Document:

exv10w20

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.

10.

 

          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.

 

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.

 

          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.

 

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.

 

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.

 

	 	 	 	 	 

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.

 

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.exv10w21

Exhibit 10.21

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
effective as of this 31st day of December, 2008 by and between Cypress Bioscience,
Inc., a Delaware corporation (the “Company”) and Denise Wheeler (the “Employee”).

     WHEREAS, the Company desires to employ the Employee in an executive capacity as its General
Counsel on the terms and conditions set forth herein and the Employee is willing to accept and
undertake such employment.

     WHEREAS, the Company and the Employee desire to amend and restate this Agreement in its
entirety as set forth herein, effective as of the date set forth above, to, among other things,
clarify the application of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”) to the benefits that may be provided to the Employee.

AGREEMENT

     NOW THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the
Company and the Employee agree as follows:

ARTICLE 1

EMPLOYMENT; TERM; DUTIES

     1.1 Employment. Upon the terms and conditions hereinafter set forth, the Company hereby
employs the Employee, and the Employee hereby accepts continued employment, as General Counsel
(“General Counsel”) of the Company.

     1.2 Term. Unless sooner terminated as provided in Article 5 hereof, the Employee’s employment
hereunder shall be for a term commencing in February 2004 and ending on February 4, 2006, subject
to automatic renewal for one year periods unless written notice has been provided by either party
at least seventy-five (75) days prior to the date of such automatic renewal (a “Non-Renewal
Notice”). Notwithstanding anything herein to the contrary, either party may terminate the
Employee’s employment under this Agreement at any time, with or without Cause, subject to the terms
and conditions of Article 5 herein. The actual term of employment hereunder, giving effect to any
early termination of employment under Article 5 hereof, is referred to as the “Term.”

     1.3 Duties. During the Term, the Employee shall perform such executive duties for the Company
and for its subsidiaries, consistent with her position hereunder and as typically associated with
the duties of a General Counsel of a publicly-held corporation and as reasonably may be assigned to
her from time to time by the Board and the Chief Executive Officer of the Company. Except as
contemplated by Section 1.5, the Employee shall devote her entire business time, attention and
energies to the performance of her duties hereunder.

     1.4 Exclusive Agreement. The Employee represents and warrants to the Company that she is not
a party to any agreement or arrangement, whether written or oral, in effect which

1.

 

would prevent the Employee from rendering the services contemplated hereunder to the Company
during the Term.

     1.5 Other Activity. Notwithstanding the foregoing, subject to her fiduciary duties to the
Company under applicable law, the Company acknowledges and understands that the Employee may serve
as a director of other companies not in competition with the Company by providing prior written
notice to the Company; provided, however, that the performance of such services shall not restrict
or limit in any manner the Employee’s ability to perform her duties hereunder.

     1.6 Insurance. The Company shall obtain, and shall use its commercially reasonable best
efforts to maintain during the Term, Director’s and Officer’s Insurance and Product Liability
Insurance policies, with full defense coverage of at least $10,000,000 for each, respectively, with
regard to all actions undertaken by the Employee in her capacity as an officer and employee of the
Company.

ARTICLE 2

COMPENSATION

     2.1 Base Salary. For all services rendered by the Employee hereunder and in consideration of
all covenants and conditions undertaken by her pursuant to this Agreement, the Company shall pay
the Employee an annual base salary (“Base Salary”) of $225,000 per year in equal semi-monthly
installments, and which shall be increased if there is an across the board increase in base salary
for other executive officers. In addition, each year during the Term, the Board shall review the
Base Salary with a view to determining whether it would be appropriate to increase such Base
Salary. The annual Base Salary payable to the Employee hereunder, as it may be so increased,
thereafter shall constitute the “Base Salary”. If the first or last month of the Term is not a
full calendar month, then any calculation of Base Salary for such period shall be prorated for the
number of days in such months during which the Employee was employed.

     2.2 Bonuses.

          (a) In addition to the Base Salary, the Employee may be eligible for cash bonuses (the “Bonus
Amount”) based on the performance of the Employee during a fiscal year, as evaluated by the CEO and
the Board in their sole discretion. Any such Bonus Amount shall be paid no later than the
fifteenth day of the third month following the end of the Company’s fiscal year for which such
Bonus Amount was earned. It is acknowledged and agreed that the determination and the payment of
the Bonus Amount to the Employee shall be at the sole discretion of the Board which may consider,
among other matters, the financial condition of the Company at the time. In exercising its
discretion pursuant to this subsection, the Board shall act in a manner at least as favorable to
the Employee as governs the award of bonuses to other executive officers and key employees of the
Company.

