<PAGE>
                                                                   EXHIBIT 10.35

                                                                  EXECUTION COPY

                             COLLABORATION AGREEMENT

This COLLABORATION AGREEMENT is entered into as of November 9, 2005 (the
"Effective Date"), by and between PAIN THERAPEUTICS, INC., a Delaware
corporation having an address of 416 Browning Way, South San Francisco,
California 94080 ("PTI"), and KING PHARMACEUTICALS, INC., a Tennessee
corporation having an address of 501 Fifth Avenue, Bristol, Tennessee 37620
("King"). Each of King and PTI is sometimes referred to individually herein as a
"Party" and collectively as the "Parties."

WHEREAS, PTI owns or controls certain technology and intellectual property
rights relating to the preparation of tamper-resistant opioid formulations;

WHEREAS, King is engaged in the development and marketing of human therapeutics;

WHEREAS, King is entering into this Agreement based on, among other things,
PTI's specialized skill, knowledge, and expertise with respect to the technology
and intellectual property relating to the preparation of tamper-resistant opioid
formulations; and

WHEREAS, the Parties desire to enter into a collaboration for the purpose of
Developing Remoxy and other Products and to give King the right to Market and
manufacture Products, in each case, derived from PTI technology and intellectual
property;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration the receipt and sufficiency of which
are acknowledged by the Parties, the Parties hereto, intending to be legally
bound, agree as follows.

1. DEFINITIONS

Capitalized words and phrases used in this Agreement have the meanings ascribed
to such terms in Annex A attached hereto.

2. ADMINISTRATION OF THE COLLABORATION

2.1 ESTABLISHMENT AND FUNCTION OF JOC. PTI and King shall establish the JOC
within thirty (30) days of the Closing Date, which shall have the
responsibilities set forth in this Agreement, including Section 2.2. Each Party
shall appoint, in its sole discretion, three members to the JOC (which members
shall be employees of such Party), with those members designated primarily to
represent such Party with respect to clinical/regulatory,
sales/marketing/finance and manufacturing matters. King and PTI each shall
designate a co-chairman (each a "Co-Chairman" and together the "Co-Chairmen").
Upon the approval of both Co-Chairmen (or the remaining Co-Chairman in the event
of a substitution in that position), which approval shall not be unreasonably
withheld, each Party may substitute individuals, on a permanent or temporary
basis, for any of its previously designated representatives to the JOC, by
giving written notice thereof to the other Party. PTI and King shall each bear
all out-of-pocket expenses of their respective JOC members related to their
participation on the JOC and attendance at JOC meetings.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

2.2 JOC RESPONSIBILITIES. The JOC shall administer and monitor all matters with
respect to the Collaboration, including the following matters:

2.2.1 oversight of the Development Plans and Manufacturing/CMC Plans, including
all related strategy and objectives, timelines and activities thereunder, and
changes with respect thereto on a quarterly basis; such oversight will confer to
each Party, through its JOC representative, an ongoing right of Consultation;

2.2.2 review and approval of all budgets to support the Program Plans;

2.2.3 review of the management and allocation of resources of the Collaboration;

2.2.4 review of all Patent Rights and Technology used in connection with
Product;

2.2.5 review and approval (prior to execution by either Party) of (a) all Third
Party licenses (including all amendments thereto), and (b) all subcontracts,
sublicenses, and other agreements (including all amendments thereto) that are
required or to be entered into in connection with the Development Program and
that either (i) require payments by a Party to a Third Party of greater than
[***] U.S. dollars ($[***]) over the life of the contract or (ii) are otherwise
material, or reasonably likely to become material, to the Collaboration, such
review in each case to include a determination, with respect to each such
subcontract, sublicense, license, or agreement, regarding whether it is
appropriate to require the inclusion of the protections set forth in Section 3.8
hereof; and

2.2.6 performance of such other functions as appropriate to further the purposes
of this Agreement and the Collaboration as determined from time to time by the
Parties.

2.3 DISPUTE RESOLUTION.

2.3.1 In the event that the JOC shall not be able, within 10 days, to reach a
decision or take an action on any matter, then such unresolved matter shall
first be referred for resolution to the Chief Executive Officer of each Party
for attempted resolution by good faith negotiation. Such good faith negotiation
may include the appointment by either Party, at its own expense, of an
unaffiliated Consultant, who shall be an expert chosen based on such person's
experience and expertise in the particular type of issue that is unresolved to
advise such officers on the matter.

2.3.2 If such officers are unable to resolve the matter within 10 days, then,
except as provided in Section 3.4.6 or 3.9, and subject to Section 3.3.2:

(a) the following matters shall be finally decided by PTI: (i) all matters
related to the Development Plan in the U.S. Territory until immediately prior to
the Phase II Meeting with respect to a Product (subject to Section 3.4.3); and
(ii) all CMC matters relating to the Manufacturing/CMC Plan through the
Regulatory Approval of an NDA for a Product;

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        2

<PAGE>

(b) the following matters shall be finally decided by King: (i) all matters
related to the Development Plan in the U.S. Territory after the Regulatory
Approval of an NDA for a Product; (ii) all matters relating to the Development
Plan in the ROW; (iii) all CMC matters relating to the Manufacturing/CMC Plan
after the Regulatory Approval of an NDA for a Product; (iv) all non-CMC matters
relating to the Manufacturing/CMC Plan that impact commercial supply (i.e.,
matters relating to choice of secondary packaging, secondary labeling,
logistics, and the like); and (v) all matters relating to the Yearly Brand Plan;
and

(c) notwithstanding the foregoing provisions of this Section 2.3.2, neither
Party shall have final decision-making authority with respect to the following:
(i) all matters related to the Development Plan in the U.S. Territory during the
period immediately prior to the Phase II Meeting until the Regulatory Approval
of an NDA for a Product (subject to Section 3.4.3) and (ii) all other matters
not otherwise described in Sections 2.3.2(a) and (b) above, including, subject
to the parameters set forth in Sections 3.3.2 and 3.7, final decisions with
respect to budgets and spending funds in excess of approved budgets (or in
excess of [***] percent ([***]%) of the [***] under the budget of a Development
Plan, as provided in Section 3.7.2).

2.3.3 Disputes not subject to the final decision-making authority of either
Party, as described in Section 2.3.2(c) above, will be resolved by binding
arbitration in accordance with the rules of the American Arbitration Association
(the "AAA"), unless another non-profit professional dispute resolution
organization knowledgeable with respect to drug development is agreed to by the
Parties within five (5) days, and the provisions of this Section 2.3.3.

(a) The Party desiring to initiate an arbitration proceeding will send a written
notice to the other Party requesting the commencement of the arbitration
proceeding and specifying the issue to be resolved. Following such notice, the
JOC will work in good faith to select one neutral arbitrator, who will be an
expert with respect to drug development and the pharmaceuticals industry so as
to better understand the legal, business, and scientific issues addressed in the
arbitral proceeding. In the event that, within 10 business days of such notice,
the JOC is unable to agree upon an arbitrator, who is available to participate
in the arbitration proceeding, then, each Party will designate one neutral
arbitrator within 15 days thereafter. Within an additional 15 days thereafter,
the first two arbitrators will designate a third. Each arbitrator will be a
neutral arbitrator, who is an expert in drug development and the pharmaceuticals
industry. If either Party fails to choose an arbitrator within the foregoing
time period, the AAA (or equivalent organization) will choose an arbitrator on
behalf of that Party. Disputes about arbitration procedure will be resolved by
the arbitrators or, failing agreement, by the AAA (or equivalent organization)
in San Francisco, California. Unless otherwise agreed by the Parties, the
arbitration proceedings will be conducted in San Francisco, California.

(b) Within 5 days of the selection of the final arbitrator, the Parties will
deliver to the arbitrators a joint letter (i) stating each of the issues that is
the subject of the dispute, (ii) setting forth each Party's final position with
respect to each such issue, and (iii) directing the arbitrators to resolve the
dispute by selecting the final position of one of the Parties; provided that, if
the Parties cannot agree on a joint letter, each Party will submit a letter
setting forth its position on each issue, and the failure of any Party to submit
such a joint letter will not prevent the arbitration from proceeding. In
addition, each Party may submit with the joint letter

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        3

<PAGE>

supporting documentation for such Party's final position or a request that the
arbitrators permit the Parties to undertake limited discovery. In resolving the
dispute, the arbitrators will have no authority to make a decision on any issue
other than by selecting the final position of one of the Parties.

(c) An arbitration decision will be rendered in writing within 30 days of the
submission of the letter described above, which award will be final and binding
on the Parties and will be deemed enforceable in any court having concurrent
jurisdiction of the subject matter hereof and the Parties. In selecting the
final position of one of the Parties, the arbitrators will have the authority to
grant specific performance and allocate costs between the Parties (excluding
attorneys' fees, which each Party must bear itself); provided that the
arbitrators will have no authority to award punitive damages or any damages in
excess of the limitations contained in this Agreement.

2.4 COMMITTEES. The JOC shall have the right and power to appoint and delegate
its responsibilities to committees, and the composition and eligibility
requirements for the same shall be agreed upon by the members of the JOC. Except
as otherwise mandated by the JOC, each committee established by the JOC shall be
governed by the rules and guidelines applicable to the JOC set forth in this
Agreement.

2.5 MEETINGS.

2.5.1 SCHEDULE OF MEETINGS. The JOC shall establish a schedule of times for
meetings, taking into account the planning needs of the Development Program and
the need of the JOC to consult and render decisions. In no event shall the JOC
meet less frequently than quarterly. Meetings shall alternate between the
respective offices of the Parties in (i) Princeton, New Jersey or Cary, North
Carolina and (ii) San Francisco, California, or another mutually agreed upon
location; provided, however, that the Parties may mutually agree to meet by
teleconference or video conference or may act by a written memorandum executed
by the members of the JOC.

2.5.2 QUORUM; VOTING; DECISIONS. At each JOC meeting, the attendance of at least
one member representing each Party shall constitute a quorum. All decisions of
the JOC shall be made by unanimous vote. Representatives of each Party or of its
Affiliates who are not members of the JOC may attend JOC meetings or committee
meetings as non-voting observers at the invitation of either Party with the
prior approval of the other Party, which approval shall not be unreasonably
withheld.

2.5.3 AGENDA AND MINUTES. An agenda for each JOC meeting shall be circulated no
less than three days prior to the meeting, to the extent practicable. The JOC
shall keep accurate minutes of its deliberations that record all proposed
decisions and all actions recommended or taken. Drafts of the minutes shall be
delivered to the members of the JOC within a reasonable time, not to exceed 10
days after the meeting. The responsibility for the preparation and circulation
of the draft minutes shall alternate between the Parties. Draft minutes then
shall be edited by the Co-Chairmen and shall be issued in final form within a
reasonable time not to exceed 14 days after the meeting.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        4

<PAGE>

3. DEVELOPMENT PROGRAM

3.1 DEVELOPMENT OF PRODUCTS.

3.1.1 INITIAL PRODUCT DESIGNATIONS. The Parties shall Develop no less than four
(4) Products under the Collaboration. The Parties agree that the first such
Product shall be Remoxy, the second such Product shall be a product within the
Field containing [***] as its opioid API, and the third such Product shall be a
product within the Field containing [***] as its opioid API. The fourth Product,
and all additional Products, shall be selected as set forth in Section 3.1.2
below.

3.1.2 DESIGNATION OF ADDITIONAL PRODUCTS. In Consultation with PTI and review by
the JOC and in accordance with the strategies of the Program Plans, King shall
have the right to designate which products within the Field, in addition to the
three (3) Products listed in Section 3.1.1 above, shall be selected for
Development and Marketing under the Development Program. Upon King's designation
of a product within the Field for inclusion in the Development Program, PTI
shall inform Durect of such selection, and provided that such product is a
product that may be developed under the DLA, PTI shall exercise its rights under
Section 2.1 of the DLA to designate such product a "Licensed Product," and the
Parties shall thereafter promptly generate the Program Plans for such Product,
all as further described in this Article 3.

3.1.3 MINIMUM DEVELOPMENT AND MARKETING OBLIGATIONS.

(a) King shall ensure that it is Marketing or funding the Development of a
minimum of at least [***] different Products under the Collaboration at all
times; provided that beginning on [***], such minimum number of different
Products shall increase to [***]. In order to satisfy the foregoing requirement
that King is Marketing or funding the Development of at least [***] different
Products under the Collaboration by [***], King further agrees that it will
designate a [***] Product to be Developed and Marketed hereunder no later than
[***]. King further agrees that in the event King (i) does not designate a [***]
Product by [***] or (ii) notifies PTI of its intention to terminate Development
and Marketing of a Product pursuant to Section 3.1.4, is required pursuant to
Section 3.1.4 to designate a replacement Product, and fails to select such a
replacement Product within the applicable time frame specified thereunder (and
such failure would result in a default of King's obligations under this Section
3.1.3), PTI will be entitled to designate such Product on King's behalf. For
purposes of this Section 3.1.3, King shall be deemed to be "funding the
Development" of a Product if King has (A) designated such Product for inclusion
within the Collaboration pursuant to Section 3.1.2, (B) has used commercially
reasonable efforts to have the JOC promptly approve a Development Plan and
Manufacturing/CMC Plan for such Product, and (C) is meeting its material funding
obligations under all existing Program Plans.

(b) Subject to King's satisfaction of its funding obligations pursuant to
Section 3.1.3(a) above, PTI shall ensure that it is Developing, together with
the Products King is Marketing, a minimum of at least [***] different Products
under the Collaboration at all times; provided that beginning on [***], such
minimum number of different Products shall increase to [***].

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        5

<PAGE>

3.1.4 PRODUCT TERMINATION. King shall have the right to terminate Development
and Marketing of a Product (the "Terminated Product") hereunder by providing
written notice to PTI [***] days prior to the effective date of such termination
and, if necessary to comply with its obligations for maintaining a minimum
number of Products, as provided in Section 3.1.3(a) above, designating a
replacement Product in such notice, which shall be treated as a Product
designation in accordance with Section 3.1.2 above, and the provisions of
Section 9.2.2(a) shall apply to such Terminated Product in all respects. If a
replacement Product is required to be designated, such notice of termination for
such Terminated Product shall not be effective until a replacement Product has
been selected and a Development Plan for such replacement Product has been
approved by the JOC.

3.2 DURECT LICENSE AGREEMENT. Notwithstanding anything herein to the contrary,
King acknowledges and agrees that PTI is subject to certain obligations under
the Durect License Agreement as set forth in Section 2.4 of the License
Agreement.

3.3 PROGRAM PLANS. Disputes relating to the matters set forth in this Section
3.3 will be governed by Section 2.3.2.

3.3.1 GENERALLY. In consultation with the JOC and in accordance with the
strategy and objectives of the Program Plans, each Party shall be primarily
responsible for those tasks assigned it as set forth in each Program Plan and
such obligations set forth in this Agreement. The Parties will take such actions
necessary to define, generate, and approve the Program Plans for each Product
following the Effective Date. The Parties shall ensure that the Program Plans,
including all timelines set forth therein, are consistent with each other,
accurately reflect the objectives of the Development Program, and meet all of
PTI's obligations to Durect under the DLA. Each Program Plan shall be in writing
and shall set forth objectives and tasks to be performed by each of the Parties
for the period covered by the Program Plan as agreed by such Party and as
specifically set forth in this Agreement. Any Program Plan may be amended at any
time in accordance with the same procedures applicable to the adoption thereof.
Although not specifically a part of a Program Plan, all issues and activities
relating to Patent Rights and Technology used in connection with a Product shall
be subject to review of the JOC.

