Document:

Warrant To Purchase Common Stock

  Exhibit 10.3
 THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO CYPRESS THAT SUCH REGISTRATION IS NOT REQUIRED.
 CYPRESS BIOSCIENCE, INC.
 WARRANT TO PURCHASE COMMON
STOCK

			
	No. CSW-__	 	June 6, 2003

 Void After June 6, 2008
          This Certifies That, for value received, PIERRE FABRE MÉDICAMENT, with its principal office at of 45,
place Abel-Gance, 92654 Boulogne cedex, France, or assigns (“Pierre Fabre”), is entitled to subscribe for and purchase at the Exercise Price (defined below) from CYPRESS BIOSCIENCE
INC., a Delaware corporation, with its principal office at 4350 Executive Drive, Suite 325 San Diego, California 92121 (“Cypress”) up to 300,000 shares of Common Stock (the “Common
Stock”) of Cypress. This Warrant is being issued in connection with the Second Restated License Agreement, dated of even date herewith by and among Cypress and Pierre Fabre (the “Restated License
Agreement”).
          1.       DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:

		
	 	          (a)               “Effective Date” shall be June 6,
2003.

 
                   
 (b)               “Exercise Period” shall mean the period commencing with the date hereof and ending five years later, unless sooner terminated as
provided below.
                     (c)              
“Exercise Price” shall be $4.909 per share, which is 125% of the average of the Per Share Market Price of Common Stock of Cypress for the 10 days immediately preceding the Effective Date. The Exercise Price shall be subject to
adjustment pursuant to Section 5 below.
                     (d)              
“Exercise Shares” shall mean up to 300,000 shares of Common Stock of Cypress issuable upon exercise of this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section
5 below.
                     (e)               “Per
Share Market Price” shall be determined based on the closing bid price of the Common Stock as reported by the National Association of Securities Dealers, Inc. Automated Quotations System.
          2.       EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by delivery of the following
 1.

  to Cypress at its address set forth above (or at such other address as it may designate by notice in writing to Pierre Fabre):
                     (a)               An executed
Notice of Exercise in the form attached hereto;
                     (b)               Payment of
the Exercise Price either in cash or by check; and
                     (c)               This
Warrant.
          Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in
the name of Pierre Fabre or persons affiliated with Pierre Fabre, if Pierre Fabre so designates, shall be issued and delivered to Pierre Fabre within a reasonable time after the rights represented by this Warrant shall have been so
exercised.
          The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed
to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of Cypress are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are
open.
          3.       COVENANTS OF CYPRESS.
                     3.1         Covenants as to Exercise Shares. Cypress
covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. Cypress further covenants and agrees that Cypress will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, Cypress
will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.
                     3.2         No Impairment. Except and to the extent as waived or
consented to by Pierre Fabre, Cypress will not, by amendment of its Amended and Restated Certificate of Incorporation, as amended, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Cypress, but will at all times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of Pierre Fabre against impairment.
                     3.3       Notices of Record Date. In the event of any taking by
Cypress of a record of the holders of any class of securities for the purpose of determining the holders thereof
 2.

  who are entitled to receive any dividend (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, Cypress shall mail to Pierre
Fabre, at least 10 days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution.
                     3.4       Rule 144 Reporting. So long as Pierre Fabre holds the
Warrant or the Exercise Shares, and with a view to making available to Pierre Fabre the benefits of certain rules and regulations of the SEC which may permit the sale of the Warrant or the Exercise Shares to the public without registration, Cypress
agrees to use commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act (as defined below); and file
with the SEC, in a timely manner, all reports and other documents required of Cypress under the Securities Exchange Act of 1934, as amended.
          4.      REPRESENTATIONS OF PIERRE FABRE.
                     4.1       Accredited Investor. Pierre Fabre is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares presenting an investment decision like that involved in the issuance of the Warrant and the Exercise Shares, and has requested,
received, reviewed and considered all information Pierre Fabre deems relevant in making an informed decision with respect to the investment in the Warrant and the Exercise Shares. Pierre Fabre is an “accredited investor” within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act.
                     4.2
        Acquisition of Warrant for Personal Account. Pierre Fabre represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or
for sale or distribution of said Warrant or Exercise Shares or any part thereof. Pierre Fabre also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares Pierre Fabre is acquiring is being acquired for, and will
be held for, its account only.
                     4.3       
Securities Are Not Registered.
                                    (a)
               Pierre Fabre understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the
“Securities Act”). Pierre Fabre realizes that the basis for the exemption may not be present if, notwithstanding its representations, Pierre Fabre has a present intention of acquiring the securities for a fixed or
determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. Pierre Fabre has no such present intention.
                                    (b)
               Pierre Fabre recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Pierre Fabre recognizes that Cypress has no obligation to register the Warrant or the Exercise Shares of Cypress (except as provided in the Equity Investment Agreement between Pierre Fabre and Cypress,
dated as of even date herewith), or to comply with any exemption from such registration.
 3.

