounts which, under federal, state or local tax law, the Company (or other employer corporation)
is required to withhold upon exercise of the Option; and

          (e) The lapse of such reasonable period of time following the exercise of the Option as the
Committee may from time to time establish for reasons of administrative convenience.

 STOCK OPTION AGREEMENT PAGE 5

 

     4.5 Rights as Stockholder; Book Entry Procedures. The holder of the Option shall not
be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until such shares shall
have been issued by the Company to such holder. Notwithstanding any other provision of the Plan or
this Agreement, unless otherwise determined by the Committee or required by applicable law, rule or
regulation, the Company shall not deliver to the Optionee certificates evidencing shares of Stock
issued in connection with the exercise of this Option and instead such shares of Stock will be
recorded in the books of the Company (or as applicable, its transfer agent or stock plan
administrator).

ARTICLE V

OTHER PROVISIONS

     5.1 Administration. The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee in good faith shall be final
and binding upon the Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and duties of the Committee
under the Plan and this Agreement.

     5.2 Option Not Transferable.

          (a) Subject to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in
any manner other than by will or the laws of descent and distribution unless and until the Option
has been exercised, or the shares underlying such Option have been issued, and all restrictions
applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall
be liable for the debts, contracts or engagements of the Optionee or his or her successors in
interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or
by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void
and of no effect, except to the extent that such disposition is permitted by the preceding
sentence.

          (b) Notwithstanding any other provision in this Agreement, with the consent of the Committee
and to the extent the Option is designated as a Non-Qualified Stock Option, the Option may be
transferred to, exercised by and paid to certain persons or entities related to the Optionee,
including but not limited to members of the Optionee’s family, charitable institutes or trusts or
other entities whose beneficiaries or beneficial owners are members of the Optionee’s family or to
such other persons or entities as may be expressly approved by the Committee (each a “Permitted
Transferee”), pursuant to such conditions and procedures as the Committee may require.

          (c) Unless transferred to a Permitted Transferee in accordance with Section 5.2(b), during the
lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof.
Subject to such conditions and procedures as the Committee may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Optionee’s lifetime. After the death of the
Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in
accordance with Section 10.4 of the Plan. If no beneficiary has been designated or survives the
Optionee, the Option

 STOCK OPTION AGREEMENT PAGE 6

 

may be exercised by the person entitled to such exercise pursuant to the Optionee’s will or
the laws of descent and distribution.

     5.3 Lock-Up Period. The Optionee hereby agrees that, if so requested by the Company
or any representative of the underwriters (the “Managing Underwriter”) in connection with any
registration of the offering of any securities of the Company under the Securities Act, the
Optionee shall not sell or otherwise transfer any shares of Stock or other securities of the
Company during such period as may be requested in writing by the Managing Underwriter and agreed to
in writing by the Company (which period shall not be longer than one hundred eighty days) (the
“Market Standoff Period”) following the effective date of a registration statement of the Company
filed under the Securities Act; provided, however, that such restriction shall apply only to the
first registration statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act.

     5.4 Restrictive Legends and Stop-Transfer Orders.

          (a) The share certificate or certificates, if issued, evidencing the shares of Stock purchased
hereunder shall be endorsed with any legends that may be required by state or federal securities
laws.

          (b) The Optionee agrees that, in order to ensure compliance with the restrictions referred to
herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if
any, and that, if the Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.

          (c) The Company shall not be required: (i) to transfer on its books any shares of Stock that
have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or
(ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such shares shall have been so transferred.

     5.5 Shares to Be Reserved. The Company shall at all times during the term of the
Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy
the requirements of this Agreement.

