SOMAXON PHARMACEUTICALS, INC. EMPLOYMENT AGREEMENT

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Exhibit 10.7

SOMAXON PHARMACEUTICALS, INC.

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this "AGREEMENT") made and entered into as of August

15, 2003 between SOMAXON PHARMACEUTICALS, INC., a Delaware corporation (the

"COMPANY"), and Kenneth Cohen who resides at 895 La Jolla Corona Court, La

Jolla, California 92037 ("EXECUTIVE").

W I T N E S S E T H:

WHEREAS, the Company desires to employ Executive and Executive desires to

accept employment with Company upon the terms and conditions hereinafter set

forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants

hereinafter set forth, and intending to be legally bound hereby, it is hereby

agreed as follows:

1. Position and Duties. Executive shall diligently and

conscientiously devote Executive's full business time, attention, energy, skill

and best efforts to the business of the Company and the discharge of Executive's

duties hereunder. Executive's duties under this Agreement shall be to serve as

President and Chief Executive Officer, with the responsibilities, rights,

authority and duties customarily pertaining to such office and as may be

established from time to time by or under the direction of the Board of

Directors of the Company (the "BOARD") or its designees. Executive shall report

to the Board. Executive shall also act as an officer and/or director and/or

manager of such affiliates of the Company as may be designated by the Board from

time to time, commensurate with Executive's office, all without further

compensation, other than as provided in this Agreement.

2. Employment Term. Subject to the provisions contained in Paragraph

8, Executive's employment by the Company shall be for a term commencing on the

date hereof and expiring on the close of business on December 31, 2004 (the

"INITIAL TERM"); provided, however, the term of Executive's employment by the

Company shall continue for an indefinite period thereafter unless and until

either party shall give to the other 60 days advance written notice of

expiration of the term (the Initial Term and the period, if any, thereafter,

during which the Executive's employment shall continue are collectively referred

to as the "EMPLOYMENT TERM").

3. Place of Employment. Executive's performance of services under

this Agreement shall be rendered in San Diego County, California, subject to

necessary travel requirements of Executive's position and duties hereunder.

4. Compensation.

(a) Base Salary. The Company shall pay to Executive base

salary compensation at an annual rate of not less than $225,000. Following the

end of the Company's fiscal year 2003, and annually thereafter, the Board shall

review Executive's base salary in light of the performance of Executive and the

Company, and may, in its sole discretion, maintain or increase (but not

decrease) such base salary by an amount it determines to be appropriate.

Executive's annual base salary payable hereunder, as it may be maintained or

increased from time to time, is referred to herein as "BASE SALARY." Base Salary

shall be paid in equal installments in accordance with the Company's payroll

practices in effect from time to time for executive officers, but in no event

less frequently than monthly.

(b) Bonus Plan. The Company shall adopt a bonus program

providing for annual bonus awards to Executive and the Company's other eligible

employees dependent upon, among

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other things, the achievement of certain performance levels by the Company, the

nature, magnitude and quality of the services performed by Executive for the

Company and the compensation paid for positions of comparable responsibility and

authority within the Company's industry (the "COMPANY EMPLOYEE BONUS PLAN").

(c) Equity Investment by Executive. Concurrently with the

signing of this Agreement, the Company is offering Executive, and Executive is

purchasing from the Company, pursuant to a Restricted Stock Purchase Agreement

substantially in the form attached hereto as Exhibit A, 450,000 shares of Common

Stock of the Company, for an aggregate purchase price of $45.00. Such shares of

Common Stock shall be subject to a right of repurchase at the original price

thereof according to a monthly vesting schedule over four years commencing

retroactive to May 1, 2003.

(d) Option Grants. In connection with the Company's subsequent

preferred stock financing or other significant capital raising transaction, the

Company shall adopt an equity incentive plan providing for the grant of stock

options and other stock awards to the Company's employees (the "OPTION PLAN").

The Board shall set grant to Executive an option to acquire a number of shares

deemed to be appropriate by the Board in its discretion in order to reward

Executive for services rendered to the Company and/or as an incentive for

continued service to the Company. Such option shall be subject to the terms and

conditions of the Option Plan, including vesting, exercise price and

termination, except as may be modified by this Agreement or an addendum hereto.