                                  (c)   
     Pierre Fabre is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met, including, among other things, the existence of a
public market for the shares, the availability of certain current public information about Cypress, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding
specified limitations.

			
	 	 4.4 	Disposition of Warrant and Exercise Shares.

 
                                 (a)   
     Pierre Fabre further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until Pierre Fabre shall have notified Cypress of the proposed disposition and shall
have furnished Cypress with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by Cypress, Pierre Fabre shall have furnished Cypress with an opinion of counsel, reasonably satisfactory to
Cypress, for Pierre Fabre to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Securities Act or any applicable state securities laws; provided that it is agreed that Cypress will not require
opinions of counsel for transactions with respect to Exercise Shares made pursuant to Rule 144, except in unusual circumstances.
                                  (b)  
      Pierre Fabre understands and agrees that all certificates evidencing the shares to be issued to Pierre Fabre may bear the following legend:

		
	 	 
	 	THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO CYPRESS THAT SUCH REGISTRATION IS NOT REQUIRED.

 
                     5.         ADJUSTMENT OF
EXERCISE PRICE.   In the event of changes in the outstanding Common Stock of Cypress by reason of dividends or other distributions to holders of Common Stock (without payment therefor) of Common Stock or
other shares of stock or other securities convertible or exercisable for Common Stock or rights or options to subscribe for or purchase any of the foregoing, stock splits and reverse stock splits, split-ups, recapitalizations, reclassifications,
combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under the Warrant in the aggregate and the Exercise Price shall be appropriately and correspondingly adjusted to
give Pierre Fabre of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as Pierre Fabre would have owned had the Warrant been exercised prior to the event and had Pierre Fabre continued to
hold such shares until after the event requiring adjustment; provided, however, that such adjustment shall not be made with respect to, and this Warrant shall terminate if not exercised prior to, the events set forth in Section 7 below. The form of
this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.
 4.

                      6.        
FRACTIONAL SHARES.   No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon
exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, Cypress shall,
in lieu of issuance of any fractional share, pay Pierre Fabre otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of an Exercise Share by such fraction.

                    7.         EARLY
TERMINATION.   In the event of, at any time during the Exercise Period, any capital reorganization, or any reclassification of the capital stock of Cypress (other than a change in par value or from par value to no par
value or no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of Cypress with or into another corporation (other than a merger solely to effect a
reincorporation of Cypress into another state), or the sale or other disposition of all or substantially all the properties and assets of Cypress in its entirety to any other person, Cypress shall provide to Pierre Fabre 20 days advance written
notice of such reorganization, reclassification, consolidation, merger or sale or other disposition of Cypress’s assets, and this Warrant shall terminate unless exercised prior to the date of the occurrence of such reorganization,
reclassification, consolidation, merger or sale or other disposition of Cypress’s assets.
                     8.         MARKET
STAND-OFF AGREEMENT.    Pierre Fabre shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with
the same economic effect as a sale, any Common Stock (or other securities) of Cypress held by Pierre Fabre, for a period of time specified by the managing underwriter(s) (not to exceed 180 days, or such shorter period as is imposed by such managing
underwriter(s) on the officers, directors or other stockholders of Cypress) following the effective date of a registration statement of Cypress filed under the Securities Act. Pierre Fabre agrees to execute and deliver such other agreements as may
be reasonably requested by Cypress and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, Cypress may impose stop-transfer
instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of Cypress’s stock are intended third party beneficiaries of this Section 8 and shall have the right, power and authority to
enforce the provisions hereof as though they were a party hereto.
                     9.
        NO STOCKHOLDER RIGHTS.   This Warrant in and of itself shall not entitle Pierre Fabre to any voting rights or other rights as a stockholder of
Cypress.
                     10.       TRANSFER
OF WARRANT.   Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by Pierre Fabre in person or by
duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Pierre Fabre. The transferee shall sign an investment letter in form and substance reasonably satisfactory to
Cypress.
 5.