     5.6 Notices. Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of the Secretary of the Company, and any notice to be
given to the Optionee shall be addressed to the Optionee at the address given beneath the
Optionee’s signature on the Grant Notice. By a notice given pursuant to this Section 5.6, either
party may hereafter designate a different address for notices to be given to that party. Any
notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be
given to the Optionee’s designated beneficiary if any, or the person otherwise entitled to exercise
his or her Option pursuant to Section 4.1 by written notice under this Section 5.6. Any notice
shall be deemed duly given when sent via email or enclosed in a properly sealed envelope or wrapper
addressed as aforesaid and deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

     5.7 Titles. Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

     5.8 Stockholder Approval. The Plan will be submitted for approval by the Company’s
stockholders within twelve months after the date the Plan was initially adopted by the Board. The
Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by
the

 STOCK OPTION AGREEMENT PAGE 7

 

stockholders, and if such approval has not been obtained by the end of said twelve month
period, the Option shall thereupon be canceled and become null and void.

     5.9 Notification of Disposition. If this Option is designated as an Incentive Stock
Option, the Optionee shall give prompt notice to the Company of any disposition or other transfer
of any shares of stock acquired under this Agreement if such disposition or transfer is made (a)
within two years from the Grant Date with respect to such shares or (b) within one year after the
transfer of such shares to him. Such notice shall specify the date of such disposition or other
transfer and the amount realized, in cash, other property, assumption of indebtedness or other
consideration, by the Optionee in such disposition or other transfer.

     5.10 Construction. This Agreement shall be administered, interpreted and enforced
under the laws of the State of California without regard to conflicts of laws thereof.

     5.11 Conformity to Securities Laws. The Optionee acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the Securities Act and the
Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein
to the contrary, the Plan shall be administered, and the Option is granted and may be exercised,
only in such a manner as to conform to such laws, rules and regulations. To the extent permitted
by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

     5.12 Amendments. This Agreement may not be modified, amended or terminated except by
an instrument in writing, signed by the Optionee or such other person as may be permitted to
exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.

     5.13 Restrictions on Shares. Optionee hereby agrees that shares of Stock purchased
upon the exercise of the Option shall be subject to such terms and conditions as the Committee
shall determine in its sole discretion, including, without limitation, restrictions on the
transferability of shares of Stock, the right of the Company to repurchase shares of Stock, and a
right of first refusal in favor of the Company with respect to permitted transfers of shares of
Stock. Such terms and conditions may, in the Committee’s sole discretion, be contained in the
Exercise Notice with respect to the Option or in such other agreement as the Committee shall
determine and which the Optionee hereby agrees to enter into at the request of the Company.

 STOCK OPTION AGREEMENT PAGE 8

 

EXHIBIT A

TO GRANT NOTICE AND STOCK OPTION AGREEMENT

FORM OF EXERCISE NOTICE

     Effective as of today,                                         ,                     , the undersigned
 (“Optionee”) hereby elects to
exercise Optionee’s option to purchase                                                     shares of the Common Stock (the “Shares”) of
Cadence Pharmaceuticals, Inc. (the “Company”) under and pursuant to the Cadence Pharmaceuticals,
Inc. 2004 Equity Incentive Award Plan (the “Plan”) and the Grant Notice and Stock Option Agreement
dated                                         ,                     , (the “Option Agreement”). Capitalized terms used herein without
definition shall have the meanings given in the Option Agreement.

	 	 	 
	Grant Date:

	 	                                                                        
        
	 
	 	 
	Number of Shares as to which Option is
Exercised:

	 	                                                                       
     
    
	 
	 	 
	Exercise Price per Share:

	 	$                                         
	 
	 	 
	Total Exercise Price:

	 	$                                         
	 
	 	 
	Certificate to be issued in name of:

	 	                                                                        
        
	 
	 	 
	Cash Payment delivered herewith:

	 	$                                          (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)

Type of Option:       o Incentive Stock Option       o Non-Qualified Stock Option

     1. Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement. Optionee agrees to abide by and be bound by
their terms and conditions.

     2. Rights as Stockholder. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder shall exist
with respect to Shares subject to the Option, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Article 11 of the Plan.