3.3.2 PROGRAM PLAN BUDGETS.

(a) Each Program Plan shall set forth an annual budget with respect to all
material tasks required to be conducted by the Parties pursuant to such Program
Plan. Each Party shall use commercially reasonable efforts to complete all tasks
assigned to it pursuant to the Program Plans in accordance with the funding
allocated to such tasks in the budget. All overruns and additional expenditures
will be governed by Section 3.7.

(b) PTI will provide the JOC with updated budgets for each Development Plan and
Manufacturing/CMC Plan on a [***], which updated budgets shall specify the
funding which PTI projects to be required during the following [***] to perform
its obligations under such Development Plans and Manufacturing/CMC Plans. Each

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        6

<PAGE>

such budget will be subject to review and approval of the JOC (such approval not
to be unreasonably withheld); provided that it is understood that such budgets
may include expenses for Third Party services extending beyond the [***] period
covered by such budget if incurring such expenses is contractually required in
obtaining such services.

(c) Notwithstanding anything to the contrary herein, the Parties agree that the
Collaboration Costs budgeted for PTI's activities under the Development Plan(s)
and Manufacturing/CMC Plan(s) with respect to Remoxy between the [***] shall be
at least [***]. The Parties further agree that King's financial commitment with
respect to Products other than Remoxy shall be commensurate with the foregoing
commitment to Remoxy, taking into account such factors as the stage of
development and potential market of such Products relative to the stage of
development and potential market of Remoxy and the regulatory strategy with
respect to the Product; provided that the total Collaboration Costs budgeted for
PTI's activities under the Development Plans and Manufacturing/CMC Plans for all
Products shall not exceed [***] a year in any of the first [***] Years following
the inception of this Agreement, or a cumulative total of one hundred million
U.S. dollars ($100,000,000). Notwithstanding the foregoing, the Parties agree
that the JOC may (but the arbitrators may not) waive the preceding spending
limits if, in its reasonable judgment, such increases in spending are warranted.
For purposes of calculating the foregoing annual and cumulative spending limits,
as well as the foregoing minimum financial commitment with respect to Remoxy,
Collaboration Costs as used in this section shall exclude (i) any [***], (ii)
costs of [***], including costs incurred in [***], (iii) all costs and expenses
related to [***], and (iv) costs incurred in connection with [***], it being
understood that the [***]. The Parties further agree that with respect to
Products subsequent to Remoxy, prompt Development and Regulatory Approval shall
mean the speediest Development Plan needed to reach Development and Regulatory
Approval of any dosage form of such Products in the U.S. Territory, consistent
with patients' safety and all applicable regulatory rules and regulations. If
the Program Plans need to be amended to maintain these annual and cumulative
limits, King will propose those amendments it believes are required, subject to
review and approval of PTI, which approval shall not be unreasonably withheld.

3.4 DEVELOPMENT PLANS.

3.4.1 PTI, in Consultation with King, will prepare, and provide the JOC with a
copy of, a Development Plan for each Product, which will include pre-clinical,
clinical, and regulatory timelines and an annual budget, including a general
overview of the expected schedule of meetings, discussions, and correspondence
with Regulatory Authorities and the expected Regulatory Filings to be completed
and maintained by the Collaboration. The Development Plan will be subject to
review and approval of the JOC, including ongoing review as provided in Section
2.2.1, which approval not to be unreasonably withheld; provided that the

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        7

<PAGE>

JOC shall not withhold its approval or otherwise object to the budget in such
Development Plan on any grounds that are inconsistent with the criteria and
objectives set forth in Section 3.3.2(c) above.

3.4.2 Subject to Sections 3.4.5 and 3.4.6 below, the provisions of this Section
3.4.2 will apply to all matters relating to the Development Plan in the U.S.
Territory. Until the Completion of Phase II for a Product (but immediately prior
to the Phase II Meeting), PTI, in Consultation with King, will have sole control
and responsibility for execution of all matters described in the Development
Plan with respect to a Product. Following the Completion of Phase II for a
Product but prior to the Regulatory Approval of an NDA for such Product, King
and PTI will assume joint control and responsibility, through the JOC, for all
matters described in the Development Plan with respect to such Product; provided
that PTI, in Consultation with King, will continue to be responsible for
execution of matters under such plan. Following such Regulatory Approval, King,
in Consultation with PTI, will have sole control and responsibility for
execution of all matters described in the Development Plan with respect to such
Product. In addition, each Party will be given the opportunity to review and
comment on draft and final development plans and all associated protocols,
reports, and Regulatory Filings on an ongoing basis. Draft documents will be
provided to a Party in electronic or written form in advance of finalization or
submission to Regulatory Authorities.

3.4.3 In the event the FDA, during the Phase II Meeting for a Product,
determines that the Development of such Product may not proceed to Phase III, or
the Parties otherwise agree that additional Development should be performed
before proceeding to Phase III, King and PTI will jointly develop a revised
Development Plan for such Product, and PTI will then reassume sole control and
responsibility for execution of such Development Plan until Completion of Phase
II for a Product (immediately prior to the Phase II Meeting), as provided
herein.

3.4.4 King, in Consultation with PTI, will have sole control and responsibility
for execution of all Product Development and associated regulatory matters
described in the Development Plan with respect to a Product in the ROW. King, or
its Affiliates or Sublicensees, shall be responsible for all clinical and
regulatory expenses incurred in seeking Regulatory Approval in markets in the
ROW.

3.4.5 Upon the FDA's approval of an NDA for a Product in the U.S. Territory,
PTI, in Consultation with King, shall continue to have sole control and
responsibility for the execution of any post-approval commitments mandated by
the FDA with respect to such Product and the first Regulatory Approval thereof,
and King, in Consultation with PTI, shall assume sole control and responsibility
for execution of further Product Development of the Product.

3.4.6 In the event an NDA for Remoxy has not been accepted for filing by the FDA
within [***] months of the Effective Date, King may elect to assume sole control
and responsibility for execution of all matters under the Development Plan (and
all CMC matters under the Manufacturing/CMC Plans) with respect to Remoxy in the
U.S. Territory by providing PTI with written notice thereof. In such event,
notwithstanding the provisions of Section 2.3.2, PTI will not have final
decision-making authority with respect to matters related to Remoxy under the
Development Plan, but King will have the final decision-making authority with
respect

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        8

<PAGE>

to all such matters. Both Parties agree that such transfer of control and
responsibility from PTI to King described in this Section 3.4.6 shall in no way
diminish PTI's or Durect's right to receive royalties or milestones, as provided
in the License Agreement. King agrees to use commercially reasonable efforts to
diligently proceed with execution of the Development Plan in good faith and
consistent with PTI's obligations under the DLA and this Agreement and shall use
commercially reasonable efforts and diligence in Developing and seeking
Regulatory Approval of Remoxy in the U.S. Territory in accordance with its
business, legal, medical, and scientific judgment and in undertaking
investigations and actions required to obtain appropriate Regulatory Approvals
necessary to market Remoxy in the U.S. Territory and to meet its obligations
hereunder. In addition, following such transfer of control and responsibility,
King will provide PTI with such plans, budgets, data, and other information as
PTI had been obligated to provide to King prior to the assumption of control by
King under this Section 3.4.6.

3.4.7 Upon transfer of control and responsibility of a Product, the Parties will
cooperate with each other in effecting a Tech Transfer of such matters to King
with respect to such Product.

3.4.8 PTI shall use commercially reasonable efforts to complete all tasks
assigned to it pursuant to the Development Plans in accordance with the budget;
provided, however, that PTI may spend the funds allocated to such task plus an
additional [***]% of such funds, which additional expenditures shall be paid by
King. If the actual costs under a particular Development Plan will likely exceed
[***]% of the funds allocated to such task, the provisions of Section 3.7 shall
govern.

3.4.9 During the period in which the Parties share joint control of matters
under the Development Plan, both Parties agree that only PTI may initiate or
respond to FDA communications (including e-mail) regarding a Product; provided,
however, that PTI shall keep King informed regarding all important
communications, whether written or oral, between PTI and the FDA and shall
provide King with an opportunity to review and comment on all important written
correspondence (including all e-mail correspondence) and participate in all
planned meetings and telephone calls, between PTI and the FDA.

3.4.10 All INDs and NDAs for a Product in the U.S. Territory will be owned and
maintained in the name of PTI; provided that, upon Regulatory Approval of a
Product, ownership and maintenance of INDs and NDAs for such Product will be
transferred to King. In connection with such transfer to King, PTI will transfer
all underlying clinical data and regulatory filings in an electronic format, to
the extent available, agreed upon by the Parties. PTI shall transfer the NDA for
each approved Product to King within [***] days of the receipt of Regulatory
Approval of such Product. PTI further agrees to transfer the applicable INDs,
clinical data, and other regulatory filings within [***] days of the Regulatory
Approval of the Product to which they relate. All INDs and NDAs for a Product in
the ROW will be owned and maintained by King. PTI hereby grants King access to,
and right of reference to, any INDs and NDAs for Products in the Territory owned
and maintained in the name of PTI to the extent necessary for King to perform
its obligations hereunder or conduct Product Development in the Territory. King
hereby grants PTI access to, and right of reference to, any INDs and NDAs for
Products in the Territory owned and maintained in the name of King to the extent
necessary for PTI (a) to perform its obligations hereunder, (b) to develop
products

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                        9

<PAGE>

that are within the Field (including Products) outside the Territory, (c) to
develop [***] pursuant to the terms of this Agreement and the License Agreement,
(d) to develop products outside the Field, including [***], or (e) as otherwise
reasonably requested by PTI. For purposes of clarity, the rights granted by King
to PTI in the preceding sentence shall include the right to permit Third Parties
to access or reference such Regulatory Filings, so long as such Third Parties
have agreed to confidentiality obligations that are at least as stringent as
those set forth herein; provided that PTI agrees that it will not provide such
rights of access or reference to Third Parties who are not engaged in a
research, development, manufacturing, or marketing relationship with PTI.

3.4.11 PTI will use commercially reasonable efforts and diligence in Developing
and seeking Regulatory Approval of each Product in the U.S. Territory in
accordance with its business, legal, medical, and scientific judgment and in
undertaking investigations and actions required to obtain appropriate Regulatory
Approvals necessary to market Products in the U.S. Territory and to meet its
obligations hereunder.

3.4.12 Subject to Section 2.1.4 of the License Agreement, following the
acceptance for review by a Regulatory Authority in the U.S. Territory of an NDA
for a Product, King will use commercially reasonable efforts and diligence in
conducting Product Development and seeking Regulatory Approval of such Product
in the Major Market Countries in the ROW in accordance with its business, legal,
medical, and scientific judgment and in undertaking investigations and actions
required to obtain appropriate Regulatory Approvals necessary to market such
Product in the Major Market Countries and to meet its obligations hereunder. In
exercising its business, legal, medical, and scientific judgment, King may take
the following factors, among other things, into consideration: [***]; provided
that the level of efforts and diligence used by King in conducting Product
Development and seeking Regulatory Approval of Products in the ROW shall at all
times be at least a level of efforts sufficient to ensure that PTI's obligations
to Durect under the DLA are satisfied. Notwithstanding anything herein or in the
License Agreement to the contrary, in the event PTI obtains Regulatory Approval
for a [***] in any country in the Territory, including a Major Market Country,
before King obtains in such country Regulatory Approval for the Product that
contains the same opioid agonist as its API as such [***], King shall not be
obligated to conduct Product Development, seek Regulatory Approval, or Market
such Product in such country.

3.5 MANUFACTURING/CMC PLANS.

3.5.1 King and PTI will jointly prepare each Manufacturing/CMC Plan and provide
a copy to the JOC for its review and approval. Notwithstanding the foregoing,
the Parties agree that PTI shall be solely responsible for preparing a
Manufacturing/CMC Plan for

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       10

<PAGE>

Remoxy, it being understood that King will be given an opportunity to review and
offer recommendations regarding such plan during its preparation, which
recommendations PTI will consider in good faith.

3.5.2 PTI, in Consultation with King, will have control and responsibility for
execution and implementation of all CMC development of a Product throughout the
Territory until the first Regulatory Approval for such Product in the applicable
country, including responsibility for provision of CTM, CMC information for such
Product in Regulatory Filings, and pre-market validation of such Product.
Notwithstanding the foregoing, PTI, in Consultation with King, will continue to
have control and responsibility for execution and implementation of all CMC
development after the first Regulatory Approval of a Product for all changes in
formulation, including changes in dosage strength, requiring a further
pre-market clearance by the FDA or other Regulatory Authority. Such changes in
formulation may include line extension developments or reformulations that are,
in PTI's reasonable judgment, within the scope of the DLA. For purposes of
clarity, with respect to novel Product formulations, PTI and Durect shall be
responsible for determining the qualitative and quantitative composition of each
novel formulation with respect to excipients and API and setting technical and
regulatory specifications for each such excipient and API used in creating such
novel formulation. King shall have the right to select the manufacturer of such
excipients and API prior to the manufacture of Phase III CTM, so long as the
excipients supplied by King's selected manufacturer comply with the technical
and regulatory specifications set by PTI and Durect. King shall have the right
to negotiate and enter into supply agreements for API and excipients and to be
the assignee with respect to agreements that may be in place for such Product
excipients and API as of the Effective Date, in each case to the extent
permitted under such supply agreements, and in compliance with the DLA and
Section 2.1.3 of the License Agreement.

3.5.3 Except as provided in Section 3.5.2 above, King, in Consultation with PTI,
will have control and responsibility for execution and implementation of
post-approval support of each Product immediately upon the Regulatory Approval
of an NDA for such Product, including logistics planning relating to such
Product. To the extent PTI is obligated to purchase any excipients, additives,
solvents, API, bulk form of Product, or other ingredients or materials from
Durect pursuant to the terms of the DLA and which ingredients or materials,
under the terms of the DLA, would be required to be used by King in its
manufacture of Products, PTI shall sell to King such ingredients or materials so
purchased by PTI at PTI's actual cost, without any mark-up. In connection with
the transfer of control and responsibility, upon filing of an NDA for a Product,
the Parties will cooperate with each other to develop a plan for the completion
of the Tech Transfer of such matters; and, with respect to all information,
files, and documentation available as of the date of such NDA filing, within
sixty (60) days from the acceptance by a Regulatory Authority of the NDA filing
for a Product, the Parties will complete the Tech Transfer of such matters,
including transferring files necessary for chemistry and manufacturing, to King
with respect to such Product. Thereafter, the Parties will continue to perform
Tech Transfer in a timely manner with respect to all other information, files,
and documentation relating to such matters, including permitting King to witness
pre-market validation and manufacture and quality operations. PTI agrees to
assist, as requested by King, in post-approval support (including providing
technical assistance, troubleshooting, and provision of post-marketing clinical
supplies) to maximize the market opportunity for the Products and to assure
uninterrupted supply.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       11

<PAGE>

3.5.4 In Consultation with King, PTI may enter into such agreements covering the
clinical supply and manufacture of Products as are reasonably necessary to
accomplish the objectives and purposes of the Development Program; and King
agrees to abide by the terms of any such agreements which King has approved or
which has been unanimously approved by the JOC pursuant to its oversight and
approval functions set forth in Section 2.2.5. King may enter into such
agreements covering the commercial supply and manufacture of component materials
and API following the Completion of Phase II as are reasonably necessary to
accomplish the objectives and purposes of the Development Program. King may at
any time enter into an agreement covering manufacture of commercial Product.

