EXHIBIT 10.20
Cypress Bioscience, Inc.
AMENDED AND RESTATED SEVERANCE BENEFIT PLAN
Section 1. Introduction.
          The Cypress Bioscience, Inc. Amended and Restated Severance Benefit
Plan (the “Plan”) was originally established effective May 21, 2004 and amended
and restated effective December 31, 2008. The purpose of the Plan is to provide
severance benefits to certain eligible service providers of the Company upon
selected terminations of service. This Plan document is also the Summary Plan
Description for the Plan.
Section 2. Definitions.
          For purposes of the Plan, the following terms are defined as follows:
          (a) “Base Salary” means an individual’s annual base salary and
excludes all bonuses, commissions, fringe benefits, option grants, equity
awards, employee benefits and other similar items of compensation.
          (b) “Board” means the Board of Directors of the Company.
          (c) “Cause” means the occurrence of one or more of the following:
               (1) An individual’s conviction of, or plea of guilty or no
contest with respect to, (i) any crime involving fraud, dishonesty or moral
turpitude or (ii) any felony under the laws of the United States or any state
thereof;
               (2) An individual’s attempted commission of, or participation in,
a fraud or act of dishonesty against the Company that results in (or might
reasonably result in) material harm to the Company;
               (3) An individual’s intentional and material violation of any
statutory duty owed to the Company;
               (4) An individual’s unauthorized use or disclosure of the
Company’s confidential information, trade secrets or proprietary information; or
               (5) An individual’s gross misconduct.
          (d) “Change in Control” means the occurrence in a single transaction
or in a series of related transactions of any one or more of the following
events:
               (1) A sale of all or substantially all of the assets of the
Company;
               (2) A merger or consolidation in which the Company is not the
surviving entity and in which the holders of the Company’s outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities

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representing less than fifty percent (50%) of the voting power of the entity
surviving such transaction or, where the surviving entity is a wholly-owned
subsidiary of another entity, the surviving entity’s parent;
               (3) A reverse merger in which the Company is the surviving entity
but the shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities of the surviving entity’s parent, cash or otherwise, and in which the
holders of the Company’s outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the Company or, where the
Company is a wholly-owned subsidiary of another entity, the Company’s parent;
               (4) An acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or subsidiary of the Company or other
entity controlled by the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least seventy five
percent (75%) of the combined voting power entitled to vote in the election of
directors; or
               (5) The Company employs any Chief Executive Officer other than
Jay D. Kranzler.
     A transaction effected exclusively for the purpose of changing the domicile
of the Company shall not constitute a Change in Control and once a Change in
Control has occurred, no future events shall constitute a Change in Control for
purposes of the Plan.
          (e) “Change in Control Covered Termination” means either a termination
of employment by the Company without Cause or a voluntary resignation of
employment for Good Reason; either of which occurring within one (1) month prior
to, or thirteen (13) months following, the effective date of a Change in
Control.
          (f) “Company” means Cypress Bioscience, Inc. or, following a Change in
Control, the surviving entity resulting from such transaction or the parent
company of such surviving entity.
          (g) “Covered Termination” means either a termination of employment by
the Company without Cause or a voluntary resignation of employment for Good
Reason that does not occur within one (1) month prior to, or thirteen
(13) months following, the effective date of a Change in Control.
          (h) “Director Covered Termination” means the resignation of a Board
member or the termination of a Board member’s service following the completion
of his or her term as a result of his or her refusal to stand for re-election or
the Company’s failure to nominate such individual for re-election.

