Exhibit 10.74

ANESIVA, INC.

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of the 20th day
of January, 2009 (the “Effective Date”), by and among Anesiva, Inc., a Delaware
corporation (the “Company”), and the investors set forth on Schedule 1 hereto
(each an “Investor” and collectively, the “Investors”).

WHEREAS:

A. The Company requires additional financial support to enable the Company to
maintain its operations, including continued payment of creditors and to secure
additional time to try to effect a long-term solution to the Company’s financial
needs or a sale or other liquidation of the Company in a manner to maximize the
available return to creditors and stockholders of the Company. The Company,
having explored all reasonable alternatives has, therefore, requested that the
Investors enter into this Agreement for the purpose of providing additional
financial support upon the terms of this Agreement. The Company, after diligent
exploration, believes the terms offered by this Agreement are the only terms
available to it. The Company believes that the entry of this Agreement will
provide the Company with necessary financial support, helping to preserve the
going concern value of the Company for the benefit of all creditors and other
parties in interest, enabling the pay down of existing obligations and
maximizing the returns to creditors as compared to any of the alternatives
(including any bankruptcy proceedings – which would necessarily entail
substantial adverse effects to the business of the Company and diminish value
for all creditors, stockholders and other parties in interest).

B. Each of the Investors, other than entities managed or advised by CMEA
Development Co. LLC, is a current stockholder of the Company.

C. Subject to the terms and conditions of this Agreement, the Investors have
agreed upon the terms of this Agreement to purchase from the Company, and the
Company has agreed to sell to the Investors, securities in the form set forth in
Exhibit A.

D. In connection with the execution of this Agreement, the Company, each of the
Company’s Subsidiaries (other than Anesiva Hong Kong Limited) (the “Subsidiary
Guarantors”), CMEA Ventures VII, L.P., as collateral agent of the Investors, and
the Investors are also entering into a Pledge, Security and Collateral Agent
Agreement (as such may be amended or modified from time to time, the “Security
Agreement”) in the form set forth in Exhibit B. The Security Agreement, among
other things, provides that the Securities (as defined below) issued hereunder
shall be secured obligations under such Security Agreement.

E. In connection with the execution of this Agreement, each of the Subsidiary
Guarantors shall guaranty the obligations of the Company arising under this
Agreement and the Related Documents (as defined below) pursuant to a form of
Guaranty (as such may be amended or modified from time to time, the “Guaranty”)
in the form set forth in Exhibit C.

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NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, and for other consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:

 

1. AMOUNT AND TERMS OF THE SECURITIES

Subject to the terms and conditions of this Agreement, the Company agrees to
sell and issue to the Investors, severally and not jointly, and the Investors
agree to purchase from the Company securities in the form attached hereto as
Exhibit A (each, as amended or otherwise modified from time to time, a
“Security” and collectively, the “Securities”) in the aggregate principal amount
of up to Seven Million Dollars ($7,000,000.00) (the “Aggregate Commitment”) with
the Company issuing Securities in aggregate principal amount of up to Three
Million Dollars ($3,000,000.00) in the Initial Closing (as defined below) and
issuing Securities in aggregate principal amount of up to Four Million Dollars
($4,000,000.00) in the Subsequent Closings (as defined below) on the terms and
conditions set forth in Section 2.2 below. All Securities shall be issued in the
same form (with such changes as may be necessary to reflect the different
Investors, principal amounts and issuance dates) and shall rank pari passu among
themselves. No Securities shall be issued at a discount. The Lenders’
obligations hereunder are several and not joint obligations and no Lender shall
have any liability to any Person for the performance or non-performance by any
other Lender hereunder.

 

2. THE CLOSINGS

2.1 Initial Closing. The initial closing (the “Initial Closing”) of the purchase
and sale of the Securities to the Investors shall take place at the offices of
Cooley Godward Kronish LLP, Five Palo Alto Square, 3000 El Camino Real, Palo
Alto, California, 94306 on the date hereof, or at such other time and place as
the Company and the Investors mutually agree upon orally or in writing (the
“Initial Closing Date”). At the Initial Closing, the Company agrees to issue and
sell to the Investors and the Investors, severally and not jointly, agree,
subject to the satisfaction or waiver of the conditions set forth in Section 5,
to purchase Securities in the aggregate principal amount of Three Million
Dollars ($3,000,000.00), with each Investor purchasing Securities in the
principal amount equal to such Investor’s commitment as set forth under the
heading “Initial Closing Commitment” on Schedule 1 (in each case, their “Initial
Closing Commitment”).

2.2 Subsequent Closings. At any time prior to April 1, 2009, the Board of
Directors (the “Board”) of the Company may, in its discretion, request a
subsequent closing (each, a “Subsequent Closing,” and, together with the Initial
Closing, the “Closings”); provided that (i) the amount requested by the Company
in any Subsequent Closing shall not exceed Two Million Dollars ($2,000,000.00)
per Closing; (ii) the Company may not request more than two Subsequent Closings;
and (iii) the request for a Subsequent Closing must be approved in writing by
the Majority Investors (as defined below). In the event that a Subsequent
Closing is triggered in accordance with this Section 2.2, then, subject to
Section 5, each Investor (or its Affiliates, designees or successor funds, as
the case may be) may, in its sole discretion, purchase a Security in the
principal amount equal to the product of (i) the amount requested by the Company
in the Subsequent Closing multiplied by (ii) the quotient obtained by dividing
(a) such Investor’s Initial Closing Commitment by (b) the aggregate Initial
Closing Commitment of all of the Investors (with respect to each Investor, the
“Investor Allocation Ratio”) or in such other amounts as the Investors shall
agree or in such lesser amount as such Investor, in its sole discretion, may
elect.

 

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To the extent that any Investor fails to purchase its full principal amount of
Securities pursuant to its Investor Allocation Ratio in a Subsequent Closing,
then all other Investors purchasing Securities in such Subsequent Closing shall
have the right (but not the obligation) to purchase such unsold Security amounts
pursuant to their respective Investor Allocation Ratios or in such other amounts
as the Investors shall agree. All sales at a Subsequent Closing shall be made on
the terms and conditions set forth in this Agreement. In the event that a
Subsequent Closing is triggered in accordance with this Section 2.2, the
Subsequent Closing shall take place at such location and at such time as the
Company and the Majority Investors shall mutually agree.

2.3 Delivery. At each Closing: (i) each Investor participating in such Closing
will deliver to the Company in immediately available funds an amount equal to
its investment amount calculated in accordance with this Section 2 and (ii) the
Company shall deliver to each such Investor a Security dated the date of such
Closing in a principal amount equal to the amount invested by such Investor.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed by the Company in the disclosure schedule delivered to the
Investors on the date hereof (the “Disclosure Schedule”), the Company hereby
represents and warrants to each Investor that the representations and warranties
contained in this Section 3 are true, complete and correct and accurate in all
respects. The Disclosure Schedule shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Section 3, and the
disclosures in any paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph of this Section 3, unless it is reasonably clear from a
reading of the disclosure that such disclosure is applicable to such other
sections and subsections.

3.1 Organization, Good Standing and Qualification. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company and
each of the Subsidiary Guarantors has the corporate power and authority to own
and operate its properties and assets, to execute and deliver (to the extent
that it is a party to such agreement) (i) this Agreement, (ii) the Securities to
be issued in connection with this Agreement, (iii) the Security Agreement,
(iv) any Guaranty, (v) any Management Rights Letters requested by any Investors
and (vi) all other agreements related to this Agreement and the Securities (the
preceding clauses (ii) through (vi), collectively, together with all other
agreements, instruments and documents delivered from time to time in connection
herewith and therewith, as any or all of the foregoing may be supplemented or
amended from time to time, the “Related Documents”), to issue and sell the
Securities and to carry out the provisions of this Agreement and the Related
Documents and to carry on its business as presently conducted and as proposed to
be conducted. Each of the Company and each of its Subsidiaries is duly qualified
and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so has not, or would not
have, individually or in the aggregate, a material adverse effect on the
business, assets, liabilities, financial condition or prospects of the Company
and its Subsidiaries (a “Material Adverse Effect”).

 

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3.2 Capitalization; Voting Rights.

(a) The capitalization of the Company as of September 30, 2008 is as set forth
in the Form 10-Q for the period ended September 30, 2008 (the “Q3 Form 10-Q”),
increased as set forth in the next sentence. The Company has not issued any
Capital Stock since that date other than pursuant to (i) employee benefit plans
disclosed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007 (the “10-K”) or (ii) outstanding warrants, options or other
securities disclosed in the Q3 Form 10-Q. The authorized Capital Stock of each
Subsidiary of the Company is set forth on Schedule 3.2.

(b) Except as set forth in or contemplated by the Q3 Form 10-Q or the 10-K or as
disclosed on Schedule 3.2 and other than the shares reserved for issuance under
the Company’s stock option plans and stock purchase plan, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements to which the
Company is a party, or arrangements or agreements of any kind for the purchase
or acquisition from the Company of any of its securities. Except as disclosed on
Schedule 3.2, neither the offer, issuance or sale of the Securities, nor the
consummation of any transaction contemplated hereby or by the Related Documents
will result in a change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in or
affecting any such securities.

(c) All issued and outstanding shares of the Company’s Common Stock: (i) have
been duly authorized and validly issued and are fully paid and nonassessable and
(ii) were issued in compliance with all applicable laws concerning the issuance
of securities.

3.3 Authorization; Binding Obligations. All corporate action on the part of the
Company and each of its Subsidiaries (including the respective officers and
directors) necessary for the authorization of this Agreement and the Related
Documents, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the Related Documents at the Closing and, the
authorization, sale, issuance and delivery of the Securities has been taken or
will be taken prior to the Closing. This Agreement and the Related Documents,
when executed and delivered and to the extent it is a party thereto, will be
valid and binding obligations of each of the Company and each of its
Subsidiaries, enforceable against each such Person in accordance with their
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights and general principles of equity that restrict the
availability of equitable or legal remedies. The offer, sale and issuance of the
Securities are not subject to any preemptive rights or rights of first refusal
that will not have been properly waived or complied with. No vote of the
stockholders of the Company is required in connection with the issuance and sale
of the Securities or any of the other transactions contemplated by this
Agreement and the Related Documents.

3.4 Liabilities. None of the Company nor any Subsidiary has liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
except for those which (i) have been reflected in the SEC Reports or (ii) have
arisen in the ordinary course of business consistent with past practices since
September 30, 2008.

 

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3.5 Agreements; Action. Except as set forth on Schedule 3.5:

(a) the Company has filed as an exhibit to an SEC Report all agreements and
contracts required to be filed by Item 601 of Regulation S-K.

(b) Since December 31, 2007, neither the Company nor any of its Subsidiaries
has: (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock; (ii) incurred
any indebtedness for money borrowed or any other liabilities (other than
ordinary course obligations) individually in excess of Fifty Thousand Dollars
($50,000.00) or, in the case of indebtedness and/or liabilities individually
less than Fifty Thousand Dollars ($50,000.00), in excess of One Hundred Fifty
Thousand Dollars ($150,000.00) in the aggregate; (iii) made any loans or
advances to any person not in excess, individually or in the aggregate, of One
Hundred Thousand Dollars ($100,000.00), other than ordinary course advances for
travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.

(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same Person (including Persons the Company has reason
to believe are affiliated therewith) shall be aggregated for the purpose of
meeting the individual minimum dollar amounts of such subsections.

3.6 Obligations to Related Parties. Except as set forth on Schedule 3.6, there
are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than (a) for payment of salary for services rendered and for bonus
payments; (b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiaries; and (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board).

3.7 Changes. Since December 31, 2007, there has not been:

(a) any material change, except in the ordinary course of business, in the
obligations of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;

(b) any damage, destruction or loss, whether or not covered by insurance, that
has had, or could have, individually or in the aggregate, a Material Adverse
Effect;

(c) any waiver not in the ordinary course of business by the Company or any of
its Subsidiaries of a valuable right or of a material debt owed to it;

(d) any material change in any compensation arrangement or agreement with any
officer or director of the Company or any of its Subsidiaries;

(e) any labor organization activity related to the Company or any of its
Subsidiaries; or

 

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(f) any arrangement or commitment by the Company or any of its Subsidiaries to
do any of the acts described in subsection (a) through (e) above.

3.8 Title to Properties and Assets; Liens, Etc. Except as set forth on Schedule
3.8, each of the Company and each of its Subsidiaries has good and marketable
title to its respective properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (a) those resulting from taxes which have not yet become
delinquent; (b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries; (c) those that have
otherwise arisen in the ordinary course of business and (d) the Permitted Liens.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in reasonably good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. Except as set forth on Schedule 3.8, the
Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound.

3.9 Intellectual Property.

(a) Each of the Company and each of its Subsidiaries owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes reasonably necessary for its business as now conducted and to the
Company’s knowledge, as presently proposed to be conducted (the “Intellectual
Property”), without any known infringement of the rights of others.

(b) Neither the Company nor any of its Subsidiaries has received any written
communications alleging that the Company or any of its Subsidiaries has violated
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, nor is the
Company or any of its Subsidiaries aware of any basis therefor.

3.10 Compliance with Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (x) any term of its Certificate of
Incorporation, Bylaws or other organizational documents or (y) of any provision
of any indebtedness, mortgage, indenture, contract, agreement or instrument to
which it is party or by which it is bound or of any judgment, decree, order or
writ, which violation or default, in the case of this clause (y), has had, or
could have, either individually or in the aggregate, a Material Adverse Effect.
The execution, delivery and performance of and compliance with this Agreement
and the Related Documents to which it is a party, and the issuance and sale of
the Securities by the Company will not, with or without the passage of time or
giving of notice, result in any such violation, or be in conflict with or
constitute a default under any such term or provision, or result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company or any of its Subsidiaries or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its Subsidiaries, their
businesses or operations or any of their assets or properties.

 

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3.11 Litigation. Except as described in the SEC Reports, (i) there are no legal
or governmental actions, suits, proceedings or investigations pending and
(ii) to the Company’s knowledge, there are no legal or governmental actions,
suits, proceedings or investigations threatened, to which the Company or any of
its Subsidiaries is or may be a party or subject or of which property of the
Company or any of its Subsidiaries is or may be the subject, or related to
applicable environmental or discrimination matters, or instituted by the
Securities and Exchange Commission (the “SEC”), the Financial Industry
Regulatory Authority, any state securities commission or other governmental or
regulatory entity; and, to the Company’s knowledge, no labor disturbance by the
employees of the Company or any of its Subsidiaries exists, or is imminent which
is reasonably expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is a party to or subject to the provisions of any
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.

3.12 Tax Returns and Payments. Each of the Company and each of its Subsidiaries
has timely filed all tax returns required to be filed by it. All taxes shown to
be due and payable on such returns, any assessments imposed and all other taxes
due and payable by the Company or any of its Subsidiaries on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 3.12, neither the Company nor any of
its Subsidiaries has been advised (a) that any of its returns have been or are
being audited or (b) of any deficiency in assessment or proposed judgment to its
taxes.

3.13 Employees. Except as set forth on Schedule 3.13, neither the Company nor
any of its Subsidiaries has any collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to the
Company’s knowledge, threatened with respect to the Company or any of its
Subsidiaries. To the knowledge of the Company, no employee of the Company or any
of its Subsidiaries has plans to terminate his or her employment relationship
with the Company and its Subsidiaries. No director, officer or employee of or
consultant to the Company or any of its Subsidiaries is in violation of any
terms of any employment contract, non-competition agreement, non-disclosure
agreement, patent disclosure or assignment agreement or other contract or
agreement containing restrictive covenants relating to the right of any such
director, officer, employee or consultant to be employed or engaged by the
Company and its Subsidiaries because of the nature of the business conducted or
proposed to be conducted by the Company and its Subsidiaries, or relating to the
use of trade secrets or proprietary information of others. The Company and each
of its Subsidiaries is in compliance with all applicable laws, rules and
contracts relating to employment, employment practices, wages, overtime,
severance pay, bonuses and terms and conditions of employment, including
employee compensation matters and required contributions to managers insurance
and pension funds.

3.14 Registration Rights and Voting Rights. Except as set forth on Schedule
3.14, neither the Company nor any of its Subsidiaries is presently under any
obligation, and neither the Company nor any of its Subsidiaries has granted any
rights, to register any of the Company’s or its Subsidiaries’ presently
outstanding securities or any of its securities that may hereafter be issued.
Except as set forth on Schedule 3.14, to the Company’s knowledge, no stockholder
of the Company or any of its Subsidiaries has entered into any agreement with
respect to the voting of equity securities of the Company or any of its
Subsidiaries.

 

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3.15 Compliance with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which has had, or would have, either individually or in the
aggregate, a Material Adverse Effect. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or any Related Documents and the
issuance of the Securities, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. Each of the Company and its Subsidiaries has
all material franchises, permits, licenses and any similar authority necessary
for the conduct of its business as now being conducted by it.

3.16 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no expenditures are or will be required in order to comply with any
such existing statute, law or regulation. Except as set forth on Schedule 3.16,
no Hazardous Materials (as defined below) are used or have been used, stored or
disposed of by the Company or any of its Subsidiaries or, to the Company’s
knowledge, by any other person or entity on any property owned, leased or used
by the Company or any of its Subsidiaries. For the purposes of the preceding
sentence, “Hazardous Materials” shall mean (a) materials that are listed or
otherwise defined as “hazardous” or “toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment from
contamination, the control of hazardous wastes or other activities involving
hazardous substances, including building materials, or (b) any petroleum
products or nuclear materials.

3.17 Valid Offering. Assuming the accuracy of the representations and warranties
of the Investors contained in this Agreement, the offer, sale and issuance of
the Securities will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.

3.18 SEC Reports. The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), since January 1, 2008. The Company has
furnished or made available to the Investors copies of: (i) its Annual Report on
Form 10-K for its fiscal year ended December 31, 2007; (ii) its Quarterly
Reports on Form 10-Q for its fiscal quarters ended March 31, 2008, June 30, 2008
and September 30, 2008, and (iii) the Form 8-K filings which it has made during
the fiscal year 2008 and fiscal year 2009 to date (collectively, the “SEC
Reports” and, together with this Agreement and the Disclosure Schedule, the
“Disclosure Materials”). Each SEC Report was, at the time of its filing, in
compliance in all material respects with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
the date hereof, the Company satisfies the registrant requirements set forth in
General Instruction I.A. to Form S-3 for the use of a Registration Statement on
Form S-3.

 

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3.19 Internal Accounting Controls. The Company and its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with U.S. generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the Company and designed such disclosures controls and procedures to ensure that
material information relating to the Company and its Subsidiaries is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company’s Form 10-K or 10-Q, as the case may be, is
being prepared.

3.20 No Integrated Offering. Neither the Company, nor any of its Subsidiaries or
Affiliates, nor any Person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, nor will the
Company or any of its Affiliates or Subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.

3.21 Food and Drug Administration.

(a) Neither the Company nor any of its Subsidiaries is debarred under the
Generic Drug Enforcement Act of 1992 or otherwise excluded from or restricted in
any manner from participation in, any government program related to
pharmaceutical products and, to the knowledge of the Company, does not employ or
use the services of any individual who is debarred or otherwise excluded or
restricted.

(b) Each of the product candidates of the Company and its Subsidiaries is being,
and at all times has been, developed, tested, manufactured and stored, as
applicable, in substantial compliance in all material respects with all
applicable statutes, laws or regulations.

(c) Neither the Company nor any of its Subsidiaries is subject to any pending
or, to the knowledge of the Company, threatened, investigation by: (A) the FDA
pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991);
(B) Department of Health and Human Services Officer of Inspector General or
Department of Justice pursuant to the Federal Anti-Kickback Statute (42. U.S.C.
Section 1320a-7(b)) or the Civil False Claims Act (31 U.S.C. Section 3729 et
seq.); or (C) any equivalent statute of any other country. Neither the Company
nor any of its Subsidiaries, nor, to the knowledge of the Company, (1) any
officer or employee of the Company or any of its

 

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Subsidiaries, (2) any authorized agent of the Company or any of its Subsidiaries
or (3) any principal investigator or sub-investigator of any clinical
investigation sponsored by the Company or any of its Subsidiaries has, in the
case of each of (1) through (3) on account of actions taken for or on behalf of
the Company or any of its Subsidiaries, been convicted of any crime under 21
U.S.C. Section 335a(a) or any similar state or foreign statute, law or
regulation or under 21 U.S.C. Section 335a(b) or any similar state or foreign
statute, law or regulation.

(d) No clinical trial of a product of the Company or any of its Subsidiaries has
been suspended, put on hold or terminated prior to completion.

3.22 Accounts Receivable; Accounts Payable.

(a) All of the accounts receivable of the Company and its Subsidiaries are
reflected on the Company’s balance sheet (the “Balance Sheet”) at December 31,
2007 (the “Balance Sheet Date”) in accordance with U.S. generally accepted
accounting principles and represent bona fide completed sales made in the
ordinary course of business, are valid claims and, to the Company’s best
knowledge, are not subject to any set offs or counterclaims and are fully
collectible in the normal course of business after deducting the reserve set
forth in the Company’s Balance Sheet. Since the Balance Sheet Date, the Company
and its Subsidiaries have collected their respective accounts receivable in the
ordinary course and in a manner that is consistent with their prior practices.
Neither the Company nor any of its Subsidiaries has any accounts receivable or
loans receivable from any Person that is an Affiliate of the Company or any of
its Subsidiaries or from any director, officer or employee of the Company or any
of its Subsidiaries or any Affiliate thereof.

(b) All of the accounts payable and notes payable of the Company and each of its
Subsidiaries arose in bona fide arms’ length transactions in the ordinary course
of business, and no such account payable or note payable is delinquent by more
than sixty (60) days in its payment. Since the Balance Sheet Date, the Company
and its Subsidiaries have paid their respective accounts payable in the ordinary
course and in a manner that is consistent with their respective prior practices.
As of the date hereof, neither the Company nor any of its Subsidiaries have any
accounts payable to any Person that is an Affiliate of the Company or any of its
Subsidiaries or to any director, officer or employee of the Company or any of
its Subsidiaries or any Affiliate thereof.

3.23 Foreign Corrupt Practices Act. Neither the Company nor any of its
Subsidiaries has engaged, nor has any officer, director, employee or agent of
the Company or any of its Subsidiaries engaged, in any act or practice that
would constitute a violation of the Foreign Corrupt Practices Act of 1977, or
any rules or regulations promulgated thereunder. There is not now, and there
never has been, any employment by the Company or any of its Subsidiaries by, any
governmental or political official in any country in the world.

3.24 Solvency. After giving effect to the transactions contemplated by this
Agreement and the Related Documents, including, without limitation, the expenses
to be incurred by the Company and its Subsidiaries in connection herewith and
therewith, none of the Company or any of its Subsidiaries: (i) will be
insolvent; (ii) will be left with unreasonably small capital with which to
engage in its business; or (iii) will have incurred debts beyond its ability to
pay such debts as they mature.

 

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3.25 Change of Control Benefits. Neither the consummation of any Change of
Control (either alone or in connection with any other event, including any
termination of employment or service), will (i) result in any payment (including
any bonus, golden parachute or severance payment) becoming due to any employee
or consultant of the Company or any of its Subsidiaries; (ii) result in any
forgiveness of indebtedness owing by any employee or consultant of the Company
or any of its Subsidiaries to the Company or any of its Subsidiaries or, to the
knowledge of the Company, owing by any employee of the Company or any of its
Subsidiaries to any third party; (iii) materially increase the benefits payable
by the Company or any of its Subsidiaries, or (iv) result in any acceleration of
the time of payment or vesting of any such benefits.

3.26 Full Disclosure. Neither this Agreement, the Related Documents or the
exhibits and schedules hereto and thereto or any other information provided by
the Company or its agents to the Investors in connection with the transactions
contemplated by this Agreement and the Related Documents contain any untrue
statement of a material fact nor omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.

 

4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby, severally and not jointly, represents and warrants to the
Company, as of the date hereof, as to itself only, as follows:

4.1 Purchase for Own Account. Such Investor represents that it is acquiring the
Securities solely for its own account and beneficial interest for investment and
not for sale or with a view to distribution of the Securities or any part
thereof, has no present intention of selling (in connection with a distribution
or otherwise), granting any participation in or otherwise distributing the same.
Such Investor is not a registered broker-dealer under Section 15 of the Exchange
Act or an entity engaged in a business that would require it to be so registered
as a broker-dealer. Such Investor further represents that it has full power and
authority to enter into this Agreement and the Related Documents to which it is
a party and all such agreements, when executed and delivered by such Investor,
shall constitute valid and legally binding obligations of the Investor,
enforceable against the Investor in accordance with their respective terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws of general application
affecting enforcement of creditor’s rights generally and as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.

4.2 Information and Sophistication. Such Investor represents that it has
reviewed the Disclosure Materials and has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Securities. Such Investor further represents that it has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risk of this investment. The foregoing, however, shall
not be deemed in any way to limit the scope of the representations and
warranties of the Company in Section 3 or the ability of the Investors to rely
thereupon.

 

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4.3 Ability to Bear Economic Risk. Such Investor acknowledges that investment in
the Securities involves a high degree of risk, and represents that it is able,
without materially impairing its financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss of the investment.

4.4 Further Limitations on Disposition. Such Investor understands that the
Securities are characterized as “restricted securities” for the purposes of
federal securities laws and are being acquired in a transaction not involving a
public offering, have not been registered under the Securities Act and that such
securities may only be resold only if registered pursuant to the provisions of
the Securities Act or if an exemption from registration is available and that
the Company is not required to register the Securities under the Securities Act.
Such Investor acknowledges that it is familiar with Rule 144 promulgated under
the Securities Act and understands the resale limitation imposed thereby.

4.5 Experience. Such Investor is an “accredited investor” as such term is
defined in Rule 501 under the Securities Act.

4.6 No Governmental Review. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

4.7 Certain Trading Activities. Other than with respect to the transactions
contemplated herein, since the time that such Investor was first contacted by
the Company or any other Person regarding the transactions contemplated hereby,
neither such Investor nor any Affiliate of such Investor which (i) had knowledge
of the transactions contemplated hereby, (ii) has or shares discretion relating
to such Investor’s investments or trading or information concerning such
Investor’s investments, including in respect of the Securities, and (y) is
subject to such Investor’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”) has directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor or Trading Affiliate, effected or agreed to
effect any transactions in the securities of the Company (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities). Notwithstanding the foregoing, in the case of an Investor and/or
Trading Affiliate that is, individually or collectively, a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of such Investor’s or Trading Affiliate’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor’s or Trading Affiliate’s assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio managers that have knowledge about the financing
transaction contemplated by this Agreement. Other than to other Persons party to
this Agreement and to advisors, such Investor has maintained the confidentiality
of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). For purposes of this Section 4.7,
“Short Sales” include, without limitation, (i) all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and (ii) sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers.

 

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4.8 Regulation M. Such Investor is aware that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of the Company’s Common
Stock and other activities with respect to the Company’s Common Stock by the
Investors.

