EXHIBIT 10.3
 
COMMON STOCK
ISSUANCE AGREEMENT
 
THIS AGREEMENT (this “Agreement”) is made as of October 31, 2002 (the “Effective
Date”), by and between CYPRESS BIOSCIENCE, INC., a Delaware corporation having a
principal place of business at 4350 Executive Drive, Suite 325, San Diego,
California 92121 (“Cypress”), and COLLEGIUM PHARMACEUTICAL, INC., a Delaware
corporation (“Collegium”) having a principal place of business at 349 Lincoln
Street, Hingham, Massachusetts 02043.
 
RECITALS
 
WHEREAS, Cypress and Collegium have entered into that certain Reformulation and
New Product Agreement dated August 22, 2002 (the “Reformulation Agreement”); and
 
WHEREAS, in connection with the Reformulation Agreement, Cypress may issue
shares of its Common Stock, par value $0.02 per share (the “Common Stock”), to
Collegium on the terms and subject to the conditions set forth in this
Agreement.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, do hereby agree as follows:
 
1.    AUTHORIZATION OF ISSUANCE OF THE SECURITIES.    Subject to the terms and
conditions of this Agreement, Cypress has authorized the issuance of up to
1,800,000 shares of Common Stock at the Milestone Closings (as defined below).
 
2.    AGREEMENT TO ISSUE THE MILESTONE SHARES.
 
2.1    Issuance of Shares.    At a Milestone Closing, if Collegium has elected
to receive a milestone payment that is due and payable under Section 4.4(a) of
the Reformulation Agreement with Common Stock in accordance with the terms of
Section 4.4(b) of the Reformulation Agreement, but subject to Section 4.4(c) of
the Reformulation Agreement, Cypress will issue to Collegium, and Collegium will
accept from Cypress, the number of shares of Common Stock determined pursuant to
Section 4.4 of the Reformulation Agreement (the “Milestone Shares”), as payment
in full of such milestone payment.
 
3.    CLOSING AND DELIVERY.
 
3.1    Milestone Closings.    Each closing of the issuance of Milestone Shares
pursuant to this Agreement (each a “Milestone Closing” and collectively the
“Milestone Closings”) shall be held within 30 days following receipt of a
Collegium Notice (as defined in the Reformulation Agreement) in which Collegium
has elected to receive payment of a milestone payment due and payable under
Section 4.4(a) of the Reformulation Agreement with Common

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Stock. The date on which a Milestone Closing takes place shall be referred to
herein as a “Milestone Closing Date.”
 
3.2    Delivery of the Milestone Shares at the Milestone Closing.    At a
Milestone Closing, Cypress shall deliver to Collegium a stock certificate
registered in the name of Collegium, representing the Milestone Shares issuable
in accordance with this Agreement and the Reformulation Agreement as payment in
full for achievement of the applicable milestone under the Reformulation
Agreement.
 
4.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF COLLEGIUM.
 
4.1    Collegium represents and warrants to, and covenants with, Cypress that:
 
(a)  Collegium is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the issuance of the Milestone Shares,
and has requested, received, reviewed and considered, all information Collegium
deems relevant in making an informed decision with respect to the investment in
the Milestone Shares.
 
(b)  In the event that Collegium elects to receive any Milestone Shares,
Collegium would be acquiring the Milestone Shares pursuant to this Agreement in
the ordinary course of its business and for its own account for investment only
and at the time of such acquisition, with no present intention of distributing
any of such Milestone Shares and without any arrangement or understanding with
any other persons regarding the distribution of such Milestone Shares.
 
(c)  Collegium will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the securities acquired hereunder except in
compliance with the Securities Act of 1933, as amended (the “Securities Act”),
applicable blue sky laws, and the rules and regulations promulgated thereunder.
 
(d)  Collegium is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
 
(e)  Collegium has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement. Upon the execution and delivery of this Agreement by Collegium,
this Agreement shall constitute a valid and binding obligation of Collegium,
enforceable in accordance with its terms.
 
(f)  Collegium has not engaged and will not engage in any short sales of Common
Stock of Cypress or other hedging transactions involving Common Stock of Cypress
for so long as Collegium has the right to receive Milestone Shares or holds such
Milestone Shares.
 
(g)  Collegium understands that Cypress has not provided any legal, tax or
investment advice and that independent legal counsel has reviewed this Agreement
on

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Collegium’s behalf. Collegium has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with entering into this Agreement.
 
5.    SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.    Notwithstanding
any investigation made by Cypress, all covenants, agreements, representations
and warranties made by Collegium herein shall survive the execution of this
Agreement, the Milestone Closings, and the delivery to Collegium of the
Milestone Shares.
 