     Optionee shall enjoy rights as a stockholder until such time as Optionee disposes of the
Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon
such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except
the right to receive payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s), if any issued, evidencing the
Shares so purchased to be surrendered to the Company for transfer or cancellation.

EXERCISE NOTICE PAGE 1

 

 

     3. Optionee’s Rights to Transfer Shares.

          (a) Company’s Right of First Refusal. Before any Shares held by Optionee or any
permitted transferee (each, a “Holder”) may be sold, pledged, assigned, hypothecated, transferred,
or otherwise disposed of (each, a “Transfer”), the Company or its assignee(s) shall have a right of
first refusal to purchase the Shares proposed to be Transferred on the terms and conditions set
forth in this Section (the “Right of First Refusal”). In the event that the Company’s Bylaws
contain a right of first refusal with respect to the Shares, such right of first refusal shall
apply to the Shares to the extent such provisions are more restrictive than the Right of First
Refusal set forth in this Section.

          (b) Notice of Proposed Transfer. In the event any Holder desires to Transfer any
Shares, the Holder shall deliver to the Company a written notice (the “Notice”) stating: (i) the
Holder’s bona fide intention to sell or otherwise Transfer such Shares; (ii) the name of each
proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be
Transferred to each Proposed Transferee; and (iv) the price for which the Holder proposes to
Transfer the Shares (the “Offered Price”), and the Holder shall offer such Shares at the Offered
Price to the Company or its assignee(s).

          (c) Exercise of Right of First Refusal. Within twenty-five days after receipt of the
Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than
all, of the Shares proposed to be Transferred to any one or more of the Proposed Transferees by
delivery of a written exercise notice to the Holder (a “Company Notice”). The purchase price will
be determined in accordance with subsection (d) below.

          (d) Purchase Price. The purchase price (“Purchase Price”) for the Shares repurchased
under this Section shall be the Offered Price.

          (e) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within five days after delivery of the
Company Notice or in the manner and at the times mutually agreed to by the Company and the Holder.
Should the Offered Price specified in the Notice be payable in property other than cash, the
Company shall have the right to pay the purchase price in the form of cash equal in amount to the
value of such property. If the Holder and the Company cannot agree on such cash value within ten
days after the Company’s receipt of the Notice, the valuation shall be made by the Board. The
payment of the purchase price shall then be held on the later of (i) five days following delivery
of the Company Notice or (ii) five days after such valuation shall have been made.

          (f) Holder’s Right to Transfer. If all or a portion of the Shares proposed in the
Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in
this Section, then the Holder may sell or otherwise Transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is
consummated within sixty days after the date of the Notice and provided further that any such sale
or other Transfer is effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section and the Restricted Stock Purchase
Agreement, if applicable, shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not Transferred to the Proposed Transferee
within such sixty-day period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal as provided herein before any
Shares held by the Holder may be sold or otherwise Transferred.

          (g) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section notwithstanding, the Transfer of any or all of the Shares during the Optionee’s
lifetime or

EXERCISE NOTICE PAGE 2

 

 

upon the Optionee’s death by will or intestacy to the Optionee’s Immediate Family or a trust for
the benefit of the Optionee’s Immediate Family shall be exempt from the Right of First Refusal. As
used herein, “Immediate Family” shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister or stepchild (whether or not adopted). In such case, the transferee or other
recipient shall receive and hold the Shares so Transferred subject to the provisions of this
Section (including the Right of First Refusal) and the Restricted Stock Purchase Agreement, if
applicable, and there shall be no further Transfer of such Shares except in accordance with the
terms of this Section.

          (h) Termination of Right of First Refusal. The Right of First Refusal shall terminate
as to all Shares upon the Public Trading Date.

          (i) Transfer Restrictions. Any transfer or sale of the Shares is subject to
restrictions on transfer imposed by any applicable state and federal securities laws. Any Transfer
or attempted Transfer of any of the Shares not in accordance with the terms of this Agreement shall
be void and the Company may enforce the terms of this Agreement by stop transfer instructions or
similar actions by the Company and its agents or designees.