3.5.5 The Parties agree that PTI's existing plan for manufacturing and quality
operations with respect to Remoxy will continue to be followed by the
Collaboration, with a commercial supply agreement being entered into with
Mallinckrodt-Hobart as the primary manufacturer. King acknowledges that PTI's
current understanding with Mallinckrodt-Hobart contemplates a term for such
supply agreement of at least [***] of commercial launch in the United States.
PTI, in Consultation with King, may continue negotiating an agreement with
Mallinckrodt-Hobart; provided that any such agreement will include a provision
that the agreement [***]; and provided further that [***]. The
Mallinckrodt-Hobart supply agreement, with respect to Remoxy, will be assigned
by PTI to King at a time mutually agreed to by the Parties, but no later than
upon FDA approval of an NDA for Remoxy. Except with King's consent, not to be
unreasonably withheld, the Mallinckrodt-Hobart supply agreement will have
provisions such that the supply of Remoxy is independent of the supply of any
other products covered by the agreement (including provisions so that a breach
by PTI of its obligations with respect to the other products will not affect the
supply of Remoxy) and permit the assignment of the supply agreement with respect
to Remoxy independent of any other products, it being understood that King shall
not withhold its consent to PTI's entering into the Mallinckrodt-Hobart supply
agreement if PTI agrees to indemnify King and hold King harmless with respect to
damages which King may incur as a result of Mallinckrodt-Hobart's
cross-termination of the supply agreement with respect to Remoxy as a result of
a PTI's breach of its obligations thereunder with respect to a product other
than Remoxy. PTI will use commercially reasonable efforts to have provisions of
the type described in the preceding sentence included in the Mallinckrodt-Hobart
supply agreement.

3.5.6 Except with respect to Remoxy, which is addressed by Section 3.5.5 above,
King will have control and responsibility for the commercial supply of Products
in the Territory. Except as provided for Remoxy in Sections 3.5.1, 3.5.2, and
3.5.5 above, King may, in its sole discretion, decide to include its own
manufacturing facility as a primary manufacturing site in the initial Regulatory
Filings for any Products. Upon PTI's request and with King's consent (such
consent not to be unreasonably withheld), King agrees to enter into an agreement

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       12

<PAGE>

with respect to King's commercial supply of Products to PTI or its licensee in
Australia and New Zealand, the terms of such agreement to be negotiated in good
faith. In the event that King agrees to supply Product to PTI and PTI agrees to
purchase Product from King for commercial supply in Australia and New Zealand,
then such Product will be sold by King to PTI [***].

3.5.7 Upon PTI's written request, a second manufacturing site will be qualified
for each Product at such time as any of the following shall occur: (a) such
[***], or (b) there is an [***], or (c) [***]. With respect to Remoxy, such
qualification will be obtained on a post-approval basis and may include, at
King's discretion, a King facility or other contract manufacturer. With respect
to all other Products, if the primary site for such Product is a King
manufacturing site, PTI may require that the second manufacturing site not be a
King manufacturing site.

3.5.8 In connection with the Manufacturing/CMC Plans, each Party

(a) will, upon written request of the other Party, provide the other with the
following documents to the extent that such documents being requested are
available and in the possession or control of the Party to whom the request is
made: for each Product, pharmaceutics development report and history, copies of
CMC section submitted as part of any Regulatory Filings, and minutes from any
meeting or correspondence with any Regulatory Authority regarding pharmaceutics
development or CMC; and

(b) will allow the other Party to examine and copy, at the site where such
records are normally stored and at a time that is mutually acceptable to the
Parties, the following: (i) CMC development protocols and reports, (ii) for each
batch of API and each batch of Product produced as CTM, batch records,
analytical monograph (tests and specifications), certificate of analysis for
Good Manufacturing Practices release, a table containing initial release and
stability testing results (which table will be updated each time a stability
pull point is analyzed), copies of any out of specification or laboratory
investigation report events, and report of any failed batches and any corrective
action; and (iii) for each batch of Product produced as CTM, packaging and
labeling batch records.

The Manufacturing/CMC Plans will include a list and brief description of
protocols to be developed thereunder. The reports described in clause (a) above
and the protocols in the Manufacturing/CMC Plans that King notifies PTI that
King would like to review will be developed in Consultation with the other Party
and will be made available to the other Party in draft form with sufficient time
for such Party to review and comment on the foregoing, as well as being provided
to the other Party in final form when such materials are completed. In addition,
each Party will make available to the other Party such additional documentation
reasonably related to such other Party's performance of its obligations
hereunder that is in the possession or control of the Party to whom the request
is made as such documentation is reasonably requested by the other Party.

3.6 YEARLY BRAND PLANS. King will prepare each Yearly Brand Plan for each
Product and provide a copy to the JOC for its review and comment. King, in
Consultation with PTI, will

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       13

<PAGE>

have control and responsibility for Marketing each Product and for all matters
under the Yearly Brand Plan, including determining the packaging, trade dress,
and labeling (to the extent not dictated by any applicable Regulatory Approval)
for the distribution and sale of Product. Subject to Section 2.1.4 of the
License Agreement, King shall use commercially reasonable efforts and diligence
to Market the Product commensurate with industry standards; provided that in no
event shall such level of efforts and diligence be less than King uses in
marketing its own products of similar market potential and at a similar stage in
development as the applicable Product, taking into account the competitiveness
of the marketplace, the proprietary position of the Product, and the efforts and
resources available to a company having a comparable market capitalization and
taking into account then-current market conditions. King will spend at least
[***] on Marketing for Remoxy in the U.S. Territory (excluding expenses related
to a sales force) between the Closing Date and the date of Regulatory Approval
of Remoxy by the FDA; provided that King will be entitled to suspend such
spending in the event the JOC decides to cease pursuing Regulatory Approval of
Remoxy in the U.S. Territory, such suspension to only remain in effect until
such time as the JOC elects to resume pursuing Regulatory Approval of Remoxy in
the U.S. Territory; provided further that King may propose changes in spending
levels, with respect to which changes PTI will not unreasonably withhold its
consent, in the event of (a) the FDA not accepting the NDA covering Remoxy for
filing (or refusal to file), (b) a determination by the FDA that such NDA is not
approvable, or (c) a failure by the FDA to approve such NDA within eighteen (18)
months of the date of the FDA's acceptance of an NDA for Remoxy.

3.7 COLLABORATION COSTS, OVERRUNS, AND ADDITIONAL EXPENDITURES.

3.7.1 Subject to the terms and conditions of this Agreement, including Section
3.3.2, (a) all Collaboration Costs incurred by either Party on and after the
Closing Date shall be paid by King; and (b) all Collaboration Costs incurred by
either Party on or after the Effective Date but prior to the Closing Date will
be paid by King, with such payment not to be paid prior to the Closing Date, so
long as this Agreement is not terminated prior to Closing and such Collaboration
Costs comply with the terms and conditions of this Agreement, as it will be in
effect as of the Closing Date. Except as otherwise provided herein, PTI shall be
entitled to reimbursement for the Collaboration Costs incurred by it in
connection with the Collaboration; provided that all such Collaboration Costs
must be included in the budget governing the activities for which such costs
were incurred, subject to the provisions of this Section 3.7. All payments made
by King hereunder shall be treated for all purposes, including all tax and
accounting purposes, as the expenses of King and any applicable deductions shall
be wholly allocable to King.

3.7.2 The Parties understand and agree that a Product may generate new data or
may be the subject of new regulatory guidance at any time for any reason during
a Calendar Year and that such changes may require substantial revisions to the
clinical development activities associated with a Product or may cause PTI, in
Consultation with King, or Durect to re-work a Product. In the event either
Party anticipates or becomes aware that the actual costs of any given task
assigned to it may or will likely exceed the funds allocated to such task in the
applicable Program Plan budget, such Party shall promptly notify the JOC in
writing. If the actual aggregate costs of conducting a particular Program Plan
will likely exceed the aggregate annual funds budgeted for such Program Plan
under the applicable Program Plan budget (or in the case of work conducted under
a Development Plan, if the actual aggregate costs of conducting a

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       14

<PAGE>

particular Development Plan will likely exceed [***] of the aggregate annual
funds budgeted for such Development Plan under the applicable Development Plan
budget), the JOC shall work in good faith for up to thirty (30) days to approve
a budget amendment that provides for the continued prompt clinical Development
and Regulatory Approval of a Product. Such amendment may include increasing the
budget, readjusting the budget to allocate additional funds to such task,
revising the scope of such task to permit satisfactory completion at the
then-budgeted funding level, or all three. In the event no decision is reached,
the matter shall be subject to the arbitration provisions of Section 2.3.3
hereof. For purposes of clarity, neither Party shall be obligated to perform any
additional services in connection with such task if the JOC does not approve
increasing the budget to pay for such additional services.

3.7.3 Notwithstanding the foregoing, either Party may, in its discretion, spend
additional amounts above and beyond those allocated in the applicable budget
("Discretionary Funding") on any task assigned to such Party pursuant to the
Program Plans or on any other task the JOC has approved. In such event, the
Party wishing to expend Discretionary Funding shall first inform the second
Party of such first Party's intent to do so. If the second Party consents to the
Discretionary Funding being deemed a Collaboration Cost, which consent shall not
be unreasonably withheld, the Discretionary Funding shall constitute a
Collaboration Cost. If the second Party does not consent, then the Discretionary
Funding shall not constitute a Collaboration Cost, but shall be borne solely by
the Party undertaking the Discretionary Funding.

3.7.4 Except to the extent this Agreement expressly provides for payments that
do not require JOC approval, and except to the extent the JOC has approved any
payment hereunder, neither Party shall (a) be obligated to incur any costs or
expend any funds that have not been approved by such Party or (b) have the
authority to cause the other Party to incur any costs or expend any funds that
have not been approved by such other Party.

3.8 THIRD PARTY LICENSES AND COLLABORATIONS. Subject to the review and the
approval of the JOC as provided in Section 2.2.5, King may enter into such other
Third Party licenses and collaboration agreements as are reasonably necessary to
accomplish the objectives and purposes of the Development Program; and subject
to the review and the approval of the JOC as provided in Section 2.2.5, PTI may
enter into such Third Party licenses and collaborations agreements as are
reasonably necessary to accomplish the objectives and purposes of the
Collaboration. Except with the other Party's consent, not to be unreasonably
withheld, each such agreement shall (a) if only one Party is a party to the
agreement, name the other Party as a third party beneficiary to such agreement,
(b) include an assignment of all right, title, and interest in and to all work
product and all inventions arising from the performance of such agreement, and
all intellectual property rights attaching thereto to the contracting Party, and
(c) bind the relevant Third Party by obligations of confidentiality and non-use
with respect to all such work product, inventions, and intellectual property
rights that are at least as stringent as those set forth herein. In order to
ensure the ability of a Party (the "Non-Defaulting Party") to proceed with the
Development Program notwithstanding certain conduct of the other Party (the
"Defaulting Party") or the termination of this Agreement by the Non-Defaulting
Party pursuant to Section 9.2.3, the JOC may require the inclusion, in those
subcontracts, licenses, and other agreements (including manufacturing and supply
agreements) entered into in connection with the Development Program ("Third
Party Agreements") that are or are likely to become material to the conduct of
the Development Program, of (i) an enforceable provision granting to the
Non-Defaulting

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       15

<PAGE>

Party hereto the same rights, benefits, and obligations as those granted to the
Defaulting Party under that Third Party Agreement (whether by automatic
assignment, a direct agreement, or otherwise), contingent upon a Default by the
Defaulting Party of that Third Party Agreement or the termination of this
Agreement by the Non-Defaulting Party pursuant to Section 9.2.3, and (ii) the
applicable Third-Party's unconditional consent to such provision.

3.9 FAILURE TO PERFORM.

3.9.1 GENERAL. In the event that a Party does not perform a task or tasks
assigned to it under a Program Plan, including due to a dispute as to the budget
or scope of such task, or otherwise fails to perform its Development or
Marketing obligations hereunder, including meeting timelines and budgets set
forth in the Program Plans, PTI and King will negotiate in good faith with
respect to remedying such failures. In the event such negotiations do not result
in a resolution of such issues satisfactory to both Parties within thirty (30)
days of the initiation of such negotiations, the matter shall be submitted to
arbitration as set forth in Section 2.3.3.

3.9.2 REMEDY. In the event the arbitrators determine that the failure to perform
was intentional or willful (but not as a result of a failure to perform because
of a disagreement about budget matters or regulatory strategy, which
disagreement prevents the Parties from continuing to perform their obligations),
the arbitrators may grant the non-breaching Party the right, but not the
obligation, to perform the task or tasks of the breaching Party. In addition, in
the event of any breach, including a failure to use commercially reasonable
efforts to perform a Party's obligations, the arbitrators may award the
non-breaching Party monetary damages.

3.9.3 NO WAIVER. In the event a Party is granted a right to perform the other
Party's task, a Party's election to perform such task will not be deemed a
waiver with respect to such electing Party's ability to exercise any other
rights hereunder, including any rights under Section 9.2.2 or 9.2.3.

4. INFORMATION EXCHANGE

4.1 RECORDS.

4.1.1 RECORD KEEPING. Each of PTI and King shall maintain records in sufficient
detail and in accordance with Good Laboratory Practice, Good Clinical Practice,
and Good Manufacturing Practice, and as will properly reflect and document, in a
manner appropriate for purposes of supporting the filing of potential patent
applications and Regulatory Filings, all work done and results achieved in the
performance of the Development Program (including all data in the form required
under any Applicable Law); provided, however, that prior to King's election to
assume control and responsibility of execution of all matters under the
Development Plan with respect to a particular Product, PTI shall be responsible
for maintaining master files in accordance with Good Clinical Practices, Good
Laboratory Practices, and Good Manufacturing Practices, to the extent
applicable; provided, further, that upon such election by King, PTI shall
transfer such records to King with respect to such Product. Subject to Section
6.4.3 hereof, PTI and King each hereby grants the other the right to inspect and
copy such records to the extent reasonably required for the performance of its
obligations or exercise of its rights under this Agreement, and neither Party
shall use such records or information except to the extent otherwise permitted
by this Agreement.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       16

<PAGE>

4.1.2 REPORTS. Each Party shall keep the JOC reasonably informed about the
status of the Development Program, including furnishing the JOC with copies of
all material reports that relate to the Development Program. In particular,
without limitation, each Party shall (a) provide periodic reports in reasonable
detail to the JOC, at least each Calendar Quarter and as requested from time to
time by the JOC; (b) provide the other Party with access to all Technology and
information employed in or arising out of the Development Program solely for the
purpose of conducting their respective roles hereunder; (c) provide the other
Party with the information and reports described in Section 3.5.8 at least each
Calendar Quarter and as requested from time to time by the other Party; and (d)
provide the other Party with information concerning the Development Program as
such other Party shall reasonably request. For purposes hereof, "information"
will include data, results, reports, records, and similar information.

4.2 UPDATES; ADVERSE EVENT INFORMATION.

4.2.1 ADVERSE EVENT REPORTS. In addition to the reports described in Section
4.1.2 above, each Party shall provide the JOC with all adverse event information
and product complaint information required by such Party to be disclosed to any
Regulatory Authority in connection with the Development, Marketing, or sale of
any Product, within time frames consistent with reporting obligations under
Applicable Law.

4.2.2 CONFIDENTIAL INFORMATION. Except as otherwise required in connection with
disclosures to Regulatory Authorities required by Applicable Law, all reports,
updates, adverse event, or product complaint and other information provided by a
Party under this Agreement (including under this Section 4.2) shall be
considered Confidential Information of both Parties, regardless of who provided
the same, and shall be subject to the terms of Article 8.