4.9 California Securities Laws. Such Investor acknowledges and agrees that the
sale of the Securities has not been qualified with the Commissioner of
Corporations of the State of California and the issuance of such securities or
the payment or receipt of any part of the consideration for such securities
prior to such qualification is unlawful, unless the sale of securities is exempt
from qualification by Section 25100, 25102 or 25105 of the California
Corporations Code. The rights of all parties to this agreement are expressly
conditioned upon such qualification being obtained, unless the sale is so
exempt.

4.10 Legends. Each Security may bear a form of the following legends:

(a) “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAW. NO SALE, PLEDGE OR DISPOSITION
MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAW OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAW.”

(b) Any legend required by applicable corporations or securities laws of any
state.

 

5. CONDITIONS TO EACH CLOSING OF INVESTORS

The Investors’ obligation to lend money to the Company at each Closing is
subject to the satisfaction or waiver, each at the discretion of the Investors,
of the following conditions:

5.1 Representations and Warranties. Subject to receipt by the Investors of an
update to the Disclosure Schedule in a form acceptable to the Investors, the
representations and warranties of the Company contained in Section 3 shall be
true and correct on and as of the applicable Closing.

5.2 Performance. The Company and its Subsidiaries shall have performed and
complied with all covenants, agreements, obligations and conditions contained in
this Agreement and the Related Documents that are required to be performed or
complied with by it on or before the applicable Closing, including the filing of
UCC-1 financing statements and appropriate filings with the Patent and Trademark
Office.

5.3 Compliance Certificate. The Company shall have delivered to each Investor a
certificate of the Company executed by its Chief Executive Officer and Chief
Financial Officer, dated as of the applicable Closing, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.

 

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5.4 Security Agreement. The Company, the Subsidiary Guarantors and the Investors
shall have executed and delivered the Security Agreement and such agreement
shall be in full force and effect.

5.5 Guaranty. Each of the Subsidiary Guarantors shall have executed and
delivered a Guaranty for the benefit of the Investors and such agreement shall
be in full force and effect.

5.6 Consents and Approvals. All consents, approvals, waivers, authorizations,
licenses or orders of, registrations, qualifications, designations, declarations
or filings with, or notice to any governmental entity or any other Person
necessary to be obtained, made or given as of the applicable Closing in
connection with the transactions contemplated hereby shall have been duly
obtained, made or given and shall be in full force and effect, without the
imposition upon the Company of any condition, restriction or required
undertaking.

5.7 Proceedings. All corporate and other proceedings taken or required to be
taken by the Company and in connection with the transactions contemplated
hereby, including the approvals by the Board and the Special Committee, shall be
reasonably satisfactory in form and substance to the Investors and all documents
incident thereto shall have been executed and delivered to the Investors or
their counsel, and shall be reasonably satisfactory in form and substance to the
Investors and their counsel. In addition, the Company shall have delivered good
standing certificates and tax good standing certificates with respect to the
Company and its Subsidiaries from each jurisdiction in which such Person is
incorporated and in which such Person is qualified to do business.

5.8 Legal Opinion. The Investors shall have received from Cooley Godward Kronish
LLP, corporate counsel for the Company, an opinion, dated as of the applicable
Closing, in substantially the form agreed to as of the date hereof.

5.9 Secretary’s Certificate. The Secretary of the Company shall have delivered
to the Investors at the applicable Closing a certificate certifying: (a) the
Company’s Certificate of Incorporation as in effect as of the applicable
Closing; (b) the Bylaws of the Company as in effect as of the applicable
Closing; (c) resolutions of the Board approving this Agreement, the Related
Documents and the transactions contemplated hereby and thereby; and
(d) resolutions of the Special Committee of the Board recommending to the Board
this Agreement, the Related Documents and the transactions contemplated hereby
and thereby.

5.10 Due Diligence. The Investors shall be satisfied in their sole discretion at
the applicable Closing with the diligence review of the business, legal,
accounting and other investigations undertaken by the Investors and their
advisors and agents with respect to the Company, and each Investor shall have
obtained the approval of such Investor’s investment committee.

5.11 Financing Statements. The Company shall have authorized the Collateral
Agent (as defined in the Security Agreement), for the benefit of the Investors,
to prepare and file such financing statements and other instruments, including,
without limitation, the filing of UCC-1

 

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financing statements and appropriate filings with the Patent and Trademark
Office (collectively, “Financing Statements”), as the Collateral Agent shall
require in order to perfect and maintain the continued perfection of the first
priority security interest created by the Security Agreement and the other
applicable Related Documents and the Company hereby authorize the Collateral
Agent to prepare and file such Financing Statements.

5.12 Search Results; Lien Terminations. The Collateral Agent shall have received
search reports of filings with appropriate government agencies, dated a date
reasonably near to the applicable Closing, showing that there are no Liens on
the assets of the Company or any of its Subsidiaries (in each case, under their
present names or any previous names) other than Permitted Liens.

5.13 Existing Creditors. The Company shall have obtained settlement with (or be
actively conducting negotiations with) its existing creditors to the
satisfaction, in their sole discretion, of the Investors.

5.14 Employee Plans. The Company shall have amended the existing executive
change in control and severance benefit plan or other similar payment
arrangements of the Company (collectively, the “Employee Plans”) that would be
triggered by a Change in Control as directed in the sole discretion of the
Investors. The Company shall have adopted the Amended and Restated Executive
Change In Control and Severance Benefit Plan in the form attached hereto as
Exhibit D.

5.15 Management Rights Letters. The Company and each Investor requesting one
shall have entered into a Management Rights Letter in a form acceptable to such
Investor (each, a “Management Rights Letter” and, collectively, the “Management
Rights Letters”).

5.16 Indemnification Agreements. The Company shall enter into an indemnification
agreement with each member of the Board and their affiliated funds in a form
satisfactory to the Investors in their sole discretion.

5.17 D&O Insurance. As of each applicable Closing, the Company shall have in
full force and effect directors’ and officers’ liability insurance with coverage
satisfactory to the Investors in their sole discretion.

5.18 Stock Certificates. The Collateral Agent shall have received all
certificates, instruments and other documents representing all Capital Stock
being pledged pursuant to the Security Agreement and stock powers for such
certificates, instruments and other documents executed in blank.

5.19 No Event of Default. No event shall have occurred and be continuing or
would result from the consummation of the applicable Closing that would
constitute an Event of Default.

 

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6. REGISTRATION, TRANSFER AND EXCHANGE OF SECURITIES

6.1 Register. The Company shall keep, at its sole cost and expense, books for
the registration of the Securities as to both principal and returns on such
principal, the name and address of each holder of the Securities and the
registration of any transfer of the Securities (the “Register”). Included in the
Register shall be notations as to whether the Securities have been accelerated
or prepaid or otherwise paid or cancelled, and, in the case of a mutilated,
destroyed, lost or stolen Security, whether such Security has been replaced. The
failure of the Company to make a notation in the Register shall in no way affect
the validity of any sale, transfer or assignment of the Security made in
compliance with this Agreement.

6.2 Transfer. Subject to Section 4.2, each Investor shall be entitled to
transfer its Security(ies) in any manner permitted by applicable law and to the
registration of such transfer by the Company in the name of such transferee or
transferees as shall be specified by the Investor. In the event of a proposed
transfer, the transferring Investor shall give written notice to the Company of
such Investor’s intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall, if the Company so requests, be accompanied by either: (i) a
written opinion of legal counsel, who shall be reasonably satisfactory to the
Company, addressed to the Company and reasonably satisfactory in form and
substance to the Company’s counsel, to the effect that the proposed transfer of
the Security may be effected without registration under the Securities Act or
(ii) a “no action” letter from the SEC to the effect that the transfer of such
Security without registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto, whereupon the holder of
such restricted securities shall be entitled to transfer such restricted
securities in accordance with the terms of the notice delivered by such holder
to the Company; provided, however, that no opinion or “no action” letter need be
obtained with respect to a transfer to: (a) an affiliate (as such term is
defined in the Securities Act) of the Investor; (b) a partner, active or
retired, of the Investor; (c) the estate of any such partner; or (d) the spouse,
children, grandchildren or spouse of such children or grandchildren of any
holder or to trusts for the benefit of the Investor or such Persons. In
connection with any transfer in accordance with this Section 6.2 and at all
other times hereunder, the Investor shall be entitled to surrender its Security
to the Company together with a written request for the issuance of one or more
new Securities, specifying the denomination or denominations thereof and, in the
case of a transfer of a Security, the name and address of the new transferee or
transferees. As soon as reasonably practicable, the Company shall issue a new
Security bearing the same rate or return and in the same form, in the same
aggregate principal amount as the Security being surrendered, registered in the
name specified in the written request from such Investor. Each such new Security
shall be dated and bear a rate of return from the date to which returns shall
have been paid on the surrendered Security or dated the date of the surrendered
Security if no returns shall have been paid thereon. Each Security presented or
surrendered for reissuance and registration of a new Security shall be endorsed,
or, in the case of a transfer of a Security, shall be accompanied by a duly
executed written instrument of transfer in an appropriate form. The applicable
Investor shall be responsible for any transfer taxes associated with the
transfer of any Security. Any transferee, by its acceptance of a Security
registered in its name (or the name of its nominee), shall be deemed to have
made the representations set forth in Section 4. Notwithstanding the foregoing,
any such transferee shall execute and deliver a counterpart of this Agreement,
the Security Agreement and the Guaranty to the Company and the Investors, in
form and substance satisfactory to the Majority Lenders, and, by delivering such
counterpart, such transferee shall be deemed to agree to be bound by the
provisions of this Agreement, the Security Agreement, the Guaranty and the other
Related Documents.

 

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6.3 Reliance of Register. The Company and the Investors may treat the Person in
whose name any Security is registered on the Register as the absolute owner of
such Security for all purposes, and all payments in respect of a Security made
to any such Person or upon such Person’s order shall satisfy and discharge the
liability of the Company or the Investor (as the case may be) on such Security
to the extent of the sum or sums so paid.

6.4 Mutilated, Destroyed, Lost or Stolen Securities. In case any Security shall
become mutilated or defaced, or be destroyed, lost or stolen, the Company shall
execute and deliver a new Security of like principal amount in exchange and
substitution for the mutilated or defaced Security, or in lieu of and in
substitution for the destroyed, lost or stolen Security. In the case of a
mutilated or defaced Security, the relevant Investor shall surrender such
Security to the Company. In the case of any destroyed, lost or stolen Security,
such Investor shall furnish to the Company: (i) evidence to the Company’s
satisfaction of the destruction, loss or theft of such Note and (ii) such
security or indemnity as may be reasonably required by the Company.

 

7. AFFIRMATIVE COVENANTS

The Company hereby covenants that so long as any portion of any Security remains
outstanding:

7.1 Notices. The Company shall notify each Investor within five (5) Business
Days after the Board of Directors or senior officers of the Company has
knowledge or becomes aware of the occurrence of: (i) any action, suit or
proceeding before any arbitrator, court or governmental department, domestic or
foreign, pending, or to the Company’s knowledge, threatened against or affecting
the Company or any Subsidiary of the Company, which if adversely determined
could have a Material Adverse Effect or (ii) any material dispute or default by
the Company, any of its Subsidiaries or any other party under any joint venture,
partnering, distribution, cross-licensing, strategic alliance, collaborative
research or manufacturing, license or similar agreement which would reasonably
be expected to have a Material Adverse Effect.

7.2 Existence. The Company shall maintain and preserve the existence, present
form of business and all rights and privileges necessary or desirable in the
normal course of business of the Company and its Subsidiaries; and keep all of
the property of the Company and its Subsidiaries in good working order and
condition, ordinary wear and tear excepted.

7.3 Insurance. The Company shall (and shall cause its Subsidiaries to) obtain
and keep in force insurance in such amounts and types as is usual in the type of
business conducted by the Company or such Subsidiary, as applicable, with
insurance carriers having a policyholder rating of not less than “A” and
financial category rating of Class VII in “Best’s Insurance Guide,” unless
otherwise approved by the Majority Investors. Such insurance policies must be in
form and substance reasonably satisfactory to the Majority Investors, and shall
list the Collateral Agent as an additional insured or loss payee, as applicable,
on endorsement(s) in form reasonably acceptable to the Majority Investors. The
Company shall furnish to the Collateral Agent such endorsements, and upon the
Collateral Agent’s request, copies of any or all such policies. If no Event of
Default has occurred and is continuing, proceeds payable under any casualty
policy will, at the Company’s option, be payable to the Company to replace the
property subject to the claim, provided that such replacement property shall be
deemed part of the

 

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Collateral (as defined in the Security Agreement). If an Event of Default has
occurred and is continuing, then, at the Majority Investors’ option, the
proceeds payable under any casualty policy will be payable to the Investors and
applied toward satisfaction of the Securities Amounts.

7.4 Accounting Records. On and after the date of this Agreement, the Company
shall (and shall cause its Subsidiaries to) maintain adequate books, accounts
and records, and prepare all financial statements in accordance with U.S.
generally accepted accounting principles, and in compliance with the regulations
of any governmental or regulatory authority having jurisdiction over the
Company, such Subsidiary or the business of the Company or such Subsidiary.

7.5 Compliance with Laws. The Company shall (and shall cause its Subsidiaries
to) comply with all laws, rules, regulations applicable to, and all orders and
directives of any governmental or regulatory authority having jurisdiction over,
the Company, such Subsidiary or the business of the Company or such Subsidiary,
and with all material agreements to which the Company or such Subsidiary is a
party, except where the failure to so comply would not have a Material Adverse
Effect.

7.6 Taxes and Other Liabilities. The Company shall (and shall cause its
Subsidiaries to) pay all of Indebtedness (as defined below) of the Company or
such Subsidiary when due; pay all taxes and other governmental or regulatory
assessments before delinquency or before any penalty attaches thereto, except as
may be contested in good faith by the appropriate procedures and for which the
Company shall maintain appropriate reserves; and timely file all required tax
returns.

7.7 Special Collateral Covenants. The Company shall (and shall cause its
Subsidiaries to):

(a) do all things reasonably necessary to maintain, preserve, protect and keep
all Collateral in good working order and saleable condition, ordinary wear and
tear excepted, deal with the Collateral in all ways as are considered good
practice by owners of like property and use the Collateral lawfully and, to the
extent applicable, only as permitted by the insurance policies of the Company
and its Subsidiaries;

(b) maintain, or cause to be maintained, complete and accurate Records (as
defined below) relating to the Collateral;

(c) upon reasonable prior notice at reasonable times during normal business
hours with reasonable prior notice, permit the Investors’ officers, employees,
representatives and agents to inspect the Collateral and to discuss the
Collateral and the Records relating thereto with the officers and employees of
the Company and its Subsidiaries, and, in the case of any Rights to Payment (as
defined below), with any Person which is or may be obligated thereon;

(d) at the request of the Majority Investors, firmly affix a decal, stencil or
other marking to designated items of Equipment (as defined below), indicating
thereon the security interest of the Investors; and

 

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(e) obtain and maintain such acknowledgments, consents, waivers and agreements
from the owner, lienholder, mortgagee and landlord with respect to any real
property on which Collateral is located as the Majority Investors may reasonably
require, all in form and substance satisfactory to the Majority Investors.

7.8 Financing Statements and Other Actions. The Company shall execute and
deliver to the Collateral Agent all financing statements, notices and other
documents (including, without limitation, any filings with the Patent and
Trademark Office) from time to time as may be reasonably requested by the
Majority Investors to maintain a first priority perfected security interest in
the Collateral in favor of the Investors; and perform such other acts, and
execute and deliver to the Investors such additional conveyances, assignments,
agreements and instruments, as the Majority Investors may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or the Investors’ rights, powers and remedies hereunder.

7.9 Tax Characterization. The Company and each Investor agree (and agree to
cause their respective owners or Affiliates) to treat the Securities as equity,
not debt, for all U.S. tax purposes and not to take any position inconsistent
with such U.S. tax treatment for U.S. tax purposes to the extent permitted by
law.

7.10 Rights Offering. The Company and the Investors acknowledge and agree that
the Company anticipates, upon approval by the Board of Directors, to offer to
its stockholders non-transferable subscription rights to purchase Securities in
an aggregate principal amount of up to Three Million Dollars ($3,000,000.00). In
such event, each Investor hereby agrees to waive any right to participate in any
such rights offering, except to the extent that not all of the principal amount
of Securities offered in any such rights offering are purchased by the Company’s
stockholders (excluding the Investors).

7.11 Further Assurances. The Company shall, and shall cause any of its
Subsidiaries to, take such actions as are necessary or as the Collateral Agent
or the Majority Lenders may reasonably request from time to time (including the
execution and delivery of joinders and/or guaranties to this Agreement and any
other applicable Related Documents, termination statements, deposit account
control agreements, securities account control agreement and other documents,
the filing or recording of any of the foregoing, and the delivery of stock
certificates and other collateral with respect to which perfection is obtained
by possession) to ensure that the obligations of the Company and its
Subsidiaries hereunder and under the other Related Documents are secured by
substantially all of the assets, equity securities and personal property of the
Company and its Subsidiaries (whether now existing or promptly upon the
acquisition or creation thereof after the date hereof).

7.12 Additional Subsidiaries. If any additional Subsidiary of the Company is
formed or acquired after the Effective Date, the Company shall, within three
Business Days after such Subsidiary is formed or acquired, (i) notify the
Collateral Agent and the Lenders thereof, (ii) cause such Subsidiary to execute
and become a party to a guaranty of the obligations hereunder, the Security
Agreement or any other security agreement, and such other Related Documents in
favor of the Collateral Agent as the Collateral Agent may request and
(iii) pledge one hundred percent (100%) of the Capital Stock of such Subsidiary
(except that the Company or any of its

 

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Subsidiaries shall not be required to pledge more than 65% of the outstanding
voting Capital Stock of any Subsidiary organized under the laws of any
jurisdiction outside the United States of America) to the Collateral Agent
pursuant to the Security Agreement or any other security agreement. The Company
agrees to provide such evidence as the Collateral Agent shall request as to the
perfection and priority status of each security interest and Lien created by
such security documents.

 

8. NEGATIVE COVENANTS

8.1 Restrictions on Fundamental Changes. Except with the prior written approval
of the Majority Investors, neither the Company nor any of its Subsidiaries will
merge with or consolidate into, or acquire all or substantially all of the
assets of, any Person, or sell, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or substantially all or
any material amount of its assets or commence any Insolvency Proceeding with
respect to itself; or a custodian, receiver, trustee, assignee for the benefit
of creditors, or other similar official shall be appointed to take possession,
custody or control of the properties of the Company or any Subsidiary, and such
involuntary Insolvency Proceeding, petition or appointment is acquiesced to by
the Company or such Subsidiary as applicable or is not dismissed within sixty
(60) days; or dissolve or terminate of the business of the Company or any
Subsidiary.

8.2 Change of Control. In the event of a Change of Control of the Company, the
Company agrees to pay to the Investors an amount equal to seven (7) times the
sum of the outstanding principal amount of the Securities, plus all accrued but
unpaid returns thereon. Except as otherwise set forth herein, the payments on
the Securities pursuant to this Section 8.2 shall constitute the payment in full
of the Securities. The Company acknowledges and agrees that this Section 8.2 is
a material inducement to incent the Investors to lend funds to the Company at a
time when the Company requires additional financial support to enable the
Company to maintain its operations, and after the Company, having diligently
explored all reasonable alternatives, has requested that the Investors provide
additional capital for the Company to meet its short-term obligations, help to
preserve the going concern value of the Company for the benefit of all
creditors, stockholders and other parties in interest, enable the pay down of
existing obligations and maximize the returns to creditors as compared to any of
the alternatives (including any bankruptcy proceedings – which would necessarily
entail substantial adverse effects to the business of the Company and diminish
value for all creditors, stockholders and other parties in interest).

8.3 Distributions. Except with the prior approval of the Majority Investors,
neither the Company nor any of its Subsidiaries will declare or pay any
dividends in respect of their Capital Stock, or purchase, redeem, retire or
otherwise acquire for value any of their Capital Stock now or hereafter
outstanding, return any capital to their stockholders as such, or make any
distribution of assets to their stockholders as such, or permit any of its
Subsidiaries to purchase, redeem, retire or otherwise acquire for value any
stock of the Company, except that the Company may: (i) declare and deliver
dividends and distributions payable solely in Common Stock of the Company and
(ii) purchase shares or options of employees, consultants and other service
providers in accordance with stock option, stock issuance or other stock
purchase plans and employment contracts of the Company.

 

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8.4 Indebtedness. Except with the prior approval of the Majority Investors,
neither the Company nor any Subsidiary will create, incur, assume or otherwise
become liable for or suffer to exist any Indebtedness (including under existing
facilities), other than: (i) Indebtedness for borrowed money to the Investors
hereunder; (ii) Guaranty and any other guarantees by any Subsidiaries of the
Company of Indebtedness of the Company incurred hereunder; (iii) Indebtedness
consisting of guarantees resulting from endorsement of negotiable instruments
for collection by the Company in the ordinary course of business;
(iv) Indebtedness incurred for the purpose of financing the acquisition of
equipment provided that the principal amount therefore does not exceed the
purchase price of such equipment; and (v) Indebtedness consisting of accounts
payable to trade creditors for goods and services and expenses (other than for
borrowed money), in each case incurred in the ordinary course of business as
presently conducted.

8.5 Liens. Except with the prior written approval of the Majority Investors,
neither the Company nor any Subsidiary will create, incur, assume or suffer to
exist any Lien upon or with respect to any of its properties, revenues or
assets, whether now owned or hereafter acquired except for any of the following
(“Permitted Liens”): (i) Liens in favor of the Investors in respect of the
indebtedness hereunder and under the Security Agreement and in connection with
the Rights Offering; (ii) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and which are adequately reserved for in
accordance with U.S. generally accepted accounting principles; (iii) Liens of
materialmen, mechanics, warehousemen, carriers or employees or other like Liens
arising in the ordinary course of business and securing obligations either not
delinquent or being contested in good faith by appropriate proceedings;
(iv) Liens consisting of deposits or pledges to secure the payment of worker’s
compensation, unemployment insurance or other social security benefits or
obligations, or to secure the performance of bids, trade contracts, leases,
public or statutory obligations, surety or appeal bonds or other obligations of
a like nature incurred in the ordinary course of business; (v) easements, rights
of way, servitudes or zoning or building restrictions and other minor
encumbrances on real property and irregularities in the title to such property
which do not in the aggregate materially impair the use or value of such
property or risk the loss or forfeiture of title thereto; (vi) non-exclusive
licenses granted in the ordinary course of business and consistent with past
practices; and (vii) Liens upon or in any equipment acquired or held by the
Company or any Subsidiary to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, provided that the Lien is confined solely to the equipment so
acquired and accessions thereon.

8.6 Capital Expenditures. Except with the prior written approval of the Majority
Investors, neither the Company nor any Subsidiary shall make any Capital
Expenditures in excess of One Hundred Thousand Dollars ($100,000.00) in any one
instance or series of related instances.

8.7 Use of Proceeds. Except with the prior written approval of the Majority
Investors, neither the Company nor any Subsidiary shall use any proceeds from
any of the Securities hereunder, directly or indirectly, for the purposes of
repaying any pre-existing debt of the Company or any of its Subsidiaries.

 

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8.8 Affiliate Transactions. Except with the prior written approval of the
Majority Investors, neither the Company nor any Subsidiary shall enter into any
transaction, including the purchase, sale or exchange of property or the
rendering of any services, with any Affiliate or enter into, assume or suffer to
exist any employment or consulting contract with any Affiliate, except a
transaction or contract which is in the ordinary course of the business of the
Company or such Subsidiary, as applicable, and which is upon fair and reasonable
terms not less favorable to the Company or such Subsidiary, as applicable, than
it would obtain in a comparable arm’s length transaction with a Person not an
Affiliate.

8.9 Investments. Except with the prior written approval of the Majority
Investors, neither the Company nor any Subsidiary shall make loans to,
investments in or purchase securities of any Person or Subsidiary, or otherwise
extend credit to any Person or Subsidiary (other than extensions of trade credit
arising from the sale of goods or services in the ordinary course of business)
or loans or advances to employees for travel expenses as approved by the Board,
in amounts in excess of Ten Thousand Dollars ($10,000.00) individually or
Twenty-Five Thousand Dollars ($25,000.00) in the aggregate.

8.10 Sales of Assets. Except with the prior written approval of the Majority
Investors, neither the Company nor any Subsidiary shall sell, transfer, lease,
license or otherwise dispose of (a “Transfer”) any of its assets except:
(i) non-exclusive licenses of Intellectual Property in the ordinary course of
business consistent with industry practice; (ii) Transfers of worn-out, obsolete
or surplus property (each as determined by the Company in its reasonable
judgment); (iii) Transfers of Inventory (as defined below); (iv) Transfers
constituting Permitted Liens; and (v) Transfers of assets (other than
Intellectual Property) for fair consideration and in the ordinary course of its
business.

8.11 Other Business. Except with the prior written approval of the Majority
Investors, neither the Company nor any Subsidiary shall engage in any material
line of business other than the business that the Company or such Subsidiary
conducts or intends to conduct as of the Effective Date.

8.12 Deposit Accounts and Securities Accounts. Except with the prior written
approval of the Majority Investors, neither the Company nor its Subsidiaries
shall maintain any Deposit Accounts or accounts holding securities owned by the
Company or any Subsidiary except for Deposit Accounts and securities/investment
accounts, in each case, with respect to which the Company or the Subsidiary, as
applicable, and the Investors shall have taken such action as the Majority
Investors reasonably deem necessary to obtain a perfected first security
interest therein, including the execution and delivery of control agreements in
favor of the Collateral Agent.

8.13 Documents of Title. Except with the prior written approval of the Majority
Investors or with respect to Permitted Liens, neither the Company nor any
Subsidiary shall sign or authorize the signing of any financing statement or
other document naming the Company or such Subsidiary, as applicable, as debtor
or obligor, or acquiesce or cooperate in the issuance of any bill of lading,
warehouse receipt or other document or instrument of title with respect to any
Collateral, except those negotiated to the Collateral Agent, or those naming the
Collateral Agent as secured party.

 

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8.14 Debt or Equity Offering. Except with the prior written approval of the
Majority Investors, neither the Company nor any of its Subsidiaries shall issue,
deliver, sell, authorize, grant, pledge or otherwise encumber any shares of
Capital Stock or any securities convertible into shares of Capital Stock, or any
debt or convertible debt securities, or subscriptions, rights, warrants or
options to acquire any shares of Capital Stock or any securities convertible
into shares of Capital Stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares, debt or convertible
securities, other than (i) the issuance, delivery and/or sale of shares of the
Company’s Common Stock pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement; (ii) the issuance or delivery of
shares of the Company’s Common Stock pursuant to the exercise of warrants
outstanding on the date of this Agreement; and (iii) as contemplated by this
Agreement.

8.15 Certain Agreements on Rights to Payment. Except with the prior written
approval of the Majority Investors or as done in the ordinary course of
business, neither the Company nor any Subsidiary shall make any material
discount, credit, rebate or other reduction in the original amount owing on a
Rights to Payment or accept in satisfaction of a Rights to Payment less than the
original amount thereof.