5. Benefits. As soon as financially feasible for the Company, the

Company shall adopt a reasonably comprehensive benefits package for the

participation of Executive, which shall include, but not necessarily be limited

to, the following: medical, dental, vision, disability, life insurance,

accidental death & dismemberment, medical savings and 401(k) plans. Executive

shall be eligible to participate in all employee benefit programs of the Company

offered from time to time during the Employment Term by the Company to employees

or executive officers of Executive's rank, to the extent that Executive

qualifies under the eligibility provisions of the applicable plan or plans, in

each case consistent with the Company's then-current practice as approved by the

Board from time to time. Except to the extent financially feasible for the

Company, the foregoing shall not be construed to require the Company to

establish such plans or to prevent the modification or termination of such plans

once established, and no such action or failure thereof shall affect this

Agreement. Executive recognizes that the Company has the right, in its sole

discretion, to amend, modify or terminate its benefit plans without creating any

rights in Executive.

6. Vacation. Executive shall be entitled to paid vacation and sick

time ("PTO") of up to four weeks per calendar year, with such number of weeks

being pro-rated for the remainder of the 2003 calendar year. Executive may

roll-over unused PTO time from one calendar year to another, subject to a

maximum of six weeks of accrued PTO.

7. Business Expenses. The Company shall promptly reimburse Executive

for Executive's reasonable and necessary expenditures for travel, entertainment

and similar items made in furtherance of Executive's duties under this Agreement

consistent with the policies of the Company as applied to all executive

officers. Executive shall document and substantiate such expenditures as

required by the policies of the Company as applied to all executive officers,

including an itemized list of all expenses incurred, the business purposes for

which such expenses were incurred, and such receipts as Executive reasonably has

been able to obtain.

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8. Termination of Employment.

(a) Death or Disability.

(i) In the event of Executive's death during the

Employment Term, the Employment Term shall automatically terminate.

(ii) Each of the Company and Executive shall have the

right to terminate the Employment Term in the event of Executive's Disability.

"DISABILITY" as used in this Agreement shall have meaning set forth in Section

22(e)(3) of the Internal Revenue Code, which as of the date of this Agreement is

as follows: "An individual is permanently and totally disabled if he is unable

to engage in any substantial gainful activity by reason of any medically

determinable physical or mental impairment which can be expected to result in

death or which has lasted or can be expected to last for a continuous period of

not less than 12 months." A termination of Executive's employment by either

party for Disability shall be communicated to the other party by written notice,

and shall be effective on the 10th day after receipt of such notice by the other

party (the "DISABILITY EFFECTIVE DATE"), unless Executive returns to full-time

performance of Executive's duties before the Disability Effective Date.

(b) By the Company. The Company shall have the right to

terminate the Employment Term for Cause. "CAUSE" as used in this Agreement shall

mean:

(i) Executive's breach of any of the covenants contained

in Paragraphs 11 and 12 of this Agreement;

(ii) Executive's conviction by, or entry of a plea of

guilty or nolo contendere in, a court of competent and final jurisdiction for

any crime involving moral turpitude or punishable by imprisonment in the

jurisdiction involved;

(iii) Executive's commission of an act of fraud, whether

prior to or subsequent to the date hereof upon the Company;

(iv) Executive's continuing repeated willful failure or

refusal to perform Executive's duties as required by this Agreement (including,

without limitation, Executive's inability to perform Executive's duties

hereunder as a result of chronic alcoholism or drug addiction and/or as a result

of any failure to comply with any laws, rules or regulations of any governmental

entity with respect to Executive's employment by the Company);

(v) Executive's gross negligence, insubordination or

material violation of any duty of loyalty to the Company or any other material

misconduct on the part of Executive;

(vi) Executive's commission of any act which is

detrimental to the Company's business or goodwill; or

(vii) Executive's breach of any other provision of this

Agreement, provided that termination of Executive's employment pursuant to this

subsection (vii) shall not constitute valid termination for good cause unless

Executive shall have first received written notice from the Board stating with

specificity the nature of such breach and affording Executive at least fifteen

(15) days to correct the breach alleged.

