Employment Agreement

Amendment to Agreement

Severance Benefit Plan

 

 

 

EX-10.19 2 a51251exv10w19.htm EX-10.19

Exhibit 10.19

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“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 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.

     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 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 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.”

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     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.

     1.5 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 $578,111.94 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 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 and 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. 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

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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 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, 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

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later than the end of the Employee’s taxable year following the year in which the Employee pays the related taxes.

     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.

     3.6 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. Such reimbursement payment shall be made as soon as practicable following the date Employee incurred such legal fees, but in no event later than the end of the Employee’s taxable year following the year in which the Employee pays such legal fees.

     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. Such reimbursement payment shall be made as soon as practicable following the date Employee incurred such fees, but in no event later than the end of the Employee’s taxable year following the year in which the Employee pays such fees.

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 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 Stock Awards shall vest immediately and 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 5.2(b) or 5.4 hereof, all Stock Awards shall vest immediately upon such Termination Date. In addition, all Stock Awards shall vest immediately upon a Change-in-Control (as defined in paragraph 5.6 herein).

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          (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 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), to the extent permitted by law. 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) a lump sum 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 3.2 hereof. Subject to the provisions of Section 5.7, if applicable, such lump sum payment shall be made promptly, but in no event later than sixty (60) days following the Employee’s termination due to death or Disability.

     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, to the extent permitted by applicable laws, the Company shall be permitted to terminate the Employee’s employment immediately, subject to payment by the Company of the Employee’s Base Salary for the number of months following the Termination Date until disability insurance payments are to commence, subject to a maximum payment by the Company in a lump sum 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 (including the Employee, if applicable), 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

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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.”

     5.2 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.

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     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 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 an amount equal to eighteen months of the Employee’s Base Salary, payable in a single lump sum, 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 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. 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 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 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 (the “Gross-Up Payment”) sufficient to pay such excise tax (such excise tax, together with any such interest and penalties are hereinafter collectively referred to as the “Excise Tax”) as well as all income and

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employment taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment, and any interest or penalties with respect to income and employment taxes imposed on the Gross-Up Payment; 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; however, such calculations shall be performed assuming that Employee pays taxes at the highest applicable marginal tax rate. 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. Any Gross-Up Payment shall be made as soon as practicable following the triggering event, but in no event later than the end of the Employee’s taxable year following the year in which the Employee pays the related Excise Taxes.

     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 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.

     5.7 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

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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.

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 Employee’s Stock Awards (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 Company participating in the offering, to the extent required

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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

               (ithe 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

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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:

               (iTo 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

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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.

12


 

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

13


 

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

14


 

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, January 30, 2001, August 11, 2003 and January 26, 2007. 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.

          (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.

15


 

          (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.

     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. Such payment shall be made 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.

     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 Johnson

 

 

 

 

 

 

 

 

 

 

 

 

Its:

 

     Chief Operating Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

               /s/ Jay D. Kranzler

 

 

 

 

 

 

 

 

 

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

 

 

16


 

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

 

 

 

 

 

 

 

EX-10.19 3 a55504exv10w19.htm EX-10.19

Exhibit 10.19

AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amendment (this “Amendment”) to the Amended and Restated Employment Agreement (“Employment Agreement”) entered into as of December 31, 2008, by and between CYPRESS BIOSCIENCE, INC. (the “Company”) and JAY D. KRANZLER, M.D., Ph.D. (the “Employee”), is entered into as of December 24, 2009. Capitalized terms used but not assigned a meaning in this Amendment shall have the meanings assigned to such terms in the Employment Agreement.

     WHEREAS, the Company and the Employee have determined it is in the best interest of the Company and the Employee to amend the Employment Agreement to provide that a restricted stock unit award for 100,000 shares of the Company’s common stock to be granted to the Employee on or about January 4, 2010 shall include a double trigger vesting acceleration provision in connection with a Change-in-Control, rather than, as the Employment Agreement currently provides, a single trigger vesting acceleration provision.

     NOW, THEREFORE, in consideration of the benefits and mutual promises hereinafter set forth, the parties hereto agree to amend the Employment Agreement as follows:

     1. Section 4.1(c) of the Employment Agreement is hereby amended, restated, superseded and replaced in its entirety by the following:

     “(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 5.2(b) (other than, with respect to the restricted stock unit award for 100,000 shares of the Company’s common stock granted to the Employee on or about January 4, 2010 (the “Applicable Award”), Section 5.2(b)(ii)) or 5.4 hereof, all Stock Awards shall vest immediately upon such Termination Date. In addition, all Stock Awards, except the Applicable Award, shall vest immediately upon a Change-in-Control (as defined in Section 5.6 herein), and the Applicable Award, in connection with a Change-in-Control, shall vest as set forth in its stock award agreement.”