     4. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     5. Restrictive Legends and Stop-Transfer Orders.

          (a) Legends. Optionee understands and agrees that the Company shall cause any
certificates issued evidencing the Shares shall have the legends set forth below or legends
substantially equivalent thereto, together with any other legends that may be required by state or
federal securities laws:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO
TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION
STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE
TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN
THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY)
REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER
TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES
OF THESE SHARES.

EXERCISE NOTICE PAGE 3

 

 

          (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

          (c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

     6. Optionee Representations. Optionee hereby makes the following certifications and
representations with respect to the Shares listed above:

          (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Optionee is acquiring these Shares for investment for Optionee’s own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.

          (b) Optionee acknowledges and understands that the Shares constitute “restricted securities”
under the Securities Act and have not been registered under the Securities Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee’s investment intent as expressed herein. Optionee understands that the Shares
must be held indefinitely unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Shares. Optionee understands that the
certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of
the Shares unless they are registered or such registration is not required in the opinion of
counsel satisfactory to the Company and any other legend required under applicable state securities
laws.

          (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer
period as any market stand-off agreement may require) the securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including:
(i) the resale being made through a broker in an unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined under the Exchange Act); and, in
the case of an affiliate, (ii) the availability of certain public information about the Company,
(iii) the amount of securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (iv) the timely filing of a Form 144, if applicable.

          (d) In the event that the Company does not qualify under Rule 701 at the time of grant of the
Option, then the securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than one year after the later
of the date the securities were sold by the Company or the date the securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the
securities by an affiliate,

EXERCISE NOTICE PAGE 4

 

 

or by a non-affiliate who subsequently holds the securities less than two years, the
satisfaction of the conditions set forth in sections (i), (ii), (iii) and (iv) of paragraph (c)
above.

          (e) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

     7. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

     8. Interpretation. Any dispute regarding the interpretation of this Agreement shall
be submitted by Optionee or by the Company forthwith to the Committee, which shall review such
dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Optionee.

     9. Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the State of California excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     10. Notices. Any notice required or permitted hereunder shall be given in accordance
with the provisions set forth in Section 5.6 of the Option Agreement.

     11. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

     12. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan, the Option Agreement and the Restricted Stock Purchase
Agreement, if applicable, constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof.

(Signature Page Follows)

EXERCISE NOTICE PAGE 5

 

 

	 	 	 	 	 	 	 
	ACCEPTED BY:	 	SUBMITTED BY:	 	 
	 
	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC.	 	OPTIONEE	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	Name:

	 	 

	 	 

Optionee
	 	 
	 

	 	 	 	 	 	 
	Its:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

EXERCISE NOTICE PAGE 6

 

 

EXHIBIT B

TO GRANT NOTICE AND STOCK OPTION AGREEMENT

RESTRICTED STOCK PURCHASE AGREEMENT

     THIS RESTRICTED STOCK PURCHASE AGREEMENT is made between                                          (the “Purchaser”) and
Cadence Pharmaceuticals, Inc. (the “Company”), as of                                                             ,      
               .

RECITALS

     (1) Pursuant to the exercise of the Option granted to Purchaser under the Company’s 2004
Equity Incentive Award Plan (the “Plan”) and pursuant to the Stock Option Agreement (the “Option
Agreement”) dated                                         ,                     , by and between the Company and Purchaser with respect to
such grant, which Option Agreement is hereby incorporated by reference, Purchaser has elected to
purchase                                          of those shares which have not become vested under the vesting schedule set
forth in the Option Agreement (“Unvested Shares”). The Unvested Shares and the shares subject to
the Option Agreement which have become vested are sometimes collectively referred to herein as the
“Shares”.

     (2) As required by the Option Agreement, as a condition to Purchaser’s election to exercise
the option, Purchaser must execute this Restricted Stock Purchase Agreement, which sets forth the
rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.