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          (i) “Good Reason” means, with respect to an individual covered by this
Plan, the occurrence of one or more of the following events without such
individual’s express written consent:
               (1) A material reduction in such individual’s authority, duties
or responsibilities (and not simply a change in title or reporting
relationships); provided, however, that Good Reason shall not be satisfied
solely by reason of such individual retaining the same position held prior to a
Change in Control, but in a distinct legal entity or business unit of a larger
entity following such Change in Control;
               (2) A material reduction by the Company in such individual’s Base
Salary; or
               (3) An increase in the one-way driving distance from the
individual’s principal residence to the individual’s principal place of work in
effect as of May 21, 2004 by more than thirty (30) miles.
     Notwithstanding the foregoing, an individual shall have “Good Reason” for
his or her resignation only if: (a) the individual notifies the Company in
writing, within thirty (30) days after the first occurrence of one of the
foregoing events, that he or she intends to terminate his or her employment no
earlier than thirty (30) days after providing such notice; (b) the Company does
not cure such condition within thirty (30) days following its receipt of such
notice or states unequivocally in writing that it does not intend to attempt to
cure such condition; and (c) the individual resigns from employment within
thirty (30) days following the end of the period within which the Company was
entitled to remedy the condition constituting Good Reason but failed to do so.
          (j) “Release Deadline Date” means: (1) with respect to a Covered
Termination or a Director Covered Termination, forty-five (45) days following
such termination, and (2) with respect to a Change in Control Covered
Termination, the later of: (a) forty-five (45) days following such termination,
or (b) forty-five (45) days following the applicable Change in Control.
Section 3. Eligibility For Benefits.
          (a) General Rules. Subject to the requirements set forth in this
Section, the Company shall provide severance benefits under the Plan to the
individuals and in the capacities set forth on Appendix A. The Company is free
to add individuals to Appendix A at any time. In order to be eligible to receive
benefits under the Plan, an individual must (i) experience a Covered
Termination, Change in Control Covered Termination or Director Covered
Termination, (ii) be designated on Appendix A, (iii) have provided continuous
service to the Company as a Board member or an employee for at least one
(1) year and (iv) execute a general waiver and release in substantially the form
attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate within the
applicable time period set forth therein, but in no event later than the Release
Deadline Date, and such release must become effective in accordance with its
terms. The Company, in its sole discretion, may modify the forms of the required
release and shall determine the appropriate form of release.

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Section 4. Amount Of Benefit.
          Benefits under the Plan, if any, shall be provided to the employees
described in Section 3 in the following amounts:
          (a) Employee Covered Termination Benefits. Upon an individual
employee’s Covered Termination, such individual shall receive one of the
following severance packages:
               (1) If such individual has been employed with the Company for
more than one (1) year, but less than or equal to two (2) years, then such
individual shall receive:
               Cash Severance Benefits. A lump sum cash payment equal to three
(3) months of such individual’s Base Salary.
               COBRA Benefits. If such individual timely elects to continue
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), the Company will pay all COBRA premiums for such individual and his
or her eligible dependents through the earliest of (i) the end of the three
(3) month period following the termination of employment, (ii) the expiration of
such individual’s continuation coverage under COBRA or (iii) the date such
individual becomes eligible for substantially equivalent health insurance
coverage in connection with new employment.
               Stock Option Vesting. 25% of all of such individual’s unvested
outstanding stock options and unvested shares of common stock under the
Company’s equity incentive plans and programs shall become fully vested and
exercisable as of the date of such termination of employment.
               (2) If such individual has been employed with the Company for
more than two (2) years, but less than or equal to three (3) years, then such
individual will receive:
               Cash Severance Benefits. A lump sum cash payment equal to six
(6) months of such individual’s Base Salary.
               COBRA Benefits. If such individual timely elects to continue
coverage under COBRA, the Company will pay all COBRA premiums for such
individual and his or her eligible dependents through the earliest of (i) the
end of the six (6) month period following the termination of employment,
(ii) the expiration of such individual’s continuation coverage under COBRA or
(iii) the date such individual becomes eligible for substantially equivalent
health insurance coverage in connection with new employment.
               Stock Option Vesting. 50% of all of such individual’s unvested
outstanding stock options and unvested shares of common stock under the
Company’s equity incentive plans and programs shall become fully vested and
exercisable as of the date of such termination of employment.
               (3) If such individual has been employed with the Company for
more than three (3) years, but less than or equal to four (4) years, then such
individual shall receive:

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               Cash Severance Benefits. A lump sum cash payment equal to nine
(9) months of such individual’s Base Salary.
               COBRA Benefits. If such individual timely elects to continue
coverage under COBRA, the Company will pay all COBRA premiums for such
individual and his or her eligible dependents through the earliest of (i) the
end of the nine (9) month period following the termination of employment,
(ii) the expiration of such individual’s continuation coverage under COBRA or
(iii) the date such individual becomes eligible for substantially equivalent
health insurance coverage in connection with new employment.
               Stock Option Vesting. 75% of all of such individual’s unvested
outstanding stock options and unvested shares of common stock under the
Company’s equity incentive plans and programs shall become fully vested and
exercisable as of the date of such termination of employment.
               (4) If such individual has been employed with the Company for
more than four (4) years, then such individual shall receive:
               Cash Severance Benefits. A lump sum cash payment equal to twelve
(12) months of such individual’s Base Salary.
               COBRA Benefits. If such individual timely elects to continue
coverage under COBRA, the Company will pay all COBRA premiums for such
individual and his or her eligible dependents through the earliest of (i) the
end of the twelve (12) month period following the termination of employment,
(ii) the expiration of such individual’s continuation coverage under COBRA or
(iii) the date such individual becomes eligible for substantially equivalent
health insurance coverage in connection with new employment.
               Stock Option Vesting. 100% of such individual’s unvested
outstanding stock options and unvested shares of common stock under the
Company’s equity incentive plans and programs shall become fully vested and
exercisable as of the date of such termination of employment.
          (b) Employee Change in Control Covered Termination Benefits. Upon an
individual employee’s Change in Control Covered Termination, such individual
shall receive the following severance package:
               Cash Severance Benefits. A lump sum cash payment equal to twelve
(12) months of such individual’s Base Salary.
               COBRA Benefits. If such individual timely elects to continue
coverage under COBRA, the Company will pay all COBRA premiums for such
individual and his or her eligible dependents through the earliest of (i) the
end of the twelve (12) month period following the termination of employment,
(ii) the expiration of such individual’s continuation coverage under COBRA or
(iii) the date such individual becomes eligible for substantially equivalent
health insurance coverage in connection with new employment.