     2. Section 5.4(b) of the Employment Agreement is hereby amended by changing the reference therein to “Section 4.1(d)” to “Section 4.1(c).”

     3. Except as specifically set forth by this Amendment, the terms and conditions of the Employment Agreement shall remain in full force and effect.

     4. This Amendment shall be governed by and construed in accordance with the laws of the State of California.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

1.

size=2 width="100%" noshade style='color:#ACA899' align=center>
 

     5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Amendment on the day and year written above.

 

 

 

 

 

 

 

 

 

CYPRESS BIOSCIENCE, INC.

 

 

 

EMPLOYEE

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Sabrina Martucci Johnson

 

 

 

/s/ Jay D. Kranzler

 

 

 

 

 

 

 

 

 

 

 

 

 

Sabrina Martucci Johnson

 

 

 

JAY D. KRANZLER, M.D., Ph.D.

 

 

Its:

 

Executive Vice President, Chief Operating Officer and Chief Financial Officer

 

 

 

 

 

 

2.

 

 

 

 

 

 

 

 

 

 

EX-10.20 3 a51251exv10w20.htm EX-10.20

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 Salarymeans 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) “Boardmeans the Board of Directors of the Company.

          (c) “Causemeans 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 Controlmeans 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

1.

<hr size=2 width="100%" noshade style='color:#9D9DA1' align=center>

 

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 Terminationmeans 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) “Companymeans 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 Terminationmeans 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 Terminationmeans 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 Reasonmeans, with respect to an individual covered by this Plan, the occurrence of one or more of the following events without such individual’s express written consent:

               (1) A material reduction in such individual’s authority, duties or responsibilities (and not simply a change in title or reporting relationships); provided, however, that Good Reason shall not be satisfied solely by reason of such individual retaining the same position held prior to a Change in Control, but in a distinct legal entity or business unit of a larger entity following such Change in Control;

               (2) A material reduction by the Company in such individual’s Base Salary; or

               (3) An increase in the one-way driving distance from the individual’s principal residence to the individual’s principal place of work in effect as of May 21, 2004 by more than thirty (30) miles.

     Notwithstanding the foregoing, an individual shall have “Good Reason” for his or her resignation only if: (a) the individual notifies the Company in writing, within thirty (30) days after the first occurrence of one of the foregoing events, that he or she intends to terminate his or her employment no earlier than thirty (30) days after providing such notice; (b) the Company does not cure such condition within thirty (30) days following its receipt of such notice or states unequivocally in writing that it does not intend to attempt to cure such condition; and (c) the individual resigns from employment within thirty (30) days following the end of the period within which the Company was entitled to remedy the condition constituting Good Reason but failed to do so.

          (j) Release Deadline Date means: (1) with respect to a Covered Termination or a Director Covered Termination, forty-five (45) days following such termination, and (2) with respect to a Change in Control Covered Termination, the later of: (a) forty-five (45) days following such termination, or (b) forty-five (45) days following the applicable Change in Control.

Section 3. Eligibility For Benefits.

          (a) General Rules. Subject to the requirements set forth in this Section, the Company shall provide severance benefits under the Plan to the individuals and in the capacities set forth on Appendix A. The Company is free to add individuals to Appendix A at any time. In order to be eligible to receive benefits under the Plan, an individual must (i) experience a Covered Termination, Change in Control Covered Termination or Director Covered Termination, (ii) be designated on Appendix A, (iii) have provided continuous service to the Company as a Board member or an employee for at least one (1) year and (iv) execute a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate within the applicable time period set forth therein, but in no event later than the Release Deadline Date, and such release must become effective in accordance with its terms. The Company, in its sole discretion, may modify the forms of the required release and shall determine the appropriate form of release.

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Section 4. Amount Of Benefit.

          Benefits under the Plan, if any, shall be provided to the employees described in Section 3 in the following amounts:

          (a) Employee Covered Termination Benefits. Upon an individual employee’s Covered Termination, such individual shall receive one of the following severance packages:

               (1) If such individual has been employed with the Company for more than one (1) year, but less than or equal to two (2) years, then such individual shall receive:

               Cash Severance Benefits. A lump sum cash payment equal to three (3) months of such individual’s Base Salary.