 

9. EVENTS OF DEFAULT; ACCELERATION

9.1 Events of Default. The occurrence of any of the following, upon written
notice by the Majority Investors to the Company, shall constitute an “Event of
Default.” An Event of Default that has not been cured within the applicable
period of time or waived by the Majority Investors in accordance with the terms
hereof shall, at the option of the Majority Investors (1) make all sums of
unpaid principal and returns on the Securities and any Securities Amounts and
other amounts due and owing under this Agreement or any Related Document
immediately due and payable (including, in the case where the underling Event of
Default would trigger the Company’s obligations set forth in Section 8.2 hereof,
the sums due pursuant to Section 8.2) and (2) give the Investors the right to
exercise any other right or remedy provided by contract or applicable law:

(a) the Company shall fail to pay any principal or returns due under the
Securities, or fail to pay any fees or other charges when due under this
Agreement or any of the Related Documents, and such failure continues for three
(3) Business Days or more after the same first becomes due;

(b) any representation or warranty made, or financial statement, certificate or
other document provided, by the Company or any Subsidiary under this Agreement
or any Related Document shall prove to have been false or misleading in any
material respect when made or deemed made herein;

(c) any registration statement, proxy statement, report or other document filed
by the Company under the Securities Act or the Exchange Act shall contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;

 

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(d) the Company or any Subsidiary shall fail to pay or admit its inability to
pay its debts generally as they become due or shall commence any Insolvency
Proceeding with respect to itself; an involuntary Insolvency Proceeding shall be
filed against the Company or any Subsidiary, or a custodian, receiver, trustee,
assignee for the benefit of creditors, or other similar official shall be
appointed to take possession, custody or control of the properties of the
Company or any Subsidiary, and such involuntary Insolvency Proceeding, petition
or appointment is acquiesced to by the Company or such Subsidiary as applicable
or is not dismissed within sixty (60) days; or the dissolution or termination of
the business of the Company or any Subsidiary;

(e) the Company or any Subsidiary shall be in default beyond any applicable
period of grace or cure under any other agreement involving the borrowing of
money, the purchase of property, the advance of credit or any other monetary
liability of any kind to any Investor or to any other Person that results in the
acceleration of payment of such obligation in an amount in excess of One Hundred
Thousand Dollars ($100,000.00);

(f) any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by the
Company or any Subsidiary shall have any unfunded liabilities, any of which, in
the reasonable judgment of the Majority Investors, would reasonably be expected
to have a Company Material Adverse Effect;

(g) any sale, transfer or other disposition of all or a substantial or material
part of the assets of the Company or any Subsidiary, including, without
limitation, to any trust or similar entity, shall occur, except where such
transaction is consented to by the Majority Investors;

(h) any judgment(s) singly or in the aggregate in excess of One Hundred Thousand
Dollars ($100,000.00) shall be entered against the Company or any Subsidiary
that remain unsatisfied, unvacated or unstayed pending appeal for forty-five
(45) or more days after entry thereof;

(i) the Company or any Subsidiary shall fail to perform or observe any covenant
contained in this Agreement;

(j) the Company’s Cash and Cash Equivalents (as defined below) shall fall below
Two Hundred Fifty Thousand Dollars ($250,000.00);

(k) there shall be a Material Adverse Effect on the Company and its Subsidiaries
(for the avoidance of doubt, the departure of key members of the Company’s
management shall constitute a Material Adverse Effect) or the Collateral shall
be impaired; and

(l) the Company or any Subsidiary shall fail to perform or observe any covenant
or agreement contained in this Agreement or any Related Document (other than a
covenant that is dealt with specifically elsewhere in this Article 9) and, if
capable of being cured, the breach of such covenant is not cured within thirty
(30) days after the sooner to occur of the Company’s receipt of notice of such
breach from the Majority Investors or the date on which such breach first
becomes known to any officer of the Company; provided, however, that if such
breach is not capable of being cured within such thirty (30)-day period and the
Company timely notifies

 

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the Majority Investor of such fact and the Company diligently pursues such cure,
then the cure period shall be extended to the date requested in the Company’s
notice but in no event more than ninety (90) days from the initial breach;
provided, further, that such additional sixty (60)-day opportunity to cure shall
not apply in the case of any failure to perform or observe any covenant which
has been the subject of a prior failure within the preceding one hundred eighty
(180) days or which is a willful and knowing breach by the Company or any
Subsidiary.

No delay or omission to exercise any right, power or remedy accruing to any
party under this Agreement, upon any breach or default of any other party under
this Agreement, will impair any such right, power or remedy of such
non-breaching or non-defaulting party nor will it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor will any waiver of any single breach
or default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and will be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, will be cumulative
and not alternative.

9.2 Remedies Upon Default. (a) Upon the occurrence and during the continuance of
an Event of Default described in Section 9.1(c), each of (i) the unpaid
principal amount of and accrued returns on the Securities and (ii) all other
Securities Amounts shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Company, and (b) upon the occurrence
and during the continuance of any other Event of Default, the Investors shall be
entitled to, at their option, exercise any or all of the rights and remedies
available to a secured party under the UCC or any other applicable law, and
exercise any or all of their rights and remedies provided for in this Agreement
and in any Related Document. The obligations of the Company under this Agreement
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any Securities Amounts is rescinded or must otherwise be
returned by a Investor upon, on account of or in connection with, the
insolvency, bankruptcy or reorganization of the Company, any Subsidiary or
otherwise, all as though such payment had not been made.

9.3 Sale of Collateral. In addition to any other rights set forth in this
Agreement or any of the Related Documents, upon the occurrence and during the
continuance of an Event of Default, the Investors may sell all or any part of
the Collateral, at public or private sales, to themselves, a wholesaler,
retailer or investor, for cash, upon credit or for future delivery, and at such
price or prices as the Investors may deem commercially reasonable. To the extent
permitted by law, the Company hereby specifically waives all rights of
redemption and any rights of stay or appraisal that it has or may have under any
applicable law in effect from time to time. Any such public or private sales
shall be held at such times and at such place(s) as the Investors may determine.
In case of the sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Investors until the
selling price is paid by the purchaser, but the Investors shall not incur any
liability in case of the failure of such purchaser to pay for the Collateral
and, in case of any such failure, such Collateral may be resold. The Investors
may, instead of exercising their power of sale, proceed to enforce their
security interest in the Collateral by seeking a judgment or decree of a court
of competent jurisdiction. Without limiting the generality of the foregoing, if
an Event of Default is in effect:

(a) Subject to the rights of any third parties, the Investors may, in compliance
with applicable law, license, or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any Copyrights,
Patents, Trademarks or other Intellectual Property included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as the Investors shall in their sole discretion determine;

 

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(b) The Investors may (without assuming any obligations or liability
thereunder), at any time and from time to time, enforce (and shall have the
exclusive right to enforce) against any licensee or sublicensee all rights and
remedies of the Company in, to and under any Copyright Licenses, Patent
Licenses, Trademark Licenses or other Intellectual Property and take or refrain
from taking any action under any thereof, and the Company hereby releases the
Investors from, and agrees to hold the Investors free and harmless from and
against any claims arising out of, any lawful action so taken or omitted to be
taken with respect thereto other than claims arising out of an Investor’s gross
negligence or willful misconduct; and

(c) Upon request by the Majority Investors, the Company will execute and deliver
to the Investors a power of attorney, in form and substance reasonably
satisfactory to the Majority Investors, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other disposition of a
Copyright, Patent, Trademark or other Intellectual Property. In the event of any
such disposition pursuant to this clause (c), the Company shall supply its
know-how and expertise relating to the products or services made or rendered in
connection with Patents, the manufacture and sale of the products bearing
Trademarks and its customer lists and other records relating to such Copyrights,
Patents, Trademarks or other Intellectual Property and to the distribution of
said products, to the Investors.

9.4 Company’s Obligations Upon Default. Upon the request of the Majority
Investors after the occurrence and during the continuance of an Event of
Default, the Company will:

(a) Assemble and make available to the Investors the Collateral at such place(s)
as the Majority Investors shall reasonably designate, segregating all Collateral
so that each item is capable of identification; and

(b) Subject to the rights of any lessor, permit the Investors, by the Investors’
officers, employees, agents and representatives, to enter any premises where any
Collateral is located, to take possession of the Collateral, to complete the
processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of the Investors for rent or other compensation for the
use of the Company’s premises.

 

10. SHARING

10.1 Payments on Account of Securities. The Company agrees that all payments on
account of the Securities shall be made ratably among the Investors in
accordance with their respective Pro Rata Shares (as defined herein).

 

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10.2 Security Payments on Account of Securities. Each Investor acknowledges and
agrees that all Security Payments (as defined herein) on account of the
Securities shall be made on a pro rata basis, in accordance with each Investor’s
respective Pro Rata Share at the time of payment. Without limiting the
generality of the foregoing, each Investor agrees that upon the occurrence of
any Event of Default and so long as such Event of Default continues, any and all
Security Payments shall be applied in the following order: (i) first, for
application to the payment of any fees, costs and expenses of the Investors in
connection with the enforcement of the Securities and the Collateral; and
(ii) second, ratably in accordance with their Pro Rata Shares, for application
to the payment of (A) accrued and unpaid returns on the Securities, then (B) the
outstanding principal of the Securities and (C) the other Securities Amounts.

10.3 Excess Security Payments. If, despite the provisions of this Section 10,
any Investor shall receive any Security Payment in excess of its Pro Rata Share
to which it is then entitled in accordance with this Agreement, such Investor
shall hold such excess Security Payment in trust for the benefit of the parties
entitled thereto and promptly pay over or deliver such excess Security Payment
to the other Investors for application in accordance with this Agreement.
Additionally, such Investor shall, if so required by the Majority Investors,
purchase from the other Investors such participations in their respective
Securities or other Securities Amounts as shall be required by them to permit
the sharing of such excess Security Payment in accordance with the requirements
of this Agreement. If all or any portion of such excess Security Payment is
thereafter recovered by or on behalf of the Company from such Investor, each
other party that shares in the benefit thereof shall return to such Investor its
portion of the payment so recovered.

10.4 Security Payment Defined. For the purposes of this Agreement, “Security
Payment” means any payment or distribution by or on behalf of the Company or any
of its Subsidiaries, directly or indirectly, of assets of the Company or any of
its Subsidiaries of any kind or character, whether in cash, property or
securities, on account of the Securities, any of the other Related Documents or
any Securities Amounts (including the purchase, redemption or other acquisition
thereof), as a result of any collection, sale or other disposition of
Collateral, or by setoff, exchange or in any other manner.

10.5 Pro Rata Share Defined. For the purposes of this Agreement, the “Pro Rata
Share” of an Investor means the proportion that the unpaid principal and accrued
returns on such Investor’s Securities bears to the aggregate unpaid principal
and accrued returns on all outstanding Securities.

10.6 Majority Investors Defined. For the purposes of this Agreement, “Majority
Investors” means at any time Investors holding at least sixty percent (60%) of
the aggregate unpaid principal of the then outstanding Securities purchased
pursuant to this Agreement.

10.7 Authority of Majority Investors. Each of the Investors hereby agrees that
the Majority Investors shall have the right, power and authority to direct, on
behalf of all Investors, the manner of any and all action taken by the Investors
in respect of: (i) the demand or acceleration of the Securities or any other
Securities Amounts; (ii) the enforcement of this

 

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Agreement and the Related Documents or exercise of any remedial action in
respect thereof; (iii) the exercise or non-exercise of remedies against the
Collateral; (iv) the release of any Collateral; and (v) the granting of waivers,
forbearances or making of amendments in respect of this Agreement, any Related
Document or any Event of Default or any Collateral. Any such direction by or
approval of the Majority Investors shall be binding on all Investors and each
Investor agrees to join in any action or proceeding commenced by the Majority
Investors hereunder and/or to otherwise assist the Majority Investors with
respect to any such direction or approval. Without limitation to the foregoing,
each of the Investors agrees to execute and deliver such documents or
instruments (including where appropriate powers of attorney) and do all such
things as may be required by the Majority Investors in connection with the
exercise of their authority hereunder.

10.8 Prohibited Actions. Without prejudice or limitation to any of the
foregoing, except with the prior written approval of the Majority Investors, no
Investor shall commence, or if already commenced shall continue in, any of the
following actions:

(a) accelerate or otherwise make due and payable prior to the original stated
maturity thereof any of the Securities or other Securities Amounts or bring suit
or institute any other actions or proceedings to enforce its rights or interests
under or in respect of this Agreement or any of the Related Documents;

(b) exercise any right of set-off, counterclaim, banker’s lien or other claim it
may have against the Company or any other Person with respect to the Securities
or other Securities Amounts;

(c) exercise any rights under or with respect to (A) guaranties of the
Securities or other Securities Amounts, or (B) any Collateral, including causing
or compelling the pledge or delivery of any Collateral, any attachment of, levy
upon, execution against, foreclosure upon or the taking of other action against
or institution of other proceedings with respect to any Collateral, notifying
any account debtors of the Company or asserting any claim or interest in any
insurance with respect to any Collateral, or release any Collateral or other
guaranties; or

(d) commence, or cause to be commenced, or join with any creditor in commencing,
any bankruptcy, insolvency or receivership proceeding against the Company or any
Subsidiary.

Notwithstanding the forgoing, the Collateral Agent may exercise its rights under
the Security Agreement and any other Related Documents.

10.9 Exculpation among Investors. Each Investor acknowledges and agrees that no
other Investor (nor any of their officers, directors, employees, agents,
advisors or attorneys) has represented it or otherwise been responsible for
acting for it in connection with the preparation, negotiation or execution and
delivery of this Agreement or any of the Related Documents and that each
Investor has made its own independent review and appraisal of, and sought its
own independent advice (and if it has not sought such advice assumes the risks
associated with not obtaining such advice) regarding, the terms of this
Agreement and the Related Documents and the structure of the transactions
contemplated hereby and thereby, the scope and nature of the

 

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Collateral, the financial or other condition of the Company, its Subsidiaries
and all other matters pertaining to this Agreement and the Related Documents or
the transactions contemplated thereby. No Investor shall have any obligation or
duty to ensure the compliance by the Company, any of its Subsidiaries or any
Investor with the conditions specified in any of this Agreement or the Related
Documents for any extension of credit to the Company. Each Investor by executing
this Agreement shall be deemed to have consented to, approved or accepted and to
be satisfied with, each document or other matter required to be consented to or
approved by or acceptable or satisfactory to the Investors. Each Investor
acknowledges and agrees that: (i) no Investor has any implied or other duties to
any other Investor or anyone else; (ii) except as otherwise expressly agreed
herein, each Investor can advance its own interests as it sees fit; and (iii) no
other role or position of any Investor or any Affiliate, officer, employee,
attorney or agent of any Investor with respect to the Company, Investor or any
other Person, shall impair or alter any of the Investor’s rights or otherwise
create any liability or obligation to the other Investors.

10.10 Independent Investigation. Each Investor has itself been, and will
continue to be, based on such documents and information as it has deemed
appropriate, solely responsible for making its own independent appraisal of, and
investigations into, the financial condition, creditworthiness, condition,
affairs, status and nature of the Company or any of its Subsidiaries and the
nature and value of any the Securities and any other Securities Amounts.
Accordingly, each Investor confirms to the other Investors that it has not
relied, and will not hereafter rely, on the other Investors: (i) to check or
inquire on such Investor’s behalf into the adequacy, accuracy or completeness of
any information provided by the Company or any other Person under or in
connection with this Agreement or the transactions contemplated by this
Agreement and the Related Documents (whether or not such information has been or
is hereafter distributed to such Investor) or (ii) to assess or keep under
review on such Investor’s behalf, the financial condition, creditworthiness,
condition, affairs, status or nature of the Company, any Subsidiary or the
nature or value of any Collateral.

10.11 Other Activities. Each of the Investors and its Affiliates may make loans
to, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory, underwriting, equity investment, venture capital or
other business with the Company, or the Investors and their Subsidiaries and
Affiliates as though such Investor was not an Investor hereunder and without
notice to or consent of the other Investors. The Investors acknowledge that,
pursuant to such activities, an Investor or its Affiliates may receive
information regarding the Company and its Subsidiaries or Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Person) and acknowledge that such Investor shall be under no obligation to
provide such information to them.

10.12 Collateral Agent. Each Investor and each subsequent holder of any Security
by its acceptance thereof, hereby designates and appoints the Collateral Agent
as the collateral agent for such Investor hereunder and under the other Related
Documents and authorizes the Collateral Agent to take such actions as agent on
its behalf and to exercise such powers as are delegated to the Collateral Agent
by the terms of this Agreement and the Related Documents, together with such
powers as are reasonably incidental thereto. The Collateral Agent shall not have
any duties or responsibilities, except those expressly set forth herein or in
the Related Documents, or any fiduciary relationship with any Investor, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Collateral Agent shall be read into this

 

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Agreement or any Related Documents or otherwise exist for the Collateral Agent.
In performing its functions and duties hereunder or under the Related Documents,
the Collateral Agent shall act solely as agent for the Investors and does not
assume, nor shall be deemed to have assumed, any obligation or relationship of
trust or agency with or for the Company, any Subsidiary of the Company or any of
their respective successors or assigns. The Collateral Agent shall not be
required to take any action that exposes the Collateral Agent to personal
liability or that is contrary to this Agreement, the Related Documents or
applicable laws.

10.13 Sole Benefit of Investors. This Section 10 has been entered into for the
sole protection and benefit of the Investors and their successors and assigns,
and no other Person, including, but not limited to, the Company and its
Subsidiaries, shall be a direct or indirect beneficiary of, or shall have any
direct or indirect cause of action or claim in connection with, this Section 10.

 

11. INDEMNIFICATION

The Company hereby agrees to indemnify the Investors and their directors,
officers, employees, agents, counsel, Affiliates and other advisors (each an
“Indemnified Person”) against, and hold each of them harmless from, any and all
liabilities, obligations, losses, claims, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever, including the reasonable fees and disbursements of counsel to an
Indemnified Person (including allocated costs of internal counsel), that may be
imposed on, incurred by or asserted against any Indemnified Person (i) in any
way relating to or arising out of this Agreement or any of the Related
Documents, the use or intended use of the proceeds of the Securities, or the
transactions contemplated hereby or thereby; (ii) the breach or default by the
Company or any of its Subsidiaries of any representation, warranty, covenant or
agreement of the Company or any of its Subsidiaries contained in this Agreement
or any of the Related Documents and (iii) with respect to any investigation,
litigation or other proceeding relating to any of the foregoing, irrespective of
whether the Indemnified Person shall be designated a party thereto (the
“Indemnified Liabilities”); provided, however, that the Company shall not be
liable to any Indemnified Person for any portion of such Indemnified Liabilities
to the extent that they are found by a final decision of a court of competent
jurisdiction to have resulted from such Indemnified Person’s gross negligence or
willful misconduct. If and to the extent that the foregoing indemnification is
for any reason held unenforceable, the Company agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.

 

12. MISCELLANEOUS

12.1 Binding Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be enforceable by the Company and the Investors and their
respective successors and assigns. The Company may not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder without the prior express written consent of the Majority Investors.
Any such purported assignment, transfer, hypothecation or other conveyance by
the Company without the prior express written consent of the Majority Investors
shall be void. Nothing in this Agreement, express or implied, is intended to
confer upon any third party any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.

 

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12.2 Governing Law; Venue; Arbitration; Dispute Resolution.

(a) This Agreement shall be governed by and construed according to the laws of
the State of California, without regard to conflict of law principles thereof.
The Company hereby (i) submits to the exclusive jurisdiction of the courts of
the County of San Francisco, State of California and the Federal courts of the
United States sitting in the Northern District of the State of California for
the purpose of any action or proceeding arising out of or relating to this
Agreement and the Related Documents; (ii) agrees that all claims in respect of
any such action or proceeding may be heard and determined in such courts;
(iii) irrevocably waives (to the extent permitted by applicable law) any
objection that it now or hereafter may have to the laying of venue of any such
action or proceeding brought in any of the foregoing courts, and any objection
on the ground that any such action or proceeding in any such court has been
brought in an inconvenient forum; and (iv) agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner permitted by law.

(b) The parties agree that any dispute, controversy or claim (including any
counterclaim) (each, a “Dispute”) arising out of or relating to this Agreement
or any Related Documents shall be finally resolved by confidential binding
arbitration in San Francisco County, California as the sole and exclusive method
of resolving such dispute, controversy or claim. Any Dispute shall be settled by
arbitration under the rules then in effect of JAMS/Endispute conducted by a
single arbitrator reasonably acceptable to the parties. The arbitrator shall
have no power to amend this Agreement or any Related Documents. The arbitrator
shall issue an award in writing (including an explanation of the grounds for
such award) as promptly as practicable that shall be final and binding on the
parties. Judgment upon any award thus obtained may be entered in any court
having jurisdiction thereof. No action at law or in equity based upon any claim
arising out of or related to this Agreement or any Related Documents shall be
instituted in any court by any party except (a) an action to compel arbitration
pursuant to this Section 12.2(b); or (b) an action to enforce an award obtained
in an arbitration proceeding in accordance with this Section 12.2(b). Pending
the submission to arbitration and thereafter until the arbitrator publishes its
award, each party shall, except in the event of termination, continue to perform
all its obligations under this Agreement and the Related Documents without
prejudice to a final adjustment in accordance with the award.

12.3 Counterparts. This Agreement may be executed in two or more counterparts,
including counterparts transmitted by facsimile, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.

12.4 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

12.5 Notices. Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal delivery,
overnight courier, facsimile or upon deposit with the United States Post Office,
postage prepaid, addressed to the Company, or to the Investors at their
addresses shown on the signature pages hereto, or at such other address as such
party may designate by ten (10) days advance written notice to the other party.

 

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12.6 Entire Agreement. This Agreement, the Related Documents and the exhibits
and schedules hereto and thereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof, and
supersede any prior agreements among the parties regarding the subject matter
hereof. No party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein.

12.7 Amendments and Waivers. Any term of this Agreement, the Security Agreement,
the Guaranty, the Securities and the other Related Documents may be amended and
the observance of any term of this Agreement, the Security Agreement, the
Guaranty, the Securities and the other Related Documents may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Majority
Investors. Any amendment or waiver effected in accordance with this Section 12.7
shall be binding upon each Investor and each other holder of any Securities
purchased under this Agreement at the time outstanding, each future holder of
all such Securities and the Company.

12.8 Maximum Interest. Notwithstanding anything to the contrary in this
Agreement or any Related Documents, in no event whatsoever shall the aggregate
of all amounts deemed interest hereunder, under the Securities or under any
other Related Documents and charged or collected pursuant to the terms of this
Agreement, the Securities or such Related Document exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto or thereto. If any provisions of
this Agreement, the Securities or any other Related Documents are in
contravention of any such law, such provisions shall be deemed amended to
conform thereto (the “Maximum Rate”). If at any time, the amount of interest
paid hereunder, under the Securities or any other Related documents is limited
by the Maximum Rate, and the amount at which interest accrues hereunder or
thereunder shall remain at the Maximum Rate, until such time as the aggregate
interest paid hereunder or thereunder equals the amount of interest that would
have been paid had the Maximum Rate not applied.

12.9 Severability. Whenever possible, each provision of this Agreement and the
Related Documents shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or any of the
Related Documents is held to be prohibited by or invalid under applicable law in
any jurisdiction, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating any other provision of this
Agreement or the Related Documents. To the extent that any Securities Amounts
otherwise paid or payable by the Company to any Investor hereunder or under any
of the Related Documents shall have been finally adjudicated to exceed the
maximum amount permitted by applicable law, the Investors shall be entitled to
the maximum amount allowable under applicable law.

12.10 Expenses. Irrespective of whether the Initial Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Initial Closing is effected, the Company agrees to pay

 

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promptly: (i) all reasonable costs and expenses of negotiation, preparation and
execution of this Agreement and the Related Documents and any consents,
amendments, waivers or other modifications thereto; (ii) all costs and expenses
of furnishing all opinions by counsel for the Company (including any opinions
requested by the Collateral Agent or the Investors as to any legal matters
arising hereunder) and of the Company’s performance of and compliance with all
agreements and conditions on its part to be performed or complied with under
this Agreement and the Related Documents; (iii) all reasonable fees, expenses
and disbursements of counsel to the Investors or the Collateral Agent (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administration of this Agreement and the Related
Documents and any consents, amendments, waivers or other modifications thereto
and any other documents or matters requested by the Company; (iv) all costs and
expenses of creating and perfecting Liens in favor of the Collateral Agent on
behalf of the Investors pursuant to any Related Document, including filing and
recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums, and reasonable fees, expenses and disbursements of
counsel to the Investors or the Collateral Agent and of counsel providing any
opinions that the Collateral Agent or the Majority Lenders may request in
respect of this Agreement and the Related Documents or the Liens created
pursuant hereto and thereto; (v) all costs and expenses incurred by the
Collateral Agent in connection with the custody or preservation of any of the
Collateral; (vi) all costs and expenses, including reasonable attorneys’ fees
(including allocated costs of internal counsel) and fees, costs and expenses of
accountants, advisors and consultants, incurred by the Investors or the
Collateral Agent and its counsel relating to efforts to (a) evaluate or assess
the Company or any of its Subsidiaries, their business or financial condition
and (b) protect, evaluate, assess or dispose of any of the Collateral under this
Agreement and any Related Documents; (ix) all costs and expenses, including
attorneys’ fees (including allocated costs of internal counsel), fees, costs and
expenses of accountants, advisors and consultants and costs of settlement,
incurred by the Collateral Agent and the Lenders in enforcing any Securities
Amounts of or in collecting any payments due from the Company or any of its
Subsidiaries hereunder or under the Related Documents (including in connection
with the sale of, collection from, or other realization upon any of the
Collateral or the enforcement of this Agreement and the Related Documents) or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a “work-out” or pursuant to any
insolvency or bankruptcy proceedings, (x) all fees and expenses of O’Melveny &
Myers LLP and all other legal fees and expenses of the Investors incurred in
connection with the transactions contemplated hereby; (xi) the fees and expenses
of O’Melveny & Myers LLP and all other legal fees and expenses of the Investors
incurred in connection with any Subsequent Closing; and (xii) the fees and
expenses of O’Melveny & Myers LLP and all other legal fees and expenses of the
Investors incurred in connection with the Rights Offering.

 

13. DEFINITIONS

The definitions appearing in this Agreement shall be applicable to both the
singular and plural forms of the defined terms:

“Account” means any “account,” as such term is defined in the UCC, now owned or
hereafter acquired by the Company or any Subsidiary or in which the Company or
any Subsidiary now holds or hereafter acquires any interest and, in any event,
shall include, without limitation, all

 

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accounts receivable, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper, Documents or Instruments) now owned
or hereafter received or acquired by or belonging or owing to the Company or any
Subsidiary (including, without limitation, under any trade name, style or
division thereof) whether arising out of goods sold or services rendered by the
Company or any Subsidiary or from any other transaction, whether or not the same
involves the sale of goods or services by the Company or any Subsidiary
(including, without limitation, any such obligation that may be characterized as
an account or contract right under the UCC) and all of the rights of the Company
or any of its Subsidiaries in, to and under all purchase orders or receipts now
owned or hereafter acquired by it for goods or services, and all of the rights
of the Company or any of its Subsidiaries to any goods represented by any of the
foregoing (including, without limitation, unpaid seller’s rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to the Company or any
Subsidiary under all purchase orders and contracts for the sale of goods or the
performance of services or both by the Company or any Subsidiary or in
connection with any other transaction (whether or not yet earned by performance
on the part of the Company or any Subsidiary), now in existence or hereafter
occurring, including, without limitation, the right to receive the proceeds of
said purchase orders and contracts, and all collateral security and guarantees
of any kind given by any Person with respect to any of the foregoing.