Nothing in this Paragraph 8(b) shall prevent Executive from challenging the

Board's determination that Cause exists or that Executive has failed to cure any

act (or failure to act) that purportedly formed the basis for the Board's

determination, under the arbitration procedures set forth in Paragraph 22 below.

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(c) By Executive.

(i) Executive shall have the right to terminate the

Employment Term for Good Reason (as defined below), upon 30 days' written notice

to the Board given within 60 days following the occurrence of an event

constituting Good Reason; provided that the Company shall have 20 days after the

date such notice has been given to the Board in which to cure the conduct

specified in such notice. Executive's continued employment during such 20-day

period shall not constitute Executive's consent to, or a waiver of rights with

respect to, any act or failure to act constituting Good Reason hereunder.

(ii) For purposes of this Agreement "GOOD REASON" shall

mean:

(1) a change in Executive's position or

responsibilities (including reporting responsibilities) that represents a

substantial reduction in the position or responsibilities as in effect

immediately prior thereto; the assignment to Executive of any duties or

responsibilities that are materially inconsistent with such position or

responsibilities; or any removal of Executive from or failure to reappoint or

reelect Executive to any of such positions, except in connection with the

termination of Executive's employment for Cause, as a result of his or her

Disability or death, or by Executive other than for Good Reason;

(2) a reduction in Executive's Base Salary other

than in connection with a general reduction in wages for all employees of the

Company and its parent and subsidiaries, if any;

(3) the Company requiring Executive (without

Executive's consent) to be based at any place outside a 50-mile radius of his or

her initial place of employment with the Company, except for reasonably required

travel on the Company's business;

(4) the Company's failure to provide Executive

with compensation and benefits substantially equivalent (in terms of benefit

levels and/or reward opportunities) to those provided for under each of the

Company's material employee benefit plan, program and practice as in effect from

time to time; or

(5) any material breach by the Company of its

obligations to Executive under this Agreement.

(iii) Subject to the notice period set forth in

Paragraph 2 above, Executive shall have the right to terminate his or her

employment hereunder without Good Reason by providing the Company with a written

notice of termination, and such termination shall not in and of itself be a

breach of this Agreement.

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(d) Termination Payments.

(i) If the Employment Term is terminated pursuant to

Paragraph 8(a)(i) (i.e., death), the Company shall pay to Executive (a) his or

her accrued but unpaid Base Salary through the date of termination (plus all

accrued and unpaid expenses reimbursable in accordance with Paragraph 7), (b)

any accrued but unused PTO, and (c) at the discretion of the Board, an annual

bonus for the year in which Executive's death or Disability occurs, prorated

through the date of death or Disability, based on the Board's good-faith

estimate of the actual amount, if any, that would have been payable for such

year under the Company Employee Bonus Plan (assuming Executive had remained

employed by the Company through the end of such year) in accordance with

Paragraph 4(b).

(ii) If the Employment Term is terminated pursuant to

Paragraph 8(a)(ii) (i.e., Disability), the Company shall pay to Executive (a)

his or her accrued but unpaid Base Salary through the date of termination (plus

all accrued and unpaid expenses reimbursable in accordance with Paragraph 7),

(b) any accrued but unused PTO, (c) an amount equal to Executive's actual Base

Salary (not including any bonus payable) for the 12 month period immediately

prior to such termination, payable in 12 equal installments during the 12 month

period following such termination, and (d) at the discretion of the Board, an

annual bonus for the year in which Executive's death or Disability occurs,

prorated through the date of death or Disability, based on the Board's

good-faith estimate of the actual amount, if any, that would have been payable

for such year under the Company Employee Bonus Plan (assuming Executive had

remained employed by the Company through the end of such year) in accordance

with Paragraph 4(b).

(iii) If the Employment Term is terminated by Executive

pursuant to Paragraph 8(c) (i.e., Good Reason), if the Company elects not to

renew the Employment Term in accordance with Paragraph 2 or if the Company

terminates the Employment Term other than pursuant to Paragraphs 8(a) or 8(b),

the Company shall pay to Executi