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          (c) Director Covered Termination Benefits. Upon an individual’s
Director Covered Termination, such individual shall receive one of the following
severance packages:
               (1) If such individual has served on the Board for more than one
(1) year, but less than or equal to two (2) years, then 25% of all of such
individual’s unvested outstanding stock options and unvested shares of common
stock granted under the Company’s equity incentive plans and programs shall
become fully vested and exercisable as of the date of such termination.
               (2) If such individual has served on the Board for more than two
(2) years, but less than or equal to three (3) years, then 50% of all of such
individual’s unvested outstanding stock options and unvested shares of common
stock granted under the Company’s equity incentive plans and programs shall
become fully vested and exercisable as of the date of such termination.
               (3) If such individual has served on the Board for more than
three (3) years, but less than or equal to four (4) years, then 75% of all of
such individual’s unvested outstanding stock options and unvested shares of
common stock granted under the Company’s equity incentive plans and programs
shall become fully vested and exercisable as of the date of such termination.
               (4) If such individual has served on the Board for more than four
(4) years, then 100% of such individual’s unvested outstanding stock options and
unvested shares of common stock granted under the Company’s equity incentive
plans and programs shall become fully vested and exercisable as of the date of
such termination.
All cash severance payment referenced in this Section 4 shall be subject to all
applicable tax withholdings and deductions required by law and shall be paid
within ten (10) business days following the effective date of the general waiver
and release referenced in Section 3 of the Plan, subject to the provisions of
Section 5(f), if applicable. An individual’s right to exercise vested option
shares shall be as set forth in the applicable Company equity incentive plans
and programs and applicable stock option or award agreement(s). All terms,
conditions and limitations applicable to an individual’s options and/or shares
of common stock shall remain in full force and effect.
          (d) Certain Reductions. Notwithstanding any other provision of the
Plan to the contrary, any benefits payable to an individual under this Plan
shall be reduced (but not below one week of Base Salary) by any severance
benefits payable by the Company or an affiliate of the Company to such
individual under any other policy, plan, program, agreement or arrangement,
including, without limitation, a contract between such individual and any
entity, covering such individual. In addition, to the extent that any federal,
state or local laws, including, without limitation the Worker Adjustment
Retraining Notification Act, 29 U.S.C. Section 2101 et seq., or any similar
state statute, require the Company to give advance notice or make a payment of
any kind to an individual because of that individual’s involuntary termination
due to a layoff, reduction in force, plant or facility closing, sale of
business, change of control, or any other similar event or reason, the benefits
payable under this Plan shall either be reduced or eliminated by such required
payments or notice. The benefits provided under this Plan are