                      11.        
LOST, STOLEN, MUTILATED OR DESTROYED WARRANT.   If this Warrant is lost, stolen, mutilated or destroyed, Cypress may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such
new Warrant shall constitute an original contractual obligation of Cypress, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.
                     12.         NOTICES, ETC.
  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business
hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to Cypress and Pierre Fabre at the addresses listed in the introductory paragraph, or at such other address as Cypress or Pierre
Fabre may designate by 10 days advance written notice to the other party hereto.
                     13.         ACCEPTANCE.
  Receipt of this Warrant by Pierre Fabre shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
                     14.         GOVERNING
LAW.   This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of New York, excluding its conflicts of laws principles.
                     IN WITNESS WHEREOF, Cypress has caused this Warrant to
be executed by its duly authorized officer as of June 6, 2003.

			
	 	 	 
	  	CYPRESS BIOSCIENCE, INC.	

	 	 	 
	 	By:	/s/ JAY D. KRANZLER
	  	 	

	 	 	Jay D. Kranzler
	  	 	Chief Executive Officer

 6.

  NOTICE OF EXERCISE
 TO: Cypress Bioscience, Inc.
                     (1)         The undersigned hereby elects to purchase ________ shares
of the Common Stock of Cypress Bioscience, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
                     (2)         Please issue a certificate or
certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

			
	 	 
 	 
	 	(Name)	 
	 	 	 
	 	 
 	 
	 	 
 	 
	 	(Address)	 

                     (3)
        The undersigned represents that (i) the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of Cypress’s business affairs and financial condition and has acquired sufficient information about
Cypress to reach an informed and knowledgeable decision regarding its investment in Cypress; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that the shares of Common Stock issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the
bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption
from such registration is available; (v) the undersigned is aware that the aforesaid shares of Common Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held
the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about Cypress and Cypress has not made such information available and has no present
plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Common Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with said registration statement, or the

  undersigned has provided Cypress with an opinion of counsel satisfactory to Cypress, stating that such registration is not required.

			
	
	 	

	(Date)	 	(Signature)
	 	 	 
	   	 	

	  	 	(Print name)

  ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do
not use this form to purchase shares.)
          FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to

		
	Name:	 
	 	
 
	 	(Please Print)
	 	 
	Address:	 
	 	
 
	 	(Please Print)
	Dated:	__________, 20__	

			
	 	 	 
	Holder’s Signature:	 	 
	 	 
	 
	 	 	 
	Holder’s Address:	 	 
	 	 
	 

 NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant,
without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.Amended and restated Employment Agreement

  Exhibit 10.4
 AMENDED AND RESTATED EMPLOYMENT AGREEMENT
          THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into effective as of this 11th day of August 2003, by and between
CYPRESS BIOSCIENCE, INC., a Delaware corporation (the ‘Company”) and Jay D. Kranzler, M.D., Ph.D. (the “Employee”).
          WHEREAS,  the Company desires to employ the Employee in an executive capacity as Chief Executive Officer on the terms and conditions set forth herein and the
Employee is willing to accept and undertake such employment.
 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 Chief Executive Officer (CEO) of the Company.
          1.2      Directorship; Chairman of the Board.  The Employee currently serves as a member of the Board of Directors and as Chairman of
the Board of Directors of the Company (the “Board”). The Employee’s continued service (i) as a member of the Board is subject to re-election by the Company stockholders in accordance with the Company’s Certificate of
Incorporation and Bylaws; and (ii) as Chairman of the Board is subject to the on-going approval of the Board. The Employee shall devote such additional time to the business of the Company as is necessary for the fulfillment of the Employee’s
duties as Chairman of the Board.
          1.3      Term.   Unless sooner terminated as provided in Article 5 hereof, the
Employee’s employment hereunder shall be for a term commencing on August 1, 2003 and ending on August 1, 2006, subject to automatic renewal for two one year periods following August 1, 2006, 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.”
          1.4      Duties.   During the Term, the Employee shall perform such executive duties for the
Company and for its subsidiaries, consistent with his position hereunder and as typically associated with the duties of a Chief Executive Officer of a publicly-held corporation and as reasonably may be assigned to him from time to time by the Board.
Except as contemplated by Section 1.6, the Employee shall devote his entire business time, attention and energies to the performance of his duties hereunder.
 1.