4.3 SALES REPORT. Starting immediately following the First Commercial Sale of a
Product and for the Term of this Agreement, King, at its own expense, shall
provide PTI with such U.S. sales reports that King has obtained for itself from
a third party vendor of King's choice (such as IMS or NDC). Such report shall be
provided to PTI on a timely basis in electronic form, if available, each
Calendar Quarter and shall include no less than the following data (provided
that King has obtained or can obtain such data without undue burden): (a)
Product sales by territory, by prescriber, and by strength, (b) Product sales by
hospital, clinic, or mail-order services, independent pharmacies, chains, mass
merchandisers, and food stores, (c) a comparison of actual Product sales versus
King's forecast sales, (d) wholesale volume reports, (e) top 250 hospital
report, and (f) a summary of managed care accounts by volume of Product. In
addition, starting immediately following the First Commercial Sale of a Product
and for eighteen (18) months thereafter, King, at its own expense, shall (i)
provide PTI with a weekly Product sales report in electronic form and (ii)
provide telephonic (or in-person) access to King's national sales manager for
purposes of holding an accurate discussion of a Product's commercial sales
trends, general market trends, and the like. PTI agrees that all information,
data, and reports provided by King to PTI hereunder shall be considered
Confidential Information of King, subject to the requirements of Article 8.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       17

<PAGE>

5. CERTAIN OTHER PROVISIONS

5.1 PRODUCT LIABILITY COSTS. The Parties understand and agree that, because of
the nature of the collaborative effort set forth in this Agreement, should any
Third Party claims be asserted against either Party or both Parties or any of
their Affiliates, agents, or representatives that are in the nature of product
liability claims ("Claims"), the Parties will cooperate through the JOC to
ensure that such claims are defended and settled or compromised in a manner that
best protects the interests of the Parties. In addition, the Parties will
procure and maintain product liability insurance with first-class carriers in
coverages and amounts and with deductibles not less than those determined by the
JOC; provided that:

(a) PTI shall obtain such insurance for a Product for Claims arising prior to
the Completion of Phase II, at PTI's sole cost, which coverage shall continue
until the earlier of (i) the initiation of Phase III for such Product and (ii)
five years after the Completion of Phase II for such Product;

(b) If Phase III for a Product is initiated, PTI shall obtain such insurance for
such Product for Claims arising following Completion of Phase II but prior to
the First Commercial Sale of such Product, at PTI's and King's joint and equal
cost, which coverage shall continue until the earlier of (i) the First
Commercial Sale of such Product and (ii) five years after the first to occur of
(A) the completion of Phase III, (B) the decision of the JOC not to proceed with
the commercial sale of such Product, and (C) the termination of this Agreement
in its entirety pursuant to Article 9 or with respect to such Product pursuant
to Section 9.2.2(a), unless PTI or any of its Affiliates or its sublicensee
continues to Develop the Product following such termination, in which case
clause (d) below will apply;

(c) As of the First Commercial Sale of a Product, King shall, at its sole cost,
have obtained such insurance for a Product for Claims arising following the
First Commercial Sale of such Product, such insurance to be in an appropriate
level (at a minimum of $[***]) exclusive of self-insured amounts and shall be in
amounts maintained by King for other products of King of similar market
potential and at a similar stage in development as the applicable Product,
taking into account any particular risks related to such Product, which coverage
shall continue until the earlier of (i) the termination of this Agreement in its
entirety pursuant to Article 9 or with respect to such Product pursuant to
Section 9.2.2(a), so long as PTI or any of its Affiliates or its sublicensee
continues to sell the Product following such termination, and (ii) five years
after the last commercial sale of the Product pursuant to this Agreement; and

(d) PTI shall, at its sole cost, obtain such insurance for a Product for Claims
arising following the termination of this Agreement in its entirety or with
respect to such Product, so long as PTI or any of its Affiliates or its
sublicensee continues to Develop or sell the Product following such termination,
such insurance to be in an appropriate level (at a minimum of $[***] in the case
of Marketed Products) exclusive of self-insured amounts and shall be in amounts
maintained by PTI for other products of PTI of similar market potential and at a
similar stage in development as the applicable Product, taking into account any
particular risks related to such Product, which coverage shall continue until
five years after (i) termination of the Development of such Product if PTI
elects not to sell such Product commercially or (ii) the last commercial sale of
the Product, as applicable.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       18

<PAGE>

The costs incurred to obtain the insurance described in this Section 5.1 shall
not be deemed Collaboration Costs. The insurance described in this Section 5.1
shall name each Party as a co-insured.

5.2 PRODUCT PACKAGING. The Parties agree that packaging and package inserts for
each finished Product sold to consumers will include King's and PTI's names and
logos prominently displayed, subject to the approval of the applicable
Regulatory Authorities. PTI agrees that it shall not use, and it will prohibit
its Affiliates or sublicensees from using, trademarks, trade dress (including
product intaglio), packaging, or marketing material with respect to the
Marketing of products in the Field in Australia and New Zealand that is
confusingly similar with the Product Trademarks and any Product trademarks,
trade dress, packaging, or marketing material in the Territory, except with
respect to the use of PTI's name or logo. For clarity, PTI has the right to
develop and market for use in Australia and New Zealand the identical formula,
including colorants and inks, and container-closure system, as is developed and
marketed for each Product in the Territory; provided, however, that all
secondary packaging components must be different.

5.3 MUTUAL FINANCIAL REPORTING. Each Party covenants to provide the other Party
written notice at such time as (a) such Party enters the "zone of insolvency,"
as defined in Applicable Law, including interpretations in applicable case law,
(b) such Party's liabilities exceed its assets, (c) such Party is unable to pay
its debts as they become due, (d) there is an occurrence of a Default by such
Party with respect to any of its debt or payment obligations or any agreement
material to the Development Program, or (e) such Party suspends, closes, or
otherwise ceases to operate a majority of its business relating to this
Agreement and the License Agreement. In addition, within 15 days of a written
request of either Party (such request not to be made more than four times during
any Calendar Year), the other Party covenants to provide the requesting Party
with its most recent audited financial reports. Each Party will treat all
notices and financial reports (and the information contained therein) as
Confidential Information of the other Party, subject to the terms of Article 8.

6. CLOSING; PAYMENTS

6.1 CLOSING.

6.1.1 COVENANTS PENDING CLOSING.

(a) Reasonable Efforts. Subject to the terms and conditions of this Agreement,
each of the Parties agrees to use all reasonable efforts to do, or cause to be
done, all things necessary and appropriate to satisfy all conditions of and to
consummate the transactions contemplated by this Agreement, including the
satisfaction of the applicable conditions set forth in Section 6.1.3 below.

(b) Filings. The Parties shall cooperate with one another in the preparation,
execution, and filing of all documents that are required or permitted to be
filed on or before the Closing, including filings pursuant to the HSR Act and
will promptly file the same after the Effective Date. The related filing fees
shall be borne by King, and the costs and expenses incurred by each Party shall
be paid by such Party.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       19

<PAGE>

6.1.2 CLOSING. As promptly as practicable after the Effective Date and after the
satisfaction by each Party or, if permissible, waiver of the conditions set
forth in Sections 6.1.3(a) and (b), the Parties hereto shall cause the Closing
to occur on the Closing Date. The Closing shall be held at the offices of Jones
Day, 222 East 41st Street, New York, New York 10017, or such other place as the
Parties shall agree, for the purpose of confirming the satisfaction or waiver,
as the case may be, of the conditions set forth in Sections 6.1.3(a) and (b). If
the Closing Date has not occurred prior to February 9, 2006, either Party may
terminate this Agreement upon written notice to the other Party; provided,
however, that, as of such date, the Party terminating this Agreement is not in
default under this Agreement.

6.1.3 CONDITIONS TO CLOSING.

(a) The obligation of PTI to close shall be subject to the satisfaction on or
before the Closing Date of the following conditions, any or all of which may be
waived in whole or in part by PTI:

(i) the expiration or termination of all applicable waiting periods under the
HSR Act, unless a joint determination is made by PTI and King (by certification
from PTI and King to each other) that notification under the HSR Act is not
required;

(ii) the representations and warranties made by King in Article 10 shall be true
and correct in all material respects as of the Effective Date and as of the
Closing Date with the same force and effect as if they had been made as of the
Closing Date, and King shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to Closing;

(iii) the provision by King to PTI of an officer's certificate certifying that
(i) and (ii) above are true and correct as of the Closing Date;

(iv) the provision by King to PTI of an opinion of counsel, in form reasonably
satisfactory to PTI, that the execution of this Agreement and the License
Agreement and the transactions contemplated hereby and thereby are duly
authorized by all corporate action on the part of King;

(v) the payment to PTI of the Program Fee by King;

(vi) the execution by King and delivery to PTI of the License Agreement; and

(vii) any agreement entered into by PTI with Mallinckrodt-Hobart pursuant to
Section 3.5.5 shall be in form and substance satisfactory to King.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       20

<PAGE>

(b) The obligation of King to close shall be subject to the satisfaction on or
before the Closing Date of the following conditions any or all of which may be
waived in whole or in part by King:

(i) the expiration or termination of all applicable waiting periods under the
HSR Act, unless a joint determination is made by PTI and King (by certification
from PTI and King to each other) that notification under the HSR Act is not
required;

(ii) the representations and warranties made by PTI in Article 10 shall be true
and correct in all material respects as of the Effective Date and as of the
Closing Date with the same force and effect as if they had been made as of the
Closing Date, and PTI shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to Closing;

(iii) the provision by PTI to King of an officer's certificate certifying that
(i) and (ii) above are true and correct as of the Closing Date;

(iv) the provision by PTI to King of an opinion of counsel, in form reasonably
satisfactory to King, that the execution of this Agreement and the License
Agreement and the transactions contemplated hereby and thereby are duly
authorized by all corporate action on the part of PTI;

(v) the execution by Durect and PTI of an agreement, in the form attached hereto
as Exhibit B, granting Durect's consent to the transactions contemplated by this
Agreement and the License Agreement; and

(vi) the execution by PTI and delivery to King of the License Agreement.

6.2 PROGRAM FEE. Simultaneous with the Closing, King shall pay to PTI a one-time
collaboration fee in the amount of one hundred fifty million U.S. dollars
($150,000,000) (the "Program Fee"). The Program Fee shall be paid by King in
U.S. dollars by wire to an account designated by PTI.

6.3 MILESTONE PAYMENTS.

6.3.1 DEVELOPMENT MILESTONES. King will make the following payments to PTI
within ten (10) days after the determination of the first achievement of each of
the milestones set forth below. For purposes of clarity, it is understood and
agreed that the following milestone payments shall (a) be non-refundable and
non-creditable and (b) only be payable once with respect to each Product, such
that that a payment will be due only once for (i) each Product with a given
active opioid, but will not be payable with respect to line extensions, new
indications, new dosages, or new Regulatory Filings that subsequently may be
filed for a Product that contains the same active opioid, and (ii) the first
filing of an IND or NDA or the first regulatory approvable letter for such
Product in a country of the Territory, notwithstanding the subsequent filing or
approval of other Regulatory Filings in other countries in the Territory for a
Product with the same active opioid.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       21

<PAGE>

<TABLE>
<CAPTION>
                                                                                                             PAYMENT
                                                                                                --------------------------------
MILESTONE                                                                                          REMOXY     ALL OTHER PRODUCTS
---------                                                                                       -----------   ------------------
<S>                                                                                             <C>           <C>
Acceptance by a Regulatory Authority of the first IND filing for a Product in the Territory         N/A             $[***]
Acceptance by a Regulatory Authority of the first NDA filing for a Product in the Territory     $15 Million         $[***]
First regulatory approvable letter transmitted by a Regulatory Authority for NDA of a Product
in the Territory                                                                                $15 Million         $[***]

TOTAL DEVELOPMENT MILESTONES FOR EACH PRODUCT                                                   $30 Million         $[***]
</TABLE>

6.3.2 TERMINATION OF MILESTONES. In the event any suit, action, or proceeding
results in the entry of an injunction pursuant to Section 4.6 of the License
Agreement that prevents King from Marketing a Product, which injunction is
unappealable or unappealed within the time allowed for appeal, King's obligation
to make milestone payments with respect to future milestones for such Product
pursuant to this Section 6.3 shall immediately terminate. It is understood and
agreed that following the issuance of any such injunction, PTI's Development and
manufacturing obligations with respect to such Product shall be waived, and the
Parties shall promptly amend the Project Plans and, if required to meet the
minimum obligations under Section 3.1.3, designate a replacement Product
pursuant to Section 3.1.2. For purposes of clarity, it is understood that this
Section 6.3.2 shall not relieve King of its obligation to pay any milestone
payments for milestones that were achieved prior to the date such injunction is
issued or to subsequently pay milestones in the event such injunction is lifted.

6.4 COLLABORATION COSTS.

6.4.1 DETERMINATION OF COLLABORATION COSTS. Within [***] following the end of
the [***] of each Calendar Quarter, PTI shall submit to King a documented and
reasonably detailed accounting of all Collaboration Costs, determined in
accordance with GAAP, incurred by PTI with respect to all Products during the
[***], which King shall pay to PTI pursuant to Section 3.7 above. All such
payments shall be made within [***] following the end of the second month of the
applicable Calendar Quarter.

6.4.2 CURRENCY CONVERSION. All Collaboration Costs incurred in currencies other
than U.S. dollars shall be converted to U.S. dollars using the method agreed by
the Parties and set forth in the budget of the applicable Program Plan.

6.4.3 RECORDS. Each Party shall maintain its records in accordance with GAAP.
PTI shall maintain, and shall require that its Affiliates, Sublicensees, and
licensees maintain, for three years from the date of each quarterly
reconciliation of Collaboration Costs, complete and accurate records of the
same, in sufficient detail to allow calculation and verification of
Collaboration Costs. King shall have the right for a period of three years after
receiving any report or statement with respect to Collaboration Costs to
appoint, at its expense, an independent certified public accountant reasonably
acceptable to PTI to inspect the relevant records of PTI and its Affiliates and,
if applicable, Sublicensees to verify such report or statement. PTI, its
Affiliates, and, if applicable, Sublicensees shall each make its records
available for inspection by such independent certified public accountant (who
agrees to confidentiality provisions consistent

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       22

<PAGE>

with Article 8) during regular business hours at such place or places where such
records are customarily kept, upon reasonable notice from King, solely to verify
the accuracy of the reports and payments. PTI will use commercially reasonable
efforts to ensure that King is granted the right to audit PTI's Sublicensees'
financial records, as provided herein; provided that, to the extent that PTI
does not obtain that right for King, PTI shall obtain for itself such right and,
at the request of King, PTI shall exercise such audit right with respect to such
Sublicensees and provide the results of such audit for inspection by King
pursuant to this Section 6.4.3. Such inspection right shall not be exercised
more than once in any Calendar Year. The results of each inspection, if any,
shall be binding on both Parties. In the event that any such inspection shall
conclude that Collaboration Costs were overstated by more than [***] percent
([***]%) in any given Calendar Year, PTI shall pay for all the reasonable costs
of King in respect of the inspection, as well as make any payments required to
remedy the overstatement. Any dispute regarding the results of any such
inspection hereunder shall be subject to the dispute resolution provisions of
Section 2.3 hereof; provided that if PTI is the Party with final decision-making
authority over the subject matter in dispute, and the CEO's are unable to reach
agreement even after good faith discussions in accordance with Section 2.3, then
the dispute shall not be subject to the sole discretion of either Party but
shall be subject to arbitration pursuant to the provisions of Section 2.3.3. All
information and data reviewed in the inspection shall be used only for the
purpose of verifying the accuracy of the reports and payments and shall be
treated as PTI's Confidential Information subject to the obligations of this
Agreement.

6.4.4 OVERDUE PAYMENTS. All overdue payments, not subject to a bona fide
dispute, due and payable pursuant to this Agreement shall bear interest at a
rate of [***] per month from the due date until paid in full.

6.4.5 WITHHOLDING TAXES. All payments made by a Party hereunder shall be made to
the other Party free and clear of any Taxes. If a Party is required by law to
deduct or withhold any Taxes from any payment made hereunder, then such Party
shall (a) make such deductions and withholdings; (b) pay the full amount
deducted or withheld to the relevant taxing authority or other applicable
governmental authority; and (c) promptly provide the other Party with written
documentation of any such payment that, if applicable, shall be in a form
sufficient to satisfy the requirements of the United States Internal Revenue
Code relating to a claim by such other Party for a foreign tax credit in respect
of such Tax payment.