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intended to satisfy any and all statutory obligations that may arise out of an
individual’s involuntary termination of employment for the foregoing reasons,
and the Plan Administrator shall so construe and implement the terms of the
Plan.
Section 5. Limitations on Benefits.
          (a) Mitigation. Except as otherwise specifically provided herein, an
individual shall not be required to mitigate damages or the amount of any
payment provided under the Plan by seeking other employment or otherwise, nor
shall the amount of any payment provided for under the Plan be reduced by any
compensation earned by an individual as a result of employment by another
employer or any retirement benefits received by such individual after the date
of service or employment termination.
          (b) Termination of Benefits. Benefits under the Plan shall terminate
immediately if the individual, at any time, violates (i) any proprietary
information or confidentiality obligation to the Company, (ii) any term of this
Plan or (iii) any term of the applicable general waiver and release referenced
in Section 3 above.
          (c) Non-Duplication of Benefits. No individual is eligible to receive
benefits under this Plan more than one time.
          (d) Indebtedness of Individuals. If an individual is indebted to the
Company or an affiliate of the Company on the date of his or her termination of
employment or service, the Company reserves the right to offset any severance
benefits under the Plan by the amount of such indebtedness, to the extent
permitted by law.
          (e) Parachute Payments. If any payment or benefit an individual would
receive in connection with a Change in Control from the Company or otherwise (a
“Payment”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and
(ii) but for this sentence, be subject to the excise tax imposed by Section 4999
of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced
Amount. For the avoidance of doubt, a Payment shall not be considered a
parachute payment for purposes of this paragraph if such Payment is approved by
the stockholders of the Company in accordance with the procedures set forth in
Section 280G(b)(5)(A)(ii) and (B) of the Code and the regulations thereunder,
and at the time of such shareholder approval, no stock of the Company is readily
tradable on an established securities market or otherwise (within the meaning of
Section 280G(b)(5)(A)(ii)(I) of the Code). The “Reduced Amount” shall be either
(x) the largest portion of the Payment that would result in no portion of the
Payment being subject to the Excise Tax or (y) the largest portion of the
Payment, up to and including the total Payment, whichever amount, after taking
into account all applicable federal, state and local employment taxes, income
taxes, and the Excise Tax (all computed at the highest applicable marginal
rate), results in the individual’s receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or benefits
constituting “parachute payments” is necessary so that the Payment equals the
Reduced Amount, reduction shall occur in the following order: reduction of cash
payments; cancellation of accelerated vesting of stock awards; reduction of
employee benefits. If acceleration of vesting of stock award compensation is to
be reduced, such acceleration of vesting shall be cancelled in the reverse order
of the date of grant of the individual’s stock awards.

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          The accounting firm engaged by the Company for general audit purposes
as of the day prior to the effective date of the Change in Control shall perform
the foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.
          The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and the individual within ten (10) calendar days after the date on
which the individual’s right to a Payment is triggered (if requested at that
time by the Company or the individual) or such other time as requested by the
Company or the individual. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Company and the individual with an
opinion reasonably acceptable to the individual that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of the
accounting firm made hereunder shall be final, binding and conclusive upon the
Company and the individual.
          (f) Application of Section 409A. Notwithstanding anything to the
contrary set forth herein, any payments and benefits provided under this Plan
(the “Severance Benefits”) that constitute “deferred compensation” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”) and the regulations and other guidance thereunder and any state law of
similar effect (collectively “Section 409A”) shall not commence in connection
with an individual’s termination of employment unless and until such individual
has also incurred a “separation from service” (as such term is defined in
Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the
Company reasonably determines that such amounts may be provided to such
individual without causing such individual to incur the additional 20% tax under
Section 409A.
          For the avoidance of doubt, it is intended that payments of the
Severance Benefits set forth in the Plan satisfy, to the greatest extent
possible, the exemptions from the application of Section 409A provided under
Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).
However, if the Company (or, if applicable, the successor entity thereto)
determines that the Severance Benefits constitute “deferred compensation” under
Section 409A and an individual, on the termination of service, a “specified
employee” of the Company or any successor entity thereto, as such term is
defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent
necessary to avoid the incurrence of the adverse personal tax consequences under
Section 409A, the timing of the Severance Benefit payments shall be delayed
until the earlier to occur of: (i) the date that is six months and one day after
such individual’s Separation From Service, or (ii) the date of such individual’s
death (such applicable date, the “Specified Employee Initial Payment Date”), the
Company (or the successor entity thereto, as applicable) shall pay to such
individual a lump sum amount equal to the sum of the Severance Benefit payments
that such individual would otherwise have received prior to the Specified
Employee Initial Payment Date.