     2.3 Deductions. The Company shall deduct from the compensation described in this Section 2
any Federal, state or city withholding taxes, social security contributions and any other

2.

 

amounts which may be required to be deducted or withheld by the Company pursuant to any
federal, state or city laws, rules or regulations.

ARTICLE 3

BENEFITS

     3.1 Benefits. During the Term, the Employee shall be entitled to participate in such
compensation and incentive plans and group life, health, accident, disability and hospitalization
insurance plans, pension plans and retirements plans as the Company may make available to its other
executive officers.

     3.2 Life Insurance. The Company agrees that it will provide the Employee with life insurance
policy or policies in amounts at least as favorable to the Employee as governs the other executive
officers, subject to availability of such insurance at commercially reasonable costs and the mutual
agreement of the Company and the Employee as to the type and nature of the policies.

     3.3 Expenses. The Company agrees that the Employee is authorized to incur reasonable and
customary expenses in the performance of her duties hereunder, including travel and entertainment
costs, and upon presentation of appropriate documentation thereof, the Company promptly, but in no
event later than December 31 of the calendar year following the year in which such expenses were
incurred by the Employee, shall pay or reimburse the Employee for such reasonable expenses. In the
event that any reimbursement by the Company of expenses of the Employee hereunder is deducted by
the Company, and results in additional taxes due and payable by the Employee, the Company shall pay
to the Employee an additional tax gross-up payment to the Employee in an amount that shall fully
fund the payment by the Employee of any income and employment taxes on such reimbursement payment
and tax gross-up payment. Any tax gross-up payment shall be made as soon as practicable, but in no
event later than the end of the Employee’s taxable year following the year in which the Employee
pays the related taxes.

     3.4 Vacations. During each full year of the Term, the Employee shall be entitled to four (4)
weeks of paid vacation, to be taken at times determined by the Employee which are mutually
agreeable with the Company and which do not unreasonably interfere with the performance of her
duties hereunder.

ARTICLE 4

STOCK AWARDS

     4.1 Stock Awards.

          (a) In the event of a termination (as described in Article 5), and except as otherwise
provided in Section 4.1(b) and 4.1(c) hereof, all Stock Awards which have not vested as of the
Termination Date shall cease vesting and any unvested Stock Awards shall be cancelled as of the
Termination Date. Unless otherwise set forth in the applicable equity incentive plan or stock
award agreement, and except as otherwise provided in Section 4.1(b) and 4.1(c) hereof, all

3.

 

vested and exercisable Stock Awards shall be cancelled three (3) months after the Termination
Date if not exercised prior to such expiration date.

          (b) Upon the Employee’s death or Disability (as defined in Section 5.1 below), all rights
under such Stock Awards shall transfer to the Employee’s designated beneficiary, if applicable.
Unless otherwise set forth in the applicable equity incentive plan or stock award agreement, all
Stock Awards shall be cancelled twelve (12) months after the Employee is terminated due to
Disability if not exercised prior to such expiration date. In the event of the Employee’s death,
the Employee’s legal representatives shall have eighteen (18) months following the Termination Date
to exercise any exercisable Stock Awards before they are cancelled.

          (c) Notwithstanding anything to the contrary in the foregoing, in the event of a termination
of this Agreement in any of the cases identified in Section 5.3 or 5.4 hereof, Stock Awards may
accelerate vesting as provided in those Sections.

          (d) The Company may grant the Employee Stock Awards to purchase the Company’s common stock at
such times and on such terms as may be decided from time to time by the Board, in its sole
discretion.

          (e) For purposes of this Agreement, “Stock Awards” means all stock options, restricted stock,
and other equity awards granted pursuant to the Company’s stock option and equity incentive award
plans or agreements and any shares of Company stock issued upon exercise thereof. However, “Stock
Awards” does not include stock awards issued under or held in any plan sponsored by the Company
that is intended to be qualified under Section 401(a) of the Internal Revenue Code (e.g., the
Company’s 401(k) plan).

ARTICLE 5

DEATH, DISABILITY; TERMINATION

     5.1 Death; Disability. The Employee’s employment hereunder shall terminate upon her death or,
at the election of the Company, by written notice to the Employee if the Employee becomes Disabled
(as such term is hereinafter defined), to the extent permitted by law. In the event of a
termination of the Employee’s employment for death or disability, the Company shall promptly pay
the Employee (or her legal representatives, as the case may be) all earned and unpaid wages and
accrued vacation.