“Affiliate” means any Person which directly or indirectly controls, is
controlled by or is under common control with such Person. “Control,”
“controlled by” and “under common control with” mean direct or indirect
possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided, that control shall be conclusively presumed when any
Person or affiliated group directly or indirectly owns five percent (5%) or more
of the securities having ordinary voting power for the election of directors of
a corporation.

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in San Francisco, California or New York City, New York are
authorized or required by law to close.

“Capital Expenditures” shall mean capital expenditures of the Company and its
Subsidiaries determined and consolidated in accordance with U.S. generally
accepted accounting principles, excluding expenditures made in connection with
the replacement, substitution or restoration of assets to the extent financed
with insurance proceeds, cash awards arising from a taking by eminent domain or
condemnation or cash proceeds of asset dispositions reinvested in replacement
assets.

“Capital Stock” means (a) with respect to any Person that is a corporation, any
and all shares, interests or equivalents in capital stock (whether voting or
nonvoting, and whether common or preferred) of such corporation and (b) with
respect to any Person that is not a corporation, any and all partnership,
membership, limited liability company or other equity interests of such Person
(including all economic, voting and other rights related thereto); and in each
case, any and all warrants, rights or options to purchase any of the foregoing.

 

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“Cash and Cash Equivalents” means, as at any date of determination: (i) cash;
(ii) marketable securities (a) issued or directly and unconditionally guaranteed
as to interest and principal by the United States government or (b) issued by
any agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (iii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, investment grade rating
from either Standard & Poor’s (“S&P”) or Moody’s Investors Service, Inc.
(“Moody’s”); (iv) commercial paper maturing no more than one year from the date
of creation thereof and having, at the time of the acquisition thereof, a rating
of at least A-1 from S&P or at least P-1 from Moody’s; (v) certificates of
deposit or bankers’ acceptances maturing within one year after such date and
issued or accepted by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia that (a) is
at least “adequately capitalized” (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than U.S. $100,000,000; and (vi) shares of any money
market mutual fund that (a) has at least 95% of its assets invested continuously
in the types of investments referred to in clauses (ii) and (iii) above, (b) has
net assets of not less than U.S. $500,000,000, and (c) has an investment grade
rating from either S&P or Moody’s.

“Change of Control” means the occurrence of any of the following:

(a) any transaction or series of related transactions resulting in the sale or
issuance of securities or any rights to securities of the Company representing
in the aggregate more than fifty percent (50%) of the Company’s issued and
outstanding voting securities, on a fully diluted basis, or any transaction or
series of related transactions resulting in the sale, transfer, assignment or
other conveyance or disposition of any securities or any rights to securities of
the Company by any holder or holders thereof representing in the aggregate more
than fifty percent (50%) of the issued and outstanding voting securities of the
Company;

(b) a merger, consolidation, reorganization, recapitalization or share exchange
(whether or not the Company is the surviving and continuing entity) in which the
stockholders or equityholders of the Company immediately prior to such
transaction receive, in exchange for securities of the Company owned by them
(whether alone or together with cash, property or other securities), cash,
property or securities of the resulting or surviving entity and as a result
thereof Persons who were holders of voting securities of the Company immediately
prior to such transaction hold less than fifty percent (50%) of the issued and
outstanding Capital Stock of the resulting or surviving entity entitled to vote
in the election of directors, managers or similar governing body or otherwise;

(c) a sale, transfer, exclusive license, exclusive partnering arrangement or
other disposition in a single transaction or series of related transactions of
fifty percent (50%) or more of the assets of the Company and its Subsidiaries,
on a consolidated basis, other than sales of inventory in good faith to
customers for fair value in the ordinary course of business and dispositions of
obsolete equipment not used or useful in the business of the Company and its
Subsidiaries;

 

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(d) a sale, transfer, exclusive license, exclusive partnering arrangement or
other disposition in a single transaction or series of related transactions of
the Company’s Adlea assets;

(e) prepayment of the Securities in accordance with the third paragraph of such
Securities;

(f) the Company or any Subsidiary shall fail to pay or admit its inability to
pay its debts generally as they become due or shall commence any Insolvency
Proceeding with respect to itself; an involuntary Insolvency Proceeding shall be
filed against the Company or any Subsidiary, or a custodian, receiver, trustee,
assignee for the benefit of creditors, or other similar official shall be
appointed to take possession, custody or control of the properties of the
Company or any Subsidiary, and such involuntary Insolvency Proceeding, petition
or appointment is acquiesced to by the Company or such Subsidiary as applicable
or is not dismissed within sixty (60) days; or the dissolution or termination of
the business of the Company or any Subsidiary; and

(g) the failure of the Company to own and control, directly or indirectly,
through one or more wholly-owned Subsidiaries, one hundred percent (100%) of the
issued and outstanding Capital Stock of its Subsidiaries.

“Chattel Paper” means any “chattel paper,” as such term is defined in the UCC,
now owned or hereafter acquired by the Company or any Subsidiary or in which the
Company or any Subsidiary now holds or hereafter acquires any interest.

“Copyright License” means any written agreement granting any right to use any
Copyright or Copyright registration now owned or hereafter acquired by the
Company or any Subsidiary or in which the Company or any Subsidiary now holds or
hereafter acquires any interest.

“Copyrights” means all of the following now owned or hereafter acquired by the
Company or any Subsidiary or in which the Company or any Subsidiary now holds or
hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or of any other country; (ii) all registrations, applications and recordings in
the United States Copyright Office or in any similar office or agency of the
United States, any State thereof or any other country; (iii) all continuations,
renewals or extensions thereof; and (iv) any registrations to be issued under
any pending applications.

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the
UCC, now owned or hereafter acquired by the Company or any Subsidiary or in
which the Company or any Subsidiary now holds or hereafter acquires any
interest.

“Documents” means any “documents,” as such term is defined in the UCC, now owned
or hereafter acquired by the Company or any Subsidiary or in which the Company
or any Subsidiary now holds or hereafter acquires any interest.

“Equipment” means any “equipment,” as such term is defined in the UCC, now owned
or hereafter acquired by the Company or any Subsidiary or in which the Company
or any Subsidiary now holds or hereafter acquires any interest and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.

 

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“Indebtedness” of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker’s
acceptance or similar instrument, whether drawn or undrawn; (vi) all obligations
of such Person to purchase securities that arise out of or in connection with
the sale of the same or substantially similar securities; (vii) all obligations
of such Person to purchase, redeem, exchange, convert or otherwise acquire for
value any Capital Stock of such Person or any warrants, rights or options to
acquire such Capital Stock, now or hereafter outstanding, except to the extent
that such obligations remain performable solely at the option of such Person;
(viii) all obligations to repurchase assets previously sold (including any
obligation to repurchase any accounts or chattel paper under any factoring,
receivables purchase or similar arrangement); (ix) obligations of such Person
under interest rate swap, cap, collar or similar hedging arrangements; and
(x) all obligations of others of any type described in clause (i) through clause
(ix) above guaranteed by such Person.

“Insolvency Proceeding” means with respect to a Person: (a) any case, action or
proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors with respect to such Person or (b) any general
assignment for the benefit of creditors, composition, marshalling of assets for
creditors, or other, similar arrangement in respect of such Person’s creditors
generally or any substantial portion of its creditors, undertaken under federal,
state or foreign law, including the Bankruptcy Code, but in each case, excluding
any avoidance or similar action against such Person commenced by an assignee for
the benefit of creditors, bankruptcy trustee, debtor in possession or other
representative of another Person or such other Person’s estate.

“Instruments” means any “instrument,” as such term is defined in the UCC, now
owned or hereafter acquired by the Company or any Subsidiary or in which the
Company or any Subsidiary now holds or hereafter acquires any interest.

“Inventory” means any “inventory,” as such term is defined in the UCC, wherever
located, now owned or hereafter acquired by the Company or any Subsidiary or in
which the Company or any Subsidiary now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property that are held by or on behalf of the Company
or any Subsidiary for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the business of the
Company or any Subsidiary, or the processing, packaging, promotion, delivery or
shipping of the same, and all finished goods, whether or not the same is in
transit or in the constructive, actual or exclusive possession of the Company,
any Subsidiary or is held by others for the account of the Company or any
Subsidiary, including, without limitation, all goods covered by purchase orders
and contracts with suppliers and all goods billed and held by suppliers and all
such property first may be in the possession or custody of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other
Persons.

 

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“knowledge” means the knowledge of the Company’s officers and other
manager-level employees, and it shall be deemed that such persons shall have
made due and diligent inquiry of such matter in question.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
against any property, any conditional sale or other title retention agreement,
any lease in the nature of a security interest, and the filing of any financing
statement (other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.

“Patent License” means any written agreement granting any right with respect to
any invention on which a Patent is in existence now owned or hereafter acquired
by the Company or any Subsidiary or in which the Company or any Subsidiary now
holds or hereafter acquires any interest.

“Patents” means all of the following property now owned or hereafter acquired by
the Company or any Subsidiary or in which the Company or any Subsidiary now
holds or hereafter acquires any interest: (a) all letters patent of, or rights
corresponding thereto in, the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent
of, or rights corresponding thereto in, the United States or any other country,
including, without limitation, registrations, recordings and applications in the
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all petty patents, divisionals
and patents of addition; and (d) all patents to be issued under any such
applications.

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign or otherwise,
including any instrumentality, division, agency, body or department thereof).

“Records” means all of the computer programs, software, hardware, source codes
and data processing information of the Company and its Subsidiaries, all written
documents, books, invoices, ledger sheets, financial information and statements
of the Company and its Subsidiaries, and all other writings concerning the
business of the Company and its Subsidiaries.

“Rights to Payment” means all of the accounts, instruments, contract rights,
documents, chattel paper and all other rights to payment of the Company and its
Subsidiaries, including, without limitation, the Accounts, all negotiable
certificates of deposit and all rights to payment under any Patent License, any
Trademark License or any commercial or standby letter of credit.

“Securities Amounts” means all amounts, howsoever arising, owed by the Company
or any Subsidiary to the Investors of every kind and description (whether or not
evidenced by any instrument and whether or not for the payment of money), now
existing or hereafter arising

 

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under or pursuant to the terms of this Agreement, the Securities and each of the
Related Documents, including, all interest, fees, charges, expenses, attorneys’
fees and costs and accountants’ fees and costs chargeable to and payable by the
Company or any Subsidiary hereunder and thereunder, in each case, whether direct
or indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.

“Subsidiary” means with respect to any Person, (a) any corporation (or similar
entity under foreign law) of which an aggregate of more than fifty percent
(50%) of the outstanding Capital Stock having ordinary voting power to elect a
majority of the board of directors (or equivalent body) of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than fifty percent (50%) of such Capital Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership, limited liability company, association, joint venture, trust or
other entity in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than fifty percent (50%) or of which
any such Person is a general partner or managing member or may exercise the
powers of a general partner or managing member. Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
the Company.

“Trademark License” means any written agreement granting any right to use any
Trademark or Trademark registration now owned or hereafter acquired by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries now holds or hereafter acquires any interest.

“Trademarks” means all of the following property now owned or hereafter acquired
by the Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries now holds or hereafter acquires any interest: (a) all trademarks,
trade names, corporate names, business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and any applications in connection therewith, including,
without limitation, registrations, recordings and applications in the Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof and
(b) reissues, extensions or renewals thereof.

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of Delaware; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, the Investors’ Lien on any Collateral
is governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of Delaware, the term “UCC” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions. Unless otherwise defined herein, terms that are defined in the UCC
and used herein shall have the meanings given to them in the UCC.

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IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

COMPANY: ANESIVA, INC. By:   /s/ Michael L. Kranda Name:   Michael L. Kranda
Title:   President and Chief Executive Officer Address:   650 Gateway Boulevard
  South San Francisco, CA 94080-7014 INVESTORS: SOFINNOVA VENTURE PARTNERS VII,
L.P. By:  

Sofinnova Management VII, L.L.C.

Its General Partner

By:   /s/ Michael F. Powell   Michael F. Powell, Managing General Partner ALTA
CALIFORNIA PARTNERS III, L.P. By:   Alta California Management Partners III, LLC
By:   /s/ Daniel S. Janney   Managing Director

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ALTA EMBARCADERO PARTNERS III, LLC By:   /s/ Hilary Strain   Vice President of
Finance & Administration ALTA PARTNERS VIII, LP By:   Alta Partners Management
VIII, LLC By:   /s/ Daniel S. Janney   Managing Director CMEA VENTURES VII, L.P.
By:   CMEA Ventures VII GP, L.P.,   Its General Partner By:   CMEA Ventures VII
GP, LLC,   Its General Partner By:   /s/ David J. Collier   Name: David J.
Collier, M.D.   Title: Manager CMEA VENTURES VII (PARALLEL), L.P. By:   CMEA
Ventures VII GP, L.P.,   Its General Partner By:   CMEA Ventures VII GP, LLC,  
Its General Partner By:   /s/ David J. Collier   Name: David J. Collier, M.D.  
Title: Manager

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INTERWEST PARTNERS VIII, LP INTERWEST INVESTORS VIII, LP INTERWEST INVESTORS Q
VIII, LP By:   InterWest Management Partners VIII, LLC,   General Partner By:  
/s/ Arnold L. Oronsky   Arnold L. Oronsky, Managing Director

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SCHEDULE 1

Initial Closing – January 20, 2009

 

Investor

   Initial Closing
Commitment

Sofinnova Venture Partners VII, L.P.

   $ 810,000.00

Alta California Partners III, L.P.

   $ 81,718.00

Alta Embarcadero Partners III, LLC

   $ 2,759.00

Alta Partners VIII, LP

   $ 995,523.00

CMEA Ventures VII, L.P.

   $ 292,500.00

CMEA Ventures VII (Parallel), L.P.

   $ 7,500.00

InterWest Partners VIII, LP

   $ 781,407.00

InterWest Investors VIII, LP

   $ 6,237.00

InterWest Investors Q VIII, LP

   $ 22,356.00

TOTAL:

   $ 3,000,000.00

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EXHIBIT A

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”). NO SALE, PLEDGE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.

THIS SECURITY IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PURCHASE AGREEMENT
(AS DEFINED BELOW).

SECURITY

 

$[                    ]    [                    ]

For value received, Anesiva, Inc., a Delaware corporation (the “Company”),
promises to pay to the order of [                    ] (together with its
successors and assigns, the “Holder”), the principal sum of
[                    ], together with returns accrued but unpaid thereon, upon
the terms of this Security (the “Security”).

Returns shall accrue from the date hereof until maturity at a continuously
compounding rate equal to seven percent (7%) per annum; provided, however, that,
during the occurrence and continuance of an Event of Default (as defined in that
certain Security Purchase Agreement, dated as of January 20, 2009 (as amended or
otherwise modified from time to time, the “Purchase Agreement”), among the
Company and, among others, the Holder), returns shall accrue at a continuously
compounding rate equal to fourteen percent (14%) per annum. All computations of
returns shall be made on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days (including the first day but excluding the
last) occurring in the period for which such return is payable.

Unless earlier paid pursuant to the terms hereof or the Purchase Agreement or
accelerated in connection with an Event of Default, subject to the terms of the
Purchase Agreement, the outstanding principal and accrued but unpaid returns
shall be immediately due and payable at any time at the request of the Majority
Investors on or after July 20, 2009 (the “Maturity Date”). The Company shall not
have the right to pre-pay the amounts due under this Security prior to the
Maturity Date without the prior written consent of the Majority Investors. The
pre-payment of this Security shall be deemed to be a Change of Control and shall
require the payment by the Company to the Holder of the amounts set forth in the
Purchase Agreement.

1. This Security is issued pursuant to the terms of the Purchase Agreement. The
Holder is entitled to the benefit of, and is subject to certain restrictions
contained in, the Purchase Agreement and the other Related Documents.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Purchase Agreement. The indebtedness evidenced by this Security
shall be secured by all collateral, as more particularly described in that
certain Pledge, Security and Collateral Agent Agreement, dated as of January 20,
2009 (as may be further amended or modified from time to time, the “Security
Agreement”), among the

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Company and, among others, the Holder and the Collateral Agent and that certain
Guaranty, dated as of January 20, 2009 (as may be further amended or modified
from time to time, the “Guaranty”) by and among AlgoRx Pharmaceuticals, Inc.
and, among others, the Holder. Each holder of this Security will be deemed, by
its acceptance hereof, to have agreed to the provisions and to have made the
representations and warranties set forth in Section 4 the Purchase Agreement
(other than Section 4.2 thereof). The Securities are issuable as registered
securities. Subject to the terms of the Purchase Agreement, this Security is
transferable by surrender hereof at the principal office of the Company, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Security or by any other method permitted by the
Purchase Agreement.

2. All payments hereunder shall be applied in the order provided for in the
Purchase Agreement. Whenever any payment hereunder shall be stated to be due, or
whenever any return payment date or any other date specified hereunder would
otherwise occur, on a day other than a Business Day, then such payment shall be
made, and such return payment date or other date shall occur, on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of returns hereunder.

3. All payments in respect of this Security shall be in immediately available
lawful money of the United States of America and shall be sent so as to be
received no later than 2 p.m. (Pacific time) on the date of payment, at the
address specified in the Purchase Agreement, or at such other address as may be
specified from time to time by such Holder in a written notice delivered to the
Company. All payments in respect of this Security shall be made unconditionally
in full without any deduction, set off, counterclaim or other defense. If any
scheduled payment date is not a Business Day, such payment shall be made on the
next succeeding Business Day.

4. The Company hereby waives demand, notice, presentment, protest and notice of
dishonor.

5. (a) The terms of this Security shall be construed in accordance with the laws
of the State of California, as applied to contracts entered into by California
residents within the State of California, which contracts are to be performed
entirely within the State of California. The Company hereby (i) submits to the
exclusive jurisdiction of the courts of the County of San Francisco, State of
California and the Federal courts of the United States sitting in the Northern
District of the State of California for the purpose of any action or proceeding
arising out of or relating to this Security, the Purchase Agreement and the
Related Documents; (ii) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such courts; (iii) irrevocably waives
(to the extent permitted by applicable law) any objection that it now or
hereafter may have to the laying of venue of any such action or proceeding
brought in any of the foregoing courts, and any objection on the ground that any
such action or proceeding in any such court has been brought in an inconvenient
forum; and (iv) agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner permitted by law.

 

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(b) The parties agree that any dispute, controversy or claim (including any
counterclaim) (each, a “Dispute”) arising out of or relating to this Security,
the Purchase Agreement or any Related Documents shall be finally resolved by
confidential binding arbitration in San Francisco County, California as the sole
and exclusive method of resolving such dispute, controversy or claim. Any
Dispute shall be settled by arbitration under the rules then in effect of
JAMS/Endispute conducted by a single arbitrator reasonably acceptable to the
parties. The arbitrator shall have no power to amend this Security, the Purchase
Agreement or any Related Documents. The arbitrator shall issue an award in
writing (including an explanation of the grounds for such award) as promptly as
practicable that shall be final and binding on the parties. Judgment upon any
award thus obtained may be entered in any court having jurisdiction thereof. No
action at law or in equity based upon any claim arising out of or related to
this Security, the Purchase Agreement or any Related Documents shall be
instituted in any court by any party except (a) an action to compel arbitration
pursuant to this Section 5(b); or (b) an action to enforce an award obtained in
an arbitration proceeding in accordance with this Section 5(b). Pending the
submission to arbitration and thereafter until the arbitrator publishes its
award, each party shall, except in the event of termination, continue to perform
all its obligations under this Security, the Purchase Agreement and the Related
Documents without prejudice to a final adjustment in accordance with the award.

6. Notwithstanding any provision of this Security to the contrary, any payments
hereunder deemed to be interest shall not exceed the maximum rate permitted by
applicable law. To the extent that any interest otherwise paid or payable by the
Company to the Holder shall have been finally adjudicated to exceed the maximum
amount permitted by applicable law, such interest shall be retroactively deemed
to have been a required repayment of principal (and any such amount paid in
excess of the outstanding principal amount shall be promptly returned to the
Company).

7. Any term of this Security and the other Securities may be amended and the
observance of any term of this Security and the other Securities may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only in accordance with the terms of the Purchase Agreement. Any
such amendment or waiver shall be effective only for the specific instance and
for the specific purpose for which given.

8. No remedy herein conferred upon the Holder is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every right or other remedy now or hereafter existing at law or in
equity or by statute or otherwise.

9. No course of dealing between the Company and the Holder or any delay on the
part of the Holder in exercising any rights or remedies shall operate as a
waiver of any such right or remedy of the Holder.

10. This Security shall be binding on and inure to the benefit of and be
enforceable by the Company, the Holder and their respective successors and
assigns. The Company may not assign, transfer, hypothecate or otherwise convey
its rights, benefits, obligations or duties hereunder without the prior express
written consent of the Majority Investors. Any such purported assignment,
transfer, hypothecation or other conveyance by the Company without the prior
express written consent of the Majority Investors shall be void.

 

3

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11. Whenever possible, each provision of this Security shall be interpreted in
such manner as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Security shall be prohibited by
or invalid under any such law or regulation in any jurisdiction, it shall, as to
such jurisdiction, be deemed modified to conform to the minimum requirements of
such law or regulation, or, if for any reason it is not deemed so modified, it
shall be ineffective and invalid only to the extent of such prohibition or
invalidity without affecting the remaining provisions of this Security, or the
validity or effectiveness of such provision in any other jurisdiction.

12. This Security is issued pursuant to the Purchase Agreement and in connection
with the Security Agreement, the Pledge Agreement and the other Related
Documents. Material terms applicable to this Security are set forth in the
Purchase Agreement, the Security Agreement, the Pledge Agreement and the other
Related Documents. This Security shall be interpreted in a manner to give full
effect to its provisions and the provisions of the Purchase Agreement, the
Security Agreement, the Pledge Agreement and the other Related Documents.

13. The Company agrees to pay on demand all costs and expenses of the Holder,
and the reasonable fees and disbursements of its counsel (including the
allocated costs of internal counsel), in connection with: (i) any amendments,
modifications or waivers of the terms hereof or of the Purchase Agreement or of
any other Related Documents; (ii) the protection or preservation of the Holder’s
rights under this Security, under the Purchase Agreement or under any other
Related Documents, whether by judicial proceeding or otherwise;
(iii) enforcement or attempted enforcement of, and preservation of any rights
under, this Security, the Purchase Agreement or any other Related Documents; and
(iv) any out-of-court workout or other refinancing or restructuring or in any
bankruptcy case, including, without limitation, any and all losses, costs and
expenses sustained by the Holder as a result of any failure by the Company to
perform or observe its obligations contained herein or in the Purchase Agreement
or in any of the other Related Documents.

14. The Company and the Holder agree (and agree to cause their respective owners
or Affiliates) to treat this Security as equity, not debt, for all U.S. tax
purposes and not to take any position inconsistent with such U.S. tax treatment
for U.S. tax purposes to the extent permitted by law.

[Remainder of page intentionally left blank]

 

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This Security has been issued in reliance upon the representations and
warranties and covenants and agreements of the Company and the Holder set forth
in the Purchase Agreement.

 

ANESIVA, INC. By:     Name:     Title:     Address:          

 

Accepted and Agreed: [                    ] By:   By:    

[SIGNATURE PAGE TO SECURITY]

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EXHIBIT B

PLEDGE, SECURITY AND

COLLATERAL AGENT AGREEMENT

THIS PLEDGE, SECURITY AND COLLATERAL AGENT AGREEMENT (this “Agreement”), dated
as of January 20, 2009, is made by and among Anesiva, Inc., a Delaware
corporation (“Anesiva”), and AlgoRx Pharmaceuticals, Inc., a Delaware
corporation (together with Anesiva, each a “Grantor” and, collectively, the
“Grantors”), the Secured Parties (as defined below) and CMEA Ventures VII, L.P.,
as collateral agent for the Secured Parties (in such capacity, the “Collateral
Agent”).

The Grantor, the Collateral Agent and the Secured Parties hereby agree as
follows:

Section 1. Definitions; Interpretation.

(a) All capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings assigned to them in the Purchase Agreement (as
defined below).

(b) As used in this Agreement, the following terms shall have the following
meanings:

“Capital Stock” means (a) with respect to any Person that is a corporation, any
and all shares, interests or equivalents in capital stock (whether voting or
nonvoting, and whether common or preferred) of such corporation and (b) with
respect to any Person that is not a corporation, any and all partnership,
membership, limited liability company or other equity interests of such Person
(including all economic, voting and other rights related thereto); and in each
case, any and all warrants, rights or options to purchase any of the foregoing.

“Collateral” has the meaning set forth in Section 2.

“Event of Default” has the meaning ascribed to it in the Purchase Agreement.

“Foreign Subsidiary” means any Subsidiary organized under the laws of any
jurisdiction outside the United States of America.

“Foreign Subsidiary Voting Stock” means the voting Capital Stock of any Foreign
Subsidiary.

“Investment Property” means the collective reference to (a) all “investment
property” as such term is defined in the UCC (other than any Foreign Subsidiary
Voting Stock excluded from the definition of “Pledged Stock” in this Section 1)
and (b) whether or not constituting “investment property” as so defined, all
Pledged Stock.

“Issuers” means the collective reference to each issuer of any Investment
Property.

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“Majority Secured Parties” at any time means the Secured Parties holding at
least sixty percent (60%) of the aggregate principal amount of the Securities
purchased pursuant to the Purchase Agreement and then outstanding.

“Permitted Lien” has the meaning ascribed to it in the Purchase Agreement.

“Pro Rata Share” with respect to any Secured Party at any time, means the
percentage equivalent to the outstanding principal amount plus accrued but
unpaid returns of the Securities Amounts owed to such Secured Party divided by
the outstanding principal amount of all the Securities Amounts plus all accrued
but unpaid returns owed to all Secured Parties.

“Pledged Stock” means the shares of Capital Stock listed on Schedule 1, together
with any other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect; provided
that in no event shall more than 65% of the total outstanding Foreign Subsidiary
Voting Stock of any Foreign Subsidiary be required to be pledged hereunder.

“Proceeds” means all “proceeds” as such term is defined in the UCC and, in any
event, including, without limitation, all dividends or other income from the
Investment Property, collections thereon or distributions or payments with
respect thereto.

“Purchase Agreement” means that certain Securities Purchase Agreement of even
date herewith by and among Anesiva and the Secured Parties party thereto, as it
may be amended, restated, supplemented or otherwise modified from time to time.

“Receivable” means any right to payment for goods sold, leased, licensed,
assigned or otherwise disposed of, or for services rendered, whether or not such
right is evidenced by an Instrument or Chattel Paper and whether or not it has
been earned by performance (including, without limitation, any Account and
health-care insurance receivables).