7. LIMITATIONS

7.1 FOR PTI. Except as otherwise expressly permitted herein or in the License
Agreement with respect to [***], during the Term, PTI agrees that it will not
develop or market any products in the Field in the Territory on its own or with
or through an Affiliate, Sublicensee, licensee, or other Third Party, or grant
to any Affiliate, Sublicensee, licensee, or other Third Party any right, option,
license, covenant not to sue, or any other agreement to forbear from enforcing
PTI's rights to do so.

7.2 FOR KING. Except as otherwise expressly permitted herein or in the License
Agreement with respect to Products, during the Term, King agrees that it will
not develop or market any products incorporating SABER Technology in the
Territory with Durect or license from Durect or any licensee or other recipient
of rights from Durect, any rights to develop or market any such products, except
any rights for use in the Collaboration, in each case, either on its own or with
or through an Affiliate, Sublicensee, licensee, or other Third Party.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       23

<PAGE>

8. TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY.

8.1 CONFIDENTIALITY.

8.1.1 CONFIDENTIALITY OBLIGATIONS. PTI and King each acknowledges and agrees
that the other Party's Confidential Information constitutes highly valuable and
proprietary confidential information and materials. PTI and King each agrees
that during the Term of this Agreement and for an additional five years (or, in
the case of any Confidential Information identified as a trade secret by the
Disclosing Party at the time of disclosure, for so long as such trade secret
Confidential Information is susceptible of remaining a trade secret), it will
use commercially reasonable efforts to keep confidential, and will use
commercially reasonable efforts to cause its employees, Consultants, Affiliates,
agents, advisors, and Sublicensees to keep confidential, all Confidential
Information of the other Party. Neither PTI nor King nor any of their respective
employees, Consultants, Affiliates, or Sublicensees shall use Confidential
Information of the other Party for any purpose whatsoever except as expressly
permitted in this Agreement or the License Agreement.

8.1.2 LIMITED DISCLOSURE. PTI and King each agree that any disclosure of the
other Party's Confidential Information to any officer, employee, Consultant,
agent, or Affiliate of PTI or King, as the case may be, shall be made only if
and to the extent necessary to carry out its rights and responsibilities under
this Agreement and the License Agreement, shall be limited to the maximum extent
possible consistent with such rights and responsibilities, and shall only be
made to persons who are bound by written confidentiality obligations to maintain
the confidentiality thereof and not to use such Confidential Information except
as expressly permitted by this Agreement or the License Agreement. PTI and King
each further agrees not to disclose or transfer the other Party's Confidential
Information to any Third Parties under any circumstance without the prior
written approval from the other Party (such approval not to be unreasonably
withheld), except as otherwise required by law, and except as otherwise
expressly permitted by this Agreement or the License Agreement. Each Party shall
take such action, and shall cause its Affiliates and Sublicensees to take such
action, to preserve the confidentiality of the Disclosing Party's Confidential
Information as the Receiving Party would customarily take to preserve the
confidentiality of its own Confidential Information, using a level of care that
shall not under any circumstances be less than reasonable and prudent care. If a
court or other government authority orders that the Receiving Party disclose
Confidential Information, or proposes such an order, the Receiving Party must
notify the Disclosing Party immediately after learning of the order, so as to
provide the Disclosing Party an opportunity to protect the information, and the
Receiving Party must limit the disclosure to the minimum that will comply with
the order. Each Party, upon the request of the other Party, will return all the
Confidential Information disclosed or transferred to it by the other Party
pursuant to this Agreement, including all copies and extracts of documents and
all manifestations in whatever form, within 60 days of the request or, if
earlier, the termination or expiration of this Agreement; provided however, that
a Party may retain Confidential Information of the other Party relating to any
license or right to use Technology that survives such termination and one copy
of all other Confidential Information may be retained in inactive archives
solely for the purpose of establishing the contents thereof.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       24

<PAGE>

8.1.3 EMPLOYEES AND CONSULTANTS. PTI and King each hereby agrees that all of its
employees, and all of the employees of its Affiliates, and any Consultants to
such Party or its Affiliates, in any case that participate in the activities of
the Development Program and who shall have access to Confidential Information of
the other Party shall be bound by written obligations to maintain the same in
confidence and not to use such information except as expressly permitted herein.
Each Party agrees to enforce confidentiality obligations to which its employees
and Consultants (and those of its Affiliates) are obligated. Each Party agrees
to have each employee or Consultant that participates in the Development Program
enter into a written agreement with such Party that includes an assignment to
such Party of all right, title, and interest in and to all work product and all
inventions arising during the course of his or her employment with or provision
of services to such Party, and all intellectual property rights attaching
thereto.

8.1.4 EQUITABLE RELIEF. PTI and King each acknowledges that a breach by it of
Article 7 or the provisions of this Article 8 cannot reasonably or adequately be
compensated in damages in an action at law and that such a breach may cause the
other Party irreparable injury and damage. By reason thereof, each Party agrees
that the other Party may be entitled, in addition to any other remedies it may
have under this Agreement or otherwise, to preliminary and permanent injunctive
and other equitable relief to prevent or curtail any breach of Article 7 or 8 by
the other Party; provided, however, that no specification in this Agreement of a
specific legal or equitable remedy shall be construed as a waiver or prohibition
against the pursuing of other legal or equitable remedies in the event of such a
breach. Each Party agrees that the existence of any claim, demand, or cause of
action of it against the other Party, whether predicated upon this Agreement, or
otherwise, shall not constitute a defense to the enforcement by the other Party,
or its successors or assigns, of the covenants contained in Articles 7 and 8.

8.2 PUBLICITY. Neither Party may publicly disclose the existence or terms of
this Agreement without the prior written consent of the other Party.
Notwithstanding the foregoing, each Party shall have the right to disclose the
existence or terms of this Agreement, or information relating to the Development
Program, Remoxy, or other Products, without the consent of the other Party (a)
to the extent the disclosure is required by law or by the requirements of any
nationally recognized securities exchange, quotation system, or over-the-counter
market on which such Party has its securities listed or traded, (b) to any
investors, prospective investors, lenders, and other potential financing sources
who are obligated to keep such information confidential, or (c) to any Third
Party who is obligated by written confidentiality agreement to keep such
information confidential; provided, in each case, that the Party making such
disclosure shall use reasonable efforts to provide the other Party with as much
notice beforehand as is reasonable under the circumstances with respect to any
such disclosure. The Parties, upon the execution of this Agreement, will
mutually agree to a press release with respect to the Development Program for
publication. Once such press release or any other written statement is approved
for disclosure by both Parties, either Party may make subsequent public
disclosure of the contents of such statement without the further approval of the
other Party. Additionally from time-to-time PTI may wish to issue press releases
or make similar disclosures regarding the results or status of its research or
Product activities, the achievement of a regulatory or development milestone, or
any other material achievements under this Agreement

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       25

<PAGE>

or the DLA. Notwithstanding anything to the contrary in Section 8.3 or this
Section 8.2, PTI shall be free to issue such press releases or make such
disclosures, and shall have the right to choose the wording and timing of any
such press releases and disclosures; provided that PTI agrees to provide King a
draft copy of any such press release or disclosure at least twelve (12) hours
prior to its publication or disclosure, which copy in any event must be provided
during normal business hours, and provided further that such disclosure does not
mention King without King's prior written consent. King shall have the right to
inform PTI of any information contained therein that King believes is
inaccurate.

8.3 PUBLICATION. It is expected that each Party may wish to publish the results
of its research under this Agreement and the DLA in scientific journals or
through scientific conferences, which disclosures will be subject to the
obligations of this Section 8.3. At any time prior to the filing of an NDA for a
particular Product, PTI may publish the results of its research for such Product
in scientific journals or through scientific conferences; provided that PTI
complies with the provisions of this Section 8.3; and provided further that such
publication does not mention King without King's prior written consent. At any
time following the filing of an NDA for a particular Product, King may publish
the results of its research for such Product in scientific journals or through
scientific conferences; provided that King complies with the provisions of this
Section 8.3; and provided further that such publication does not mention PTI
without PTI's prior written consent. In order to safeguard patent rights and
other intellectual property, the Party wishing to publish in any scientific
journal or at any scientific conference the results of any research being
conducted by the Parties in the Development Program shall first submit a draft
of each proposed technical publication or an outline of each proposed
presentation for a scientific conference, with any related materials to be
published or distributed in connection therewith, to the other Party for review,
comment, and consideration of appropriate patent action at least thirty (30)
days prior to any submission for publication (or in the case of a disclosure in
connection with a scientific conference, at least fifteen (15) days prior to
such disclosure). Within fifteen (15) days of receipt of the prepublication
materials (or as soon as practicable in connection with an outline of an oral
presentation), the other Party will notify the Party seeking publication as to
whether a patent application shall be prepared and filed (in which case the
Party seeking publication shall delay submission until the first to occur of the
filing of a patent application and thirty (30) days from such notice provided by
the JOC) or whether such publication must be revised to eliminate Confidential
Information of a Party (in which case the Party seeking publication shall delete
from any proposed publication all such Confidential Information contained
therein).

9. TERM AND TERMINATION

9.1 TERM. This Agreement shall commence on the Closing Date and shall continue
in full force and effect until the later of (a) the expiration of the last to
expire of any Patent Rights licensed under the License Agreement or developed in
the Collaboration and (b) the expiration of all periods of market exclusivity
relating to any Products in the Territory, unless earlier terminated in
accordance with the provisions of Section 6.1.2 or this Article 9 (the "Term").

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       26

<PAGE>

9.2 TERMINATION. This Agreement may be terminated, with respect to a particular
Product or in whole, as follows:

9.2.1 MUTUAL TERMINATION. The Parties may agree in writing to mutually terminate
this Agreement at any time. If a Party has given notice of termination of this
Agreement pursuant to Section 9.2.2, 9.2.3, or 9.2.4 hereof, the other Party may
not invoke this Section 9.2.1 by agreeing to such termination. In the event of
termination pursuant to this Section 9.2.1, the Parties shall negotiate in good
faith within thirty (30) days after the date of such termination the terms and
conditions of such termination. In addition, King shall make payments due and
payable for the Final Calendar Year as required by Sections 6.3 and 6.4, as well
as pay any other amounts due and owing on the date of termination.

9.2.2 TERMINATION AT WILL.

(a) Product Specific Termination. King may terminate this Agreement with respect
to a particular Product as set forth in Section 3.1.4 above. In connection with
a termination pursuant to this Section 9.2.2(a), the following shall apply:

(i) King shall execute and deliver to PTI such documents, material, data,
records, analyses, and information and do such things as reasonably requested by
PTI to the extent reasonably related to the Development and Marketing of such
Terminated Product in the Territory, including the following, in each case to
the extent so related: (A) King shall use its commercially reasonable efforts to
effect a reasonably smooth and orderly transition of any ongoing clinical
studies, Regulatory Approval, or pre-marketing efforts to PTI (including all
data and reports in the possession of King) with respect to the Terminated
Product, including the assignment of any relevant Third Party contracts and
Regulatory Filings and, unless otherwise requested by PTI, shall use
commercially reasonable efforts to cancel all cancelable costs already incurred
and mitigate all other costs incurred in connection with the Development Program
for such Terminated Product; (B) King shall make its personnel and other
resources reasonably available to PTI as reasonably necessary to effect a
reasonably orderly transition of development responsibilities for such
Terminated Product; (C) King shall pay all non-cancelable costs in connection
with the Development Program for such Terminated Product; (D) King shall pay all
costs of any of the ongoing clinical trials of such Terminated Product for a
period of six (6) months from the effective date of termination, but only for
such costs incurred for those patients already enrolled in the study at the time
of giving the termination notice (it being understood that King shall continue
to be liable beyond the end of such six (6)-month period for any non-cancelable
costs associated with such clinical trials); (E) all rights and licenses granted
herein to King with respect to the Terminated Product shall, for no additional
consideration, immediately terminate; and (F) King shall, within ten (10) days
after the termination date, provide and assign to PTI all clinical data, INDs,
NDAs, Regulatory Approvals, Regulatory Filings, and all other documentation
reasonably useful in respect of the Terminated Product in the Territory. Except
as otherwise provided herein, all reasonable costs and expenses incurred with
respect to the foregoing (except for non-cancelable costs as described in clause
(C) above) will be borne by King for a period of six (6) months after the
effective date of termination, unless the Parties otherwise agree.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       27

<PAGE>

(ii) The Parties shall make payments due and payable for the Final Calendar Year
with respect to the Terminated Product as required by Sections 6.3 and 6.4, as
well as pay any other amounts due and owing on the date of termination.

(b) Termination of the Agreement in its Entirety. King may terminate this
Agreement in its entirety upon six (6) months' prior written notice to PTI,
which notice may be given (1) following the third anniversary of the Effective
Date, or (2) in the event of Scientific Failure, with such termination to be
effective at the end of such six (6)-month period. As used herein, "Scientific
Failure" means a determination by the JOC that the Development Program is
unlikely to be commercially viable, or is unlikely to generate any marketable
Products, as determined in accordance with its business, legal, medical, and
scientific judgment. In connection with a termination pursuant to this Section
9.2.2(b), the following shall apply:

(i) King shall execute and deliver to PTI such documents, material, data,
records, analyses, and information and do such things as reasonably requested by
PTI to the extent reasonably related to the Development and Marketing of all
Products in the Territory, including the following, in each case only to the
extent so related: (A) King shall use its commercially reasonable efforts to
effect a reasonably smooth and orderly transition of any ongoing clinical
studies, Regulatory Approval, or pre-marketing efforts to PTI (including all
data and reports in the possession of King) with respect to the Products,
including the assignment of any relevant Third Party contracts and Regulatory
Filings and, unless otherwise requested by PTI, shall use commercially
reasonable efforts to cancel all cancelable costs already incurred and mitigate
all other costs incurred in connection with the Development Program for all
Products; (B) King shall make its personnel and other resources reasonably
available to PTI as reasonably necessary to effect a reasonably orderly
transition of development responsibilities for such Products; (C) King shall pay
all non-cancelable costs in connection with the Development Program for such
Products; (D) King shall pay all costs of any of the ongoing clinical trials of
such Products for a period of six (6) months from the effective date of
termination, but only for such costs incurred for those patients already
enrolled in the study at the time of giving the termination notice (it being
understood that King shall continue to be liable beyond the end of such six
(6)-month period for any non-cancelable costs associated with such clinical
trials); (E) all rights and licenses granted herein to King with respect to the
Products shall, for no additional consideration, immediately terminate; and (F)
King shall, within ten (10) days after the termination date, provide and assign
to PTI all clinical data, INDs, NDAs, Regulatory Approvals, Regulatory Filings,
and all other documentation reasonably useful in respect of the Products in the
Territory. All reasonable costs and expenses incurred with respect to the
foregoing (except for non-cancelable costs as described in clause (C) above)
will be borne by King for a period of six (6) months after the effective date of
termination, unless the Parties otherwise agree. In addition, King shall
continue to pay the labor costs of PTI personnel at the FTE Rate for the number
of hours of service called for in the budget then in effect, whether or not such
PTI employees are providing such services, for a period of six (6) months after
the effective date of termination; provided that, if a budget is not in effect
for a portion of such six (6)-month period, the labor costs for such unbudgeted
period will be paid for the number of hours of service set forth in the final
approved budget pro-rated to the length of such unbudgeted period.
Notwithstanding the

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       28

<PAGE>

foregoing, King shall not be obligated to continue to pay such labor costs for
such PTI personnel to the extent such PTI personnel are actually redeployed to
other projects funded by a Third Party or are no longer employed by PTI.