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Section 6. Right To Interpret Plan; Amendment and Termination.
          (a) Exclusive Discretion. The Plan Administrator shall have the
exclusive discretion and authority to establish rules, forms, and procedures for
the administration of the Plan and to construe and interpret the Plan and to
decide any and all questions of fact, interpretation, definition, computation or
administration arising in connection with the operation of the Plan, including,
but not limited to, the eligibility to participate in the Plan and amount of
benefits paid under the Plan. The rules, interpretations, computations and other
actions of the Plan Administrator shall be binding and conclusive on all
persons.
          (b) Amendment or Termination. The Company reserves the right to amend
or terminate this Plan or the benefits provided hereunder at any time; provided,
however, that no such amendment or termination shall affect the rights of any
individual designated on Appendix A unless such individual consents to such
amendment or termination of the Plan in writing. Any action amending,
terminating or extending the Plan shall be in writing and executed by the Chief
Executive Officer of the Company.
Section 7. Continuation Of Certain Employee Benefits.
          (a) COBRA Continuation. Each individual who is enrolled in a health or
dental plan sponsored by the Company or an affiliate of the Company may be
eligible to continue coverage under such health or dental plan (or to convert to
an individual policy), at the time of the individual’s termination of employment
under COBRA. The Company will notify the individual of any such right to
continue health coverage at the time of termination. No provision of this Plan
will affect the continuation coverage rules under COBRA. Therefore, the period
during which an individual may elect to continue the Company’s group medical or
dental coverage at his or her own expense under COBRA, the length of time during
which COBRA coverage will be made available to the individual, and all other
rights and obligations of the individual under COBRA will be applied in the same
manner that such rules would apply in the absence of this Plan. At the
conclusion of the COBRA premium reimbursements made by the Company, if any, the
individual will be responsible for the entire payment of premiums required under
COBRA for the duration, if any, of the COBRA period.
          (b) Other Employee Benefits. All non-health benefits (such as life
insurance, disability and 401(k) plan coverage) terminate as of an employee’s
termination date (except to the extent that a conversion privilege may be
available thereunder).
Section 8. No Implied Employment Contract.
          The Plan shall not be deemed (i) to give any employee or other person
any right to be retained in the employ or service of the Company or (ii) to
interfere with the right of the Company to discharge any employee or other
person at any time and for any reason, which right is hereby reserved.

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Section 9. Legal Construction.
          This Plan is intended to be governed by and shall be construed in
accordance with the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of
California.
Section 10. Claims, Inquiries And Appeals.
          (a) Applications for Benefits and Inquiries. Any application for
benefits, inquiries about the Plan or inquiries about present or future rights
under the Plan must be submitted to the Plan Administrator in writing by an
applicant (or his or her authorized representative). The Plan Administrator is:
Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Chief Executive Officer
          (b) Denial of Claims. In the event that any application for benefits
is denied in whole or in part, the Plan Administrator must provide the applicant
with written or electronic notice of the denial of the application, and of the
applicant’s right to review the denial. Any electronic notice will comply with
the regulations of the U.S. Department of Labor. The written notice of denial
will be set forth in a manner designed to be understood by the employee and will
include the following:
               (1) the specific reason or reasons for the denial;
               (2) references to the specific Plan provisions upon which the
denial is based;
               (3) a description of any additional information or material that
the Plan Administrator needs to complete the review and an explanation of why
such information or material is necessary; and
               (4) an explanation of the Plan’s review procedures and the time
limits applicable to such procedures, including a statement of the applicant’s
right to bring a civil action under section 502(a) of ERISA following a denial
on review of the claim, as described in Section 10(d) below.
          This written notice will be given to the applicant within ninety
(90) days after the Plan Administrator receives the application, unless special
circumstances require an extension of time, in which case, the Plan
Administrator has up to an additional ninety (90) days for processing the
application. If an extension of time for processing is required, written notice
of the extension will be furnished to the applicant before the end of the
initial ninety (90) day period.

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          This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application.
          (c) Request for a Review. Any person (or that person’s authorized
representative) for whom an application for benefits is denied, in whole or in
part, may appeal the denial by submitting a request for a review to the Plan
Administrator within sixty (60) days after the application is denied. A request
for a review shall be in writing and shall be addressed to:
Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Chief Financial Officer
          A request for review must set forth all of the grounds on which it is
based, all facts in support of the request and any other matters that the
applicant feels are pertinent. The applicant (or his or her representative)
shall have the opportunity to submit (or the Plan Administrator may require the
applicant to submit) written comments, documents, records, and other information
relating to his or her claim. The applicant (or his or her representative) shall
be provided, upon request and free of charge, reasonable access to, and copies
of, all documents, records and other information relevant to his or her claim.
The review shall take into account all comments, documents, records and other
information submitted by the applicant (or his or her representative) relating
to the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.
          (d) Decision on Review. The Plan Administrator will act on each
request for review within sixty (60) days after receipt of the request, unless
special circumstances require an extension of time (not to exceed an additional
sixty (60) days), for processing the request for a review. If an extension for
review is required, written notice of the extension will be furnished to the
applicant within the initial sixty (60) day period. This notice of extension
will describe the special circumstances necessitating the additional time and
the date by which the Plan Administrator is to render its decision on the
review. The Plan Administrator will give prompt, written or electronic notice of
its decision to the applicant. Any electronic notice will comply with the
regulations of the U.S. Department of Labor. In the event that the Plan
Administrator confirms the denial of the application for benefits in whole or in
part, the notice will set forth, in a manner calculated to be understood by the
applicant, the following:
               (1) the specific reason or reasons for the denial;
               (2) references to the specific Plan provisions upon which the
denial is based;
               (3) a statement that the applicant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant to his or her claim; and