     1. Repurchase Option.

          (a) In the event of Purchaser’s Termination of Service (as defined in the Option Agreement)
for any reason, including for cause, death, Disability or Misconduct, the Company shall have the
right and option to purchase from Purchaser, or Purchaser’s personal representative, as the case
may be, all of Purchaser’s Unvested Shares as of the date of the Purchaser’s Termination of Service
at the exercise price paid by Purchaser for such Shares in connection with the exercise of the
Option (the “Repurchase Option”).

          (b) The Company may exercise its Repurchase Option by delivering, personally or by registered
mail, to Purchaser (or his or her transferee or legal representative, as the case may be), within
ninety days of the date of the Purchaser’s Termination of Service, a notice in writing indicating
the Company’s intention to exercise the Repurchase Option and setting forth a date for closing not
later than thirty days from the mailing of such notice. The closing shall take place at the
Company’s office. At the closing, the holder of the certificates for the Unvested Shares being
transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and
the Company shall deliver the purchase price therefor.

          (c) At its option, the Company may elect to make payment for the Unvested Shares to a bank
selected by the Company. The Company shall avail itself of this option by a notice in writing to
Purchaser stating the name and address of the bank, date of closing, and waiving the closing at the
Company’s office.

RESTRICTED STOCK AGREEMENT PAGE 1

 

 

          (d) If the Company does not elect to exercise the Repurchase Option conferred above by giving
the requisite notice within ninety days following the date of Purchaser’s Termination of Service,
the Repurchase Option shall terminate.

          (e) 100% of the Unvested Shares shall initially be subject to the Repurchase Option. The
Unvested Shares shall be released from the Repurchase Option in accordance with the Vesting
Schedule set forth in the Option Agreement until all Shares are released from the Repurchase
Option. Fractional Shares shall be rounded down to the nearest whole share.

     2. Transferability of the Shares; Escrow.

          (a) Purchaser hereby authorizes and directs the secretary of the Company, or such other person
designated by the Company from time to time, to transfer the Unvested Shares as to which the
Repurchase Option has been exercised from Purchaser to the Company.

          (b) To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase by
the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the
assistant secretary, or any other person designated by the Company from time to time as escrow
agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares,
if any, repurchased by the Company pursuant to the Repurchase Option. If certificates for the
Shares are issued, then Purchaser shall, upon execution of this Agreement, deliver and deposit with
the assistant secretary of the Company, or such other person designated by the Company from time to
time, any share certificate(s) issued representing the Unvested Shares, together with the stock
assignment duly endorsed in blank, attached hereto as Exhibit B-1. The Unvested Shares and
stock assignment shall be held by the assistant secretary in escrow, pursuant to the Joint Escrow
Instructions of the Company and Purchaser attached as Exhibit B-2 hereto, until the Company
exercises its Repurchase Option as provided in Section 1, until such Unvested Shares are vested, or
until such time as this Agreement no longer is in effect. As a further condition to the Company’s
obligations under this Agreement, the spouse of Purchaser, if any, shall execute and deliver to the
Company the Consent of Spouse set forth on the signature page hereto. Upon vesting of the Unvested
Shares, the escrow agent shall promptly deliver to Purchaser the certificate or certificates
representing such Shares in the escrow agent’s possession belonging to Purchaser, and the escrow
agent shall be discharged of all further obligations hereunder; provided, however, that the escrow
agent shall nevertheless retain such certificate or certificates as escrow agent if so required
pursuant to other restrictions imposed pursuant to this Agreement. If the Shares are held in book
entry form, then such entry will reflect that the Shares are subject to the restrictions of this
Agreement.

          (c) The Company, or its designee, shall not be liable for any act it may do or omit to do with
respect to holding the Shares in escrow and while acting in good faith and in the exercise of its
judgment.