     For the purposes of this Agreement, the Employee shall be deemed to be “Disabled” or have a
“Disability” if as a result of the occurrence of mental or physical disability during the Term she
has been unable to perform her duties hereunder for six (6) consecutive months or one hundred
eighty (180) days in any twelve (12) consecutive month period, as determined in good faith by the
Board; provided, however, that if the Employee develops a mental or physical disability during the
Term, and it is determined, in the reasonable professional judgment of an independent, objective
and qualified medical expert in the field of such disability, that the Employee will be unable to
perform her duties hereunder and that such disability will continue for six (6) consecutive months
or one hundred eighty 180 days in any twelve (12) consecutive

4.

 

month period, then to the extent permitted by law, the Company shall be permitted to terminate
the Employee’s employment immediately.

     The date of any termination of employment under this Section 5.1 or Sections 5.2, 5.3 or 5.4
is referred to herein as the “Termination Date.”

     5.2 Termination of Employment by Employee.

          (a) Notwithstanding any provision to the contrary herein, unless otherwise provided herein or
unless otherwise provided by law, the Employee at any time, upon thirty (30) days’ written notice
to the Company, may terminate her employment by the Company hereunder. Except as otherwise
provided in Section 5.2(b) below, the Company shall not be liable to the Employee for the payment
of any amount on such termination.

          (b) In the event that the Employee terminates her employment as General Counsel following (i)
an uncured material breach of this Agreement by the Company, (ii) the occurrence the relocation of
the Company’s executive offices or principal business location to a point more than thirty (30)
miles from the San Diego, California area, (iii) any uncured action by the Board or direction given
by the Board to the Employee that is contrary to applicable law or accounting standards or
constitutes an unethical business practice, or (iv) a demotion or the occurrence of a material
reduction in the Employee’s authority, functions or responsibilities as General Counsel without her
consent, then such termination by the Employee shall be deemed for all purposes, including for
purposes of severance payments and benefits provided under Section 5.3 hereof, to be a termination
by the Company of the employment of the Employee hereunder without cause pursuant to Section 5.3.
The Company shall have thirty (30) days following receipt of written notice by the Employee to the
Company of the material breach described in items (i) and (iii) above, setting forth in reasonable
detail the matter constituting such breach, to cure such breach.

               (i) Termination of Employment With Cause. In addition to any other remedies available to it
at law, in equity or as set forth in this Agreement, the Company shall have the right, upon written
notice to the Employee, to immediately terminate her employment hereunder if the Employee (a)
evidences a pattern of willful breach in any material respect of any material provision of this
Agreement or a pattern of willful violation of any reasonable policies or orders of the CEO or the
Board and such pattern of willful breach or violation does not cease within thirty (30) days after
the Employee’s receipt of written notice thereof from the Board setting forth in reasonable detail
the matters constituting such pattern; (b) the Employee’s commission of an act that materially
injures the business of the Company; (c) the Employee’s conviction of a felony involving moral
turpitude that is likely to inflict or has inflicted material injury on the business of the
Company; (d) the Employee’s engaging or in any manner participating in any activity which is
directly competitive with or injurious to the Company or any of its Affiliates or which violates
any material provisions of Article 6 hereof or the Employee’s Proprietary Information and
Inventions Agreement with the Company; or (e) the Employee’s commission of any fraud against the
Company, its Affiliates, employees, agents or customers or use or intentional appropriation for her
personal use or benefit of any funds or properties of the Company not authorized by the CEO or the
Board to be so used or appropriated.

5.

 

     5.3 Termination of Employment Without Cause or for Non-Renewal.

          (a) Notwithstanding any provision to the contrary herein and unless otherwise provided by law,
the Company, at any time upon thirty (30) days’ written notice to the Employee, in its sole and
absolute discretion and for any or no reason, may terminate the employment of the Employee as
General Counsel hereunder without cause. In such event, if the Company issues the Employee a
Non-renewal Notice, or if the Agreement expires and the Employee is not rehired, then upon the
Employee furnishing the Company with a Release and Waiver of Claims in the form of either Exhibit A
or Exhibit B attached hereto, as applicable (the “Release”) within the applicable time period set
forth therein, but in no event later than forty-five (45) days following termination of employment,
and permitting such Release to become effective in accordance with its terms, the Company shall pay
the Employee a single lump sum equal to six (6) months of the Base Salary within ten (10) days
following the effective date of the Release. Notwithstanding the foregoing, the timing of the
severance payments is subject to the provisions of Section 5.7, to the extent applicable.