“Secured Party” means each Investor (as defined in the Purchase Agreement), and
collectively the “Secured Parties.”

“Securities” means the series of securities, dated from and after the date
hereof, issued by Anesiva pursuant to the Purchase Agreement in favor of each of
the Secured Parties.

“Securities Amounts” has the meaning ascribed to it in the Purchase Agreement.

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of California; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
California, the term “UCC” shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.

 

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(c) Where applicable and except as otherwise defined herein, terms used in this
Agreement shall have the meanings assigned to them in the UCC.

(d) In this Agreement, (i) the meaning of defined terms shall be equally
applicable to both the singular and plural forms of the terms defined; and
(ii) the captions and headings are for convenience of reference only and shall
not affect the construction of this Agreement.

Section 2. Security Interest.

(a) As security for the payment and performance of the Securities Amounts, each
Grantor hereby pledges, assigns, transfers, hypothecates and sets over to the
Collateral Agent, for itself and on behalf of and for the ratable benefit of the
Secured Parties, and hereby grants to the Collateral Agent, a first priority
security interest in, all of such Grantor’s right, title and interest in, to and
under the following property, wherever located and whether now existing or owned
or hereafter acquired or arising (collectively, the “Collateral”):

(i) all accounts, accounts receivable, contract rights, rights to payment,
chattel paper, rights to trade, letters of credit, documents, money and
instruments and Investment Property, whether held directly or through a
securities intermediary, and other obligations of any kind owed to the Grantor,
however evidenced;

(ii) all deposits and deposit accounts with any bank, savings and loan
association, credit union or like organization, and all funds and amounts
therein, and whether or not held in trust, or in custody or safekeeping, or
otherwise restricted or designated for a particular purpose;

(iii) all inventory, including, without limitation, all materials, raw
materials, parts, components, work in progress, finished goods, merchandise,
supplies and all other goods that are held for sale, lease or other disposition
or furnished under contracts of service or consumed in such Grantor’s business,
including, without limitation, those held for display or demonstration or out on
lease or consignment;

(iv) all equipment owned by such Grantor, including, without limitation, all
machinery, furniture, furnishings, fixtures, trade fixtures, tools, parts and
supplies, appliances, computer and other electronic data processing equipment
and other office equipment, computer programs and related data processing
software, and all additions, substitutions, replacements, parts, accessories and
accessions to and for the foregoing;

(v) all general intangibles and other personal property of such Grantor,
including, without limitation, (A) all tax and other refunds, rebates or credits
of every kind and nature to which such Grantor is now or hereafter may become
entitled; (B) all intellectual property and all rights therein of any type or
description, including, without limitation, all inventions and discoveries,
patents and patent applications, copyrights and applications for copyright
(together with the underlying works of authorship) whether or not

 

3

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registered, together with any renewals and extensions thereof, trademarks,
service marks and trade names, and applications for registration of such
trademarks, service marks and trade names, trade secrets, trade dress, trade
styles, logos, other source of business identifiers, mask-works, mask-work
registrations, mask-work applications, software, confidential and proprietary
information, customer lists, other license rights, advertising materials,
operating manuals, methods, processes, know-how, algorithms, formulae,
databases, quality control procedures, product, service and technical
specifications, operating, production and quality control manuals, sales
literature, drawings, specifications, blue prints, descriptions, inventions,
name plates and catalogs, and the entire good will of or associated with the
businesses now or hereafter conducted by such Grantor connected with and
symbolized by any of the aforementioned properties and assets, and all licenses
relating to any of the foregoing, all reissuance, continuations and
continuations-in-part of the foregoing, all other rights derived from or
associated with the foregoing, including the right to sue and recover for past
infringement, and all income and royalties with respect thereto; (C) all good
will, choses in action and causes of action; (D) all interests in partnerships;
and (E) all indemnity agreements, guaranties, insurance policies, insurance
claims and other contractual, equitable and legal rights of whatever kind or
nature;

(vi) all books, records and other written, electronic or other documentation in
whatever form maintained by or for such Grantor in connection with the ownership
of its assets or the conduct of its business or evidencing or containing
information relating to the Collateral; and

(vii) all products and Proceeds at any time, including insurance proceeds, of
any and all of the foregoing.

(b) Anything herein to the contrary notwithstanding, (i) the Grantors shall
remain liable under any contracts, agreements and other documents included in
the Collateral, to the extent set forth therein, to perform all of their duties
and obligations thereunder to the same extent as if this Agreement had not been
executed; (ii) the exercise by the Collateral Agent or any of the Secured
Parties of any of the rights hereunder shall not release the Grantors from any
of their duties or obligations under such contracts, agreements and other
documents included in the Collateral; and (iii) none of the Secured Parties or
the Collateral Agent shall have any obligation or liability under any contracts,
agreements and other documents included in the Collateral by reason of this
Agreement, nor shall the Collateral Agent or any of the Secured Parties be
obligated to perform any of the obligations or duties of the Grantors thereunder
or to take any action to collect or enforce any such contract, agreement or
other document included in the Collateral hereunder.

(c) Notwithstanding the foregoing provisions of this Section 2, the grant of a
security interest as provided herein shall not extend to, and the term
“Collateral” shall not include, any general intangibles or other assets of any
Grantor (whether owned or held as licensee or lessee, or otherwise), to the
extent that (i) such general intangibles or assets are not assignable or capable
of being encumbered as a matter of law or under the terms of the license, lease
or other agreement applicable thereto (but solely to the extent that any such
restriction shall be enforceable under applicable law), without the consent of
the licensor or lessor thereof or other applicable party thereto and (ii) such
consent has not been obtained; provided, however, that the foregoing grant of
security interest shall extend to, and the term “Collateral” shall

 

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include, (A) any general intangible or asset that is an account receivable or a
proceed of, or otherwise related to the enforcement or collection of, any
account receivable, or goods that are the subject of any account receivable;
(B) any and all proceeds of any general intangibles or assets that are otherwise
excluded to the extent that the assignment or encumbrance of such proceeds is
not so restricted; and (C) upon obtaining the consent of any such licensor,
lessor or other applicable party’s consent with respect to any such otherwise
excluded general intangibles or assets, such general intangibles and assets as
well as any and all proceeds thereof that might have theretofore have been
excluded from such grant of a security interest and the term “Collateral.”

(d) Notwithstanding the foregoing provisions of this Section 2, the grant of a
security interest as provided herein shall not extend to, and the term
“Collateral” shall not include more than 65% of the total outstanding Foreign
Subsidiary Voting Stock of any Foreign Subsidiary.

(e) This Agreement shall create a continuing security interest in the Collateral
that shall remain in effect until terminated in accordance with Section 18
hereof.

Section 3. Pledge of Pledged Collateral.

(a) Each Grantor hereby assigns and pledges to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in, all of such Grantor’s right, title and interest in, to and
under (i) the Pledged Stock; (ii) subject to Section 9(d), all payments of
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of, in exchange for or upon
conversion of, and all other Proceeds received in respect of the Pledged Stock;
(iii) subject to Section 9(d), all rights and privileges of such Grantor with
respect to the securities and other property referred to in clauses (i) and
(ii) above; and (iv) all Proceeds of any of the foregoing (the items in clauses
(i) through (iv) above being collectively referred to as the “Pledged
Collateral”);

(b) Each Grantor agrees to promptly deliver or cause to be delivered to the
Collateral Agent any and all Pledged Stock. Upon delivery to the Collateral
Agent, (i) any Pledged Stock shall be accompanied by stock powers duly executed
in blank or other instruments of transfer satisfactory to the Collateral Agent
and by such other instruments and documents as the Collateral Agent may
reasonably request and (ii) all other property comprising part of the Pledged
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Grantor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged Stock
shall be accompanied by a schedule describing the securities, which schedule
shall be attached hereto as Schedule 1 and made a part hereof; provided that the
failure to attach any such schedule hereto shall not affect the validity of such
pledge of such Pledged Collateral. Each schedule so delivered shall supplement
any prior schedules so delivered. In the event that any Grantor shall deliver
Pledged Stock representing more than 65% of the total outstanding Foreign
Subsidiary Voting Stock of any Foreign Subsidiary, such Grantor shall be deemed
to have pledged and delivered 65% of the total outstanding Foreign Subsidiary
Voting Stock of such Foreign Subsidiary.

 

5

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Section 4. Collateral Agent and Indemnification.

(a) Each of the Secured Parties, by signing below or by its acceptance of the
benefits of this Agreement, hereby appoints CMEA Ventures VII, L.P. as
“Collateral Agent.” Nothing in this Agreement shall restrict or prevent the
Collateral Agent from being a Secured Party. In its capacity as a Secured Party,
the Collateral Agent shall have the same rights and powers under this Agreement,
the Purchase Agreement and the Related Documents as any other Secured Party and
may exercise the same as though it were not the Collateral Agent. In this
regard, the term “Secured Party” shall, unless otherwise expressly indicated,
include the Collateral Agent in its individual capacity. The Collateral Agent
shall receive no compensation but shall be entitled to reimbursement of expenses
and indemnification as set forth herein. The Collateral Agent’s duties and
obligations shall commence as of the first day a Security is executed by Anesiva
in favor of any Secured Party. Each Secured Party hereby authorizes the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers and perform such duties under this Agreement, the Purchase Agreement and
the Related Documents as are delegated to the Collateral Agent by the terms
hereof or thereof, together with such powers as are reasonably incidental
thereto. The duties and obligations of the Collateral Agent are strictly limited
to those expressly provided for herein, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Collateral Agent. Notwithstanding
anything to the contrary contained herein, the Collateral Agent shall not be
required to take any action that is contrary to this Agreement, the Purchase
Agreement, the Related Documents or applicable law.

(b) The Collateral Agent is hereby appointed as agent and attorney-in-fact and
is authorized on behalf of each of the Secured Parties and at the direction of
the Majority Secured Parties to: (i) exercise or refrain from exercising any
rights, remedies or powers of the Secured Parties under applicable law in
respect of the Securities or all or any portion of any Collateral; (ii) sell,
release, surrender, realize upon or otherwise deal with, in any manner and in
any order, all or any portion of any Collateral; (iii) make any demands or give
any notices under or in connection with this Agreement, the Purchase Agreement
and the Related Documents; (iv) distribute payments to the Secured Parties of
amounts paid to it by any Grantor or received by it in connection with the
Collateral; (v) receive and hold on behalf of the Secured Parties any
instruments or other possessory Collateral; and (vi) engage, replace, instruct
and remunerate on behalf of the Secured Parties consultants, experts, counsel
and other persons to be engaged by the Collateral Agent or the Secured Parties,
including legal counsel for the Collateral Agent or the Secured Parties. As to
the exercise of any of its powers and discharge of any of its duties, the
Collateral Agent shall be entitled to obtain instructions of the Majority
Secured Parties, and shall be fully protected in acting or refraining from
acting upon such instructions and such instructions shall be binding upon all
Secured Parties. Except for actions expressly required of the Collateral Agent
hereunder, the Collateral Agent shall in all cases be fully justified in failing
or refusing to act under this Agreement, the Purchase Agreement and the Related
Documents unless it shall be indemnified to its satisfaction by the Secured
Parties against any and all liability and expense that may be incurred by reason
of taking or continuing to take any such action, and the Collateral Agent shall
not in any event be required to take any action that exposes the Collateral
Agent to liability or that is contrary to this Agreement, the Purchase
Agreement, the Related Documents or applicable law.

 

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(c) The Collateral Agent shall hold the Collateral for the ratable benefit of
Secured Parties in accordance with their Pro Rata Shares. Distribution of
Collateral or any and all proceeds of any of the Collateral shall be made in
accordance with Secured Parties respective Pro Rata Shares.

(d) Neither the Collateral Agent nor any of its directors, officers, employees
or agents shall be responsible to any Secured Party for any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except in
the case of gross negligence or willful misconduct. The Collateral Agent may
rely upon any notice, consent, certificate, telegram, facsimile, telex or
teletype message, statement or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties or by acting upon any
representation or warranty made or deemed to be made hereunder or under any
other Related Document. The Collateral Agent shall use the level of care it uses
with respect to its own property of a similar nature to assure the safe custody
of the Collateral in its possession. Beyond the exercise of such level of care
to assure the safe custody of the Collateral in its possession as the Collateral
Agent, and the accounting for any monies actually received by the Collateral
Agent in such capacity, the Collateral Agent shall have no duty or liability to
exercise or preserve any rights, privileges and powers pertaining to the
Collateral.

(e) The Secured Parties hereby agree to indemnify the Collateral Agent, and any
affiliates, directors, officers, employees, partners, members, agents, counsel
and other advisors (collectively, the “Related Persons”) of the Collateral Agent
ratably in accordance with their Pro Rata Share, against and hold each of them
harmless from any and all liabilities, obligations, losses, claims, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including the fees and disbursements of counsel to
the Collateral Agent (collectively, the “Liabilities”), that may be imposed on,
incurred by or asserted against the Collateral Agent or any such Related Person
to be indemnified, in any way relating to or arising out of this Agreement, the
Purchase Agreement or the Related Documents or any action taken or omitted by
the Collateral Agent or other such Related Person to be indemnified in
connection with any of the foregoing, unless such Liabilities shall be caused by
the willful misconduct or gross negligence of the Collateral Agent.

(f) The Collateral Agent may, in its discretion, employ from time to time one or
more agents or attorneys-in-fact (including any of the Collateral Agent’s
affiliates) to perform any of the Collateral Agent’s duties under this
Agreement, the Purchase Agreement and the Related Documents. The Collateral
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

(g) Subject to the appointment and acceptance of a successor Collateral Agent as
provided below, the Collateral Agent may resign at any time by giving five
(5) Business Days’ written notice thereof to the Secured Parties and the
Grantors. Upon any such resignation, the Majority Secured Parties shall have the
right to appoint a successor Collateral Agent from among the Secured Parties,
and the Secured Parties shall use their best efforts so to appoint a successor
Collateral Agent. The Grantors shall promptly execute all documents and
instruments necessary to convey all rights and interests under this Agreement
and related documents and instruments to any successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Majority Secured
Parties, and shall have accepted

 

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such appointment, prior to the effective date of the retiring Collateral Agent’s
resignation, the retiring Collateral Agent may, on behalf of the Secured
Parties, appoint a successor Collateral Agent from among the Secured Parties.
Upon the effectiveness of the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges,
duties and obligations of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations under this
Agreement, the Purchase Agreement and the Related Documents. After any retiring
Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of
this Section 4 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent under this Agreement, the Purchase
Agreement and the Related Documents.

Section 5. Financing Statements; Further Assurances.

(a) Pursuant to any applicable law, each Grantor authorizes the Collateral Agent
to file or record financing statements and other filing or recording documents
or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Collateral Agent determines
appropriate to perfect the security interests granted hereby. Each Grantor
authorizes the Collateral Agent to use the collateral description “all personal
property” or “all assets” in any such financing statements. Each Grantor hereby
ratifies and authorizes the filing by the Collateral Agent of any financing
statement with respect to the Collateral made prior to the date hereof.

(b) Upon request to a Grantor by the Collateral Agent, at any time following the
execution of this Agreement, and at any time and from time to time thereafter,
each Grantor shall promptly execute all financing statements, assignments,
continuation financing statements, termination statements, account control
agreements, intellectual property security agreements and other documents and
instruments, in form reasonably satisfactory to the Collateral Agent, and take
all other action, as the Collateral Agent may reasonably request, including,
without limitation, the provision of assistance in the preparation of any of the
aforementioned documents and instruments and the filing of intellectual property
security agreements with the United States Patent and Trademark Office and the
United States Copyright Office, to perfect and continue perfected, maintain the
priority of or provide notice of the security interest of the Collateral Agent
in the Collateral and to accomplish the purposes of this Agreement. Without
limiting the generality of the foregoing, each Grantor will: (a) (i) execute (if
necessary) and file such financing or continuation statements, or amendments
thereto, (ii) execute and deliver, and cause to be executed and delivered,
agreements establishing that the Collateral Agent has control of deposit
accounts and Investment Property of such Grantor and (iii) deliver such
instruments or notices, in each case, as may be necessary or desirable, or as
Collateral Agent may request, in order to perfect and preserve the security
interests granted or purported to be granted hereby; (b) furnish to the
Collateral Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail; (c) at any reasonable time, upon request by the Collateral Agent,
exhibit the Collateral to and allow inspection of the Collateral by the
Collateral Agent, or persons designated by the Collateral Agent; (d) at
Collateral Agent’s request, appear in and defend any action or proceeding that
may affect such Grantor’s title to or the Collateral Agent’s security interest
in all

 

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or any part of the Collateral; and (e) use commercially reasonable efforts to
obtain any necessary consents of third parties to the creation and perfection of
a security interest in favor of the Collateral Agent with respect to any
Collateral.

Section 6. Representations and Warranties. To induce the Collateral Agent and
the Secured Parties to enter into the Purchase Agreement and to induce the
Investors to make their respective extensions of credit to Anesiva thereunder,
each Grantor hereby, jointly and severally, represents and warrants to the
Collateral Agent and each other Secured Party that:

(a) The Grantor is a corporation duly organized, validly existing and in good
standing under the law of the jurisdiction of its incorporation and has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.

(b) All corporate action on the part of the Grantors, their officers, directors
and stockholders necessary for the authorization, execution and delivery of this
Agreement, the Purchase Agreement and the Related Documents, the performance of
all obligations of the Grantors hereunder and thereunder and the authorization,
issuance and delivery of the Securities has been taken or will be taken prior to
the Initial Closing, and this Agreement, the Purchase Agreement and the Related
Documents, when executed and delivered by the Grantors, shall constitute valid
and legally binding obligations of the Grantors, enforceable against the
Grantors in accordance with their terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other laws of general application affecting enforcement of creditors’ rights
generally and as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

(c) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any foreign, federal,
state or local governmental authority or any third party on the part of the
Grantors is required in connection with the consummation of the transactions
contemplated by the Purchase Agreement and the Related Documents, except for
filings pursuant to applicable state securities laws and Regulation D of the
Securities Act of 1933, as amended, which filings will be effected within the
time prescribed by law.

(d) Each Grantor’s chief executive offices and principal places of business are
located at the addresses set forth in Schedule 1; all other locations where each
of the Grantors conduct business or the Collateral is kept are set forth in
Schedule 3; and all trade names and fictitious names under which each of the
Grantors at any time in the past have conducted or presently conduct their
business operations are set forth in Schedule 1.

(e) Each of the Grantor’s U.S. and foreign patents and patent applications,
registered copyrights, applications for copyright, trademarks, service marks and
trade names (whether registered or unregistered), and applications for
registration of such trademarks, service marks and trade names, are set forth in
Schedule 2.

(f) (i) This Agreement creates a first priority security interest that is
enforceable against the Collateral in which the Grantors now have rights and
will create a security interest that is enforceable against the Collateral in
which the Grantors hereafter acquire

 

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rights at the time any Grantor acquires any such rights and (ii) the Secured
Parties have a perfected and first priority security interest in the Collateral
in which the Grantors now have rights, and will have a perfected and first
priority security interest in the Collateral in which the Grantors hereafter
acquire rights at the time any Grantor acquires any such rights, in each case
securing the payment and performance of the Securities Amounts, except in each
case for Permitted Liens.

(g) The names and addresses of all financial institutions at which any Grantor
maintains its deposit accounts, and the account numbers and account names of
such deposit accounts, are set forth in Schedule 1.

(h) All securities accounts of the Grantors and other Investment Property of the
Grantors are set forth in Schedule 1. No account control agreements exist with
respect to any Investment Property other than any account control agreements in
favor of the Secured Parties.

(i) The Grantors have the right and power to transfer the Collateral, and the
Grantors are the sole and complete owners of the Collateral, free from any Lien
other than Permitted Liens.

(j) (i) The shares of Pledged Stock pledged by any Grantor hereunder constitute
all the issued and outstanding shares of all classes of the Capital Stock of
each Issuer owned by such Grantor or, in the case of a Foreign Subsidiary Voting
Stock, if less, 65% of the outstanding Foreign Subsidiary Voting Stock of each
relevant Issuer.

(ii) All the shares of the Pledged Stock have been duly and validly issued and
are fully paid and nonassessable.

(iii) Schedule 1 correctly sets forth the percentage of the issued and
outstanding shares of each class of Capital Stock of the Issuer thereof
represented by such Pledged Stock.

(iv) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person.

(v) Except for restrictions and limitations imposed by the Purchase Agreement,
the Related Documents or securities laws generally, the Pledged Stock is and
will continue to be freely transferable and assignable, and none of the Pledged
Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or by-law provisions or contractual restriction
of any nature that might prohibit, impair, delay or otherwise affect the pledge
of such Pledged Collateral hereunder, the sale or disposition thereof pursuant
hereto or the exercise by the Collateral Agent of rights and remedies hereunder.

(vi) By virtue of the execution and delivery by the Grantors of this Agreement,
when any Pledged Stock is delivered to the Collateral Agent in accordance with
this Agreement, the Collateral Agent will obtain a legal, valid and perfected
first priority lien upon and security interest in such Pledged Stock as security
for the payment and performance of the Securities Amounts.

 

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(vii) The pledge effected hereby is effective to vest in the Collateral Agent,
for the benefit of the Secured Parties, the rights of the Collateral Agent in
the Pledged Collateral as set forth herein.

(k) As of the time any Receivable owned by a Grantor becomes subject to the
security interest provided for hereby, and at all times thereafter, such Grantor
shall be deemed to have represented and warranted as to each and all of such
Receivables that:

(i) all representations and warranties of such Grantor set forth in this
Agreement are true and correct in all material respects with respect to each
such Receivable;

(ii) each Receivable represents a bona fide transaction completed in accordance
with the terms and provisions contained in the invoices and other documents
evidencing the same in all material respects, and all such invoices and other
documents relating thereto are genuine and in all material respects what they
purport to be;

(iii) each Receivable is valid and subsisting; that no amount payable to such
Grantor under or in connection with any Receivable is evidenced by any
Instrument or Chattel Paper which has not been delivered to the Collateral Agent
to the extent required by Section 7(h);

(iv) the amount of such Receivable represented as owing is not disputed and is
not subject to any set-offs, credits, deductions or countercharges other than
those arising in the ordinary course of business; and

(v) the goods giving rise to Accounts are not subject to any Lien, except in
favor of the Collateral Agent and the Secured Parties and except as permitted by
the Purchase Agreement and the Related Documents.

Section 7. Covenants. So long as any of the Securities Amounts remain
unsatisfied, each Grantor agrees that:

(a) Such Grantor shall appear in and defend any action, suit or proceeding that
may affect to a material extent its title to, or right or interest in, or
Collateral Agent’s right or interest in, the Collateral, and shall do and
perform all reasonable acts that may be necessary and appropriate to maintain,
preserve and protect in all material respects the Collateral.

(b) Such Grantor shall comply in all material respects with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.

 

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(c) Such Grantor shall give prompt written notice to the Collateral Agent (and
in any event not later than ten (10) days prior to any change described below in
this subsection) of: (i) any change in the location of a Grantor’s chief
executive office or principal place of business; (ii) any change in the
locations set forth in Schedule 1 or Schedule 3; (iii) any change in its name;
(iv) any changes in, additions to or other modifications of its trade names and
trade styles set forth in Schedule 1 or Schedule 2; and (v) any changes in its
identity or structure, including its jurisdiction of organization, in any manner
that might make any financing statement filed hereunder incorrect or misleading.

(d) Such Grantor shall carry and maintain in full force and effect, at its own
expense and with financially sound and reputable insurance companies, insurance
with respect to the Collateral in such amounts, with such deductibles and
covering such risks as is customarily carried by companies engaged in the same
or similar businesses and owning similar properties in the localities where such
Grantor operates.

(e) Such Grantor shall not surrender or lose possession of (other than to the
Collateral Agent), sell, lease, rent or otherwise dispose of or transfer any of
the Collateral or any right or interest therein, except in the ordinary course
of business; provided that no such disposition or transfer of Collateral
consisting of Investment Property or instruments shall be permitted while any
Event of Default exists.

(f) Such Grantor shall keep the Collateral free of all Liens except Permitted
Liens.

(g) Such Grantor shall maintain and preserve its corporate existence, its rights
to transact business and all other rights, franchises and privileges necessary
or reasonably desirable in the normal course of its business and operations and
the ownership of the Collateral, except in connection with any transactions
expressly permitted by the Purchase Agreement or the Related Documents.

(h) Such Grantor shall (i) immediately deliver to the Collateral Agent
appropriately endorsed or accompanied by appropriate instruments of transfer or
assignment, all documents and instruments, all certificated securities with
respect to any Investment Property, all letters of credit and all accounts and
other rights to payment at any time evidenced by promissory notes, trade
acceptances or other instruments; (ii) cause any securities intermediaries to
show on their books that the Collateral Agent is the entitlement holder with
respect to any Investment Property, and/or upon the request of the Collateral
Agent obtain account control agreements in favor of the Collateral Agent from
such securities intermediaries, in form and substance satisfactory to the
Collateral Agent with respect to any Investment Property; (iii) mark all
documents and chattel paper with such legends as the Collateral Agent shall
reasonably specify; and (iv) obtain consents from any letter of credit issuers
with respect to the assignment to the Collateral Agent of any letter of credit
proceeds.

(i) If and when such Grantor shall obtain rights to any material new patents,
trademarks, service marks, trade names, mask works or copyrights, or otherwise
acquire or become entitled to the benefit of, or apply for registration of, any
of the foregoing, such Grantor (i) shall promptly notify the Collateral Agent
thereof and (ii) hereby authorizes the Collateral Agent to modify, amend or
supplement Schedule 2 and from time to time to include any of the foregoing and
make all necessary or appropriate filings with respect to the perfection of any
security interest therein granted pursuant to this Agreement.

 

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(j) The Grantor shall promptly notify the Collateral Agent of the establishment
of any deposit account or other bank account.

(k) (i) If such Grantor shall become entitled to receive or shall receive any
certificate (including, without limitation, any certificate representing a
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of the Capital Stock of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in respect thereof, such
Grantor shall accept the same as the agent of the Collateral Agent and the
Secured Parties, hold the same in trust for the Collateral Agent and the Secured
Parties and deliver the same forthwith to the Collateral Agent in the exact form
received, duly indorsed by such Grantor to the Collateral Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by such Grantor and with, if the Collateral Agent so requests, signature
guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as
additional collateral security for the Securities Amounts; provided that,
notwithstanding anything in the foregoing to the contrary, no Grantor shall be
required to deliver certificates evidencing more than 65% of the total
outstanding Foreign Subsidiary Voting Stock. Any sums paid upon or in respect of
the Investment Property upon the liquidation or dissolution of any Issuer shall
be paid over to the Collateral Agent to be held by it hereunder as additional
collateral security for the Securities Amounts, and in case any distribution of
capital shall be made on or in respect of the Investment Property, or any
property shall be distributed upon or with respect to the Investment Property
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor of the
Collateral Agent, be delivered to the Collateral Agent to be held by it
hereunder as additional collateral security for the Securities Amounts. If any
sums of money or property so paid or distributed in respect of the Investment
Property shall be received by such Grantor, such Grantor shall, until such money
or property is paid or delivered to the Collateral Agent, hold such money or
property in trust for the Secured Parties, segregated from other funds of such
Grantor, as additional collateral security for the Securities Amounts.