               COBRA Benefits. If such individual timely elects to continue coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company will pay all COBRA premiums for such individual and his or her eligible dependents through the earliest of (i) the end of the three (3) month period following the termination of employment, (ii) the expiration of such individual’s continuation coverage under COBRA or (iii) the date such individual becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

               Stock Option Vesting. 25% of all of such individual’s unvested outstanding stock options and unvested shares of common stock under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination of employment.

               (2) If such individual has been employed with the Company for more than two (2) years, but less than or equal to three (3) years, then such individual will receive:

               Cash Severance Benefits. A lump sum cash payment equal to six (6) months of such individual’s Base Salary.

               COBRA Benefits. If such individual timely elects to continue coverage under COBRA, the Company will pay all COBRA premiums for such individual and his or her eligible dependents through the earliest of (i) the end of the six (6) month period following the termination of employment, (ii) the expiration of such individual’s continuation coverage under COBRA or (iii) the date such individual becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

               Stock Option Vesting. 50% of all of such individual’s unvested outstanding stock options and unvested shares of common stock under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination of employment.

               (3) If such individual has been employed with the Company for more than three (3) years, but less than or equal to four (4) years, then such individual shall receive:

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               Cash Severance Benefits. A lump sum cash payment equal to nine (9) months of such individual’s Base Salary.

               COBRA Benefits. If such individual timely elects to continue coverage under COBRA, the Company will pay all COBRA premiums for such individual and his or her eligible dependents through the earliest of (i) the end of the nine (9) month period following the termination of employment, (ii) the expiration of such individual’s continuation coverage under COBRA or (iii) the date such individual becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

               Stock Option Vesting. 75% of all of such individual’s unvested outstanding stock options and unvested shares of common stock under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination of employment.

               (4) If such individual has been employed with the Company for more than four (4) years, then such individual shall receive:

               Cash Severance Benefits. A lump sum cash payment equal to twelve (12) months of such individual’s Base Salary.

               COBRA Benefits. If such individual timely elects to continue coverage under COBRA, the Company will pay all COBRA premiums for such individual and his or her eligible dependents through the earliest of (i) the end of the twelve (12) month period following the termination of employment, (ii) the expiration of such individual’s continuation coverage under COBRA or (iii) the date such individual becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

               Stock Option Vesting. 100% of such individual’s unvested outstanding stock options and unvested shares of common stock under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination of employment.

          (b) Employee Change in Control Covered Termination Benefits. Upon an individual employee’s Change in Control Covered Termination, such individual shall receive the following severance package:

               Cash Severance Benefits. A lump sum cash payment equal to twelve (12) months of such individual’s Base Salary.

               COBRA Benefits. If such individual timely elects to continue coverage under COBRA, the Company will pay all COBRA premiums for such individual and his or her eligible dependents through the earliest of (i) the end of the twelve (12) month period following the termination of employment, (ii) the expiration of such individual’s continuation coverage under COBRA or (iii) the date such individual becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

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          (c) Director Covered Termination Benefits. Upon an individual’s Director Covered Termination, such individual shall receive one of the following severance packages:

               (1) If such individual has served on the Board for more than one (1) year, but less than or equal to two (2) years, then 25% of all of such individual’s unvested outstanding stock options and unvested shares of common stock granted under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination.

               (2) If such individual has served on the Board for more than two (2) years, but less than or equal to three (3) years, then 50% of all of such individual’s unvested outstanding stock options and unvested shares of common stock granted under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination.

               (3) If such individual has served on the Board for more than three (3) years, but less than or equal to four (4) years, then 75% of all of such individual’s unvested outstanding stock options and unvested shares of common stock granted under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination.

               (4) If such individual has served on the Board for more than four (4) years, then 100% of such individual’s unvested outstanding stock options and unvested shares of common stock granted under the Company’s equity incentive plans and programs shall become fully vested and exercisable as of the date of such termination.

All cash severance payment referenced in this Section 4 shall be subject to all applicable tax withholdings and deductions required by law and shall be paid within ten (10) business days following the effective date of the general waiver and release referenced in Section 3 of the Plan, subject to the provisions of Section 5(f), if applicable. An individual’s right to exercise vested option shares shall be as set forth in the applicable Company equity incentive plans and programs and applicable stock option or award agreement(s). All terms, conditions and limitations applicable to an individual’s options and/or shares of common stock shall remain in full force and effect.