          (d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any
applicable state and federal securities laws. Any transferee shall hold such Shares subject to all
the provisions hereof and the Exercise Notice executed by Purchaser with respect to any Unvested
Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.
Any transfer or attempted transfer of any of the Shares not in accordance with the terms of this
Agreement shall be void and the Company may enforce the terms of this Agreement by stop transfer
instructions or similar actions by the Company and its agents or designees.

RESTRICTED STOCK AGREEMENT PAGE 2

 

 

     3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the
ownership, voting rights or other rights or duties of Purchaser, except as specifically provided
herein.

     4. Legends. Any share certificate evidencing the Shares issued hereunder shall be
endorsed with the following legend (in addition to any legend required under applicable securities
laws):

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.

     5. Adjustment for Stock Split. All references to the number of Shares and the
purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock
split, stock dividend or other change in the Shares which may be made by the Company after the date
of this Agreement.

     6. Notices. Notices required hereunder shall be given in person or by registered mail
to the address of Purchaser shown on the records of the Company, and to the Company at its
principal executive office.

     7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the
Company and their respective permitted assignees and transferees, heirs, legatees, executors,
administrators and legal successors.

     8. Section 83(b) Elections.

          (a) Election for Unvested Shares Purchased Pursuant to a Non-Qualified Stock Option.
Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise
of a Non-Qualified Stock Option for Unvested Shares, that unless an election is filed by Purchaser
with the Internal Revenue Service and, if necessary, the proper state taxing authorities,
within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions if applicable) to be taxed currently on any difference
between the purchase price of the Shares and their Fair Market Value on the date of purchase, there
will be a recognition of taxable income to the Optionee, measured by the excess, if any, of the
fair market value of the Shares, at the time the Company’s Repurchase Option lapses over the
purchase price for the Shares. Optionee represents that Optionee has consulted any tax
consultant(s) Optionee deems advisable in connection with the purchase of the Shares or the filing
of the Election under Section 83(b) and similar tax provisions.

          (b) Election for Unvested Shares Purchased Pursuant to an Incentive Stock Option.
Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise
of an Incentive Stock Option for Unvested Shares, that unless an election is filed by Purchaser
with the Internal Revenue Service and, if necessary, the proper state taxing authorities,
within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions if applicable) to be taxed currently on any difference
between the purchase price of the Shares and their Fair Market Value on the date of purchase, there
will be a recognition of income to the Purchaser, for alternative minimum tax purposes, measured by
the excess, if any, of the fair market value of the Shares at the time the Company’s

RESTRICTED STOCK AGREEMENT PAGE 3

 

 

Repurchase
Option lapses over the purchase price for the Shares. Purchaser represents that Purchaser has
consulted any tax consultant(s) Purchaser deems advisable in connection with the purchase of the
Shares or the filing of the Election under Section 83(b) and similar tax provisions.

     PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO
FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.

     9. Representations. Purchaser has reviewed with his or her own tax advisors the
federal, state, local and foreign tax consequences of this investment and the transactions
contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Purchaser understands that
Purchaser (and not the Company) shall be responsible for his or her own tax liability that may
arise as a result of this investment or the transactions contemplated by this Agreement.

     10. Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the State of California excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     Purchaser represents that he or she has read this Agreement and is familiar with its terms and
provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under this Agreement.

(Signature Page Follows)

RESTRICTED STOCK AGREEMENT PAGE 4

 

 

     IN WITNESS WHEREOF, this Agreement is deemed made as of the date first
set forth above.

	 	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

CONSENT OF SPOUSE

     I,                                                             , spouse of the Purchaser listed above,
 have read and approve this
Agreement. In consideration of granting of the right to my spouse to purchase shares of the
Company as set forth in this Agreement, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under this Agreement and agree to be bound by the provisions
of this Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant
thereto under the community property laws or similar laws relating to marital property in effect in
the state of our residence as of the date of the signing of this Agreement.