(ii) Without the prior written consent of the Collateral Agent, such Grantor
will not (i) vote to enable, or take any other action to permit, any Issuer to
issue any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any Issuer, unless such
securities are delivered to the Collateral Agent, concurrently with the issuance
thereof, to be held by the Collateral Agent as Collateral, (ii) sell, assign,
transfer, exchange or otherwise dispose of, or grant any option with respect to,
the Investment Property or Proceeds thereof (except pursuant to a transaction
expressly permitted by the Purchase Agreement), (iii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Investment Property or Proceeds thereof, or any interest therein,
except for Permitted Liens or (iv) enter into any agreement or undertaking
restricting the right or ability of such Grantor or the Collateral Agent to
sell, assign or transfer any of the Pledged Collateral.

 

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(iii) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Stock issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Collateral Agent promptly in writing
of the occurrence of any of the events described in Section 7(k)(i) with respect
to the Pledged Stock issued by it and (iii) the terms of Sections 9(d) and 9(e)
shall apply to it, mutatis mutandis, with respect to all actions that may be
required of it pursuant to Sections 9(d) or 9(e) with respect to the Pledged
Stock issued by it.

(iv) Each interest in any limited liability company or partnership controlled by
any Grantor and pledged hereunder shall be represented by a certificate, shall
be a “security” within the meaning of Article 8 of the UCC and shall be governed
by the UCC.

(l) Such Grantor shall pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, services, materials and supplies) against, the
Collateral except to the extent the validity thereof is being contested in good
faith; provided that such Grantor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against such Grantor or any of the Collateral as a result of
the failure to make such payment.

(m) Such Grantor shall permit representatives of the Collateral Agent at any
time during normal business hours to inspect and make abstracts from records of
the Collateral, and each Grantor agrees to render to the Collateral Agent, at
such Grantor’s cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto.

Section 8. Authorization; Collateral Agent Appointed Attorney-in-Fact. The
Collateral Agent shall have the right to, in the name of any Grantor, or in the
name of the Secured Parties or the Collateral Agent or otherwise, and each
Grantor hereby constitutes and appoints the Collateral Agent (and any of the
Collateral Agent’s officers, employees or agents designated by the Collateral
Agent) as such Grantor’s true and lawful attorney-in-fact, with full power and
authority to in the place and stead of such Grantor, from time to time in the
Collateral Agent’s discretion to take any action and to execute any instrument
that the Collateral may deem necessary or advisable to maintain, realize upon
and preserve the Collateral and the Collateral Agent’s security interest, on
behalf of the Secured Parties, therein and to accomplish the purposes of this
Agreement, including, without limitation:

(a) upon the occurrence and during the continuance of an Event of Default, to
obtain and adjust any insurance required to be maintained by such Grantor;

(b) upon the occurrence and during the continuance of an Event of Default, to
ask for, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;

(c) upon the occurrence and during the continuance of an Event of Default, to
receive, endorse and collect any drafts or other instruments, chattel paper and
other documents in connection with clauses (a) and (b) above;

 

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(d) upon the occurrence and during the continuance of an Event of Default, to
file any claims or take any action or institute any proceedings that the
Collateral Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce or protect the rights of a Secured Party
with respect to any of the Collateral;

(e) to pay or discharge liens (other than liens permitted under this Agreement
or the Purchase Agreement) levied or placed upon or threatened against the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole
discretion, any such payments made by the Collateral Agent to become obligations
of such Grantor to the Collateral Agent, due and payable immediately without
demand;

(f) upon the occurrence and during the continuance of an Event of Default, to
sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral; and

(g) upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and to do, at
the Collateral Agent’s option and the Grantors’ expense, at any time or from
time to time, all acts and things that the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Collateral Agent’s
security interest therein in order to effect the intent of this Agreement, all
as fully and effectively as such Grantor might do.

The foregoing power of attorney is coupled with an interest and irrevocable so
long as the Securities Amounts have not been paid and performed in full. Each
Grantor hereby ratifies, to the extent permitted by law, all that the Collateral
Agent shall lawfully and in good faith do or cause to be done by virtue of and
in compliance with this Section 8.

Section 9. Remedies.

(a) In addition to all other rights and remedies granted to it in this
Agreement, the Purchase Agreement or any of the Related Documents, each Secured
Party, through the Collateral Agent, shall be entitled to all rights and
remedies of a secured party under the UCC (whether or not the UCC applies to the
affected Collateral) and other applicable laws. Without limiting the generality
of the foregoing, the Collateral Agent, at its sole discretion, may (i) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of the Collateral Agent forthwith, assemble all or part of the
Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place to be designated by the Collateral Agent that is
reasonably convenient to both parties, (ii) enter onto the property where any
Collateral is located and take possession thereof with or without judicial
process, (iii) prior to the disposition of the Collateral, store, process,
repair or recondition the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent the Collateral Agent deems appropriate,
(iv) take possession of any Grantor’s premises or place custodians in exclusive
control thereof, remain on such premises and use the same and any of such
Grantor’s

 

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equipment for the purpose of completing any work in process, taking any actions
described in the preceding clause (iii) and collecting any obligation and
(v) sell, resell, lease, use, assign, license, sublicense, transfer or otherwise
dispose of any or all of the Collateral in its then condition or following any
commercially reasonable preparation or processing (utilizing in connection
therewith any of the Grantors’ assets, without charge or liability to the
Secured Parties therefor) at public or private sale, by one or more contracts,
in one or more parcels, at the same or different times, for cash or credit, or
for future delivery without assumption of any credit risk; provided, however,
that the Grantors shall be credited with the net proceeds of sale only when such
proceeds are finally collected by the Collateral Agent. The Collateral Agent
shall have the right upon any such public sale, and, to the extent permitted by
law, upon any such private sale, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption, which right or
equity of redemption the Grantors hereby release, to the extent permitted by
law. Each of the Secured Parties hereby authorizes the Collateral Agent to
credit bid all or any part of the Securities Amounts owed to such Secured Party.
The Collateral Agent shall make such bids in accordance with each Secured
Party’s Pro Rata Share and shall hold any Collateral so acquired in trust on
behalf of the Secured Parties in accordance with their respective Pro Rata
Shares. The Grantors hereby agree that the sending of notice by ordinary mail,
postage prepaid, to the address of the Grantors set forth herein, of the place
and time of any public sale or of the time after which any private sale or other
intended disposition is to be made, shall be deemed reasonable notice thereof if
such notice is sent ten (10) Business Days prior to the date of such sale or
other disposition or the date on or after which such sale or other disposition
may occur, provided that the Collateral Agent may provide the Grantors shorter
notice or no notice, to the extent permitted by the UCC or other applicable law.

(b) Solely for the purpose of enabling the Collateral Agent to exercise its
rights and remedies under this Agreement, effective upon the occurrence and
during the continuance of an Event of Default, the Grantors hereby grant the
Collateral Agent an irrevocable, non-exclusive and assignable license
(exercisable without payment or royalty or other compensation to the Grantors)
to use, license or sublicense any of the Collateral.

(c) The cash proceeds actually received from the sale or other disposition or
collection of the Collateral and any other amounts received in respect of the
Collateral or the application of which is not otherwise provided for herein,
shall be applied first, to the payment of the reasonable costs and expenses of
the Collateral Agent (including the reasonable costs and expenses of legal
counsel) in exercising or enforcing its rights hereunder and in collecting or
attempting to collect any of the Collateral; and second, to the payment of the
Securities Amounts. Any surplus thereof that exists after payment and
performance in full of the Securities Amounts shall be promptly paid over to the
Grantors or otherwise disposed of in accordance with the UCC or other applicable
law. The Grantors shall remain liable to the Collateral Agent and the Secured
Parties for any deficiency that exists after any sale or other disposition or
collection of the Collateral.

(d) (i) Unless an Event of Default shall have occurred and be continuing and the
Collateral Agent shall have given notice to the relevant Grantor of the
Collateral Agent’s intent to exercise its corresponding rights pursuant to
Section 9(d)(ii), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock paid in the normal course of business of
the relevant Issuer and consistent with past practice, to the

 

16

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extent permitted in the Purchase Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Collateral; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Collateral Agent’s reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Purchase Agreement, this Agreement or any Related Document.

(ii) If an Event of Default shall occur and be continuing and the Collateral
Agent shall give notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (i) the Collateral Agent shall have the right to receive
any and all cash dividends, payments or other Proceeds paid in respect of the
Pledged Collateral and make application thereof to the Securities Amounts in the
order set forth in Section 9(c) and (ii) any or all of the Pledged Collateral
shall be registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Collateral at any meeting
of stockholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Collateral as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Collateral Agent of any right, privilege or option pertaining to such
Pledged Collateral, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Collateral with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Agent may determine), all without liability except to account
for property actually received by it, but the Collateral Agent shall have no
duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.

(iii) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Collateral pledged by such Grantor hereunder to (i) comply with any instruction
received by it from the Collateral Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying and (ii) unless otherwise expressly permitted
hereby, pay any dividends or other payments with respect to the Pledged
Collateral directly to the Collateral Agent.

(e) (i) If the Collateral Agent shall determine to exercise its right to sell
any or all of the Pledged Stock pursuant to Section 9(a), and if in the opinion
of the Collateral Agent it is necessary or advisable to have the Pledged Stock,
or that portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended, the relevant Grantor will cause the Issuer
thereof to (i) execute and deliver, and cause the directors and officers of such
Issuer to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the Collateral
Agent, necessary or advisable to register the Pledged Stock, or that portion
thereof to be sold, under the provisions of the Securities Act of 1933, as
amended, (ii) use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged Stock, or that portion
thereof to be sold,

 

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and (iii) make all amendments thereto and/or to the related prospectus which, in
the opinion of the Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act of 1933, as amended, and
the rules and regulations of the Securities and Exchange Commission applicable
thereto. Each Grantor agrees to cause such Issuer to comply with the provisions
of the securities or “Blue Sky” laws of any and all jurisdictions that the
Collateral Agent shall designate and to make available to its security holders,
as soon as practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act of 1933, as
amended.

(ii) Each Grantor recognizes that the Collateral Agent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities Laws, even if such Issuer would agree to do
so.

(iii) Each Grantor agrees to use its best efforts to do or cause to be done all
such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 9(e) valid and binding and
in compliance with any and all other applicable laws. Each Grantor further
agrees that a breach of any of the covenants contained in this Section 9(e) will
cause irreparable injury to the Collateral Agent and the Secured Parties, that
the Collateral Agent and the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 9(e) shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Purchase Agreement.

(f) The Collateral Agent hereby authorizes each Grantor to collect such
Grantor’s Receivables, subject to the Collateral Agent’s direction and control
after the occurrence and during the continuance of an Event of Default, and the
Collateral Agent may curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default. If required by the
Collateral Agent at any time after the occurrence and during the continuance of
an Event of Default, any payments of Receivables, when collected by any Grantor,
(i) shall be forthwith (and, in any event, within two Business Days) deposited
by such Grantor in the exact form received, duly indorsed by such Grantor to the
Collateral Agent if required, in a collateral account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Secured Parties at its discretion, and
(ii) until so turned over, shall be held by such Grantor in trust for the
Collateral Agent and the Secured Parties, segregated from other funds of such
Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.

 

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(g) At any time after the occurrence and during the continuance of an Event of
Default, at the Collateral Agent’s request, each Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions that gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts.

(h) At any time after the occurrence and during the continuance of an Event of
Default, each Grantor will cooperate with the Collateral Agent to establish a
system of lockbox accounts, under the sole dominion and control of the
Collateral Agent, into which all Receivables shall be paid and from which all
collected funds will be transferred to a Collateral Account.

(i) Upon the request of the Collateral Agent at any time after the occurrence
and during the continuance of an Event of Default, each Grantor hereby
authorizes the Collateral Agent to notify each obligor on the Receivables that
the Receivables have been assigned to the Collateral Agent for the ratable
benefit of the Secured Parties as Collateral hereunder and to instruct such
obligor to make all payments in respect thereof directly to the Collateral Agent
or to the Collateral Account or as otherwise directed by the Collateral Agent.

Section 10. Certain Waivers. Each Grantor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder; and (ii) any right to require the
Collateral Agent or any Secured Party (A) to proceed against any Person, (B) to
exhaust any other collateral or security for any of the Securities Amounts,
(C) to pursue any remedy in any Secured Party’s or Collateral Agent’s power, or
(D) to make or give any presentments, demands for performance, notices of
nonperformance, protests, notices of protests or notices of dishonor in
connection with any of the Collateral.

Section 11. Notices. All notices or other communications hereunder shall be in
writing (including by facsimile transmission) and mailed, sent or delivered to
the respective parties hereto at or to their respective addresses or facsimile
numbers set forth below their names on the signature pages hereof, or at or to
such other address or facsimile number as shall be designated by any party in a
written notice to the other parties hereto. All such notices and other
communications shall be effective (i) if delivered by hand, when delivered;
(ii) if sent by mail, upon the earlier of the date of receipt or five Business
Days after deposit in the mail, first class (or air mail, with respect to
communications to be sent to or from the United States); (iii) if sent by
overnight mail, one day after deposit with the overnight courier; and (iv) if
sent by facsimile transmission, when sent so long as a valid confirmation is
received by sender.

Section 12. No Waiver; Cumulative Remedies. No failure on the part of any
Secured Party or the Collateral Agent to exercise, and no delay in exercising,
any right, remedy, power or privilege under this Agreement, the Purchase
Agreement and the Related Documents shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any

 

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other right, remedy, power or privilege. The rights and remedies under this
Agreement, the Purchase Agreement and the Related Documents are cumulative and
not exclusive of any rights, remedies, powers and privileges that may otherwise
be available to such Secured Party or the Collateral Agent.

Section 13. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by any Grantor, any Secured Party, any Collateral
Agent appointed hereunder and their respective successors and assigns.

Section 14. Governing Law and Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the law of the State of California, without
regard to the choice of law rules thereof, except to the extent the validity or
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
California.

Section 15. Entire Agreement; Amendment and Waiver. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and no
amendment to this Agreement, or any waiver of any provision hereof, shall be
effective unless it is in writing and signed by the Majority Secured Parties and
(in the case of any amendment) each Grantor; except that no amendment, waiver or
consent shall, unless in writing and additionally signed by the Collateral Agent
affect the rights or duties of the Collateral Agent under this Agreement.

Section 16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
applicable laws and regulations. If, however, any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid only to the
extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.

Section 17. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.

Section 18. Termination. This Agreement shall be terminated upon indefeasible
payment and performance in full of all Securities Amounts. Upon termination, the
Secured Parties and the Collateral Agent, as applicable, shall promptly, at the
cost of the Grantors, execute and deliver to the Grantors such documents and
instruments reasonably requested by the Grantors as shall be necessary to
evidence termination of all security interests given by the Grantors to the
Secured Parties hereunder; provided, however, that the obligations under
Section 4 hereof shall survive such termination.

 

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Section 19. Suretyship Waivers by Grantors, etc.

(a) Each Grantor agrees that its Securities Amounts are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance that
constitutes a legal or equitable discharge of a guarantor or surety other than
payment in full of the Securities Amounts. In furtherance of the foregoing and
without limiting the generality thereof, each Grantor agrees as follows:
(i) Secured Parties may from time to time, without notice or demand and without
affecting the validity or enforceability of the Purchase Agreement or any
Related Document or giving rise to any limitation, impairment or discharge of
such Grantor’s liability under the Purchase Agreement or any Related Document,
(A) renew, extend, accelerate or otherwise change the time, place, manner or
terms of payment of the Securities Amounts, (B) settle, compromise, release or
discharge, or accept or refuse any offer of performance with respect to, or
substitutions for, the Securities Amounts or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations, (C) request and accept guaranties of the Securities Amounts and
take and hold other security for the payment of the Securities Amounts,
(D) release, exchange, compromise, subordinate or modify, with or without
consideration, any other security for payment of the Securities Amounts, any
guaranties of the Securities Amounts, or any other obligation of any Person with
respect to the Securities Amounts, (E) enforce and apply any other security now
or hereafter held by or for the benefit of Secured Party in respect of the
Securities Amounts and direct the order or manner of sale thereof, or exercise
any other right or remedy that a Secured Party may have against any such
security, as Secured Party in its discretion may determine consistent with the
Purchase Agreement, the Related Documents and any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, and (F) exercise any other rights available to such Secured Party
under the Purchase Agreement and the Related Documents at law or in equity; and
(ii) the Purchase Agreement, the Related Documents and the Securities Amounts
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Securities Amounts), including, without limitation, the occurrence of any of the
following, whether or not such Grantor shall have had notice or knowledge of any
of them: (A) any failure to assert or enforce or agreement not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy with respect to the Securities Amounts or any agreement relating
thereto, or with respect to any guaranty of or other security for the payment of
the Securities Amounts, (B) any waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including, without
limitation, provisions relating to events of default) of the Purchase Agreement,
any of the Related Documents or any agreement or instrument executed pursuant
thereto, or of any guaranty or other security for the Securities Amounts,
(C) the Securities Amounts, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect, (D) the
application of payments received from any source to the payment of indebtedness
other than the Securities Amounts, even though a Secured Party might have
elected to apply such payment to any part or all of the Securities Amounts,
(E) any failure to perfect or continue perfection of a security interest in any
other collateral that secures any of the Securities Amounts, (F) any defenses,
set-offs or counterclaims that any Grantor may allege or assert against a
Secured Party in respect of the Securities Amounts, including, but not limited
to, failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury, and (G) any other act
or thing or omission, or delay to do any other act or thing, that may or might
in any manner or to any extent vary the risk of any Grantor as an obligor in
respect of the Securities Amounts.

 

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(b) Each Grantor hereby waives, for the benefit of the Secured Parties: (i) any
right to require a Secured Party as a condition of payment or performance by
such Grantor, to (A) proceed against such Grantor, any guarantor of the
Securities Amounts or any other Person, (B) proceed against or exhaust any other
security held from such Grantor, any guarantor of the Securities Amounts or any
other Person, (C) proceed against or have resort to any balance of any deposit
account or credit on the books of Secured Party of such Grantor or any other
Person, or (D) pursue any other remedy in the power of Secured Party whatsoever;
(ii) any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of such Grantor including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Securities Amounts or any agreement or instrument relating thereto or by
reason of the cessation of the liability of such Grantor from any cause other
than payment in full of the Securities Amounts; (iii) any defense based upon any
statute or rule of law that provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (iv) any defense based upon a Secured Party’s errors or omissions in
the administration of the Securities Amounts, except behavior that amounts to
bad faith; (v) (A) any principles or provisions of law, statutory or otherwise,
that are or might be in conflict with the terms of the Purchase Agreement, any
Related Document and any legal or equitable discharge of such Grantor’s
obligations under the Purchase Agreement or any Related Document, (B) the
benefit of any statute of limitations affecting such Grantor’s liability
hereunder or the enforcement of any Securities Amounts, (C) any rights to
set-offs, recoupments and counterclaims, and (D) promptness, diligence and any
requirement that a Secured Party protect, secure, perfect or insure any other
security interest or lien or any property subject thereto; (vi) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, notices of default under the Purchase
Agreement, any Related Document or any agreement or instrument related thereto,
notices of any renewal, extension or modification of the Securities Amounts or
any agreement related thereto, notices of any extension of credit to such
Grantor and notices of any of the matters referred to in the preceding paragraph
and any right to consent to any thereof; and (vii) to the fullest extent
permitted by law, any defenses or benefits that may be derived from or afforded
by law that limit the liability of or exonerate guarantors or sureties, or that
may conflict with the terms of the Purchase Agreement or any Related Document.

(c) As used in this Section 19(c), any reference to “the principal” includes
each Grantor, and any reference to “the creditor” includes each Secured Party.
In accordance with Section 2856 of the California Civil Code (a) each Grantor
waives any and all rights and defenses available to the Grantor by reason of
Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code. No
other provision of this Agreement shall be construed as limiting the generality
of any of the covenants and waivers set forth in this Section 19.

(d) Until the Securities Amounts shall have been paid in full, each Grantor
shall withhold exercise of (i) any claim, right or remedy, direct or indirect,
that such Grantor now has or may hereafter have against the other Grantors or
any of their assets in connection with the Purchase Agreement and the Related
Documents or the performance by such

 

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Grantor of its obligations under the Purchase Agreement and the Related
Documents, in each case whether such claim, right or remedy arises in equity,
under contract, by statute (including, without limitation, under California
Civil Code Section 2847, 2848 or 2849), under common law or otherwise and
including without limitation (A) any right of subrogation, reimbursement or
indemnification that a Grantor now has or may hereafter have against another
Grantor, (B) any right to enforce, or to participate in, any claim, right or
remedy that a Secured Party now has or may hereafter have against any Grantor,
and (C) any benefit of, and any right to participate in, any other collateral or
security now or hereafter held by a Secured Party and (ii) any right of
contribution such Grantor may have against any other guarantor of the Securities
Amounts. Each Grantor further agrees that, to the extent the waiver of its
rights of subrogation, reimbursement, indemnification and contribution as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification such Grantor may have against any other Grantor or against any
other collateral or security, and any rights of contribution such Grantor may
have against any such guarantor, shall be junior and subordinate to any rights a
Secured Party may have against the other Grantors, to all right, title and
interest a Secured Party may have in any such other collateral or security, and
to any right a Secured Party, may have against any such guarantor.

(e) No Secured Party shall have any obligation to disclose or discuss with any
Grantor its assessment, or such Grantor’s assessment, of the financial condition
of any other Grantor. Each Grantor has adequate means to obtain information from
the other Grantors on a continuing basis concerning the financial condition of
the other Grantors and their ability to perform their obligations under the
Purchase Agreement and the Related Documents, and such Grantor assumes the
responsibility for being and keeping informed of the financial condition of the
other Grantors and of all circumstances bearing upon the risk of nonpayment of
the Securities Amounts. Each Grantor hereby waives and relinquishes any duty on
the part of a Secured Party to disclose any matter, fact or thing relating to
the business, operations or condition of the other Grantors now known or
hereafter known by a Secured Party.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of
the date first above written.

 

GRANTORS: ANESIVA, INC. By:     Name:     Title:     Address:           ALGORX
PHARMACEUTICALS, INC. By:     Name:     Title:     Address:          

SIGNATURE PAGE TO PLEDGE, SECURITY

AND COLLATERAL AGENT AGREEMENT

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

COLLATERAL AGENT: CMEA VENTURES VII, L.P. By:  

CMEA Ventures VII GP, L.P.,

Its General Partner

By:  

CMEA Ventures VII GP, LLC,

Its General Partner

By:       Name:   Title: Manager SECURED PARTIES: SOFINNOVA VENTURE PARTNERS
VII, L.P. By:  

Sofinnova Management VII, L.L.C.

Its General Partner

By:       Michael F. Powell, Managing General Partner ALTA CALIFORNIA PARTNERS
III, L.P. By:   Alta California Management Partners III, LLC By:       Managing
Director

SIGNATURE PAGE TO PLEDGE, SECURITY

AND COLLATERAL AGENT AGREEMENT

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

ALTA EMBARCADERO PARTNERS III, LLC By:       Vice President of Finance &
Administration ALTA PARTNERS VIII, LP By:   Alta Partners Management VIII, LLC
By:       Managing Director CMEA VENTURES VII, L.P. By:   CMEA Ventures VII GP,
L.P.,   Its General Partner By:   CMEA Ventures VII GP, LLC,   Its General
Partner By:       Name:   Title: Manager CMEA VENTURES VII (PARALLEL), L.P. By:
  CMEA Ventures VII GP, L.P.,   Its General Partner By:   CMEA Ventures VII GP,
LLC,   Its General Partner By:       Name:   Title: Manager

SIGNATURE PAGE TO PLEDGE, SECURITY

AND COLLATERAL AGENT AGREEMENT

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

INTERWEST PARTNERS VIII, LP INTERWEST INVESTORS VIII, LP INTERWEST INVESTORS Q
VIII, LP By:   InterWest Management Partners VIII, LLC, General Partner   By:  
Arnold L. Oronsky, Managing Director

SIGNATURE PAGE TO PLEDGE, SECURITY

AND COLLATERAL AGENT AGREEMENT

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

SCHEDULE 1

to the Pledge, Security and Collateral Agent Agreement

for Anesiva, Inc.

 

1. Locations of Chief Executive Office and Other Locations, Including of
Collateral

 

  a. Chief Executive Office and Principal Place of Business:

 

  b. Other locations where the Debtor conducts business or Collateral is kept:

 

2. Trade Names and Trade Styles; Other Corporate, Trade or Fictitious Names,
Etc.

 

3. Bank Accounts

 

4. Organizational Identification Number; Federal Employer Identification Number.

 

5. State of Incorporation; Prior Names.

 

6. Assets in Possession of Third Parties. The following are names and addresses
of all persons or entities other than the Grantors, such as lessees, consignees,
warehousemen or purchasers of chattel paper, which have possession or are
intended to have possession of any of the Collateral consisting of instruments,
chattel paper, inventory or equipment:

 

7. Existing Security Interests. The Grantors’ assets are subject to the
following security interest of Persons other than the Collateral Agent:

 

8. Tax Assessments. The following tax assessments are currently outstanding and
unpaid:

 

9. Guaranties. The Grantors have directly or indirectly guaranteed the following
obligations of third parties:

 

10. Subsidiaries. The Grantors have the following subsidiaries (list
jurisdiction and date of incorporation, federal employer identification number,
type and value of assets):

 

S-1-1

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11. Securities; Instruments. The following is a complete list of all stocks,
bonds, debentures, notes and other securities and investment property owned by
the Grantor (provide name of issuer, whether certificated or uncertificated,
certificate no. (if applicable), number of shares):

 

12. Securities Accounts: The following is a complete list of all securities
accounts maintained by the Grantors (provide name and address of brokerage firm,
type of account and account number):

 

13. Pledged Stock:

 

S-1-2

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SCHEDULE 2

to the Security Agreement

for Anesiva, Inc.

 

1. Patents and Patent Applications

 

2. Copyrights and Copyright Applications

 

3. Mask Works and Mask Work Applications

 

4. Trademarks, Service Marks and Trade Names and Trademark, Service Mark and
Trade Name Applications

 

S-2-1

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SCHEDULE 3

Business Locations and Locations of Collateral

for Anesiva, Inc.

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SCHEDULE 1

to the Pledge, Security and Collateral Agent Agreement

for AlgoRx Pharmaceuticals, Inc.