          (b) In the event that the employment of the Employee hereunder is terminated by the Company
without cause, all Stock Awards that would have vested in accordance with their applicable vesting
schedules if Employee had continued in employment with the Company for an additional six (6) months
as of Termination Date, shall vest immediately upon the Termination Date.

          (c) In the event that the employment of the Employee hereunder is terminated by the Company
without cause, the Company, at no cost to the Employee and for a period of twelve (12) months from
the Termination Date, shall continue to provide Employee and her family with all health insurance
benefits available under COBRA; provided that Employee timely elects and is eligible for continued
coverage under COBRA. Subject to the provisions of Section 5.7, to the extent applicable, the
Company shall make any coverage payments directly to any insurer on a monthly basis or otherwise in
accordance with the insurer’s standard billing practices.

          (d) The Employee acknowledges that the payments referred to in this Section 5.3 constitute the
only payments which the Employee shall be entitled to receive from the Company under this Agreement
in the event of any termination pursuant to this Section 5.3, and that except for such payments and
such other obligations as are expressly provided herein the Company shall have no further liability
or obligation to her under this Agreement.

          (e) The Employee shall have no duty to mitigate damages in order to receive any severance
payments and benefits provided in this Section 5.3.

     5.4 Change in Control.

          (a) In the event Employee is terminated without cause during the period beginning one (1)
month before and ending thirteen (13) months following the effective date of a Change in Control,
in lieu of (and not in addition to) the severance benefits that would otherwise be provided under
Section 5.3(a) of this Agreement, subject to the Employee’s provision of an effective Release as
required by Section 5.3(a) no later than forty-five days following the later of

6.

 

(i) the Termination Date, or (ii) the effective date of the Change in Control, the Employee
shall be paid an amount equal to twelve (12) months of Base Salary in a lump sum within ten (10)
days following the later of (i) the effectiveness of the Release, or (ii) the effectiveness of the
Change in Control. Additionally, all Stock Awards shall be deemed to have vested immediately as of
the Termination Date, and Employee shall receive the COBRA continuation benefits described in
Section 5.3(c). In order to give effect to the intent of the foregoing provision, notwithstanding
anything to the contrary set forth in the Employee’s applicable Stock Award agreements, in no event
shall Employee’s unvested Stock Awards terminate any earlier than one (1) month following any
termination of Employee that is without cause or deemed to be without cause such that Employee may
become entitled to the vesting acceleration benefits under this Section 5.4.

          (b) For purposes of this Agreement, Change in Control means: (i) a sale of all or
substantially all of the assets of the Company; (ii) 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
representing less than 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;
(iii) 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 50% of the
voting power of the Company or, where the Company is a wholly-owned subsidiary of another entity,
the Company’s parent; or (iv) an acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act of 1934, as amended (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 75%
of the combined voting power entitled to vote in the election of directors of the Company;
provided, however, that nothing in this paragraph shall apply to a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the Company.

     5.5 Parachute Payments.

          (a) In the event that the benefits provided for in this Agreement or otherwise payable to the
Employee (i) constitute “parachute payments” within the meaning of Section 280G of the Code and
(ii) but for this Section 5.5 would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee’s benefits provided for in this Agreement or otherwise shall be payable
either (x) in full, or (y) as to such lesser amount which would result in no portion of such
termination benefits being subject to excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal, state and local income taxes and the
excise tax imposed by Section 4999, results in the receipt by the Employee on an after-tax basis,
of the greatest amount of benefits under this Agreement,

7.

 

notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of
the Code.

          (b) If a reduction in the payments and benefits that would otherwise be paid or provided to
the Employee under the terms of this Agreement is necessary to comply with the provisions of
Section 5.5(a), such reduction will occur in the following order: reduction of cash payments;
cancellation of accelerated vesting of Stock Awards; reduction of other 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 Employee’s Stock Awards. If,
as a result of any reduction required by Section 5.5(a), amounts previously paid to the Employee
exceed the amount to which the Employee is entitled, the Employee will promptly return the excess
amount to the Company.