          (d) Certain Reductions. Notwithstanding any other provision of the Plan to the contrary, any benefits payable to an individual under this Plan shall be reduced (but not below one week of Base Salary) by any severance benefits payable by the Company or an affiliate of the Company to such individual under any other policy, plan, program, agreement or arrangement, including, without limitation, a contract between such individual and any entity, covering such individual. In addition, to the extent that any federal, state or local laws, including, without limitation the Worker Adjustment Retraining Notification Act, 29 U.S.C. Section 2101 et seq., or any similar state statute, require the Company to give advance notice or make a payment of any kind to an individual because of that individual’s involuntary termination due to a layoff, reduction in force, plant or facility closing, sale of business, change of control, or any other similar event or reason, the benefits payable under this Plan shall either be reduced or eliminated by such required payments or notice. The benefits provided under this Plan are

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intended to satisfy any and all statutory obligations that may arise out of an individual’s involuntary termination of employment for the foregoing reasons, and the Plan Administrator shall so construe and implement the terms of the Plan.

Section 5. Limitations on Benefits.

          (a) Mitigation. Except as otherwise specifically provided herein, an individual shall not be required to mitigate damages or the amount of any payment provided under the Plan by seeking other employment or otherwise, nor shall the amount of any payment provided for under the Plan be reduced by any compensation earned by an individual as a result of employment by another employer or any retirement benefits received by such individual after the date of service or employment termination.

          (b) Termination of Benefits. Benefits under the Plan shall terminate immediately if the individual, at any time, violates (i) any proprietary information or confidentiality obligation to the Company, (ii) any term of this Plan or (iii) any term of the applicable general waiver and release referenced in Section 3 above.

          (c) Non-Duplication of Benefits. No individual is eligible to receive benefits under this Plan more than one time.

          (d) Indebtedness of Individuals. If an individual is indebted to the Company or an affiliate of the Company on the date of his or her termination of employment or service, the Company reserves the right to offset any severance benefits under the Plan by the amount of such indebtedness, to the extent permitted by law.

          (e) Parachute Payments. If any payment or benefit an individual would receive in connection with a Change in Control from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. For the avoidance of doubt, a Payment shall not be considered a parachute payment for purposes of this paragraph if such Payment is approved by the stockholders of the Company in accordance with the procedures set forth in Section 280G(b)(5)(A)(ii) and (B) of the Code and the regulations thereunder, and at the time of such shareholder approval, no stock of the Company is readily tradable on an established securities market or otherwise (within the meaning of Section 280G(b)(5)(A)(ii)(I) of the Code). The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion of the Payment, up to and including the total Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the individual’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. If acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the individual’s stock awards.

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          The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

          The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the individual within ten (10) calendar days after the date on which the individual’s right to a Payment is triggered (if requested at that time by the Company or the individual) or such other time as requested by the Company or the individual. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and the individual with an opinion reasonably acceptable to the individual that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the individual.

          (f) Application of Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Plan (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with an individual’s termination of employment unless and until such individual has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to such individual without causing such individual to incur the additional 20% tax under Section 409A.

          For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in the Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and an individual, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after such individual’s Separation From Service, or (ii) the date of such individual’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall pay to such individual a lump sum amount equal to the sum of the Severance Benefit payments that such individual would otherwise have received prior to the Specified Employee Initial Payment Date.

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Section 6. Right To Interpret Plan; Amendment and Termination.

          (a) Exclusive Discretion. The Plan Administrator shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan. The rules, interpretations, computations and other actions of the Plan Administrator shall be binding and conclusive on all persons.

          (b) Amendment or Termination. The Company reserves the right to amend or terminate this Plan or the benefits provided hereunder at any time; provided, however, that no such amendment or termination shall affect the rights of any individual designated on Appendix A unless such individual consents to such amendment or termination of the Plan in writing. Any action amending, terminating or extending the Plan shall be in writing and executed by the Chief Executive Officer of the Company.

Section 7. Continuation Of Certain Employee Benefits.

          (a) COBRA Continuation. Each individual who is enrolled in a health or dental plan sponsored by the Company or an affiliate of the Company may be eligible to continue coverage under such health or dental plan (or to convert to an individual policy), at the time of the individual’s termination of employment under COBRA. The Company will notify the individual of any such right to continue health coverage at the time of termination. No provision of this Plan will affect the continuation coverage rules under COBRA. Therefore, the period during which an individual may elect to continue the Company’s group medical or dental coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the individual, and all other rights and obligations of the individual under COBRA will be applied in the same manner that such rules would apply in the absence of this Plan. At the conclusion of the COBRA premium reimbursements made by the Company, if any, the individual will be responsible for the entire payment of premiums required under COBRA for the duration, if any, of the COBRA period.