           1.5      Exclusive Agreement.   The Employee represents and warrants to the Company that he is
not a party to any agreement or arrangement, whether written or oral, in effect which would prevent the Employee from rendering the services contemplated hereunder to the Company during the Term.
          1.6      Other Activity.   Notwithstanding the foregoing, subject to his 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 provided, however, that the performance of such services shall not restrict or limit in any manner the
Employee’s ability to perform his duties hereunder.
          1.7      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 his capacity as an officer, director 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 him pursuant to this Agreement, the Company shall pay the Employee an annual base salary (“Base Salary”) of $485,000.00 per year in equal semi-monthly
installments. 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 shall
be eligible for a special cash bonus of $500,000, payable in a lump sum, upon the announcement of a strategic transaction for the development and commercialization of Milnacipran approved by the Board (“Special Bonus”). This Special Bonus
shall be inclusive (and in lieu) of any and all annual bonuses to the employee for performance during the years 2001 through 2003.
                     (b)         In addition to the Base Salary, the Employee may be
eligible at the end of fiscal year 2004 and each year thereafter for a cash bonus (the “Bonus Amount”) equal to an amount up to 66 2/3% of the Base Salary within ninety (90) days after the end of such fiscal year. The Bonus Amount, if any,
shall be based on the performance of the Employee during a fiscal year, as evaluated by the Board in its sole discretion. 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
 2.

  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 amounts which may be required to be deducted or withheld by the Company pursuant to any federal, state or
city laws, rules or regulations.
          2.4      Disability Adjustments.   Any compensation otherwise payable to the
Employee pursuant to Section 2.1 in respect of any period during which the Employee is disabled (as contemplated in Section 5.1) shall be reduced by any amounts paid to the Employee for loss of earnings or the like under any disability insurance
plan or policy, the premiums for which are paid for in their entirety by the Company.
 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 $2 million of life insurance policy or policies
(including any policies currently in place), 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      Disability Insurance.   During the Term, the Company shall procure and provide the Employee with a Company-paid long-term
disability insurance policy providing for benefits of not less than 100% of his Base Salary so long as the Employee is insurable at a commercially reasonable cost.
          3.4      Expenses.    The Company agrees that the Employee is authorized to incur reasonable and customary expenses in the
performance of his duties hereunder, including travel and entertainment costs, and upon presentation of appropriate documentation thereof, the Company promptly 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 sum equal to the amount of such
additional tax liability of the Employee.
          3.5      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 do not unreasonably interfere with the performance of his duties hereunder.
 3.

         3.6        Legal Fees.     The Company will reimburse the Employee
for legal fees incurred in connection with the preparation of this Agreement in an amount not to exceed $5,000.
      3.7        Family
Estate Planning.     During the Term, the Company will reimburse the Employee for family estate planning or counseling fees in an amount not to exceed $5,000 per year.
 ARTICLE 4
 STOCK OPTIONS
        4.1
        Stock Options.
                      (a)
        Upon the date this Agreement is signed by both parties, and pursuant to the terms of the Company’s 2000 Equity Incentive Plan (the “Plan”), the Employee will be granted a stock option to
purchase 500,000 shares of the Company’s common stock (the “New Option”). The New Option will be governed by and granted pursuant to a separate stock option agreement and the Plan. The exercise price per share of the New Option will
be equal to the fair market value of the common stock of the Company on the date of grant, as required by, and consistent with the Plan. The New Option will be subject to vesting ratably and daily over four years so long as the Employee provides
Continuous Service (as such term is defined in the Plan) to the Company; provided, however, that the vesting of 25% of any unvested shares under the New Option will be accelerated in the event that the Company in-licenses a compound in clinical
development (or already commercialized) in a transaction approved by the Board (with the accelerated vesting to apply equally to 25% of each monthly vesting increment for the remainder of the New Option term). For purposes of this Agreement, the New
Option and all other stock options or stock awards held by the Employee shall be referred to as the “Options”.
                     (b)         In the event of a termination (as described in
Article 5), and except as otherwise provided in Section 4.1(c) and 4.1(d) hereof, all Options which have not vested as of the Termination Date shall cease vesting and shall be cancelled as of the Termination Date. All vested Options shall be
cancelled ninety (90) days after the Termination Date.
                     (c)
        Upon the Employee’s death or Disability (as defined in Section 5.1 below), all Options shall vest immediately and all rights under such Options shall transfer to the Employee’s designated
beneficiary. All Options shall be cancelled ninety (90) days after the Employee is terminated due to Disability. In the event of the Employee’s death, the Employee’s legal representatives shall have one hundred eighty (180) days following
the Termination Date to exercise the Options before they are cancelled.
                     (d)
        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 5.2(b) or 5.4 hereof, all Options shall vest immediately
upon such Termination Date. In addition, all Options shall vest immediately upon a Change-in-Control (as defined in paragraph 5.6 herein).
                     (e)         The Company may grant the Employee options to
purchase the Company’s common stock in addition to the Options at such times and on such terms as may be decided from time to time by the Board, in its sole discretion.
 4.