 

12. Locations of Chief Executive Office and Other Locations, Including of
Collateral

 

13. Trade Names and Trade Styles; Other Corporate, Trade or Fictitious Names,
Etc.

 

14. Bank Accounts

 

15. Organizational Identification Number; Federal Employer Identification
Number.

 

16. State of Incorporation; Prior Names.

 

17. Assets in Possession of Third Parties. The following are names and addresses
of all persons or entities other than the Grantors, such as lessees, consignees,
warehousemen or purchasers of chattel paper, which have possession or are
intended to have possession of any of the Collateral consisting of instruments,
chattel paper, inventory or equipment:

 

18. Existing Security Interests. The Grantors’ assets are subject to the
following security interest of Persons other than the Collateral Agent:

 

19. Tax Assessments. The following tax assessments are currently outstanding and
unpaid:

 

20. Guaranties. The Grantors have directly or indirectly guaranteed the
following obligations of third parties:

 

21. Subsidiaries. The Grantors have the following subsidiaries (list
jurisdiction and date of incorporation, federal employer identification number,
type and value of assets):

 

S-1-1

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22. Securities; Instruments. The following is a complete list of all stocks,
bonds, debentures, notes and other securities and investment property owned by
the Grantor (provide name of issuer, whether certificated or uncertificated,
certificate no. (if applicable), number of shares):

 

12. Securities Accounts: The following is a complete list of all securities
accounts maintained by the Grantors (provide name and address of brokerage firm,
type of account and account number):

 

13. Pledged Stock:

 

S-1-2

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SCHEDULE 2

to the Security Agreement

for AlgoRx Pharmaceuticals, Inc.

 

5. Patents and Patent Applications

 

6. Copyrights and Copyright Applications

 

7. Mask Works and Mask Work Applications

 

8. Trademarks, Service Marks and Trade Names and Trademark, Service Mark and
Trade Name Applications

 

S-2-1

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SCHEDULE 3

Business Locations and Locations of Collateral

for AlgoRx Pharmaceuticals, Inc.

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EXHIBIT C

GUARANTY

This Guaranty is entered into as of January 20, 2009 by AlgoRx Pharmaceuticals,
Inc., a Delaware corporation (the “Guarantor”), in favor of and for the benefit
of the Investors under and as defined in the Purchase Agreement (as defined
below) (the “Beneficiaries”) under that certain Securities Purchase Agreement,
dated as of January 20, 2009, by and among Anesiva, Inc., a Delaware corporation
(the “Company”), and the Beneficiaries (said Securities Purchase Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the “Purchase Agreement;” capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined).

1. Guaranty. (a) In order to induce the Beneficiaries to extend credit to the
Company pursuant to the Purchase Agreement, the Guarantor irrevocably and
unconditionally guaranties, as primary obligor and not merely as surety, the due
and punctual payment in full of all Guarantied Amounts (as hereinafter defined)
when the same shall become due, whether at stated maturity, by acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code).
The term “Guarantied Amounts” is used herein in its most comprehensive sense and
includes any and all obligations of Company in respect of notes, advances,
borrowings, loans, debts, interest, fees, costs, expenses (including, without
limitation, legal fees and expenses of counsel and allocated costs of internal
counsel), indemnities and liabilities of whatsoever nature now or hereafter
made, incurred or created, whether absolute or contingent, liquidated or
unliquidated, whether due or not due, and however arising under or in connection
with the Purchase Agreement, the Securities, this Guaranty and the other Related
Documents, including those arising under successive borrowing transactions under
the Purchase Agreement which shall either continue such obligations of the
Company or from time to time renew them after they have been satisfied.

The Guarantor acknowledges that the Guarantied Amounts are being incurred for
and will inure to the benefit of the Guarantor.

Any returns on any portion of the Guarantied Amounts that accrues after the
commencement of any proceeding, voluntary or involuntary, involving the
bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement
of the Company (or, if returns on any portion of the Guarantied Amounts ceases
to accrue by operation of law by reason of the commencement of said proceeding,
such returns as would have accrued on such portion of the Guarantied Amounts if
said proceeding had not been commenced) shall be included in the Guarantied
Amounts because it is the intention of the Guarantor and the Beneficiaries that
the Guarantied Amounts should be determined without regard to any rule of law or
order that may relieve the Company of any portion of such Guarantied Amounts.

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In the event that all or any portion of the Guarantied Amounts is paid by the
Company, the obligations of the Guarantor hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) is rescinded or recovered directly or
indirectly from any Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Amounts.

Subject to the other provisions of this Section 1, upon the failure of the
Company to pay any of the Guarantied Amounts when and as the same shall become
due, the Guarantor will upon demand pay, or cause to be paid, in cash, to the
Beneficiaries, an amount equal to the aggregate of the unpaid Guarantied
Amounts. Such payments shall be made in accordance with the applicable
provisions of the Purchase Agreement.

(b) Anything contained in this Guaranty to the contrary notwithstanding, the
obligations of the Guarantor under this Guaranty and the other Related Documents
shall be limited to a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state or foreign law (collectively,
the “Fraudulent Transfer Laws”), in each case after giving effect to all other
liabilities of the Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of the Guarantor (x) in respect of intercompany indebtedness to the Company or
other affiliates of the Company to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by the Guarantor hereunder and
(y) under any guaranty of subordinated indebtedness which guaranty contains a
limitation as to maximum amount similar to that set forth in this Section 1(b),
pursuant to which the liability of the Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of the Guarantor pursuant to
applicable law or pursuant to the terms of any agreement.

(c) The Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Purchase Agreement (the “Related
Guaranties”) that contain a contribution provision similar to that set forth in
this Section 1(c), together desire to allocate among themselves (collectively,
the “Contributing Guarantors”), in a fair and equitable manner, their
obligations arising under this Guaranty and the Related Guaranties. Accordingly,
in the event any payment or distribution is made on any date by the Guarantor
under this Guaranty or a guarantor under a Related Guaranty, the Guarantor or
such other guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the maximum amount permitted by law so as to maximize
the aggregate amount of the Guarantied Amounts paid to the Beneficiaries.

2. Guaranty Absolute; Continuing Guaranty. The obligations of the Guarantor
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance that constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied Amounts.
In furtherance

 

2

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of the foregoing, and without limiting the generality thereof, the Guarantor
agrees that: (a) this Guaranty is a guaranty of payment when due and not of
collectibility; (b) any Beneficiary may enforce this Guaranty upon the
occurrence and during the continuance of an Event of Default under the Purchase
Agreement notwithstanding the existence of any dispute between the Company and
any Beneficiary with respect to the existence of such event; (c) the obligations
of the Guarantor hereunder are independent of the obligations of the Company
under the Purchase Agreement and the Related Documents and the obligations of
any other guarantor of obligations of the Company and a separate action or
actions may be brought and prosecuted against the Guarantor whether or not any
action is brought against the Company or any of such other guarantors and
whether or not the Company is joined in any such action or actions; and (d) the
Guarantor’s payment of a portion, but not all, of the Guarantied Amounts shall
in no way limit, affect, modify or abridge the Guarantor’s liability for any
portion of the Guarantied Amounts that has not been paid. This Guaranty is a
continuing guaranty and shall be binding upon the Guarantor and its successors
and assigns, and the Guarantor irrevocably waives any right (including, without
limitation, any such right arising under California Civil Code Section 2815) to
revoke this Guaranty as to future transactions giving rise to any Guarantied
Amounts.

3. Actions by Beneficiaries. Any Beneficiary may from time to time, without
notice or demand and without affecting the validity or enforceability of this
Guaranty or giving rise to any limitation, impairment or discharge of the
Guarantor’s liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied Amounts;
(b) settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guarantied Amounts or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (c) request and accept other guaranties of the
Guarantied Amounts and take and hold security for the payment of this Guaranty
or the Guarantied Amounts; (d) release, exchange, compromise, subordinate or
modify, with or without consideration, any security for payment of the
Guarantied Amounts, any other guaranties of the Guarantied Amounts, or any other
obligation of any Person with respect to the Guarantied Amounts; (e) enforce and
apply any security now or hereafter held by or for the benefit of any
Beneficiary in respect of this Guaranty or the Guarantied Amounts and direct the
order or manner of sale thereof, or exercise any other right or remedy that the
Beneficiaries, or any of them, may have against any such security, as the
Beneficiaries in their discretion may determine consistent with the Purchase
Agreement, the Related Documents and any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable; and (f) exercise any other rights available to the Beneficiaries, or
any of them, under the Purchase Agreement or the Related Documents, at law or in
equity.

4. No Discharge. This Guaranty and the obligations of the Guarantor hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Guarantied Amounts), including without limitation the occurrence of any of the
following, whether or not the Guarantor shall have had notice or knowledge of
any of them: (a) any failure to

 

3

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assert or enforce or agreement not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy with
respect to the Guarantied Amounts or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Guarantied
Amounts; (b) any waiver or modification of, or any consent to departure from,
any of the terms or provisions of the Purchase Agreement, any of the Related
Documents or any agreement or instrument executed pursuant thereto, or of any
other guaranty or security for the Guarantied Amounts; (c) the Guarantied
Amounts, or any agreement relating thereto, at any time being found to be
illegal, invalid or unenforceable in any respect; (d) the application of
payments received from any source to the payment of indebtedness other than the
Guarantied Amounts, even though the Beneficiaries, or any of them, might have
elected to apply such payment to any part or all of the Guarantied Amounts;
(e) any failure to perfect or continue perfection of a security interest in any
collateral that secures any of the Guarantied Amounts; (f) any defenses,
set-offs or counterclaims that the Company may assert against any Beneficiary in
respect of the Guarantied Amounts, including, but not limited to, failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (g) any other act or thing
or omission, or delay to do any other act or thing, that may or might in any
manner or to any extent vary the risk of the Guarantor as an obligor in respect
of the Guarantied Amounts.

5. Waivers. The Guarantor waives, for the benefit of the Beneficiaries: (a) any
right to require the Beneficiaries, as a condition of payment or performance by
the Guarantor, to (i) proceed against the Company, any other guarantor of the
Guarantied Amounts or any other Person, (ii) proceed against or exhaust any
security held from the Company, any other guarantor of the Guarantied Amounts or
any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of any Beneficiary in favor of the
Company or any other Person, or (iv) pursue any other remedy in the power of any
Beneficiary; (b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of the Company including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Amounts or any agreement or instrument
relating thereto or by reason of the cessation of the liability of the Company
from any cause other than payment in full of the Guarantied Amounts; (c) any
defense based upon any statute or rule of law that provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal; (d) any defense based upon any
Beneficiary’s errors or omissions in the administration of the Guarantied
Amounts, except behavior that amounts to bad faith; (e) (i) any principles or
provisions of law, statutory or otherwise, that are or might be in conflict with
the terms of this Guaranty and any legal or equitable discharge of the
Guarantor’s obligations hereunder, (ii) the benefit of any statute of
limitations affecting the Guarantor’s liability hereunder or the enforcement
hereof, (iii) any rights to set-offs, recoupments and counterclaims and
(iv) promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any Lien or any property subject thereto; (f) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, including acceptance of this Guaranty,
notices of default under the Purchase Agreement or any agreement or instrument
related thereto, notices of any renewal,

 

4

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extension or modification of the Guarantied Amounts or any agreement related
thereto, notices of any extension of credit to the Company and notices of any of
the matters referred to in Sections 3 and 4 and any right to consent to any
thereof; and (g) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law that limit the liability of
or exonerate guarantors or sureties, or that may conflict with the terms of this
Guaranty.

As used in this paragraph, any reference to “the principal” includes the
Company, and any reference to “the creditor” includes each Beneficiary. In
accordance with Section 2856 of the California Civil Code, the Guarantor waives
any and all rights and defenses available to the Guarantor by reason of Sections
2787 to 2855, inclusive, of the California Civil Code, including, without
limitation, any and all rights or defenses the Guarantor may have because the
Guarantied Amounts are or may be secured by real property. This means, among
other things: (1) the creditor may collect from the Guarantor without first
foreclosing on any real or personal property collateral pledged by the principal
and (2) if the creditor forecloses on any real property collateral pledged by
the principal: (A) the amount of the Guarantied Amounts may be reduced only by
the price for which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price and (B) the creditor may collect
from the Guarantor even if the creditor, by foreclosing on the real property
collateral, has destroyed any right the Guarantor may have to collect from the
principal. This is an unconditional and irrevocable waiver of any right and
defenses the Guarantor may have because the Guarantied Amounts are secured by
real property. These rights and defenses include, but are not limited to, any
rights and defenses based upon Section 580a, 580b, 580d or 726 of the California
Code of Civil Procedure. The Guarantor also waives all rights and defenses
arising out of an election of remedies by the creditor, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for a Guarantied Amount, has destroyed the Guarantor’s rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise; and even though that election of remedies by
the creditor, such as nonjudicial foreclosure with respect to security for an
obligation of any other guarantor of any of the Guarantied Amounts, has
destroyed the Guarantor’s rights of contribution against such other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this paragraph.

6. Guarantor’s Rights of Subrogation, Contribution, Etc.; Subordination of Other
Obligations. Until the Guarantied Amounts shall have been paid in full, the
Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or
indirect, that the Guarantor now has or may hereafter have against the Company
or any of its assets in connection with this Guaranty or the performance by the
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute (including without
limitation under California Civil Code Section 2847, 2848 or 2849), under common
law or otherwise and including, without limitation, (i) any right of
subrogation, reimbursement or indemnification that the Guarantor now has or may
hereafter have against the Company; (ii) any right to enforce, or to participate
in, any claim, right or remedy that any Beneficiary now has or may hereafter
have against the Company; and (iii) any benefit of, and any right to participate
in, any

 

5

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collateral or security now or hereafter held by any Beneficiary and (b) any
right of contribution the Guarantor now has or may hereafter have against any
other guarantor of any of the Guarantied Amounts. The Guarantor further agrees
that, to the extent the agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement or indemnification the
Guarantor may have against the Company or against any collateral or security,
and any rights of contribution the Guarantor may have against any such other
guarantor, shall be junior and subordinate to any rights the Beneficiaries may
have against the Company, to all right, title and interest the Beneficiaries may
have in any such collateral or security, and to any right the Beneficiaries may
have against such other guarantor.

Any indebtedness of the Company now or hereafter held by the Guarantor is
subordinated in right of payment to the Guarantied Amounts, and any such
indebtedness of the Company to the Guarantor collected or received by the
Guarantor after an Event of Default has occurred and is continuing, and any
amount paid to the Guarantor on account of any subrogation, reimbursement,
indemnification or contribution rights referred to in the preceding paragraph
when all Guarantied Amounts have not been paid in full, shall be held in trust
for the Beneficiaries and shall forthwith be paid over to the Beneficiaries to
be credited and applied against the Guarantied Amounts.

7. Expenses. The Guarantor agrees to pay, or cause to be paid, on demand, and to
save the Beneficiaries harmless against liability for, (i) any and all costs and
expenses (including fees, costs of settlement and disbursements of counsel and
allocated costs of internal counsel) incurred or expended by any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty and (ii) any and all costs and expenses (including those arising from
rights of indemnification) required to be paid by the Guarantor under the
provisions of the Purchase Agreement or any Related Document.

8. Financial Condition of Company. No Beneficiary shall have any obligation, and
the Guarantor waives any duty on the part of any Beneficiary, to disclose or
discuss with the Guarantor its assessment, or the Guarantor’s assessment, of the
financial condition of the Company or any matter or fact relating to the
business, operations or condition of the Company. The Guarantor has adequate
means to obtain information from the Company on a continuing basis concerning
the financial condition of the Company and its ability to perform its
obligations under the Purchase Agreement and the Related Documents, and the
Guarantor assumes the responsibility for being and keeping informed of the
financial condition of the Company and of all circumstances bearing upon the
risk of nonpayment of the Guarantied Amounts.

9. Representations and Warranties. The Guarantor makes, for the benefit of the
Beneficiaries, each of the representations and warranties made in the Purchase
Agreement by the Company as to the Guarantor, its assets, financial condition,
operations, organization, legal status, business and the Related Documents to
which it is a party.

 

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10. Covenants. The Guarantor agrees that, so long as any part of the Guarantied
Amounts shall remain unpaid, the Guarantor will, unless the Majority Investors
shall otherwise consent in writing, perform or observe, and cause its
Subsidiaries to perform or observe, all of the terms, covenants and agreements
that the Purchase Agreement and the Related Documents state that the Company is
to cause the Guarantor and such Subsidiaries to perform or observe.

11. Set Off. In addition to any other rights any Beneficiary may have under law
or in equity, if any amount shall at any time be due and owing by the Guarantor
to any Beneficiary under this Guaranty, such Beneficiary is authorized at any
time or from time to time, without notice (any such notice being expressly
waived), to set off and to appropriate and to apply any and all deposits
(general or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to the Guarantor and any other property
of the Guarantor held by a Beneficiary to or for the credit or the account of
the Guarantor against and on account of the Guarantied Amounts and liabilities
of the Guarantor to any Beneficiary under this Guaranty.

12. Amendments and Waivers. No amendment, modification, termination or waiver of
any provision of this Guaranty, and no consent to any departure by the Guarantor
therefrom, shall in any event be effective without the written concurrence of
the Majority Investors and, in the case of any such amendment or modification,
the Guarantor. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. Any
amendment or waiver effected in accordance with this Section 12 shall be binding
upon each Beneficiary and each other holder of any Securities purchased under
the Purchase Agreement at the time outstanding, each future holder of all such
Securities and the Guarantor.

13. Miscellaneous. It is not necessary for the Beneficiaries to inquire into the
capacity or powers of the Guarantor or the Company or the officers, directors or
any agents acting or purporting to act on behalf of any of them.

The rights, powers and remedies given to the Beneficiaries by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to the Beneficiaries by virtue of any statute or rule of law or
in the Purchase Agreement or any of the Related Documents or any agreement
between the Guarantor and one or more Beneficiaries or between the Company and
one or more Beneficiaries. Any forbearance or failure to exercise, and any delay
by any Beneficiary in exercising, any right, power or remedy hereunder shall not
impair any such right, power or remedy or be construed to be a waiver thereof,
nor shall it preclude the further exercise of any such right, power or remedy.

In case any provision in or obligation under this Guaranty shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

 

7

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THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE GUARANTOR AND THE
BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

This Guaranty shall inure to the benefit of the Beneficiaries and their
respective successors and assigns.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE GUARANTOR ARISING OUT OF OR
RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE COURT OF COMPETENT
JURISDICTION IN SAN FRANCISCO COUNTY, STATE OF CALIFORNIA, OR IN ANY FEDERAL
COURT OF COMPETENT JURISDICTION IN THE NORTHERN DISTRICT FOR THE STATE OF
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS GUARANTY. The Guarantor agrees that service of
all process in any such proceeding in any such court may be made by registered
or certified mail, return receipt requested, to the Guarantor at its address set
forth below its signature hereto, such service being acknowledged by the
Guarantor to be sufficient for personal jurisdiction in any action against the
Guarantor in any such court and to be otherwise effective and binding service in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Beneficiary to
bring proceedings against the Guarantor in the courts of any other jurisdiction.

THE GUARANTOR AND THE BENEFICIARIES EACH AGREE TO WAIVE ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
GUARANTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
GUARANTOR AND THE BENEFICIARIES EACH (I) ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT FOR THE GUARANTOR AND THE BENEFICIARIES TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT THE GUARANTOR AND THE BENEFICIARIES HAVE ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS GUARANTY AND THAT EACH WILL CONTINUE
TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS

 

8

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IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may
be filed as a written consent to a trial by the court.

14. Counterparts. This Guaranty may be executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original for all purposes;
but all such counterparts together shall constitute but one and the same
instrument.

[Remainder of page intentionally left blank]

 

9

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IN WITNESS WHEREOF, the Guarantor and the Beneficiaries have caused this
Guaranty to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

 

GUARANTOR: ALGORX PHARMACEUTICALS, INC. By:     Name:     Title:     Address:  
        BENEFICIARIES: SOFINNOVA VENTURE PARTNERS VII, L.P. By:   Sofinnova
Management VII, L.L.C.
Its General Partner By:       Michael F. Powell, Managing General Partner ALTA
CALIFORNIA PARTNERS III, L.P. By:   Alta California Management Partners III, LLC
By:       Managing Director

 

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ALTA EMBARCADERO PARTNERS III, LLC By:       Vice President of Finance &
Administration ALTA PARTNERS VIII, LP By:   Alta Partners Management VIII, LLC
By:       Managing Director CMEA VENTURES VII, L.P. By:   CMEA Ventures VII GP,
L.P.,
Its General Partner By:   CMEA Ventures VII GP, LLC,
Its General Partner By:       Name:   Title: Manager CMEA VENTURES VII
(PARALLEL), L.P. By:   CMEA Ventures VII GP, L.P.,
Its General Partner By:   CMEA Ventures VII GP, LLC,
Its General Partner By:       Name:   Title: Manager

 

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INTERWEST PARTNERS VIII, LP INTERWEST INVESTORS VIII, LP INTERWEST INVESTORS Q
VIII, LP By:   InterWest Management Partners VIII, LLC, General Partner   By:
Arnold L. Oronsky, Managing Director

 

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EXHIBIT D

ANESIVA, INC.

AMENDED AND RESTATED EXECUTIVE CHANGE IN CONTROL AND

SEVERANCE BENEFIT PLAN

SECTION 1. INTRODUCTION.

The Anesiva, Inc. Amended and Restated Executive Change in Control and Severance
Benefit Plan (the “Plan”) has been established effective July 29, 2005 (the
“Effective Date”) and amended March 31, 2008 and January     , 2009. The purpose
of the Plan is to provide for the payment to certain eligible executive
employees of Anesiva, Inc. (the “Company”) of certain benefits in the event of a
Change in Control (as such term is defined below) as well as severance benefits
in the event that such employees are subject to qualifying employment
terminations in connection with a Change in Control. This Plan shall supersede
any change in control or severance benefit plan, policy, or practice previously
maintained by the Company, other than an individually negotiated contract or
agreement with the Company relating to change in control or severance benefits
that is in effect on the effective date of a Change in Control or an employee’s
termination date which provides benefits that the Plan Administrator (as such
term is defined below), in its sole discretion, determines to be of greater
value than the benefits provided for in this Plan, in which case such employee’s
change in control benefit or severance benefit, if any, shall be governed by the
terms of such individually negotiated employment contract or agreement and shall
be governed by this Plan only to the extent that the reduction pursuant to
Section 5(b) below does not entirely eliminate benefits under this Plan. This
Plan shall not supersede any benefit provided pursuant to an equity compensation
plan or program maintained by the Company. This document also constitutes the
Summary Plan Description for the Plan.

SECTION 2. DEFINITIONS.

For purposes of the Plan, the following terms are defined as follows:

(a) “Base Salary” means the Eligible Employee’s annual base pay (excluding
incentive pay, premium pay, commissions, overtime, bonuses and other forms of
variable compensation), at the rate in effect during the last regularly
scheduled payroll period immediately preceding the date of the Eligible
Employee’s Covered Termination.

(b) “Board” means the Board of Directors of Anesiva, Inc.

(c) “Change in Control” means the occurrence of any one or more of the following
events:

(i) any transaction or series of related transactions resulting in the sale or
issuance of securities or any rights to securities of the Company representing
in the aggregate more than fifty percent (50%) of the Company’s issued and
outstanding voting securities, on a fully diluted basis, or any transaction or
series of related transactions resulting in the sale, transfer, assignment or
other conveyance or disposition of any securities or any rights to securities of
the Company by any holder or holders thereof representing in the aggregate more
than fifty percent (50%) of the issued and outstanding voting securities of the
Company;

 

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(ii) a merger, consolidation, reorganization, recapitalization or share exchange
(whether or not the Company is the surviving and continuing entity) in which the
stockholders or equityholders of the Company immediately prior to such
transaction receive, in exchange for securities of the Company owned by them
(whether alone or together with cash, property or other securities), cash,
property or securities of the resulting or surviving entity and as a result
thereof persons who were holders of voting securities of the Company immediately
prior to such transaction hold less than fifty percent (50%) of the issued and
outstanding capital stock of the resulting or surviving entity entitled to vote
in the election of directors, managers or similar governing body or otherwise;

(iii) a sale, transfer, exclusive license, exclusive partnering arrangement or
other disposition in a single transaction or series of related transactions of
fifty percent (50%) or more of the assets of the Company and its subsidiaries,
on a consolidated basis, other than sales of inventory in good faith to
customers for fair value in the ordinary course of business and dispositions of
obsolete equipment not used or useful in the business of the Company and its
subsidiaries; and

(iv) a sale, transfer, exclusive license, exclusive partnering arrangement or
other disposition in a single transaction or series of related transactions of
the Company’s Adlea assets.

The term Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company. Once a Change in Control has occurred, no future events shall
constitute a Change in Control for purposes of the Plan.

(d) “Change in Control Proceeds” means, with respect to any Change in Control
and without duplication, all cash and the fair market value on the effective
date of the Change in Control, as determined in good faith by the Board, of all
other property paid or payable directly or indirectly by a third party or the
Company to the Company’s stockholders (or to the Company in the case of a Change
in Control structured as an asset sale, exclusive license or similar
transaction) in consideration for their shares or any debt or equity-linked
securities (e.g., warrants and options) held by the Company’s stockholders or
any third party debt holders or holders of equity-linked securities (or in
consideration of the assets of the Company in the case of a Change in Control
structured as an asset sale, exclusive license or similar transaction),
including, without limitation, amounts paid into escrow or subject to earn-outs
or other contingencies, but expressly excluding (i) amounts payable to financial
brokers or advisors in connection with any Change in Control or any other legal,
accounting, investment banking, advisory or other third party fees or costs
incurred by the Company or its affiliates in connection with the Change in
Control, or (ii) the payment of principal and interest (but specifically not
including any amount that may be due pursuant to Section 8.2 of the Securities
Purchase Agreement, dated January 20, 2009 (the “Purchase Agreement”)) to the
holders of those certain Securities issued pursuant to the Purchase Agreement
(the “Securities”), or (iii) amounts payable under this Plan. For avoidance of
doubt, Change in Control Proceeds shall not include (x) any amounts payable in
cash or other consideration under consulting, employment or other arrangements
between any acquirer and any employee, former employee, director or consultant
of the Company or any of its affiliates for services rendered or to be rendered
after the Change in Control or (y) the value of any Company debt repaid or
assumed by the acquirer in connection with the Change in Control, other than any
amount due pursuant to Section 8.2 of the Purchase Agreement to holders of the
Securities.

 

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(e) “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

(f) “Code” means the Internal Revenue Code of 1986, as amended.

(g) “Company” means Anesiva, Inc. or, following a Change in Control, the
surviving entity resulting from such transaction.

(h) “Constructive Termination” means a voluntary termination of employment by an
Eligible Employee after one of the following is undertaken without the Eligible
Employee’s express written consent:

(i) the assignment to the Eligible Employee of any duties or responsibilities
which results in a significant diminution in the Eligible Employee’s function as
in effect immediately prior to the effective date of the Change in Control;
provided, however, that a mere change in the Eligible Employee’s title shall not
constitute a Constructive Termination;

(ii) a five percent (5%) or greater reduction by the Company in an Eligible
Employee’s annual base salary, as in effect on the effective date of the Change
in Control;

(iii) any failure by the Company to continue in effect any benefit plan or
program, including fringe benefits, incentive plans and plans with respect to
the receipt of securities of the Company, in which an Eligible Employee is
participating immediately prior to the effective date of the Change in Control
(hereinafter referred to as “Benefit Plans”); or the taking of any action by the
Company that would adversely affect an Eligible Employee’s participation in or
reduce the Eligible Employee’s benefits under the Benefit Plans; provided,
however, that a “Constructive Termination” shall not exist under this paragraph
following a Change in Control if the Company offers a range of benefit plans and
programs which, taken as a whole, are comparable to the Benefit Plans; or

(iv) a relocation of an Eligible Employee’s business office to a location more
than thirty-five (35) miles from the location at which the Eligible Employee
performs duties as of the effective date of the Change in Control, except for
required travel by the Eligible Employee on the Company’s business to an extent
substantially consistent with the Eligible Employee’s business travel
obligations prior to the Change in Control.

