Related Party Transactions and Outside Related Director Information

Cypress Bioscience, Inc. (CYPB)

5/1/2006 Proxy Information

We have entered into employment agreements with our Chief Executive Officer and Vice President of Business and Legal Affairs, as described under the caption “Employment, Severance and Change of Control Agreements.” We have also granted stock options to certain of our directors and executive officers. See “Compensation of Directors” and “Compensation of Executive Officers.”

We employ the services of Dr. Judy Gendreau as a consultant and for the year ended December 31, 2005, we paid her an aggregate of $147,000 for her services. Dr. Judy Gendreau is the wife of Dr. Michael Gendreau, our Chief Medical Officer.

In June 2004, we implemented the Cypress Bioscience, Inc. Severance Benefit Plan, which provides severance benefits to certain eligible officers and our outside directors. In addition, in February 2006, we adopted a Bonus Plan for our officers. See “Employment, Severance and Change of Control Agreements.”

Our bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers, employees and other agents to the fullest extent permitted by Delaware law. We are also empowered under our bylaws to enter into indemnification contracts with our directors and officers and to purchase insurance on behalf of any person who we are required or permitted to indemnify. Pursuant to this provision, we have entered into indemnity agreements with each of our directors and officers and currently maintain directors’ and officers’ insurance coverage.

Dr. Tollefson, a member of our board, accepted the position of CEO of Orexigen Therapeutics, Inc. in April 2005. We entered into an agreement with Orexigen in January 2005 with respect to the in-license of certain patents. Under this agreement we have paid Orexigen an aggregate of $1.5 million.