  ARTICLE 5
 DEATH, DISABILITY; TERMINATION
          5.1        Death; Disability.     The Employee’s employment hereunder shall terminate upon his 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). In the event of a termination of the Employee’s employment for death, the Company shall pay the
Employee (or his legal representatives, as the case may be) an amount equal to the Employee’s Base Salary for one year, reduced (but not to a negative number) by any amounts paid or to be paid to the Employee (or his legal representatives, as
the case may be) by insurance provided by the Company pursuant to Section 3.1 hereof.
          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 he has been unable to perform his 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 his duties hereunder and that such disability will continue for six (6) consecutive months or one hundred
eighty (180) days in any twelve (12) consecutive month period, then the Company shall be permitted to terminate the Employee’s employment immediately, subject to payment by the Company of the Employee’s Base Salary until disability
insurance payments commence, subject to a maximum payment by the Company in an amount equal to the Employee’s Base Salary for one year.
          In the
event that the employment of the Employee hereunder is terminated by the Company upon the Employee’s death or Disability, the Employee’s family, for a period of two (2) years from the Termination Date, shall be entitled to maintain
coverage under the Company’s health and hospitalization insurance plans on the same terms as existed prior to such Termination Date, subject to the payment of applicable costs therefore by the Employee’s representatives, and further
subject to the policies and provisions of such insurance carriers and applicable law.
          The Employee acknowledges that the payments referred to in this
Section 5.1 constitute the only payments to which the Employee (or his legal representatives, as the case may be) shall be entitled to receive from the Company under this Agreement in the event of a termination of his employment for death or
Disability, and that except for such payments and subject to Section 4.1(c) hereof, the Company shall have no further liability or obligation to his (or his legal representatives, as the case may be) under this Agreement.
          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.

           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 his 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 his employment as CEO following (i) an uncured material breach of this Agreement by the Company, (ii) the occurrence of a Change-In-Control (as defined in paragraph 5.6 herein), (iii) the relocation of the Company’s executive offices
or principal business location to a point more than 30 miles from the San Diego, California area, (iv) any action by the Board or direction given by the Board to the Employee that in the reasonable and good faith belief of the Employee is contrary
to applicable law or accounting standards or constitutes an unethical business practice, or (v) a demotion or, in the Employee’s reasonable and good faith belief, the occurrence of a material reduction in the Employee’s authority,
functions or responsibilities as Chief Executive Officer without his consent, then such termination by the Employee shall be deemed for all purposes, including for purposes of severance payments and benefits provided under Section 5.4 hereof, to be
a termination by the Company of the employment of the Employee hereunder without cause pursuant to Section 5.4. 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), (iv) and (v) above, setting forth in reasonable detail the matter constituting such breach, to cure such breach.
          5.3        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 his 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 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; or (b) has been convicted of a felony.
          5.4        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 CEO
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 a form
acceptable to the Company, the Company shall pay the Employee an amount equal to eighteen months of the Employee’s Base Salary, with 12 months of the Base Salary payable in a lump sum , within ten (10) days following the Termination Date, and
the remaining six months of the Base Salary payable ratably over the six months following the Termination Date; provided, that, the Employee shall be entitled to payment of the entire eighteen months Base 
 6.