(i) “Covered Termination” means either (A) an Involuntary Termination Without
Cause which occurs within three (3) months prior to or twelve (12) months
following the effective date of a Change in Control, or (B) a Constructive
Termination which occurs within twelve (12) months following the effective date
of a Change in Control. Termination of employment of an Eligible Employee due to
death or disability shall not constitute a Covered Termination unless a
voluntary termination of employment by the Eligible Employee immediately prior
to the Eligible Employee’s death or disability would have qualified as a
Constructive Termination.

 

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(j) “Eligible Employee” means an individual (A) who is employed by the Company
as an officer; and (B) who is designated by the Board as an Eligible Employee.

(k) “Entity” means a corporation, partnership or other entity.

(l) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

(m) “Involuntary Termination Without Cause” means an involuntary termination by
the Company of an Eligible Employee’s employment relationship with the Company
for any reason other than the following:

(i) the Eligible Employee has committed an act that materially injures the
business of the Company;

(ii) the Eligible Employee has refused or failed to follow lawful and reasonable
directions of the Board or the appropriate individual to whom the Eligible
Employee reports, without cure within fifteen (15) days following receipt by the
Eligible Employee of written notice from the Company or the Board specifying the
particulars of the Eligible Employee’s conduct;

(iii) the Eligible Employee has willfully or habitually neglected the Eligible
Employee’s duties with the Company, without cure within fifteen (15) days
following receipt by the Eligible Employee of written notice from the Company or
the Board specifying the particulars of the Eligible Employee’s conduct;

(iv) the Eligible Employee has been convicted of a felony; or

(v) the Eligible Employee has committed a fraud, misappropriation, embezzlement
or other act of gross dishonesty that resulted in loss, damage or injury to the
Company.

(n) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to
“Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of
securities if such person or Entity, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
voting power, which includes the power to vote or to direct the voting, with
respect to such securities.

(o) “Plan Administrator” means the Board or any committee duly authorized by the
Board to administer the Plan. The Plan Administrator may, but is not required to
be, the Compensation Committee of the Board. The Board may at any time
administer the Plan, in whole or in part, notwithstanding that the Board has
previously appointed a committee to act as the Plan Administrator.

 

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(p) “Pro Rata Amount” means the percentage of Change in Control Proceeds for
each Eligible Employee designated by the Board.

(q) “Subsidiary” means, with respect to the Company, (A) any corporation of
which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, Owned
by the Company, and (B) any partnership in which the Company has a direct or
indirect interest (whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%).

SECTION 3. ELIGIBILITY FOR BENEFITS.

(a) General Rules. Subject to the limitations set forth in this Section 3 and
Section 5, in the event of a Covered Termination, the Company shall provide the
severance benefits described in Section 4 to each effected Eligible Employee.

(b) Exceptions to Benefit Entitlement. An employee, including an employee who
otherwise is an Eligible Employee, will not receive benefits under the Plan (or
will receive reduced benefits under the Plan) in the following circumstances, as
determined by the Plan Administrator in its sole discretion:

(i) With respect to the benefits provided pursuant to Section 4(a)(i):

(1) The employee has executed an individually negotiated employment contract or
agreement with the Company relating to change in control benefits (except those
provided pursuant to an equity compensation plan or program maintained by the
Company) that is in effect on the effective date of a Change in Control and
which provides benefits that the Plan Administrator, in its sole discretion,
determines to be of greater value than the benefits provided for in this Plan,
in which case such employee’s change in control benefit, if any, shall be
governed by the terms of such individually negotiated employment contract or
agreement and shall be governed by this Plan only to the extent that the
reduction pursuant to Section 5(b) below does not entirely eliminate benefits
under this Plan.

(ii) With respect to the benefits provided pursuant to Section 4(a)(ii):

(1) The employee has executed an individually negotiated employment contract or
agreement with the Company relating to severance or change in control benefits
(except those provided pursuant to an equity compensation plan or program
maintained by the Company) that is in effect on his or her termination date and
which provides benefits that the Plan Administrator, in its sole discretion,
determines to be of greater value than the benefits provided for in this Plan,
in which case such employee’s severance or change in control benefit, if any,
shall be governed by the terms of such individually negotiated employment
contract or agreement and shall be governed by this Plan only to the extent that
the reduction pursuant to Section 5(b) below does not entirely eliminate
benefits under this Plan.

 

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(2) The employee is entitled to receive benefits under another severance benefit
plan maintained by the Company (e.g., the Anesiva, Inc. Severance Benefit Plan).

(3) The employee’s employment terminates or is terminated for any reason other
than a Covered Termination.

(4) The employee voluntarily terminates employment with the Company in order to
accept employment with another entity that is controlled (directly or
indirectly) by the Company or is otherwise an affiliate of the Company.

(5) The employee does not confirm in writing that he or she shall be subject to
the Company’s proprietary information or confidentiality agreement with the
Company.

(6) The employee is rehired by the Company prior to the date benefits under the
Plan are scheduled to commence.

(7) The employee is offered an identical or substantially equivalent or
comparable position with the Company or a successor pursuant to a Change in
Control. For purposes of the foregoing, a “substantially equivalent or
comparable position” is one that offers the employee substantially the same
level of responsibility and compensation; provided, however, that an employee
shall not be considered to be offered a “substantially equivalent or comparable
position” if a voluntary termination by the employee would constitute
Constructive Termination.

(c) Termination of Benefits. An Eligible Employee’s right to receive benefits
under this Plan shall terminate immediately if, at any time prior to or during
the period for which the Eligible Employee is receiving benefits hereunder, the
Eligible Employee, without the prior written approval of the Plan Administrator:

(i) With respect to the benefits provided pursuant to Section 4(a)(i):

(1) willfully breaches a material provision of the Eligible Employee’s
proprietary information or confidentiality agreement with the Company.

(ii) With respect to the benefits provided pursuant to Section 4(a)(ii):

(1) willfully breaches a material provision of the Eligible Employee’s
proprietary information or confidentiality agreement with the Company, as
referenced in Section 3(b)(v);

(2) encourages or solicits any of the Company’s then current employees to leave
the Company’s employ for any reason or interferes in any other manner with
employment relationships at the time existing between the Company and its then
current employees; or

 

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(3) induces any of the Company’s then current clients, customers, suppliers,
vendors, distributors, licensors, licensees or other third party to terminate
their existing business relationship with the Company or interferes in any other
manner with any existing business relationship between the Company and any then
current client, customer, supplier, vendor, distributor, licensor, licensee or
other third party.

SECTION 4. AMOUNT OF BENEFITS.

(a) Benefits. The Company shall provide benefits to each Eligible Employee in an
amount equal to the greater of the amounts set forth in Section 4(a)(i) or
4(a)(ii) set forth below, as applicable.

(i) Cash Payment in a Change in Control. In the event a Change in Control
occurs, the Company shall provide the benefits in this Section 4(a)(i).

(1) In the event Change in Control Proceeds are less than or equal to
$30,000,000, such Eligible Employee’s Pro Rata Amount of an aggregate of 9.0% of
the Change in Control Proceeds;

(2) In the event Change in Control Proceeds are greater than $30,000,000 but
less than or equal to $50,000,000, such Eligible Employee’s Pro Rata Amount of
an aggregate of 10.0% of the Change in Control Proceeds;

(3) In the event Change in Control Proceeds are greater than $50,000,000 but
less than or equal to $100,000,000, such Eligible Employee’s Pro Rata Amount of
an aggregate of 11.0% of the Change in Control Proceeds; or

(4) In the event Change in Control Proceeds are greater than $100,000,000, such
Eligible Employee’s Pro Rata Amount of an aggregate of 12.0% of the Change in
Control Proceeds.

(ii) Benefits in Connection with a Covered Termination. In the event an Eligible
Employee’s employment with the Company terminates due to a Covered Termination,
the Company shall provide the benefits in this Section 4(a)(ii).

(1) Cash Severance Benefits. The Company shall make cash severance payments to
each Eligible Employee in an amount equal to the following:

a. For the CEO (i) two times the Eligible Employee’s Base Salary, as in effect
on the date of a Covered Termination, or, if higher, as in effect immediately
prior to the Change in Control, plus (ii) the Eligible Employee’s maximum annual
target cash bonus, as in effect on the date of a Covered Termination, or, if
higher, as in effect immediately prior to the Change in Control (the “Target
Bonus”).

b. For officers other than the CEO (i) one times the Eligible Employee’s Base
Salary, as in effect on the date of a Covered Termination, or, if higher, as in
effect immediately prior to the Change in Control, plus (ii) the Eligible
Employee’s Target Bonus, as defined above

 

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(2) Health Continuation Coverage.

a. Provided that the Eligible Employee is eligible for, and has made an election
at the time of the Covered Termination pursuant to COBRA under a health, dental,
or vision plan sponsored by the Company, each such Eligible Employee shall be
entitled to payment by the Company of all of the applicable premiums (inclusive
of premiums for the Eligible Employee’s dependents for such health, dental, or
vision plan coverage as in effect immediately prior to the date of the Covered
Termination) for such health, dental, or vision plan coverage for a period of
six (6) months following the date of the Covered Termination, with such coverage
counted as coverage pursuant to COBRA.

b. No such premium payments (or any other payments for health, dental, or vision
coverage by the Company) shall be made following the effective date of the
Eligible Employee’s coverage by a health, dental, or vision insurance plan of a
subsequent employer. Each Eligible Employee shall be required to notify the Plan
Administrator immediately if the Eligible Employee becomes covered by a health,
dental, or vision insurance plan of a subsequent employer. Upon the conclusion
of such period of insurance premium payments made by the Company, the Eligible
Employee will be responsible for the entire payment of premiums required under
COBRA for the duration of the COBRA period.

c. For purposes of this Section 4(a)(ii)(2), (A) references to COBRA shall be
deemed to refer also to analogous provisions of state law, and (B) any
applicable insurance premiums that are paid by the Company shall not include any
amounts payable by the Eligible Employee under an Internal Revenue Code
Section 125 health care reimbursement plan, which amounts, if any, are the sole
responsibility of the Eligible Employee.

(3) Outplacement Assistance. Each Eligible Employee shall receive outplacement
services for a period of three months to assist the Eligible Employee in finding
new employment. Such services shall commence not later than three months after
the Eligible Employee’s termination date.

(4) Other Employee Benefits. All other benefits (such as life insurance,
disability coverage, and 401(k) plan coverage) shall terminate as of the
Eligible Employee’s termination date (except to the extent that a conversion
privilege may be available thereunder).

(5) Additional Benefits. Notwithstanding the foregoing, the Plan Administrator
may, in its sole discretion, provide benefits in addition to those pursuant to
Sections 4(a)(ii)(1), 4(a)(ii)(2), and 4(a)(ii)(3) to Eligible Employees or
employees who are not Eligible Employees (“Non-Eligible Employees”) chosen by
the Plan Administrator, in its sole discretion, and the provision of any such
benefits to an Eligible Employee or a Non-Eligible Employee shall in no way
obligate the Company to provide such benefits to any other Eligible Employee or
to any other Non-Eligible Employee, even if similarly situated. If benefits
under the Plan are provided to a Non-Eligible Employee, references in the Plan
to “Eligible Employee” (with the exception of Sections 4(a)(ii)(1), 4(a)(ii)(2),
and 4(a)(ii)(3)) shall be deemed to refer to such Non-Eligible Employee.

 

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SECTION 5. LIMITATIONS ON BENEFITS.

(a) Release. In order to be eligible to receive benefits under Section 4 of the
Plan, an Eligible Employee must execute a general waiver and release in
substantially the form attached hereto as Exhibit A, Exhibit B, or Exhibit C, as
appropriate, and such release must become effective in accordance with its
terms. Unless a Change in Control has occurred, the Plan Administrator, in its
discretion, may modify the form of the required release to comply with
applicable law and shall determine the form of the required release, which may
be incorporated into a termination agreement or other agreement with the
Eligible Employee.

(b) Certain Reductions. The Plan Administrator, in its sole discretion, shall
have the authority to reduce an Eligible Employee’s benefits, in whole or in
part, by any other benefits, pay in lieu of notice, or other similar benefits
payable to the Eligible Employee by the Company that become payable in
connection with a Change in Control or the Eligible Employee’s termination of
employment pursuant to (i) any applicable legal requirement, including, without
limitation, the Worker Adjustment and Retraining Notification Act (the “WARN
Act”), (ii) a written employment or severance agreement with the Company, or
(iii) any Company policy or practice providing for the Eligible Employee to
remain on the payroll for a limited period of time after being given notice of
the termination of the Eligible Employee’s employment. The benefits provided in
Section 4(a)(ii) under this Plan are intended to satisfy, in whole or in part,
any and all statutory obligations that may arise out of an Eligible Employee’s
termination of employment, and the Plan Administrator shall so construe and
implement the terms of the Plan. The Plan Administrator’s decision to apply such
reductions to the severance benefits of one Eligible Employee and the amount of
such reductions shall in no way obligate the Plan Administrator to apply the
same reductions in the same amounts to the severance benefits of any other
Eligible Employee, even if similarly situated. In the Plan Administrator’s sole
discretion, such reductions may be applied on a retroactive basis, with
severance benefits previously paid being re-characterized as payments pursuant
to the Company’s statutory obligation.

(c) Parachute Payments. Except as otherwise provided in an agreement between an
Eligible Employee and the Company, if any payment or benefit the Eligible
Employee would receive in connection with a Change in Control from the Company
or otherwise (“Payment”) would (i) constitute a “parachute payment” within the
meaning of Section 280G of 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. 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, up to
and including the total, of the 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 Eligible Employee’s receipt of the greatest economic benefit
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 a manner necessary to provide the Eligible Employee with the
greatest economic benefit. If more than one manner of reduction of payments or
benefits necessary to arrive at the Reduced Amount yields the greatest economic
benefit, the payments and benefits shall be reduced pro rata.

 

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(d) Mitigation. Except as otherwise specifically provided herein, an Eligible
Employee shall not be required to mitigate damages or the amount of any payment
provided under this Plan by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Plan be reduced by any
compensation earned by an Eligible Employee as a result of employment by another
employer or any retirement benefits received by such Eligible Employee after the
date of the Eligible Employee’s termination of employment with the Company,
except for health continuation coverage provided pursuant to
Section 4(a)(ii)(2).

(e) Non-Duplication of Benefits. Except as otherwise specifically provided for
herein, no Eligible Employee is eligible to receive benefits under this Plan
more than one time. This Plan is designed to provide certain severance pay and
change in control benefits to Eligible Employees pursuant to the terms and
conditions set forth in this Plan. The payments pursuant to this Plan are in
addition to, and not in lieu of, any unpaid salary, bonuses or benefits to which
an Eligible Employee may be entitled for the period ending with the Eligible
Employee’s Covered Termination.

SECTION 6. TIME OF PAYMENT AND FORM OF BENEFITS.

(a) General Rules. The Plan Administrator reserves the right to determine
whether cash severance benefits under the Plan pursuant to Section 4(a)(ii), if
any, shall be paid in a single lump sum or in installments, or in any other
form, and to choose the timing of such payments. Benefits pursuant to
Section 4(a)(i) shall be paid on the same schedule and under the same terms and
condition as apply to payments to secured debtholders and stockholders of the
Company in the Change in Control. In no event shall payment of any benefit
pursuant to Section 4(a)(ii) be made prior to the Eligible Employee’s
termination date or prior to the effective date of the release described in
Section 5(a).

(b) Application of Section 409A. In the event that (i) any benefit provided
under Section 4(a)(i), (ii) cash severance benefit provided under
Section 4(a)(ii)(1), (iii) the health continuation coverage provided under
Section 4(a)(ii)(2), or (iv) the outplacement benefit provided under
Section 4(a)(ii)(3), fails to satisfy the distribution requirement of
Section 409A(a)(2)(A) of the Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, the payment of such benefit shall be
accelerated to the minimum extent necessary so that the benefit is not subject
to the provisions of Section 409A(a)(1) of the Code. (The payment schedule as
revised after the application of the preceding sentence shall be referred to as
the “Revised Payment Schedule.”) However, in the event the payment of benefits
pursuant to the Revised Payment Schedule would be subject to Section 409A(a)(1)
of the Code, the payment of such benefits shall not be paid pursuant to the
original payment schedule or Revised Payment Schedule and instead the payment of
such benefits shall be delayed to the minimum extent necessary so that such
benefits are not subject to the provisions of Section 409A(a)(1) of the Code.
The Plan Administrator may attach conditions to or adjust the amounts paid
pursuant to this Section 6(b) to preserve, as closely as possible, the economic
consequences that would have applied in the absence of this Section 6(b);
provided, however, that no such condition shall result in the payments being
subject to Section 409A(a)(1) of the Code. Payments pursuant to Section 4(a)(i)
shall be paid, if at all, no later than five years after the consummation of the
Change in Control. No Eligible Employee shall have the right to receive payments
pursuant to Section 4(a)(i) more than five years after the consummation of the
Change in Control. It is the intention that payments hereunder shall be paid
pursuant to Treasury Regulation Section 1.409A-3(i)(5)(iv)(A). The Plan
Administrator should interpret this Plan in compliance with Section 409A of the
Code.

 

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(c) Tax Withholding. All such payments under the Plan will be subject to
applicable withholding for federal, state and local income and employment taxes.

(d) Indebtedness of Eligible Employees. If an Eligible Employee is indebted to
the Company on the effective date of his or her Covered Termination, the Plan
Administrator reserves the right to offset any severance payments under the Plan
by the amount of such indebtedness.

SECTION 7. REEMPLOYMENT.

In the event of an Eligible Employee’s reemployment by the Company during the
period of time in respect of which severance benefits pursuant to Sections
4(a)(ii)(1), 4(a)(ii)(2), and 4(a)(ii)(3) have been paid, the Plan
Administrator, in its sole and absolute discretion, may require such Eligible
Employee to repay to the Company all or a portion of such severance benefits as
a condition of reemployment.

SECTION 8. 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 occur following a Change in
Control or a Covered Termination as to any Eligible Employee who would be
adversely affected by such amendment or termination unless such Eligible
Employee consents in writing to such amendment or termination. Any action
amending or terminating the Plan shall be in writing and executed by the Plan
Administrator.

SECTION 9. 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 of the Company, or (ii) to interfere with the right
of the Company to discharge any employee or other person at any time, with or
without cause, which right is hereby reserved.

 

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SECTION 10. LEGAL CONSTRUCTION.

This Plan is intended to be governed by and shall be construed in accordance
with ERISA and, to the extent not preempted by ERISA, the laws of the State of
California.

SECTION 11. 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 set forth in
Section 13(d).

(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 notice of denial will be
set forth in a manner designed to be understood by the applicant and will
include the following:

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

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

(iii) 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

(iv) 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 11(d) below.

This notice of denial 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.

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.

 

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(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:

Anesiva, Inc.

Attn: Chief Executive Officer

650 Gateway Boulevard

South San Francisco, CA 94080

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:

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

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

(iii) 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

(iv) 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.

 

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(f) Exhaustion of Remedies. No legal action for benefits under the Plan may be
brought until the applicant (i) has submitted a written application for benefits
in accordance with the procedures described by Section 11(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 11(c) above, and (iv) has been
notified that the Plan Administrator has denied the appeal. Notwithstanding the
foregoing, if the Plan Administrator does not respond to an applicant’s claim or
appeal within the relevant time limits specified in this Section 11, the
applicant may bring legal action for benefits under the Plan pursuant to
Section 502(a) of ERISA.

SECTION 12. BASIS OF PAYMENTS TO AND FROM PLAN.

The Plan shall be unfunded, and all benefits hereunder shall be paid only from
the general assets of the Company.

SECTION 13. 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 77-0503399. The Plan Number assigned
to the Plan by the Plan Sponsor pursuant to the instructions of the Internal
Revenue Service is 511.

(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:

Anesiva, Inc.

Attn: Chief Executive Officer

650 Gateway Boulevard

South San Francisco, CA 94080

(d) Plan Sponsor and Administrator. The “Plan Sponsor” and the “Plan
Administrator” of the Plan is:

Anesiva, Inc.

Attn: Chief Executive Officer

650 Gateway Boulevard

South San Francisco, CA 94080

The Plan Sponsor’s and Plan Administrator’s telephone number is (650) 624-9600.
The Plan Administrator is the named fiduciary charged with the responsibility
for administering the Plan.

SECTION 14. STATEMENT OF ERISA RIGHTS.

Participants in this Plan (which is a welfare benefit plan sponsored by Anesiva,
Inc.) are entitled to certain rights and protections under ERISA. If you are an
Eligible Employee, you are considered a participant in the Plan for the purposes
of this Section 14 and, under ERISA, you are entitled to:

 

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(a) Receive Information About Your Plan and Benefits

(i) Examine, without charge, at the Plan Administrator’s office and at other
specified locations, such as worksites, all documents governing the Plan and a
copy of the latest annual report (Form 5500 Series), if applicable, filed by the
Plan with the U.S. Department of Labor and available at the Public Disclosure
Room of the Employee Benefits Security Administration;

(ii) 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), if applicable, and an updated (as necessary) Summary Plan
Description. The Administrator may make a reasonable charge for the copies; and

(iii) Receive a summary of the Plan’s annual financial report, if applicable.
The Plan Administrator is required by law to furnish each participant with a
copy of this summary annual report.

(b) 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. No one, including your
employer, your union 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.

(c) Enforce Your Rights.

(i) If your claim for a Plan benefit is denied or ignored, in whole or in part,
you have a right to know why this was done, to obtain copies of documents
relating to the decision without charge, and to appeal any denial, all within
certain time schedules.

(ii) 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, if applicable, 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.

(iii) If you have a claim for benefits which is denied or ignored, in whole or
in part, you may file suit in a state or Federal court.

(iv) 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.

 

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(d) 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.

SECTION 15. GENERAL PROVISIONS.

(a) Notices. Any notice, demand or request required or permitted to be given by
either the Company or an Eligible Employee pursuant to the terms of this Plan
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties, in the case of the Company, at the address set forth in
Section 11(a) and, in the case of an Eligible Employee, at the address as set
forth in the Company’s employment file maintained for the Eligible Employee as
previously furnished by the Eligible Employee or such other address as a party
may request by notifying the other in writing.

(b) Transfer and Assignment. The rights and obligations of an Eligible Employee
under this Plan may not be transferred or assigned without the prior written
consent of the Company. This Plan shall be binding upon any surviving entity
resulting from a Change in Control and upon any other person who is a successor
by merger, acquisition, consolidation or otherwise to the business formerly
carried on by the Company without regard to whether or not such person or entity
actively assumes the obligations hereunder.

(c) Waiver. Any Party’s failure to enforce any provision or provisions of this
Plan shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent any Party from thereafter enforcing each and every other
provision of this Plan. The rights granted the Parties herein are cumulative and
shall not constitute a waiver of any Party’s right to assert all other legal
remedies available to it under the circumstances.

(d) Severability. Should any provision of this Plan be declared or determined to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired.

(e) Section Headings. Section headings in this Plan are included for convenience
of reference only and shall not be considered part of this Plan for any other
purpose.

 

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SECTION 16. EXECUTION.

To record the adoption of the Plan as set forth herein, Anesiva, Inc. has caused
its duly authorized officer to execute the same as of the Effective Date.

 

ANESIVA, INC. By:     Title:   Chief Executive Officer

 

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For Employees Age 40 or Older

Individual Termination

EXHIBIT A

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Anesiva, Inc.
Executive Change in Control and Severance Benefit Plan (the “Plan”).

I understand that this 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 therein.
Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

Except as otherwise set forth in this Release, I hereby generally and completely
release Anesiva, Inc. and its current and former directors, officers, employees,
shareholders, 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 Agreement. This general 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 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
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (5) all federal, state, and local statutory claims, including
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); provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to agreement or applicable law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the
consideration given for the ADEA Waiver 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)

 

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For Employees Age 40 or Older

Individual Termination

my ADEA Waiver does not apply to any rights or claims that arise after the date
I sign this Release; (b) I should consult with an attorney prior to signing this
Release; (c) I have twenty-one (21) days to consider this Release (although I
may choose to voluntarily sign it sooner); (d) I have seven (7) days following
the date I sign this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver
will not be effective until the date upon which the revocation period has
expired unexercised, which will be the eighth day after I sign this Release
(“Effective Date”). Nevertheless, my general release of claims, except for the
ADEA Waiver, is effective immediately, and not revocable.

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 or her favor at the
time of executing the release, which if known by him or her must have materially
affected his or her 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
hereunder.

I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than twenty-one (21) days following
the date it is provided to me.

 

EMPLOYEE Name:     Date:    

 

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For Employees Age 40 or Older

Group Termination

EXHIBIT B

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Anesiva, Inc.
Executive Change in Control and Severance Benefit Plan (the “Plan”).

I understand that this 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 therein.
Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

Except as otherwise set forth in this Release, I hereby generally and completely
release Anesiva, Inc. and its current and former directors, officers, employees,
shareholders, 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 Agreement. This general 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 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
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (5) all federal, state, and local statutory claims, including
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); provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to agreement or applicable law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the
consideration given for the ADEA Waiver 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 ADEA Waiver does not apply
to any rights or claims that arise after the date I sign this Release; (b) I
should consult with an attorney prior to signing this Release; (c) I have
forty-five (45) days to consider this Release (although I may choose to
voluntarily sign it sooner); (d) I have seven (7) days following the date I sign
this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be
effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after I sign this Release (“Effective
Date”). Nevertheless, my general release of claims, except for the ADEA Waiver,
is effective immediately, and not revocable.

 

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For Employees Age 40 or Older

Group Termination

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 in the same job classification or organizational unit
who were not terminated.

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 or her favor at the
time of executing the release, which if known by him or her must have materially
affected his or her 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
hereunder.

I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than forty-five (45) days following
the date it is provided to me.

 

EMPLOYEE Name:     Date:    

 

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EXHIBIT C

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Anesiva, Inc.
Executive Change in Control and Severance Benefit Plan (the “Plan”).

I understand that this 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 therein.
Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under the Company’s proprietary information and
inventions agreement.

Except as otherwise set forth in this Release, I hereby generally and completely
release Anesiva, Inc. and its current and former directors, officers, employees,
shareholders, 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 Agreement. This general 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 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
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (5) all federal, state, and local statutory claims, including
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); provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to agreement or applicable law.

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 or her favor at the
time of executing the release, which if known by him or her must have materially
affected his or her 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
hereunder.

 

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I acknowledge that to become effective, I must sign and return this Release to
the Company so that it is received not later than fourteen (14) days following
the date it is provided to me.

 

EMPLOYEE Name:     Date:    

 

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