	 	 	 	 	 
	 

	 	 

Signature of Spouse
	 	 

RESTRICTED STOCK AGREEMENT PAGE 5

 

 

EXHIBIT B-1

TO RESTRICTED STOCK PURCHASE AGREEMENT

ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I,                                         , hereby sell, assign and transfer unto                
                         
(                    ) shares of the Common Stock of Cadence Pharmaceuticals, Inc. registered in my name
on the books of said corporation represented by Certificate No.                      herewith and do hereby
irrevocably constitute and appoint                                                                          
        to transfer the said stock on the books of the within named corporation with full power
of substitution in the premises.

     This Assignment Separate from Certificate may be used only in accordance with the Restricted
Stock Purchase Agreement between Cadence Pharmaceuticals, Inc. and the undersigned dated
                                        ,                     .

Dated:                                         ,                     

Signature:                                                             

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of
this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the
Restricted Stock Purchase Agreement, without requiring additional signatures on the part of
Purchaser.

STOCK ASSIGNMENT PAGE 1

 

 

EXHIBIT B-2

TO RESTRICTED STOCK PURCHASE AGREEMENT

JOINT ESCROW INSTRUCTIONS

                                        ,                     

Secretary

Cadence Pharmaceuticals, Inc.

12730 High Bluff Drive, Suite 410

San Diego, CA 92130

     As Escrow Agent for both Cadence Pharmaceuticals, Inc. (the “Company”) and the undersigned
purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following
instructions:

     1. In the event the Company and/or any assignee of the Company (referred to collectively for
convenience herein as the “Company”) exercises the Company’s Repurchase Option set forth in the
Agreement, the Company shall give to Purchaser and you a written notice specifying the number of
shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the terms of said
notice.

     2. At the closing, you are directed (a) to date the stock assignments necessary for the
transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the
same, together with the certificate evidencing the shares of stock to be transferred, to the
Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a
check, or a combination thereof) for the number of shares of stock being purchased pursuant to the
exercise of the Company’s Repurchase Option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares of stock to be held by you hereunder and any additions and substitutions to said
shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you
as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute, with respect to
such securities, all documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated, including but not limited to the filing with any
applicable state blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

     4. Upon written request of Purchaser, but no more than once per calendar year, unless the
Company’s Repurchase Option has been exercised, you will deliver to Purchaser a certificate or
certificates representing the number of shares of stock as are not then subject to the Company’s
Repurchase Option. Within one hundred twenty days after the date of the Purchaser’s Termination of
Service (as defined in the Agreement), you will deliver to Purchaser a certificate or certificates
representing the aggregate number of shares held or issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the Company’s Repurchase Option.

JOINT ESCROW INSTRUCTIONS PAGE 1

 

 

     5. If at the time of termination of this escrow you should have in your possession any
documents, securities, or other property belonging to Purchaser, you shall deliver all of the same
to Purchaser and shall be discharged of all further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any
act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you shall not be liable
to any of the parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     10. You shall not be liable for the expiration of any rights under any applicable state,
federal or local statute of limitations or similar statute or regulation with respect to these
Joint Escrow Instructions or any documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation therefore.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
an officer or agent of the Company or if you shall resign by written notice to each party. In the
event of any such termination, the Company shall appoint a successor Escrow Agent.

     13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.

JOINT ESCROW INSTRUCTIONS PAGE 2

 

 

     15. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at such addresses as a party may designate by written notice to each of the
other parties hereto.

     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns.

     18. These Joint Escrow Instructions shall be governed by, and construed and enforced in
accordance with, the laws of the State of California, excluding that body of law pertaining to
conflicts of law.

(Signature Page Follows)

JOINT ESCROW INSTRUCTIONS PAGE 3

 

 

     IN WITNESS WHEREOF, these Joint Escrow Instructions shall be effective as of the date first
set forth above.

	 	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ESCROW AGENT:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

JOINT ESCROW INSTRUCTIONS PAGE 4

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