  Salary in a lump sum payment within ten (10) days of the Termination Date if the termination occurs following a Change-In-Control.
                     (b)        In the event that the employment of the Employee
hereunder is terminated by the Company without cause, all Options shall vest immediately upon the Termination Date as provided in Section 4.1(d) hereof.
                     (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 two (2) years from the Termination Date, shall continue to provide the Employee with at least the same life, health, accident,
disability and hospitalization insurance plans as were in effect with respect to the Employee on the date of such termination, including the coverage provided for in Sections 3.2 and 3.3 hereof, and shall continue to provide coverage for the
Employee’s family on the same terms as existed prior to such Termination Date.
                     (d)        The Employee acknowledges that the payments referred
to in Section 5.2 and this Section 5.4 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 Section 5.2, 5.3 and this Section 5.4, 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 him 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 5.4.
          5.5      Golden Parachute
Tax.     In the event that the benefits provided for in this Agreement or otherwise payable to the Employee constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”) and will be subject to the excise tax imposed by Section 4999 of the Code, then the Company shall pay to the Employee an amount sufficient to pay such excise tax; provided that such payment by the
Company to the Employee shall not exceed two hundred fifty thousand dollars ($250,000). Unless the Company and the Employee otherwise agree in writing, the determination of the Employee’s excise tax liability and the amount required to be paid
under this Section 5.5 shall be made in writing by a nationally recognized accounting firm satisfactory to both parties (the “Accountants”). For purposes of making the calculations required by this Section 5.5, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may rely on interpretations of the Code for which there is a “substantial authority” tax reporting position. The Company and the Employee shall furnish to the
Accountants such information and documents the Accountants may reasonably request in order to make a determination under this Section 5.5. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.5.
         5.6        Definition of Change-in-Control.     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 fifty percent (50%) of the voting power of 
 7.

  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 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; 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 seventy five percent (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.
 ARTICLE 6
 REGISTRATION RIGHTS
          6.1        Piggyback Registration.
                      (a)        If the Company proposes to register shares of
Common Stock or securities convertible into or exercisable for Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) (other than pursuant to a registration statement on Form S-4 or S-8 or any successor form, or
filed in connection with an exchange offer or an offering of securities solely to the existing shareholders or employees of the Company), solely where such sale will be both for the Company’s account and for the account of a selling
shareholder, then the Company shall give written notice of such proposed filing to the Employee at least ten (10) days before the anticipated filing date, and such notice shall offer the Employee the opportunity to register such number of shares of
Registrable Stock (as defined below) as the Employee may request. “Registrable Stock” shall mean any shares of the Company’s Common Stock acquired by the Employee prior to the date hereof or granted to the Employee in connection with
the options (the “Registrable Stock”). The Employee shall notify the Company in writing specifying whether or not it elects to include any Registrable Stock in such registration statement within five (5) days after delivery of the
Company’s notice of the Employee. The Company shall use commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Employee to include such securities in such offering on
the same terms and conditions as any similar securities of the Company included therein;  provided, however, that if the managing underwriter or underwriters of such offering determines that the total amount or kind of securities which it or
the Company, and any other persons or entities, intend to include in such offering is such as to materially and adversely affect the success of such offering, then the amount of Registrable Stock requested to be offered for the account of the
Employee shall be reduced or limited, on a pro rata basis with the securities of all persons and entities other than the
 8.