          (b) Other Employee Benefits. All non-health benefits (such as life insurance, disability and 401(k) plan coverage) terminate as of an employee’s termination date (except to the extent that a conversion privilege may be available thereunder).

Section 8. No Implied Employment Contract.

          The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ or service of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time and for any reason, which right is hereby reserved.

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Section 9. Legal Construction.

          This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of California.

Section 10. Claims, Inquiries And Appeals.

          (a) Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative). The Plan Administrator is:

Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Chief Executive Officer

          (b) Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The written notice of denial will be set forth in a manner designed to be understood by the employee and will include the following:

               (1) the specific reason or reasons for the denial;

               (2) references to the specific Plan provisions upon which the denial is based;

               (3) a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

               (4) an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under section 502(a) of ERISA following a denial on review of the claim, as described in Section 10(d) below.

          This written notice will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.

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          This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.

          (c) Request for a Review. Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied. A request for a review shall be in writing and shall be addressed to:

Cypress Bioscience, Inc.
4350 Executive Drive, Suite 325
San Diego, CA 92121
Attn: Chief Financial Officer

          A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

          (d) Decision on Review. The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor. In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:

               (1) the specific reason or reasons for the denial;

               (2) references to the specific Plan provisions upon which the denial is based;

               (3) a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and

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               (4) a statement of the applicant’s right to bring a civil action under section 502(a) of ERISA.

          (e) Rules and Procedures. The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

          (f) Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until the claimant (i) has submitted a written application for benefits in accordance with the procedures described by Section 10(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 10(c) above, and (iv) has been notified in writing that the Plan Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to a Participant’s claim or appeal within the relevant time limits specified in this Section 10, then the Participant may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA.

Section 11. Basis Of Payments To And From Plan.

          All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded, and benefits hereunder shall be paid only from the general assets of the Company. An individual’s right to receive payments under the Plan is no greater than that of the Company’s unsecured general creditors. Therefore, if the Company were to become insolvent, the individual might not receive benefits under the Plan.

Section 12. Other Plan Information.

          (a) Employer and Plan Identification Numbers. The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 22-2389839. The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 501.

          (b) Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31.

          (c) Agent for the Service of Legal Process. The agent for the service of legal process with respect to the Plan is Cypress Bioscience, Inc., Attn: Chief Financial Officer, 4350 Executive Drive, Suite 325, San Diego, CA 92121.

          (d) Plan Sponsor and Administrator. The “Plan Sponsor” and the “Plan Administrator” of the Plan is Cypress Bioscience, Inc., 4350 Executive Drive, Suite 325,

          San Diego, CA 92121. The Plan Sponsor’s and Plan Administrator’s telephone number is (858) 452-2323. The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.

          (e) Type of Plan: The Plan is a welfare benefit plan.

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Section 13. Statement Of ERISA Rights.

          Participants in this Plan (which is a welfare benefit plan sponsored by the Company) are entitled to certain rights and protections under ERISA. If you are listed on Appendix A, you are considered a participant in the Plan and, under ERISA, you are entitled to:

Receive Information about the Plan and Your Benefits

          (a) Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as work sites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Pension and Welfare Benefit Administration;

          (b) Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series) and updated Summary Plan Description. The Plan Administrator may make a reasonable charge for the copies; and

          (c) Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each Participant with a copy of this summary annual report.

Prudent Actions by Plan Fiduciaries

          In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries.

Enforce Your rights

          No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.

          Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.

          If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan’s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court.

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          If it should happen that the Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

Assistance with Your Questions

          If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration or accessing its website at http://www.dol.gov/ebsa/.

Section 14. Execution.

          To record the amendment and restatement of the Plan as set forth herein, effective as of December 31, 2008, Cypress Bioscience, Inc. has caused its duly authorized officer to execute the same this 31st day of December, 2008.

 

 

 

 

 

 

Cypress Bioscience, Inc.
 

 

 

/s/ Jay Kranzler  

 

 

Dr. Jay Kranzler 

 

 

Chief Executive Officer 

 

14.

