EMPLOYMENT AGREEMENT

Exhibit 10.3

EMPLOYMENT AGREEMENT

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

RECITALS

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

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

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

AGREEMENT

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

1.                                      EMPLOYMENT.

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

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

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

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2.                                      LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.

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

3.                                      COMPENSATION OF THE EXECUTIVE.

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

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

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

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

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

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

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4.                                      TERMINATION.

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

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

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

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

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

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

4.4          Compensation Upon Termination.

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

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

4.4.2.1          The Company shall continue to pay the Executive’s base salary until the end of the period following the termination or resignation of the Executive equal to nine (9) months (the “Compensation Severance Period”).   Such severance payments shall be

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subject to standard deductions and withholdings and paid in accordance with the Company’s regular payroll policies and practices.  For purposes of calculating the amount to be paid pursuant this Section 4.4.2.1, the Company shall use the Executive’s base compensation in effect on the date of such termination or resignation.

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

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

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

4.4.2.5          In the event the Executive resigns with Good Reason prior to a Change in Control, the payments described in Sections 4.4.2.1, 4.4.2.2 and 4.4.2.4 will

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commence as soon as administratively practicable following the Change in Control; otherwise the payments will commence as soon administratively practicable following the Executive’s termination or resignation.

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

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

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

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

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

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

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

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

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

(v)            Executive’s gross misconduct; or