          (c) Any determination required under this Section 5.5 shall be made in writing by a nationally
recognized accounting or consulting firm appointed by the Company, which firm shall not then be
serving as accountant or auditor for or consultant to the Company or the person or entity that
effected the Change in Control and whose determinations shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the calculations required by
this Section 5.5, such firm may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations concerning the application
of Sections 280G and 4999 of the Code. The Company and the Employee shall furnish to such firm
such information and documents as such firm may reasonably request in order to make a determination
under this Section 5.5. The Company shall bear all costs such firm may reasonably incur in
connection with any calculations contemplated by this Section 5.5.

     5.6 Application of Code Section 409A. Notwithstanding anything to the contrary set forth
herein, any payments and benefits provided under this Agreement (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
Employee’s termination of employment unless and until Employee 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 Employee
without causing Employee to incur the additional 20% tax under Section 409A. If Employee is, upon
the separation from 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 Employee’s Separation From Service, or (ii) the date of
Employee’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Company
(or the successor entity thereto, as applicable) shall pay to Employee a lump sum amount equal to
the sum of the Severance Benefit payments that Employee would otherwise have received through the
Specified Employee Initial Payment Date if the payment of the Severance Benefits had not been so
delayed pursuant to this Section.

8.

 

ARTICLE 6

INVENTIONS, NON-DISCLOSURE

     6.1 Non-Disclosure and Inventions. As a condition of continued employment the Employee agrees
to continue to abide by the Company’s Proprietary Information and Inventions Agreement dated
February 2004 that was previously executed by Employee.

     6.2 Return of Company Property. Promptly upon the expiration or termination of the Employee’s
employment hereunder for any reason, the Employee shall surrender to the Company all documents,
drawings, work papers, lists, memoranda, records and other data (including all copies) constituting
or disclosing any of the foregoing information.

     6.3 Breach of Non-Disclosure Provision. In the event that the Employee shall breach Section
6.2 hereof or any provision of the Proprietary Information and Inventions Agreement, or in the
event that any such breach is threatened by the Employee, in addition to and without limiting or
waiving any other remedies available to the Company at law or in equity, the Company shall be
entitled to immediate injunctive relief in any court having the capacity to grant such relief, to
restrain any such breach or threatened breach and to enforce the provisions of Section 6. The
Employee acknowledges and agrees that there is no adequate remedy at law for any such breach or
threatened breach and, in the event that any action or proceeding is brought seeking injunctive
relief, the Employee shall not use as a defense thereto that there is an adequate remedy at law.

     6.4 Reasonable Restrictions. The parties acknowledge that (a) the agreements in this Article
6 are essential to protect the business and goodwill of the Company, and (b) the foregoing
restrictions are under all of the circumstances reasonable and necessary for the protection of the
Company and its business.

ARTICLE 7

ARBITRATION

     To ensure the rapid and economical resolution of disputes that may arise in connection with
the Employee’s employment with the Company, the Employee and the Company agree that any and all
disputes, claims, or causes of action, in law or equity, arising from or relating to the
enforcement, breach, performance, or interpretation of this Agreement, the Employee’s employment,
or the termination of such employment, shall be resolved, to the fullest extent permitted by law,
by final, binding and confidential arbitration in San Diego, California conducted by the Judicial
Arbitration and Mediation Services, Inc. (“JAMS”) or its successor, under the then applicable rules
of JAMS. The Employee acknowledges that by agreeing to this arbitration procedure, both the
Employee and the Company waive the right to resolve any such dispute through a trial by jury or
judge or administrative proceeding. The arbitrator shall: (a) have the authority to compel
adequate discovery for the resolution of the dispute and to award such relief as would otherwise be
permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential
findings and conclusions and a statement of the award. The arbitrator shall be authorized to award
any or all remedies that the Employee

9.

 

or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’
arbitration fees in excess of those which would be required if the dispute were decided in a court
of law. Nothing in this Agreement is intended to prevent either the Employee or the Company from
obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such
arbitration.

ARTICLE 8

MISCELLANEOUS

     8.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, heirs, distributes and successors;
provided, that the obligations of the Employee under this Agreement shall not be delegable by her.

     8.2 Notices. All notices and other communications hereunder and all legal process in regard
hereto shall be validly given, made or served if in writing, when delivered personally (by courier
service or otherwise), or when actually received when mailed by first-class certified or registered
United States mail, postage-prepaid and return receipt requested, to the address of the party to
receive such notice or other communication set forth below, or at such other address as any party
hereto may from time to time advise the other party in writing:

If to the Company:

Cypress Bioscience, Inc.