(ii) The Parties shall make payments due and payable for the Final Calendar Year
with respect to the Products as required by Sections 6.3 and 6.4, as well as pay
any other amounts due and owing on the date of termination.

9.2.3 TERMINATION FOR MATERIAL BREACH. In the event that either Party breaches
any material term of this Agreement that applies to it, the other Party shall
have the right to terminate this Agreement by giving sixty (60) days' prior
written notice to the breaching Party; provided, however, that in the case of a
breach capable of being cured, if the breaching Party shall cure the breach
within such notice period after notice shall have been given, then such notice
shall not be effective. For purposes of this Section 9.2.3, (i) the failure to
timely make any payment or fulfill any funding obligation under this Agreement
that is not subject to a bona fide dispute and (ii) the commission of any act or
the occurrence of any omission, in each case that constitutes a breach of any
material term of this Agreement shall each constitute a material breach of this
Agreement (but the list set forth in clauses (i) and (ii) shall not be deemed an
exhaustive list of material breaches of this Agreement). In the event of a
termination pursuant to this Section 9.2.3, the following shall apply (the
"Termination Procedures"):

(a) In the event that PTI is the breaching Party, King shall execute and deliver
to PTI such documents, material, data, records, analyses, and information and do
such things as reasonably requested by PTI to the extent reasonably related to
the Development and Marketing of the Products in the Territory, including the
following, in each case to the extent so related: (i) King shall use its
commercially reasonable efforts to effect a reasonably smooth and orderly
transition of any ongoing clinical studies, Regulatory Approval, or
pre-marketing efforts to PTI with respect to the Products (including all data
and reports in the possession of King), including the assignment of any relevant
Third Party contracts and Regulatory Filings and, unless otherwise requested by
PTI, use commercially reasonable efforts to cancel all cancelable costs already
incurred and mitigate all other costs incurred in connection with the
Development Program; (ii) King shall make its personnel and other resources
reasonably available to PTI as reasonably necessary to effect a reasonably
orderly transition of development responsibilities for the Products; (iii) all
rights and licenses granted herein to King with respect to the Products shall,
for no additional consideration, immediately terminate; and (iv) King shall,
within 10 days after the termination date, provide and assign to PTI all
clinical data, INDs, NDAs, Regulatory Approvals, Regulatory Filings, and all
other documentation reasonably useful in respect of the Products in the
Territory. Except as otherwise provided herein, all reasonable costs and
expenses incurred with respect to the foregoing will be borne by PTI, unless the
Parties otherwise agree.

(b) In the event that King is the breaching Party, King shall execute and
deliver to PTI such documents, material, data, records, analyses, and
information and do such things as reasonably requested by PTI to the extent
reasonably related to the Development and Marketing of the Products in the
Territory, including the following, in each case to the extent so related: (i)
King shall use its commercially reasonable efforts to effect a reasonably smooth
and orderly transition of any ongoing clinical studies, Regulatory Approval, or
pre-marketing efforts to PTI with respect to the Products (including all data
and reports in the possession of

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       29

<PAGE>

King), including the assignment of any relevant Third Party contracts and
Regulatory Filings and, unless otherwise requested by PTI, use commercially
reasonable efforts to cancel all cancelable costs already incurred and mitigate
all other costs incurred in connection with the Development Program; (ii) King
shall make its personnel and other resources reasonably available to PTI as
reasonably necessary to effect a reasonably orderly transition of development
responsibilities for the Products; (iii) King shall pay all the costs for the
completion of any of the ongoing clinical trials of Products, but only for such
costs directly incurred for those patients already enrolled in the study at the
time of giving the termination notice, as well as all other non-cancelable costs
in connection with the Development Program for the Products; (iv) all rights and
licenses granted herein to King with respect to the Products shall, for no
additional consideration, immediately terminate; and (v) King shall, within 10
days after the termination date, provide and assign to PTI all clinical data,
INDs, NDAs, Regulatory Approvals, Regulatory Filings, and all other
documentation reasonably useful in respect of the Products in the Territory.
Except as otherwise provided herein, all reasonable costs and expenses incurred
with respect to the foregoing will be borne by King, unless the Parties
otherwise agree. In addition, King shall continue to pay the labor costs of PTI
personnel at the FTE Rate for the number of hours of service called for in the
budget then in effect, whether or not such PTI employees are providing such
services, for a period of six (6) months after the effective date of
termination; provided that, if a budget is not in effect for a portion of such
six (6)-month period, the labor costs for such unbudgeted period will be paid
for the number of hours of service set forth in the final approved budget
pro-rated to the length of such unbudgeted period. Notwithstanding the
foregoing, King shall not be obligated to continue to pay such labor costs for
such PTI personnel to the extent such PTI personnel are actually redeployed to
other projects funded by a Third Party or are no longer employed by PTI.

(c) The Parties shall make payments due and payable for the Final Calendar Year
as required by Sections 6.3 and 6.4, as well as pay any other amounts due and
owing on the date of termination.

9.2.4 TERMINATION FOR INSOLVENCY. In the event that a Party (a) makes an
assignment for the benefit of creditors, (b) appoints or suffers appointment of
a receiver or trustee over its property, (c) is generally unable to pay its
debts as they become due, (d) files a petition under, or invokes the protection
of, any bankruptcy, insolvency, or similar laws, and consent is requested but
not granted for an assignment of the Agreement under Section 9.4.1(c) hereof,
(e) has a petition or proceeding filed against it under any bankruptcy,
insolvency, or similar laws, which is not dismissed within sixty (60) days, and
consent is requested but not granted for an assignment of the Agreement under
Section 9.4.1(c) hereof, or (f) suspends, closes, or otherwise ceases to operate
a majority of its business relating to this Agreement and the License Agreement,
then the other Party may terminate this Agreement effective immediately upon
written notice to the first Party. In the event of a termination pursuant to
this Section 9.2.4, the Termination Procedures shall apply, with the terminating
Party treated as the non-breaching Party. Nothing in this Section 9.2.4 limits
or affects any other rights, elections, or remedies that the terminating Party
may have under the Bankruptcy Code, or other Applicable Law and all such rights,
elections, and remedies are expressly reserved.

9.2.5 REQUIRED ASSIGNMENTS. If a Party is required by the terms of this
Agreement to assign or transfer to the other Party any agreement, document, or
right and such

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       30

<PAGE>

Party, after utilizing the level of efforts required hereunder, is unable to do
so as the result of forces beyond its reasonable control, then the Party shall
use its commercially reasonable efforts to make available to the other Party the
material benefits of such agreement, document, or right in lieu of such
assignment or transfer.

9.3 SURVIVING PROVISIONS. Termination and expiration of this Agreement for any
reason shall be without prejudice to:

(a) the following provisions, which shall survive termination or expiration of
this Agreement for as long as necessary to permit their full discharge: Sections
5.1, 6.4.3, 8.1, 11.1, 11.2, 11.3, 11.5 and 11.6; Sections 9.2.2(b)(i) and
9.2.2(b)(ii) in the event of a termination by King pursuant to Section 9.2.2(b);
Sections 9.2.3(b) and 9.2.3(c) in the event of a termination by PTI pursuant to
Section 9.2.3, 9.2.4 or 9.4.3; Sections 9.2.3(a) and 9.2.3(c) in the event of a
termination by King pursuant to Section 9.2.3, 9.2.4 or 9.4.3; the obligations
of the Parties set forth in the first two sentences of Section 8.2; Articles 12
and 13; and the definitions set forth in Annex A; additionally, in the event of
termination of this Agreement for any reason, King's reporting obligations under
Section 4.2.1 with respect to adverse event information and product complaint
information shall survive; provided that King shall provide such information
directly to the PTI rather than to the JOC, and

(b) any other rights or remedies provided at law or equity that either Party may
otherwise have against the other. Except as otherwise provided in this Section
9.3, all rights and obligations of the Parties under this Agreement shall
terminate upon the expiration or termination of this Agreement; provided that it
is expressly understood that nothing herein shall relieve any Party from
liability from any breach of any covenant or agreement of such Party contained
herein or any willful or intentional breach of any representation or warranty of
such Party contained herein.

9.4 TREATMENT UPON BANKRUPTCY.

9.4.1 ASSUMPTION AND ASSIGNMENT OF AGREEMENT.

(a) Notwithstanding any other provision of this Agreement, the License
Agreement, or any other related agreements, each Party hereby consents to the
assumption of this Agreement by the other Party (the "Debtor Party") in any case
commenced by or against the Debtor Party under the Bankruptcy Code to the extent
that such consent is required under Section 365(c)(1) of the Bankruptcy Code,
but only if the Debtor Party is otherwise entitled to assume this Agreement
under the applicable requirements of the Bankruptcy Code. The sole purpose of
the foregoing consent is to overcome any restriction potentially imposed by
Section 365(c)(1) of the Bankruptcy Code on the Debtor Party's assumption of
this Agreement in a bankruptcy case concerning the Debtor Party. It is not
intended to limit any other rights of the other Party (the "Non-Debtor Party")
under this Agreement or any provision of the Bankruptcy Code, including Section
365(c)(1). The foregoing consent applies only to the assumption of this
Agreement by the Debtor Party and does not apply to the Debtor Party's
assignment of this Agreement or any rights hereunder to a Third Party.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       31

<PAGE>

(b) Notwithstanding any other provision of this Agreement (including Sections
9.4.1(c) and 13.9), the License Agreement, or any other related agreements, the
Non-Debtor Party hereby consents to the assignment of this Agreement by the
Debtor Party to a Third Party solely in connection with a sale of all or
substantially all of the Debtor Party's business or assets relating to this
Agreement and the License Agreement to such Third Party, pursuant to an orderly
sale process under Section 363 of the Bankruptcy Code or a confirmed plan under
Section 1129 of the Bankruptcy Code, that contemplates the continued operation
of the purchased business or assets and, if PTI is the Debtor Party, the
retention of the Existing Management Team, provided that such Third Party
promptly agrees in writing to be bound by the terms and conditions of this
Agreement and the Debtor Party is otherwise entitled to assign this Agreement
under the applicable requirements of the Bankruptcy Code. The sole purpose of
the foregoing consent is to overcome any restriction potentially imposed by
Section 365(c)(1) of the Bankruptcy Code on the Debtor Party's assignment of
this Agreement under the specific circumstances described in this Section
9.4.1(b). It is not intended to limit any other rights of the Non-Debtor Party
under this Agreement or any provision of the Bankruptcy Code, including Section
365(c)(1), or to apply to the assignment of this Agreement in any other context.

(c) Notwithstanding any other provision of this Agreement (including Section
13.9), the License Agreement, or any other related agreements, but subject to
Section 9.4.1(b) above, the Debtor Party may only assign this Agreement to a
Third Party in any case commenced by or against it under the Bankruptcy Code
with the prior written consent of the Non-Debtor Party.

9.4.2 INTELLECTUAL PROPERTY RIGHTS. All rights related to and licenses of
intellectual property granted under this Agreement and the License Agreement by
one Party to the other Party are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101(35A) of the Bankruptcy
Code. In addition to any other rights, elections, and remedies under this
Agreement, any related agreements, the Bankruptcy Code, or any other Applicable
Law, upon a written request under Section 365(n) of the Bankruptcy Code, the
Non-Debtor Party shall be entitled to complete access to any intellectual
property of the Debtor Party pertaining to the rights granted in the licenses
under the License Agreement, all embodiments of such intellectual property and
all documents, material, data, records, analyses, and information related
thereto (including all clinical data, INDs, NDAs, Regulatory Approvals,
Regulatory Filings, and all other documentation reasonably useful in respect of
Product in the Territory in the Field). This Agreement and any other related
agreements (to the extent such agreements do not constitute licenses of
intellectual property under the Bankruptcy Code) shall be considered agreements
supplementary (as such term is used in Section 365(n) of the Bankruptcy Code) to
the License Agreement and any other intellectual property licenses between the
Parties.

9.4.3 REJECTION IN BANKRUPTCY. Any rejection of this Agreement by the Debtor
Party pursuant to Section 365 of the Bankruptcy Code shall constitute a material
breach of this Agreement not subject to notice or cure. Upon any such rejection,
(a) all rights, elections, and remedies of the Non-Debtor Party to this
Agreement (including under Section 365 of the Bankruptcy Code) are expressly
reserved, and (b) in the event that this Agreement is deemed terminated upon or
subsequent to such rejection, the Termination Procedures shall apply, with the
Non-Debtor Party treated as the non-breaching Party. Further, upon any such
rejection, the

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       32

<PAGE>

Parties intend and agree that the Non-Debtor Party may elect to retain its
rights under this Agreement pursuant to Section 365(n) of the Bankruptcy Code
and that such election shall, among other things, entitle the Non-Debtor Party
to invoke and exercise all of its rights to any intellectual property under this
Agreement, the License Agreement, and any other related agreements.

9.5 DAMAGES; RELIEF. Termination of this Agreement shall not preclude any Party
from claiming any other damages, compensation, or legal or equitable relief that
it may be entitled to upon such termination.

9.6 TAX TREATMENT. The Parties intend that, for United States federal income tax
purposes and all other applicable state, local, and foreign income or franchise
taxes as may be permitted by law, the Collaboration shall be treated as a cost
sharing arrangement between the Parties and shall not be treated as a
partnership. The Parties agree that, to the extent permitted by law, they will
report their participation in the Collaboration in accordance with the
foregoing.

10. REPRESENTATIONS AND WARRANTIES

10.1 BY EACH PARTY. PTI and King each represents and warrants to the other as of
the Effective Date as follows:

(a) Organization. It is a corporation duly organized, validly existing and is in
good standing under the laws of the jurisdiction of its organization, is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the performance of its obligations hereunder requires
such qualification, and, except as would not have a material adverse effect on
the ability of the Party to perform its obligations hereunder, has all requisite
power and authority, corporate or otherwise, to conduct its business as now
being conducted, to own, lease, and operate its properties and to execute,
deliver, and perform this Agreement.

(b) Authorization and Right to Grant Licenses. The execution, delivery, and
performance by it of this Agreement have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
its stockholders or (ii) violate any provision of any agreement, law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to it or any provision of its charter
documents. Each Party has the right, power, and authority to grant licenses
granted by it hereunder.

(c) Binding Agreement. This Agreement is a legal, valid, and binding obligation
of it, enforceable against it in accordance with its terms and conditions,
except as enforceability may be limited by bankruptcy, insolvency, or other laws
affecting the enforcement of creditors' rights generally, and except that the
availability of the remedy of specific performance or other equitable relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.

(d) No Inconsistent Obligation. It is not under any obligation to any person or
entity, contractual or otherwise, that is conflicting or inconsistent in any
respect with the terms of this Agreement, and it has all power and authority
under all instruments or agreements to which it is a Party to enter into this
Agreement and to perform its obligations hereunder.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       33

<PAGE>

(e) Absence of Actions. To its Knowledge, it is not a party to or object of any
litigation, suit, legal claim, action, proceeding, judgment, settlement, or
investigation (an "Action") pending or threatened against it, or any of its
Affiliates, or any of its properties or assets, before any governmental
authority or Regulatory Authority that might reasonably be expected to have a
material adverse effect on its ability to diligently and completely fulfill its
obligations hereunder. A material breach of or inaccuracy in this Section
10.1(e) with respect to a Party shall constitute a material breach of this
Agreement by such Party pursuant to Section 9.2.3.

(f) Applicable Law. It has complied with and shall continue to comply with and
shall perform all its duties and obligations hereunder in accordance with all
Applicable Law.