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Appendix A

List of Participants

 

 

 

 

 

Name

 

Position

 

Effective Hire Date

Mike Gendreau

 

Officer/employee

 

October 17, 1994

Denise Wheeler

 

Officer/employee

 

February 4, 2004

Sabrina Johnson

 

Officer/employee

 

August 3, 1998

Srinivas Rao

 

Officer/employee

 

January 1, 2001

Jay Kranzler

 

Officer/employee/director

 

December 1, 1995

Michael Walsh

 

Officer/employee

 

March 4, 2008

Jon McGarity

 

Director

 

March 2004

Jean Pierre Millon

 

Director

 

March 2004

Daniel Petree

 

Director

 

June 2004

Tina Nova

 

Director

 

April 2007

Amir Kalali

 

Director

 

June 2007

Roger Hawley

 

Director

 

April 2007

15.

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Example
For Employees Age 40 and Over
(Group Termination)

Exhibit A

RELEASE AGREEMENT

     I understand and agree completely to the terms set forth in the Cypress Bioscience, Inc. Severance Benefit Plan (the “Plan”). I understand that this release and waiver (the “Release”), together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein.

     In consideration of benefits I will receive under the Plan, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, members, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release. This Release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as amended).

     I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my waiver and release do not apply to any rights or claims that may arise after I execute this Release; (b) I should consult with an attorney prior to executing this Release; (c) I have forty-five (45) days from the date I receive this Release and the information specified in (f) below to consider this Release (although I voluntarily may choose to execute this Release earlier); (d) I have seven (7) days following the execution of this Release to revoke the Release; and (e) this Release shall not be effective until the later of (i) the date upon which the revocation period has expired, which shall be the eighth (8th) day after I execute this Release, and (ii) the date I return this Release, fully executed, to the Company; and (f) I have received with this Release a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company and its affiliates in the same job

 

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classification or organizational unit who were not terminated. As required by Title 29 U.S. Code Section 626(f)(1)(H), the Company is providing you with the Disclosure attached hereto as Exhibit A-1. The information in the disclosure is confidential and should not be shared with anyone except your professional advisors.

     I represent that I have not filed any claims against the Company, and agree that, except as such waiver may be prohibited by statute, I will not file any claim against the Company or seek any compensation for any claim other than the payments and benefits referenced herein. I agree to indemnify and hold the Company harmless from and against any and all loss, cost, and expense, including, but not limited to court costs and attorney’s fees, arising from or in connection with any action which may be commenced, prosecuted, or threatened by me or for my benefit, upon my initiative, or with my aid or approval, contrary to the provisions of this Release.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company, its affiliates, and the entities and persons specified above.

 

 

 

 

 

 

Employee
 

 

 

 

 

 

Name:  

 

 

 

Date: 

 

 

2.

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Example
For Employees Age 40 and Over
(Group Termination)

Exhibit A-1

DISCLOSURE UNDER TITLE 29 U.S. CODE SECTION 626(f)(1)(H)

 

 

 

Confidentiality Provision:

 

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

 

1.

 

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

 

a.

 

                    

 

 

b.

 

                    

 

 

[ADD MORE IF NECESSARY]

 

2.

 

In the [two] departments listed above, employees whose employment will be eliminated on [date of termination] are eligible to participate in the severance package program.

 

3.

 

An individual age 40 or more years will have up to forty-five (45) days to review the terms and conditions of the severance package.

Employees Eligible For The Severance Package Program

 

 

 

Job Title

 

Age

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Employees Not Eligible For The Severance Package Program

 

 

 

Job Title

 

Age

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

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Example
For Employees Under Age 40
(Individual or Group Termination)

Exhibit B

RELEASE AGREEMENT

     I understand and agree completely to the terms set forth in the Cypress Bioscience, Inc. Severance Benefit Plan (the “Plan”). I understand that this release and waiver (the “Release”), together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein.

     In consideration of benefits I will receive under the Plan, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, members, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release. This Release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 and the California Fair Employment and Housing Act (as amended).

     I represent that I have not filed any claims against the Company, and agree that, except as such waiver may be prohibited by statute, I will not file any claim against the Company or seek any compensation for any claim other than the payments and benefits referenced herein. I agree to indemnify and hold the Company harmless from and against any and all loss, cost, and expense, including, but not limited to court costs and attorney’s fees, arising from or in connection with any action which may be commenced, prosecuted, or threatened by me or for my benefit, upon my initiative, or with my aid or approval, contrary to the provisions of this Release.

     I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than ten (10) days following the date of my employment termination. I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of

3.

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

 

 

 

 

 

 

Employee
 

 

 

 

 

 

Name:  

 

 

 

Date: 

 

 

2.

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Example
For Employees Age 40 and Over
(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

 

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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.