6.    CONDITIONS TO CYPRESS’ OBLIGATIONS AT MILESTONE CLOSINGS.    Cypress’
obligation to complete the issuance of the Milestone Shares and deliver the
Milestone Shares to Collegium at each Milestone Closing shall be subject to the
following conditions to the extent not waived by Cypress:
 
6.1    Receipt of Consideration and Election.    The applicable milestone (as
set forth in Section 4.4(a) of the Reformulation Agreement) shall have been
achieved and Collegium shall have elected to receive the Milestone Shares (as
set forth in Section 4.4(b) of the Reformulation Agreement) in connection with
the delivery of the Collegium Notice (as defined in the Reformulation
Agreement).
 
6.2    Representations, Warranties and Covenants.    The representations and
warranties made by Collegium in Section 4 hereof shall be true and correct on
each applicable Milestone Closing Date. Collegium shall have performed and
complied with all obligations and conditions required to be performed and
completed by Collegium under this Agreement on or prior to each applicable
Milestone Closing Date. Collegium shall deliver a duly executed certificate to
the effect of the foregoing to Cypress on each Milestone Closing Date.
 
7.    RESTRICTIONS ON TRANSFER.
 
7.1    Restrictions on Transfer.
 
(a)  Collegium agrees not to make any disposition of all or any portion of the
Milestone Shares unless and until, (A) except in connection with a sale exempt
from registration under Rule 144, the transferee has agreed in writing to be
bound by the terms of this Agreement, (B) Collegium shall have notified Cypress
of the proposed disposition and shall have furnished Cypress with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by Cypress, Collegium shall have furnished Cypress with an
opinion of counsel, reasonably satisfactory to Cypress, that such disposition
will not require registration of such shares under the Securities Act, provided
that Cypress will not require an opinion of counsel for transactions pursuant to
Rule 144 except in unusual circumstances.
 
(b)  Each certificate representing the Milestone Shares shall be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
 
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.

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THEY MAY NOT BE OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.”
 
7.2    “Market Stand-Off” Agreement.    If requested by Cypress or the
representative of the underwriters of Common Stock (or other securities) of
Cypress, Collegium shall not sell or otherwise transfer or dispose of any Common
Stock (or other securities) of Cypress held by Collegium for a period specified
by the representative of the underwriters, in any case not to exceed 90 days
following any registered offering of the Common Stock of Cypress, provided that
all officers and directors of Cypress enter into similar agreements (subject to
customary exceptions). The obligations described in this Section 7.2 shall not
apply to a registration relating solely to employee benefit plans on Form S-8.
Cypress may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of the applicable 90-day period.
 
8.    NO BROKER’S FEE.    Cypress and Collegium hereby represent that, there are
no brokers or finders entitled to compensation in connection with the issuance
of the Milestone Shares, and shall indemnify each other for any such fees for
which they are responsible.
 
9.    NOTICES.    All notices, requests, consents and other communications
hereunder shall be in writing, shall be sent by confirmed facsimile or mailed by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, and shall be deemed given when so sent in the
case of facsimile transmission, or when so received in the case of mail or
courier, and addressed as follows:
 
(a)
  
if to Cypress, to:
    
Cypress Bioscience, Inc.
    
4350 Executive Drive, Suite 325
San Diego, California 92121
Attention: Chief Executive Officer
    
with a copy to:
    
Cooley Godward LLP
4401 Eastgate Mall
San Diego, California 92121-9109
Attention: Kay Chandler, Esq.

 
or to such other person at such other place as Cypress shall designate to
Collegium in writing; and

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(b)
  
if to Collegium, to:
    
Collegium Pharmaceutical, Inc.
349 Lincoln Street
Hingham, Massachusetts, 02043
Attention: Chief Executive Officer

 
10.    MISCELLANEOUS.
 
10.1    Waivers and Amendments.    Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of Cypress and Collegium.
 
10.2    Headings.    The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
 
10.3    Severability.    In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
 
10.4    Governing Law.    This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California by California residents,
without regard to conflicts of law principles.
 
10.5    Counterparts.    This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute one instrument, and shall become effective when
one or more counterparts have been signed by both Collegium and Cypress.
 
10.6    Successors and Assigns.    Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of Collegium
and Cypress.
 
10.7    Entire Agreement.    This Agreement and the Reformulation Agreement,
including the exhibits, constitute the full and entire understanding and
agreement between Collegium and Cypress with regard to the subjects hereof and
thereof.
 
10.8    Payment of Fees and Expenses.    Each of Cypress and Collegium shall
bear its own expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney’s fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
 
CYPRESS BIOSCIENCE, INC.
By:
 
/s/    JAY KRANZLER        

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Dr. Jay Kranzler
Chief Executive Officer

 
COLLEGIUM PHARMACEUTICAL, INC
By:
 
/s/    MICHAEL HEFFERNAN       

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Name:
Title:
 
Michael Heffernan
President

 
 
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