(g) Debarment. As of the date hereof, neither it nor any of its respective
employees or agents, in their capacity as such, have been disqualified or
debarred by the FDA, pursuant to 21 U.S.C. Section 335(a) or (b), or been
charged with or convicted under any Applicable Law of the United States for
conduct relating to the development or approval, or otherwise relating to the
regulation of any Product under the Generic Drug Enforcement Act of 1992, or any
other relevant law, rule, or regulation or been disbarred, disqualified, or
convicted under or for any equivalent or similar applicable foreign law, rule,
or regulation.

10.2 BY PTI. PTI further represents and warrants to King as of the Effective
Date as follows:

(a) Clinical Trials. All pre-clinical and clinical work, studies, and trials
conducted, supervised, or monitored by PTI with respect to any Designated
Product and that are intended to be used to support Regulatory Approval, have,
to the Knowledge of PTI, been conducted and performed in substantial compliance
with Applicable Laws, including Good Laboratory Practice, Good Clinical
Practice, and Good Manufacturing Practice requirements and ICH Guidelines. PTI
has, or, as applicable, any Third Parties with whom PTI has contracted to
perform any clinical trials or modifications thereto with respect to any
Designated Product has, to the Knowledge of PTI, obtained and maintained any
necessary IRB approvals of clinical trials or modifications thereto sponsored by
PTI. To the Knowledge of PTI, in no clinical trial sponsored, conducted,
supervised, or monitored by PTI with respect to any Designated Product has any
IRB, ethics committee, or European competent authority approval ever been
suspended, terminated, put on clinical hold, or voluntarily withdrawn.

(b) Disclosure. To PTI's Knowledge, no employees or agents of PTI have made an
untrue statement of material fact on behalf of PTI to any Regulatory Authority
with respect to any product in the Field or failed to disclose a material fact
required to be disclosed to any Regulatory Authority with respect to any product
in the Field that at the time such disclosure was made, could reasonably be
expected to (i) provide a basis for the FDA or any other Regulatory Authority to
invoke its policy respecting Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10,
1991) or any similar policy or (ii) otherwise materially adversely affect the
prospect of, or materially delay the obtaining of, Regulatory Approval for such
product.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       34

<PAGE>

(c) Intellectual Property. To the actual knowledge of Remi Barbier, Nadav
Friedmann, Michael Zamloot, Grant Schoenhard, and Peter Roddy, the manufacture,
use, offer for sale, sale, or importation of the Designated Products (provided
that King acknowledges PTI has not conducted any patent search with regard to
hydrocodone), in each case as such Designated Product is specifically
formulated, will not infringe or misappropriate the intellectual property rights
of any Third Party as of the Effective Date, specifically excluding from such
representation and warranty the patents that have been identified by patent
number to King prior to the Effective Date (it being acknowledged by King that
PTI has not conducted, among other things, a comprehensive analysis of the other
family members of the patent families to which such identified patents belong);
provided, however, that with regard to infringement or misappropriation of the
intellectual property rights of a Third Party arising from the utilization of
the Saber Technology with regard to any such Designated Product (the "Saber
Infringement"), King acknowledges and agrees that the foregoing representation
by PTI with respect to the Saber Infringement is based solely on the
representation and warranty received by PTI from Durect with regard to the
infringement of Third Party intellectual property rights pursuant to the DLA,
and PTI shall have no liability to King with regard to any Saber Infringement
beyond the amount of damages or any other remedy that PTI shall receive from
Durect as a result of such breach.

(d) No Omissions. No representation or warranty of PTI contained in this
Agreement or the License Agreement, and no written information previously
provided by PTI to King in connection with the transactions contemplated hereby,
including any representation, warranty, or information relating to any
pre-clinical, clinical, manufacturing, or regulatory issues concerning any
Designated Product, contains any untrue statement of a Material Fact or omits to
state a Material Fact actually known to PTI and which would be necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made. For purposes of this
representation and warranty, King shall be deemed to be on notice and to have
received disclosures of the following information: (i) with respect to PTI,
information publicly available through PTI's filings with the Securities and
Exchange Commission and the publications listed on Schedule 10.2(d)(i) attached
hereto, and, (ii) with respect to Durect, information publicly available through
Durect's filings with the Securities and Exchange Commission and the
publications listed on Schedule 10.2(d)(ii) attached hereto as well as any
peer-reviewed publications in English generally available to the public
regarding the subject matter of this Agreement (including Remoxy and the SABER
Technology) and written by the individuals set forth on Schedule 10.2(d)(ii). As
used in this Section 10.2(d), a "Material Fact" means a fact that would have a
materially adverse effect on the commercial prospects for products in the Field
in the Territory taken as a whole.

11. INDEMNIFICATION

11.1 INDEMNIFICATION OF KING BY PTI. PTI shall indemnify, defend, and hold
harmless King, its Affiliates, and their respective directors, officers,
employees, and agents (the "King Indemnitees"), against any liability, damage,
loss, or expense (including reasonable attorneys' fees and expenses of
litigation) (collectively, "Losses") incurred by or imposed upon the King
Indemnitees, or any one of them, as a result of claims, causes of action, suits,
actions,

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       35

<PAGE>

demands, or judgments made against such King Indemnitees by Third Parties,
including claims for personal injury and claims of suppliers and PTI employees
(except in cases where such claims, suits, actions, demands, or judgments result
from a material breach by King of its representations or warranties under this
Agreement, gross negligence, or willful misconduct on the part of King), in each
case to the extent arising out of (a) the breach of any representation or
warranty of PTI under Article 10 hereof, (b) the gross negligence or willful
misconduct of PTI, its Affiliates, or their respective employees or agents in
the performance of any obligation under this Agreement, and (c) any government
funding received by PTI prior to the Effective Date in connection with the
research or development of any Products or any subject matter disclosed in any
PTI Patent Rights, including pursuant to any grants from the National Institutes
of Health, and the failure of PTI to comply in all material respects with the
terms and conditions of such funding agreements and grants, and with all
Applicable Laws with respect thereto, including to obtain any necessary permits
or waivers thereunder. For purposes of clarity, it is understood and agreed
that, except as provided in this Section 11.1 or in Section 9.1 of the License
Agreement, PTI provides no indemnification to King with respect to product
liabilities claims relating to Products.

11.2 INDEMNIFICATION OF PTI BY KING. King shall indemnify, defend, and hold
harmless PTI, its Affiliates, and their respective directors, officers,
employees, and agents (the "PTI Indemnitees"), against any Losses incurred by or
imposed upon the PTI Indemnitees, or any one of them, as a result of claims,
causes of action, suits, actions, demands, or judgments made against such PTI
Indemnitees by Third Parties, including personal injury and claims of suppliers
and King employees (except in cases where such claims, suits, actions, demands,
or judgments result from a material breach by PTI of its representations or
warranties under this Agreement, gross negligence, or willful misconduct on the
part of PTI), in each case to the extent arising out of (a) the breach of any
representation or warranty of King under Article 10 hereof and (b) the gross
negligence or willful misconduct of King, its Affiliates, or their respective
employees or agents in the performance of any obligation under this Agreement.
For purposes of clarity, it is understood and agreed that, except as provided in
this Section 11.2 or in Section 9.2 of the License Agreement, King provides no
indemnification to PTI with respect to product liabilities claims relating to
Products.

11.3 CONDITIONS TO INDEMNIFICATION. A Party seeking indemnification under this
Article 11 (the "Indemnified Party") shall give prompt notice of the claim to
the other Party (the "Indemnifying Party") and, provided that the Indemnifying
Party is not contesting the indemnity obligation, shall permit the Indemnifying
Party to control any litigation relating to such claim and disposition of any
such claim. The Indemnifying Party shall act reasonably and in good faith with
respect to all matters relating to the settlement or disposition of any claim as
the settlement or disposition relates to Parties being indemnified under this
Article 11. The Indemnifying Party shall not settle or otherwise resolve any
claim without prior notice to the Indemnified Party and the consent of the
Indemnified Party (which consent shall not be unreasonably withheld,
conditioned, or delayed) if such settlement involves anything other than the
payment of money by the Indemnifying Party. The Indemnified Party shall
reasonably cooperate with the Indemnifying Party in its defense of any claim for
which indemnification is sought under this Article 11 and shall have the right
to be present in person or through counsel at all legal proceedings giving rise
to the right of indemnification. For purposes of clarity, it is understood that
in the event that a claim is eligible for indemnification under both this
Article 11 and under

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       36

<PAGE>

Article 9 of the License Agreement, the Indemnified Party shall be entitled to
seek indemnification for such claim under either this Agreement or the License
Agreement, but not both.

11.4 INSURANCE. In addition to the insurance coverages required by Section 5.1
hereof, each Party shall obtain other insurance coverage from first class
insurers in types and amounts commensurate with industry standards for such
Party's activities hereunder.

11.5 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR THE LICENSE AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH
RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS, OR OTHER SUBJECT MATTER OF
THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE
FOREGOING. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY GUARANTEES TO THE OTHER CONCERNING THE SUCCESS OR POTENTIAL
SUCCESS OF THE ACTIVITIES CONTEMPLATED UNDER THIS AGREEMENT.

11.6 LIMITED LIABILITY. EXCEPT WITH RESPECT TO A BREACH OF THE OBLIGATIONS IN
ARTICLE 8 OR WITH RESPECT TO AMOUNTS PAID TO THIRD PARTIES UNDER THE
INDEMNIFICATION OBLIGATIONS OF THIS ARTICLE 11, NEITHER PTI NOR KING WILL BE
LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OR (II) COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, OR SERVICES.

12. REMEDIES

Subject to the terms of this Agreement, the Parties are not excluded from
exercising or seeking any and all rights and remedies available, in law or in
equity, under Applicable Law.

13. MISCELLANEOUS

13.1 NOTICES. All notices or other communications that shall or may be given
pursuant to this Agreement shall be in writing and shall be deemed to be
effective (a) simultaneously with the transmission or delivery thereof, if sent
by facsimile transmission (followed by hard copy by mail), (b) when delivered,
if sent by United States registered or certified mail, return receipt requested,
or (c) on the next business day, if sent by overnight courier, in each case to
the Parties at the following addresses (or at such other addresses as shall be
specified by like notice) with postage or delivery charges prepaid:

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       37

<PAGE>

If to King:                       If to PTI:

King Pharmaceuticals, Inc.        Pain Therapeutics, Inc.
501 Fifth Street                  416 Browning Way
Bristol, Tennessee 37620          South San Francisco, California 94080
Tel.: (423) 989-8000              Tel.: (650) 825-3342
Fax: (423) 990-2566               Fax: (650) 624-8222
Attention: General Counsel        Attention: President & CEO

With a copy to:                   With a copy to:

King Pharmaceuticals, Inc.        Wilson Sonsini Goodrich & Rosati
501 Fifth Street                  650 Page Mill Road
Bristol, Tennessee 37620          Palo Alto, California 94304-1050
Tel.: (423) 989-8000              Tel.: (650) 493-9300
Fax: (423) 274-2602               Fax: (650) 493-6811
Attention: Business Development   Attention: Michael O'Donnell

13.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
application of principles of conflicts of law.

13.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective legal representatives, successors,
and permitted assigns.

13.4 COUNTERPARTS. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.

13.5 AMENDMENT; WAIVER. This Agreement may be amended, modified, superseded, or
canceled, and any of the terms may be waived, only by a written instrument
executed by each Party or, in the case of waiver, by the Party or Parties
waiving compliance. The delay or failure of any Party at any time or times to
require performance of any provisions shall in no manner affect the rights at a
later time to enforce the same. No waiver by any Party of any condition or of
the breach of any term contained in this Agreement, whether by conduct, or
otherwise, in any one or more instances, shall be deemed to be, or considered
as, a further or continuing waiver of any such condition or of the breach of
such term or any other term of this Agreement.

13.6 NO THIRD PARTY BENEFICIARIES. No Third Party, including any employee of any
Party to this Agreement, shall have or acquire any rights by reason of this
Agreement.

13.7 PURPOSES AND SCOPE. The Parties hereto understand and agree that this
Development Program is limited solely to the Field in the Territory, and to the
activities, rights, and obligations as set forth in this Agreement. Nothing in
this Agreement shall be construed (a) to create or imply a general partnership
between the Parties, (b) to make either Party the agent of the other for any
purpose, (c) to alter, amend, supersede, or vitiate any other arrangements
between the Parties with respect to any subject matters not covered hereunder,
(d) to give either Party the right to bind the other, (e) to create any duties
or obligations between the Parties except as expressly set forth herein, or (f)
to grant any direct or implied licenses or any other right other than as
expressly set forth herein.

13.8 PERFORMANCE BY AFFILIATES. Each Party shall have the right to direct its
wholly-owned Affiliates to act in satisfaction of such Party's or Affiliate's
obligations hereunder or make an assignment to an Affiliate in accordance with
Section 13.9; provided that such Party shall remain liable and fully responsible
for the performance of such Affiliate hereunder.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       38

<PAGE>

13.9 ASSIGNMENT AND SUCCESSORS. Neither this Agreement nor any obligation of a
Party hereunder may be assigned by either Party without the consent of the
other, except that, subject to Section 9.4.1, each Party may assign this
Agreement and the rights, obligations, and interests of such Party, in whole or
in part, to any of its Affiliates (subject to Section 13.8) or to any Third
Party that succeeds to all or substantially all of a Party's business or assets
relating to this Agreement and the License Agreement, whether by sale, merger,
operation of law, or otherwise; provided that such assignee or transferee
promptly agrees in writing to be bound by the terms and conditions of this
Agreement. Any attempted assignment in violation of this Section 13.9 shall be
null, void, and of no effect. This Agreement shall be binding upon and inure to
the benefit of all permitted successors-in-interest and assigns.

13.10 FORCE MAJEURE. In the event of the occurrence of a Force Majeure Event,
the Parties shall not be deemed in breach of their obligations to the extent of
the Force Majeure Event. The Party affected thereby shall use reasonable efforts
to cure or overcome the same and resume performance of its obligations
hereunder.

13.11 INTERPRETATION.

(a) The Parties hereto acknowledge and agree that: (i) each Party and its
counsel reviewed and negotiated the terms and provisions of this Agreement and
have contributed to its revision; (ii) the rule of construction to the effect
that any ambiguities are resolved against the drafting Party shall not be
employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all Parties hereto
and not in a favor of or against any Party, regardless of which Party was
generally responsible for the preparation of this Agreement.

(b) The headings contained in this Agreement are for reference purposes only and
will not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they will be deemed to be followed by the words "without limitation."
Unless the context otherwise requires, (i) "or" is disjunctive but not
necessarily exclusive, (ii) words in the singular include the plural and vice
versa, and (iii) the use in this Agreement of a pronoun in reference to a Party
hereto includes the masculine, feminine, or neuter, as the context may require.
The Annex, Schedules, and Exhibits hereto will be deemed part of this Agreement
and included in any reference to this Agreement.

13.12 INTEGRATION; SEVERABILITY. This Agreement and the License Agreement, when
executed, are the sole agreements with respect to the subject matter hereof and
supersede all other agreements and understandings between the Parties with
respect to same. If any provision of this Agreement (including the temporal and
substantive scope of the restrictions set forth in Article 7) is or becomes
invalid or is ruled invalid by any court of competent jurisdiction or is deemed
unenforceable, such provision or portion thereof will be modified or deleted in
such a manner so as to make this Agreement, as modified, legal and enforceable
to the fullest extent permitted under Applicable Law, and it is the intention of
the Parties that the remainder of the Agreement shall not be affected.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       39

<PAGE>

13.13 FURTHER ASSURANCES. Each of PTI and King agrees to duly execute and
deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including the filing
of such additional assignments, agreements, documents, and instruments, that may
be necessary or as the other Party hereto may at any time and from time to time
reasonably request in connection with this Agreement or to carry out more
effectively the provisions and purposes of, or to better assure and confirm unto
such other Party its rights and remedies under, this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                       40

<PAGE>

IN WITNESS WHEREOF, the Parties have caused this Collaboration Agreement to be
executed by their duly authorized representatives as of the Effective Date.