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               (4) a statement of the applicant’s right to bring a civil action
under section 502(a) of ERISA.
          (e) Rules and Procedures. The Plan Administrator will establish rules
and procedures, consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out its responsibilities in reviewing benefit claims.
The Plan Administrator may require an applicant who wishes to submit additional
information in connection with an appeal from the denial of benefits to do so at
the applicant’s own expense.
          (f) Exhaustion of Remedies. No legal action for benefits under the
Plan may be brought until the claimant (i) has submitted a written application
for benefits in accordance with the procedures described by Section 10(a) above,
(ii) has been notified by the Plan Administrator that the application is denied,
(iii) has filed a written request for a review of the application in accordance
with the appeal procedure described in Section 10(c) above, and (iv) has been
notified in writing that the Plan Administrator has denied the appeal.
Notwithstanding the foregoing, if the Plan Administrator does not respond to a
Participant’s claim or appeal within the relevant time limits specified in this
Section 10, then the Participant may bring legal action for benefits under the
Plan pursuant to Section 502(a) of ERISA.
Section 11. Basis Of Payments To And From Plan.
          All benefits under the Plan shall be paid by the Company. The Plan
shall be unfunded, and benefits hereunder shall be paid only from the general
assets of the Company. An individual’s right to receive payments under the Plan
is no greater than that of the Company’s unsecured general creditors. Therefore,
if the Company were to become insolvent, the individual might not receive
benefits under the Plan.
Section 12. Other Plan Information.
          (a) Employer and Plan Identification Numbers. The Employer
Identification Number assigned to the Company (which is the “Plan Sponsor” as
that term is used in ERISA) by the Internal Revenue Service is 22-2389839. The
Plan Number assigned to the Plan by the Plan Sponsor pursuant to the
instructions of the Internal Revenue Service is 501.
          (b) Ending Date for Plan’s Fiscal Year. The date of the end of the
fiscal year for the purpose of maintaining the Plan’s records is December 31.
          (c) Agent for the Service of Legal Process. The agent for the service
of legal process with respect to the Plan is Cypress Bioscience, Inc., Attn:
Chief Financial Officer, 4350 Executive Drive, Suite 325, San Diego, CA 92121.
          (d) Plan Sponsor and Administrator. The “Plan Sponsor” and the “Plan
Administrator” of the Plan is Cypress Bioscience, Inc., 4350 Executive Drive,
Suite 325,
          San Diego, CA 92121. The Plan Sponsor’s and Plan Administrator’s
telephone number is (858) 452-2323. The Plan Administrator is the named
fiduciary charged with the responsibility for administering the Plan.
          (e) Type of Plan: The Plan is a welfare benefit plan.

12.

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Section 13. Statement Of ERISA Rights.
          Participants in this Plan (which is a welfare benefit plan sponsored
by the Company) are entitled to certain rights and protections under ERISA. If
you are listed on Appendix A, you are considered a participant in the Plan and,
under ERISA, you are entitled to:
Receive Information about the Plan and Your Benefits
          (a) Examine, without charge, at the Plan Administrator’s office and at
other specified locations, such as work sites, all documents governing the Plan
and a copy of the latest annual report (Form 5500 Series) filed by the Plan with
the U.S. Department of Labor and available at the Public Disclosure Room of the
Pension and Welfare Benefit Administration;
          (b) Obtain, upon written request to the Plan Administrator, copies of
documents governing the operation of the Plan and copies of the latest annual
report (Form 5500 Series) and updated Summary Plan Description. The Plan
Administrator may make a reasonable charge for the copies; and
          (c) Receive a summary of the Plan’s annual financial report. The Plan
Administrator is required by law to furnish each Participant with a copy of this
summary annual report.
Prudent Actions by Plan Fiduciaries
          In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the employee
benefit plan. The people who operate the Plan, called “fiduciaries” of the Plan,
have a duty to do so prudently and in the interest of you and other Plan
participants and beneficiaries.
Enforce Your rights
          No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising your rights under ERISA.
          Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request a copy of Plan documents or the latest annual
report from the Plan and do not receive them within 30 days, you may file suit
in a Federal court. In such a case, the court may require the Plan Administrator
to provide the materials and pay you up to $110 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the
control of the Plan Administrator.
          If you have a claim for benefits that is denied or ignored, in whole
or in part, you may file suit in a state or Federal court. In addition, if you
disagree with the Plan’s decision or lack thereof concerning the qualified
status of a domestic relations order or a medical child support order, you may
file suit in Federal court.