  Company participating in the offering, to the extent required by such managing underwriter. Notwithstanding the foregoing, if, at any time after giving written notice of its intention
to register Common Stock or other securities convertible into or exercisable for Common Stock and prior to the effectiveness of the registration statement filed in connection with such registration, the Company determines for any reason either not
to effect such registration or to delay such registration, the Company, at its election, by delivery or written notice to the Employee, (i) in the case of a determination not to effect registration, may relieve itself of its obligations to register
any Registrable Stock in connection with such registration, or (ii) in the case of determination to delay the registration, may delay the registration of such other shares of Common Stock or other securities convertible into or exercisable for
Common Stock.
                    (b)        Notwithstanding
anything to the contrary herein, if the Company registers shares of Common Stock or securities convertible into or exercisable for Common Stock under the Securities Act in an underwritten public offering and
                                   (i)
        the Employee owns unregistered Registrable Stock at the time such underwritten public offering is registered under the Securities Act, the Employee shall agree to refrain from exercising the registration
rights granted in this Article 6 with respect to such Registrable Stock for such period of time as the managing underwriter of such underwritten public offering deems reasonable; or
                                   (ii) 
       the Employee owns Registrable Stock which has been registered under the Securities Act pursuant to this Section 6.1 hereof prior to the time such underwritten public offering is registered under the Securities
Act, the Employee shall agree that it will not sell, distribute, offer to sell, contract to sell, agree to sell, grant any option to purchase, or agree to offer, sell or otherwise transfer or dispose of (nor announce any offer, sale, grant of an
option to purchase or otherwise dispose of), directly or indirectly, any such registered Registrable Stock for such period of time as the managing underwriter of such underwritten public offering deems reasonable.
                     (c)        Furnish Information. The Employee shall furnish to
the Company such reasonable information regarding the Employee, the Registrable Stock, and the intended method of disposition of such securities as are required to effect the registration of Registrable Stock as to which the Employee has requested
registration.
                     (d)        Expenses of
Registration. All expenses incident to the Company’s performance of or compliance with this Article 6 including, without limitation, all registration and filing fees, fees and expenses of complying with state securities or blue sky laws,
printing expenses and fees and disbursements of counsel for the Company and of independent public accountants (including the expense of any special audit), but excluding underwriting commissions and discounts and the fees and disbursements of
counsel for the Employee, shall be borne by the Company. The Employee shall bear his own pro rata share (calculated according to the number of his shares as a fraction of the total number of shares covered by such registration statement) of all
underwriting commissions and discounts incurred in connection with any offering of Registrable Stock with respect to a registration pursuant to this Article 6, as well as his expenses if he has counsel separate from counsel for the Company. The fees
and expenses of complying with state blue sky laws shall be borne by the sellers of securities included in such
 9.

  registration if and to the extent that the appropriate administrative official of such state requires that such sellers (rather than the Company) pay such fees and expenses.

                    (e)        Indemnification and Contribution. In the
event any shares of Registrable Stock are included in a registration statement under this Article 6:
                                   (i) 
       To the extent permitted by law, the Company shall indemnify, defend and hold harmless the Employee, any underwriter (as defined in the Securities Act), any other person or entity selling securities in such
registration statement, and each director and officer of, and person, if any, who controls such underwriter or such other person or entity within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): any untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or the omission or alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; provided, however, that the indemnity agreement contained in this subsection (i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of
or is based upon a violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by, or which results from the bad faith or gross negligence of, the Employee or
any underwriter for the Employee.
                                   (ii) 
       To the extent permitted by law, the Employee shall indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls
the Company within the meaning of the Securities Act, any underwriter, any other person or entity selling securities in such registration statement, and each director and officer of, and person, if any, who controls such underwriter or such other
person or entity, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, or underwriter or controlling person, or such other person or entity or director, officer
or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs as a result of written information furnished by the Employee in his capacity as a shareholder of the Company (as distinguished from information provided by the Employee
in his capacity as an officer or director of the Company) expressly for use in connection with such registration or results from the bad faith or gross negligence of the Employee; provided, however, that the Employee’s indemnification
obligation hereunder shall be limited to an amount equal to the net proceeds received by the Employee pursuant to the registration of Registrable Securities hereunder; and further provided, that the indemnity agreement contained in this subsection
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability
 10.

  or action if such settlement is effected without the consent of the Employee, which consent shall not be unreasonably withheld.
                                   (iii)
        Promptly after receipt by an indemnified party under this Section 6.1(e) of notice of the commencement of any action (including any governmental action), such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the parties. An indemnified party shall have the right to retain its own counsel, however, but the fees and expenses of such counsel shall be at the expense of the indemnified party;
unless (x) the employment of such counsel has been specifically authorized in writing by the indemnifying party, (y) the indemnifying party has failed timely to assume the defense and employ counsel, or (z) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for all indemnified parties). The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.1(e), but the omission so to deliver written notice to the indemnifying party shall not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 6.1(e).
                                   (iv)
        If the indemnification provided for in subsection (i) and (ii) of this Section 6.1(e) is unavailable or insufficient to hold harmless an indemnified party under such subsection in respect of any losses,
claims, damages or liabilities or action in respect thereof or referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or actions in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Employee on the other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give the notice required under such subsections. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Company on the one hand, or the Employee, on the other hand, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The Company and the Employee agree that it would not be just and equitable if contribution pursuant to this Section 6.1(e)(iv) were determined by pro rata allocation or by
any other method of allocation which did not take account of the equitable considerations referred to above in this subsection. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.
 11.