4350 Executive Square Drive, Suite 325

San Diego, CA 92121

Attention: Chief Executive Officer

If to the Employee:

Denise Wheeler

12726 Via Cortina

Del Mar, CA 92014

     8.3 Severability. If any provision of this Agreement, or portion thereof, shall be held
invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability
shall attach only to such provision or portion thereof, and shall not in any manner affect or
render invalid or unenforceable any other provision of this Agreement or portion thereof, and this
Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof
were not contained herein. In addition, any such invalid or unenforceable provision or portion
thereof shall be deemed, without further action on the part of the parties hereto, modified,
amended or limited to the extent necessary to render the same valid and enforceable.

     8.4 Waiver. No waiver by a party hereto of a breach or default hereunder by the other party
shall be considered valid, unless in writing signed by such first party, and no such

10.

 

waiver shall be deemed a waiver of any subsequent breach or default of the same or any other
nature.

     8.5 Entire Agreement. This Agreement sets forth the entire agreement between the parties with
respect to the subject matter hereof, and supersedes any and all prior agreements between the
Company and the Employee, whether written or oral, relating to any or all matters covered by and
contained or otherwise dealt with in this Agreement, including but not limited to the Employee’s
Employment Agreement dated February 2004. No representation, warranty, undertaking or covenant is
made by either party hereto except as provided herein and any representations, warranties
undertakings or covenants not set forth herein are specifically disclaimed. This Agreement does
not constitute a commitment of the Company with regard to the Employee’s employment, express or
implied, other than to the extent expressly provided for herein.

     8.6 Amendment.

          (a) No modification, change or amendment of this Agreement or any of its provisions shall be
valid, unless in writing and signed by the party against whom such claimed modification, change or
amendment is sought to be enforced.

          (b) If Employee and the Company determine that any payments or benefits payable under this
Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with
Section 409A of the Code, Employee and the Company agree to amend this Agreement, or take such
other actions as Employee and the Company deem reasonably necessary or appropriate, to comply with
the requirements of Section 409A of the Code, the Treasury Regulations thereunder, and any
applicable transition relief or other guidance thereunder, while preserving the economic agreement
of the parties. If any provision of the Agreement would cause such payments or benefits to fail to
so comply, such provision shall automatically not be effective and shall be null and void with
respect to such payments or benefits, but such provision shall otherwise remain in full force and
effect.

     8.7 Authority. The parties each represent and warrant that they have the power, authority and
right to enter into this Agreement and to carry out and perform the terms, covenants and conditions
hereof.

     8.8 Titles. The titles of the Articles and Sections of this Agreement are inserted merely for
convenience and ease of reference and shall not affect or modify the meaning of any of the terms,
covenants or conditions of this Agreement.

     8.9 Applicable Law. This Agreement, and all of the rights and obligations of the parties in
connection with the employment relationship established hereby, shall be governed by and construed
in accordance with the internal laws of the State of California without giving effect to principals
relating to the conflicts of law.

11.

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 
	 	CYPRESS BIOSCIENCE, INC.

 	 
	 	By:  	/s/ Jay Kranzler
 	 
	 	 	Its: Chief Executive Officer 	 
	 	 	 	 
	 	                       /s/ Denise Wheeler
 	 
	 	Denise Wheeler 	 
	 	 	 
	 

12.

 

Example

(Group Termination)

Exhibit A

RELEASE AGREEMENT

          I understand and agree completely to the terms set forth in the Amended and Restated
Employment Agreement dated as of ___, 2008, (the “Agreement”) between me and Cypress Bioscience,
Inc. (the “Company”) I understand that this release and waiver (the “Release”), together with the
Agreement, 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 Agreement, 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.

 

	 	 	 	 	 

Example

(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 benefits:

	 	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 receive severance benefits.
	 
	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 benefits.

	 	 	 
	Employees Eligible For Severance Benefits

	 
	Job Title
	 	Age
	 

	 	 

	 	 	 

 

 

	 	 	 
	Employees Not Eligible For Severance Benefits

	 
	Job Title
	 	Age
	 

	 	 

	 	 	 

2.

 

Example

(Individual Termination)

Exhibit B

RELEASE AGREEMENT

     I understand and agree completely to the terms set forth in the Amended and Restated
Employment Agreement dated as of ___, 2008, (the “Agreement”) between me and Cypress Bioscience,
Inc. (the “Company”) I understand that this release and waiver (the “Release”), together with the
Agreement, 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 Agreement, 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.

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