13.

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          If it should happen that the Plan fiduciaries misuse the Plan’s money,
or if you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a Federal
court. The court will decide who should pay court costs and legal fees. If you
are successful, the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.
Assistance with Your Questions
          If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, or if you need assistance in obtaining documents from the
Plan Administrator, you should contact the nearest office of the Employee
Benefits Security Administration, U.S. Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquiries,
Employee Benefits Security Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefits Security Administration or
accessing its website at http://www.dol.gov/ebsa/.
Section 14. Execution.
          To record the amendment and restatement of the Plan as set forth
herein, effective as of December 31, 2008, Cypress Bioscience, Inc. has caused
its duly authorized officer to execute the same this 31st day of December, 2008.

            Cypress Bioscience, Inc.
      /s/ Jay Kranzler       Dr. Jay Kranzler      Chief Executive Officer   

14.

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Appendix A
List of Participants

          Name   Position   Effective Hire Date
Mike Gendreau
  Officer/employee   October 17, 1994
Denise Wheeler
  Officer/employee   February 4, 2004
Sabrina Johnson
  Officer/employee   August 3, 1998
Srinivas Rao
  Officer/employee   January 1, 2001
Jay Kranzler
  Officer/employee/director   December 1, 1995
Michael Walsh
  Officer/employee   March 4, 2008
Jon McGarity
  Director   March 2004
Jean Pierre Millon
  Director   March 2004
Daniel Petree
  Director   June 2004
Tina Nova
  Director   April 2007
Amir Kalali
  Director   June 2007
Roger Hawley
  Director   April 2007

15.

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Example
For Employees Age 40 and Over
(Group Termination)
Exhibit A
RELEASE AGREEMENT
     I understand and agree completely to the terms set forth in the Cypress
Bioscience, Inc. Severance Benefit Plan (the “Plan”). I understand that this
release and waiver (the “Release”), together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated herein.
     In consideration of benefits I will receive under the Plan, I hereby
generally and completely release the Company and its directors, officers,
employees, shareholders, members, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring prior to my signing this Release. This Release includes, but
is not limited to: (1) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (3) all claims for breach of contract,
wrongful termination, and breach of the implied covenant of good faith and fair
dealing; (4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy; and
(5) all federal, state, and local statutory claims, including, but not limited
to, claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended),
the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the
California Fair Employment and Housing Act (as amended).
     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (a) my waiver and release do not apply to any rights or claims that may
arise after I execute this Release; (b) I should consult with an attorney prior
to executing this Release; (c) I have forty-five (45) days from the date I
receive this Release and the information specified in (f) below to consider this
Release (although I voluntarily may choose to execute this Release earlier);
(d) I have seven (7) days following the execution of this Release to revoke the
Release; and (e) this Release shall not be effective until the later of (i) the
date upon which the revocation period has expired, which shall be the eighth
(8th) day after I execute this Release, and (ii) the date I return this Release,
fully executed, to the Company; and (f) I have received with this Release a
detailed list of the job titles and ages of all employees who were terminated in
this group termination and the ages of all employees of the Company and its
affiliates in the same job

 

--------------------------------------------------------------------------------

 

classification or organizational unit who were not terminated. As required by
Title 29 U.S. Code Section 626(f)(1)(H), the Company is providing you with the
Disclosure attached hereto as Exhibit A-1. The information in the disclosure is
confidential and should not be shared with anyone except your professional
advisors.
     I represent that I have not filed any claims against the Company, and agree
that, except as such waiver may be prohibited by statute, I will not file any
claim against the Company or seek any compensation for any claim other than the
payments and benefits referenced herein. I agree to indemnify and hold the
Company harmless from and against any and all loss, cost, and expense,
including, but not limited to court costs and attorney’s fees, arising from or
in connection with any action which may be commenced, prosecuted, or threatened
by me or for my benefit, upon my initiative, or with my aid or approval,
contrary to the provisions of this Release.
     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor.” I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company, its affiliates, and the entities and persons specified
above.

            Employee
            Name:         Date:     

2.