  The obligations of the Company and the Employee under this Section 6.1(e) shall survive the completion of any offering of Registrable Stock in a registration statement under this
Article 6.
 ARTICLE 7
 INVENTIONS, NON-DISCLOSURE
           7.1        Inventions. Subject to the provisions of Section 2870 of the California Labor Code, all processes,
technologies and inventions (collectively, “Inventions”), including new contributions, improvements, discoveries, trademarks and trade names, conceived, developed, invented, made or found by the Employee, alone or with others, during the
Term of his employment by the Company, whether or not patentable and whether or not conceived, developed, invented, made or found on the Company’s time or with the use of the Company’s facilities or materials, and which related to the
business of the Company, shall be the property of the Company and shall be promptly and fully disclosed by the Employee to the Company. The Employee shall perform all necessary acts (including, without limitation, executing and delivering any
confirmatory assignments, documents or instruments requested by the Company) to vest title to any such Invention in the Company and to enable the Company, at its expense, to secure and maintain domestic and/or foreign patents or any other rights for
such Inventions.
           7.2       Non-Disclosure. The Employee, at any time during the Term and
thereafter, shall not, directly or indirectly, use, disclose or furnish to any other person, firm or corporation except in the course of the proper performance of his duties hereunder (a) any information of a confidential nature relating to any
process, technique or procedure of the Company; or (b) any information of a confidential nature obtained as a result of his current or future relationship with the Company, which information is not specifically a matter of public record; or (c) any
other trade secrets of the Company; except that the Employee shall not be liable under the terms of this Section 6.2 for using, disclosing or furnishing any of the foregoing which: (1) are or become generally available to the public other than as a
result of a disclosure in violation of this Agreement; or (2) are generally known in any industry in which the Company is or may become involved, or (3) are required to be disclosed by the Employee pursuant to law or the order of a court of
competent jurisdiction, or other legal process or authority, it being understood, however, that the Employee shall provide the Company with prompt notice of the requirement for such disclosure as soon as practical after the Employee is notified
thereof and prior to its disclosure thereof so as to enable the Company to challenge the order compelling such disclosure if the Company so desires. 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.
           7.3        Breach of Non-Disclosure Provision. In the event that the Employee shall breach Section 6.2 hereof, 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 6.2. 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
 12.

  proceeding is brought seeking injunctive relief, the Employee shall not use as a defense thereto that there is an adequate remedy at law.
          7.4         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 8
 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 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 9
 MISCELLANEOUS
             9.1        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 him.
             9.2        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
 13.

  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: Chairman of the Board of Directors

 
          If to the Employee:
	 	 
	 	Jay D. Kranzler, M.D., Ph.D.
 7935 Via Capri 
 La Jolla, CA 92037

 
 
             9.3           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.
             9.4           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 waiver shall be deemed a waiver of any subsequent breach or default of the same or any other nature.
             9.5           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 December 28, 1995 and various amendments to the Employment Agreement dated July 19, 1996, July 1, 2000 and January 30, 2001. 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.
             9.6           Amendment.   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.
 14.

              9.7           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.
             9.8           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.
             9.9           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.
             9.10         Expenses.   The Company shall pay all costs and expenses,
including reasonable attorneys fees, incurred by the Employee with respect to the negotiation, drafting and execution of this Agreement.
             IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

			
	 	CYPRESS BIOSCIENCE, INC.	 
	 	 	 
	 	By:	/s/  SABRINA MARTUCCI JOHNSON
		 	 
 
	  	Its:	CFO and Vice President
	   	 	 
 

 

		
	 	/s/  JAY D. KRANZLER
	 	

	 	Jay D. Kranzler, M.D., Ph.D.

 15.

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