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Example
For Employees Age 40 and Over
(Group Termination)
Exhibit A-1
DISCLOSURE UNDER TITLE 29 U.S. CODE SECTION 626(f)(1)(H)

     
Confidentiality Provision:
  The information contained in this document is private and confidential. You
may not disclose this information to anyone except your professional advisors.

1.   The following departments have been selected for the severance package
program:

  a.                            b.                            [ADD MORE IF
NECESSARY]

2.   In the [two] departments listed above, employees whose employment will be
eliminated on [date of termination] are eligible to participate in the severance
package program.   3.   An individual age 40 or more years will have up to
forty-five (45) days to review the terms and conditions of the severance
package.

Employees Eligible For The Severance Package Program

      Job Title   Age
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   

 

--------------------------------------------------------------------------------

 

Employees Not Eligible For The Severance Package Program

      Job Title   Age
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   

2.

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Example
For Employees Under Age 40
(Individual or Group Termination)
Exhibit B
RELEASE AGREEMENT
     I understand and agree completely to the terms set forth in the Cypress
Bioscience, Inc. Severance Benefit Plan (the “Plan”). I understand that this
release and waiver (the “Release”), together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated herein.
     In consideration of benefits I will receive under the Plan, I hereby
generally and completely release the Company and its directors, officers,
employees, shareholders, members, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring prior to my signing this Release. This Release includes, but
is not limited to: (1) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (3) all claims for breach of contract,
wrongful termination, and breach of the implied covenant of good faith and fair
dealing; (4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy; and
(5) all federal, state, and local statutory claims, including, but not limited
to, claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended),
the federal Americans with Disabilities Act of 1990 and the California Fair
Employment and Housing Act (as amended).
     I represent that I have not filed any claims against the Company, and agree
that, except as such waiver may be prohibited by statute, I will not file any
claim against the Company or seek any compensation for any claim other than the
payments and benefits referenced herein. I agree to indemnify and hold the
Company harmless from and against any and all loss, cost, and expense,
including, but not limited to court costs and attorney’s fees, arising from or
in connection with any action which may be commenced, prosecuted, or threatened
by me or for my benefit, upon my initiative, or with my aid or approval,
contrary to the provisions of this Release.
     I acknowledge that to become effective, I must sign and return this Release
to the Company so that it is received not later than ten (10) days following the
date of my employment termination. I acknowledge that I have read and understand
Section 1542 of the California Civil Code which reads as follows: “A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of

3.

--------------------------------------------------------------------------------

 

any jurisdiction of similar effect with respect to my release of any claims I
may have against the Company, its affiliates, and the entities and persons
specified above.

            Employee
            Name:         Date:     

2.

--------------------------------------------------------------------------------

 

         

Example
For Employees Age 40 and Over
(Individual Termination)
Exhibit C
RELEASE AGREEMENT
     I understand and agree completely to the terms set forth in the Cypress
Bioscience, Inc. Severance Benefit Plan (the “Plan”). I understand that this
release and waiver (the “Release”), together with the Plan, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated herein.
     In consideration of benefits I will receive under the Plan, I hereby
generally and completely release the Company and its directors, officers,
employees, shareholders, members, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring prior to my signing this Release. This Release includes, but
is not limited to: (1) all claims arising out of or in any way related to my
employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but
not limited to, salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (3) all claims for breach of contract,
wrongful termination, and breach of the implied covenant of good faith and fair
dealing; (4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy; and
(5) all federal, state, and local statutory claims, including, but not limited
to, claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended),
the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the
California Fair Employment and Housing Act (as amended).
     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA. I also acknowledge that the consideration
given under the Release for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the
ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I should consult with
an attorney prior to executing this Release; (C) I have twenty-one (21) days to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following my execution of this Release to
revoke the Release; and (E) this Release shall not be effective until the date
upon which the revocation period has expired, which shall be the eighth (8th)
day after I execute this Release.
     I represent that I have not filed any claims against the Company, and agree
that, except as such waiver may be prohibited by statute, I will not file any
claim against the Company or seek any compensation for any claim other than the
payments and benefits referenced herein. I agree to indemnify and hold the
Company harmless from and against any and all loss, cost, and

 

--------------------------------------------------------------------------------

 

expense, including, but not limited to court costs and attorney’s fees, arising
from or in connection with any action which may be commenced, prosecuted, or
threatened by me or for my benefit, upon my initiative, or with my aid or
approval, contrary to the provisions of this Release.
     I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor.” I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company, its affiliates, and the entities and persons specified
above.

            Employee
            Name:         Date:     

2.