                                        PAIN THERAPEUTICS, INC.


                                        By: /s/ Remi Barbier
                                            ------------------------------------
                                        Name: Remi Barbier
                                        Title: President & CEO


                                        KING PHARMACEUTICALS, INC.


                                        By: /s/ Brian A. Markison
                                            ------------------------------------
                                        Name: Brian A. Markison
                                        Title: President and Chief Executive
                                               Officer

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                                                         ANNEX A

                     DEFINITIONS TO COLLABORATION AGREEMENT

1. "AAA" has the meaning set forth in Section 2.3.3 of this Agreement.

2. "ACTION" has the meaning set forth in Section 10.1(e) of this Agreement.

3. "AFFILIATE" means any corporation, firm, partnership, or other entity that
directly or indirectly controls or is controlled by or is under common control
with a Party to this Agreement. For purposes of this definition, "control" means
ownership, directly or through one or more Affiliates, of (a) 50% or more of the
shares or voting rights in the case of a corporation or limited company, (b) 50%
or more of the shares of stock entitled to vote for the election of directors,
in the case of a corporation, (c) 50% or more of the equity or controlling
interests in the case of any other type of legal entity (including joint
ventures) or status as a general partner in any partnership, or (d) any other
arrangement whereby a Party controls or has the right to control the Board of
Directors or equivalent governing body of an entity.

4. "AGREEMENT" means this Collaboration Agreement, including all attached
exhibits, schedules and annexes, as well as all amendments, supplements, and
restatements thereof.

5. "API" means, with respect to a Product, the active pharmaceutical ingredient
used in the Product.

6. "APPLICABLE LAW" means applicable U.S. and foreign laws, rules, regulations,
guidelines, and standards, including those of the FDA and comparable foreign
Regulatory Authorities.

7. "BANKRUPTCY CODE" means the U.S. Bankruptcy Code, 11 U.S.C. Sections 101 et
seq.

8. "CALENDAR QUARTER" means, with respect to the first such Calendar Quarter,
the period beginning on the Closing Date and ending on the last day of the
calendar quarter within which the Closing Date falls and, thereafter, each
successive period of three consecutive calendar months ending on March 31, June
30, September 30, or December 31. In the event that the termination of this
Agreement does not fall on the last day of a Calendar Quarter, the "FINAL
CALENDAR QUARTER" shall mean the period from the last day of the most recent
Calendar Quarter through the applicable date of termination of this Agreement.

9. "CALENDAR YEAR" means each successive twelve (12)-month period commencing on
January 1 and ending on December 31; provided that the first such Calendar Year
shall begin on the Closing Date and end on December 31, 2005. In the event that
the termination of this Agreement does not fall on the last day of a Calendar
Year, the "FINAL CALENDAR YEAR" shall mean the period from the last day of the
most recent Calendar Year through the applicable date of termination of this
Agreement.

10. "CLAIMS" has the meaning set forth in Section 5.1 of this Agreement.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-1

<PAGE>

11. "CLOSING" shall mean, subject to the satisfaction or waiver of the
conditions set forth in Section 6.1.3 of this Agreement, the closing of the
transactions contemplated by this Agreement.

12. "CLOSING DATE" shall mean the earlier of: (a) the third day, unless the
first day falls on a weekend or holiday, in which case it shall be the next
business day, after the expiration or termination of all applicable waiting
periods under the HSR Act and the satisfaction of all the other conditions set
forth in Section 6.1.3 of this Agreement or (b) the third day, unless the first
day falls on a weekend or holiday, in which case it shall be the next business
day, after the joint determination (by certification from each Party to the
other) that notification under the HSR Act is not required and the satisfaction
of all the other conditions set forth in Section 6.1.3 of this Agreement.

13. "CMC" means, with respect to a Product, the chemistry, manufacturing, and
controls information that would typically be, or is, included in an IND or NDA
for such Product.

14. "CO-CHAIRMAN" has the meaning set forth in Section 2.1 of this Agreement.

15. "COLLABORATION" means the association of PTI and King established pursuant
to this Agreement for the purpose of conducting the Development of Products so
as to accomplish the Development objectives of the Development Program.

16. "COLLABORATION COSTS" means the sum of each of the following costs incurred
by or on behalf of a Party in fulfilling its responsibilities under the
Development Program in accordance with the Program Plans for such Product, which
costs must be documented and supported, calculated in accordance with Sections
3.3.2 and 3.7 of this Agreement, and included in the budget of a Program Plan or
otherwise approved by King:

(a) all out-of-pocket costs, including amounts paid to Durect for materials and
services PTI is obligated to obtain from Durect under the DLA and any capital
expenses for equipment purchased for purposes of fulfilling PTI's obligations
under the Agreement (provided that the cumulative costs for such capital
equipment shall not exceed [***] and provided further that King shall have title
to any such capital equipment which it funds);

(b) all internal labor costs incurred by a Party in connection with its research
employees dedicated to providing services relating to a Product, such costs to
be calculated by multiplying the Hourly FTE Rate by the total number of hours
expended by such Party's personnel in performance of such services; provided
that no time of PTI's Chief Executive Officer, Chief Financial Officer, or any
administrative personnel of PTI will be billed to the Collaboration; and

(c) any other costs expressly provided for in this Agreement or a Project Plan.

Except to the extent this Agreement expressly provides for payments that do not
require such approval, and except to the extent King has approved any payment
hereunder, neither Party shall (i) be obligated to incur any costs or expend any
funds that have not been approved by such Party or (ii) have the authority to
cause the other Party to incur any costs or expend any funds that have

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-2

<PAGE>

not been approved by such other Party. Notwithstanding anything to the contrary
contained herein, Collaboration Costs shall not include (A) except to the extent
included in the FTE Rate, indirect costs, overhead, general, and administrative
costs and other similar costs of a Party, or (B) any costs that relate to the
business of a Party as a whole without specifically relating to a Product. In
calculating the Collaboration Costs, the following principles shall apply: (1)
there shall be no double counting of any costs or expenses or of any revenues;
(2) when allocating costs and expenses under this Agreement, each Party shall
utilize the same policies and principles as it utilizes consistently within its
group and business units when making internal cost allocations; and (3) all
costs and expenses shall be determined, and all calculations shall be made, in
accordance with GAAP.

17. "COMPLETION OF PHASE II" means completion of the final statistical results
of clinical trials that collectively evaluate the safety and efficacy of a
Product's specific dosage strength in an indication the Product is intended to
treat, which data enables the Parties to proceed with pivotal registration Phase
III studies, without any objection from the FDA, as documented by FDA contact
reports. For the avoidance of doubt, the "Completion of Phase II" for each
Product in the Collaboration shall be independent events.

18. "CONFIDENTIAL INFORMATION" means all information, Technology, and
Proprietary Materials that are disclosed to a Party (the "Receiving Party") by
or on behalf of the other Party (the "Disclosing Party") hereunder or under the
License Agreement or disclosed to any of the Receiving Party's employees,
Consultants, Affiliates, or Sublicensees, except to the extent that any such
information (a) as of the date of disclosure is known to the Receiving Party or
its Affiliates, as demonstrated by credible written documentation; (b) as of the
date of disclosure is in, or subsequently enters, the public domain, through no
fault or omission of the Receiving Party; (c) is obtained from a Third Party
having a lawful right to make such disclosure free from any obligation of
confidentiality to the Disclosing Party; or (d) is independently developed by or
for the Receiving Party without reference to or reliance upon any Confidential
Information of the Disclosing Party as demonstrated by credible written
documentation. It is further agreed that PTI Technology shall be deemed the
Confidential Information of PTI, King Technology shall be deemed the
Confidential Information of King, and Joint Technology shall be deemed the
Confidential Information of both Parties. During the Term hereof, neither Party
shall disclose any of its own Confidential Information in such a manner that
would reasonably be expected to adversely impact any intellectual property
rights or commercial interests of the Development Program or the Products,
unless such disclosure is subject to confidentiality obligations as strict as
those contained in this Agreement or the License Agreement.

19. "CONSULTANT" means a Third Party who has entered into or hereafter enters
into a written agreement with PTI or King or both to provide consulting services
that are material or are reasonably likely, in the judgment of the JOC, to
become material to the Development Program, which written agreement shall (a)
include an assignment of all right, title, and interest in and to all work
product and all inventions arising from the performance of such agreement, and
all intellectual property rights attaching thereto, to PTI or King, as
applicable, and (b) bind the relevant Third Party by obligations of
confidentiality and non-use with respect to all such work product, inventions,
Confidential Information, and intellectual property rights that are at least as
stringent as those set forth herein.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-3

<PAGE>

20. "CONSULTATION" means providing a Party with an opportunity to review and
comment on the development of strategies and the implementation of Program
Plans, permitting a Party to participate in, where practical, either by
telephone or in person, and to examine formal minutes of, all meetings and
telephone calls with respect to a matter under consideration, keeping a Party
informed regarding the progress of all matters, and giving due consideration to
the input and comments of a Party with respect to the matters under
consideration.

21. "CONTROL" or "CONTROLLED" means, (a) with respect to Technology (other than
Proprietary Materials) or Patent Rights, the possession by a Party of the
ability to grant a license or sublicense of such Technology or Patent Rights as
provided herein without the payment of additional consideration (other than any
additional consideration to be paid pursuant to the DLA) and without violating
the terms of any agreement or arrangement between such Party and any Third Party
and, (b) with respect to Proprietary Materials, the possession by a Party of the
ability to supply such Proprietary Materials to the other Party as provided
herein without the payment of additional consideration and without violating the
terms of any agreement or arrangement between such Party and any Third Party.

22. "[***]" means any dosage form that is covered by any patent or patent
application set forth on Schedule 22 hereto (the "Existing Patents"), as well as
any continuations, divisionals, continuations-in-part (to the extent any claims
thereof are entitled to claim priority to the filing date of any of the Existing
Patents), patents of addition, and substitutions of the Existing Patents,
together with all registrations, reissues, reexaminations or extensions of any
kind with respect to any of the foregoing patents, in each case to the extent
same are owned or controlled by PTI. In the event PTI reasonably believes that
any claims of a continuation-in-part application of any of the Existing Patents,
which claims are not entitled to claim priority to the filings date of any of
the Existing Patents, cover only an incremental improvement to the subject
matter described and claimed in the Existing Patents, PTI shall have the right
to request that King permit such additional claims to be included within the
definition of [***], and King shall consider such request in good faith.
Notwithstanding the foregoing, with respect to United States Application Serial
Nos. [***], and any applications or patents that claim priority to either of
same, to the extent that any claims cover a dosage form of an opioid agonist
alone or a method or process of using or making such a dosage form, such claims
shall not be within the definition of [***], but shall be considered PTI
Technology and PTI Patent Rights (and such applications and issued patents will
be included on the schedule of PTI Patent Rights solely to such extent).

23. "[***]" means any dosage form of a [***] that (a) contains [***] as the only
opioid agonist API and (b) is covered by the rights granted to PTI under the
DLA.

24. "CTM" or "CLINICAL TRIAL MATERIALS" means any Product manufactured,
packaged, and labeled as required by Applicable Law to be used as an
investigational drug or placebo for use in the conduct of clinical trials in
humans.

25. "DEBTOR PARTY" has the meaning set forth in Section 9.4.1(a) of this
Agreement.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-4

<PAGE>

26. "DEFAULT" means (a) a material breach, default, or violation, (b) for
purposes of Section 5.3 of this Agreement only, the occurrence of an event that
with or without the passage of time or the giving of notice, or both, would
constitute a material breach, default, or violation or cause any material
mortgages, liens, security interests, charges, covenants, options, claims,
restrictions, and encumbrances of any kind to arise, or (c) for purposes of
Section 3.8 of this Agreement only, the occurrence of an event that with or
without the passage of time or the giving of notice, or both, would give rise to
a right of termination, renegotiation, or acceleration or a material right to
receive damages or a payment of material monies or penalties of or under such
contract by a party other than a Party.

27. "DEFAULTING PARTY" has the meaning set forth in Section 3.8 of this
Agreement.

28. "DESIGNATED PRODUCT" means a Product being developed by PTI as of the
Effective Date (i.e., the first three (3) products specified in Section 3.1.1 of
this Agreement, namely one (1) Product having oxycodone as the opioid API
(Remoxy), one (1) Product having [***] as the opioid API, and one (1) Product
having [***] as the opioid API); and "DESIGNATED PRODUCTS" means, collectively,
all of the foregoing Products.

29. "DEVELOPMENT" or "DEVELOP" means, with respect to a Product, all research,
pre-clinical, pharmaceutical, clinical, and regulatory activities and all other
activities undertaken in order to obtain Regulatory Approval of such Product in
accordance with this Agreement prior to Regulatory Approval of such Product.
These activities shall include, among other things: test method development, CMC
methods and reports (including formulation, process development,
development-stage manufacturing, manufacturing scale-up, technical transfer,
quality assurance, and quality control), pre-clinical pharmacology and
toxicology studies and associated reports, planning and conduct of clinical
studies, protocols, clinical study reports, statistical analysis plans, and
clinical quality assurance prior to obtaining Regulatory Approvals, obtaining
Regulatory Approvals, and regulatory affairs related to the foregoing.

30. "DEVELOPMENT PLANS" means the written plans (which shall include detailed
strategy, budget, and proposed timelines) describing the pre-clinical and
clinical Development activities and the regulatory activities, including a
general overview of the expected schedule of meetings, discussions, and
correspondence with Regulatory Authorities to be carried out for each Product
during each Calendar Year pursuant to this Agreement, which plans shall include
the expected Regulatory Filings to be completed and maintained by the
Collaboration for each Product. The Development Plans will be amended from time
to time to include statistical analysis plans, protocols, case report forms,
clinical study reports, audit reports, and similar matters, as such matters are
developed during the Collaboration. Without limiting the foregoing, such plans
shall include, at a minimum, the activities required to remain in compliance
with the terms and obligations applicable to PTI under the DLA. Each Development
Plan will be set forth in a written document prepared by the Parties pursuant to
Section 3.4 of this Agreement, and a separate Development Plan will be generated
and approved with respect to each Product.

31. "DEVELOPMENT PROGRAM" means, collectively, (a) the collaborative development
program in the Field conducted by PTI and King and (b) the marketing program in
the Field conducted by King, in each case, commencing on the date hereof and
conducted pursuant to this Agreement and the Program Plans.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-5

<PAGE>

32. "DISCRETIONARY FUNDING" has the meaning set forth in Section 3.7.3 of this
Agreement.

33. "DURECT LICENSE AGREEMENT" or "DLA" means the Development and License
Agreement, dated as of December 19, 2002, by and among PTI, DURECT Corporation
("DURECT"), and Southern BioSystems, Inc., a copy of which has been provided to
King, as it may be amended from time to time hereafter in accordance with
Section 2.4 of the License Agreement.

34. "EFFECTIVE DATE" has the meaning set forth in the first paragraph of this
Agreement.

35. "EXISTING MANAGEMENT TEAM" means not less than [***] percent ([***]%) of the
individuals who, as of the date that is one year prior to the commencement of
any case by or against PTI under the Bankruptcy Code, are designated as
"Officers" of PTI under Rule 16a-1(f) promulgated pursuant to the Securities
Exchange Act of 1934, as amended.

36. "FDA" means the United States Food and Drug Administration or any successor
agency.

37. "FIELD" means pharmaceutical formulations for use in humans that contain no
more than one opioid API formulated using the SABER Technology, in accordance
with the DLA.

38. "FIRST COMMERCIAL SALE" means, with respect to any product, the first
arm's-length sale by King, its Affiliates, or Sublicensees to a Third Party for
end-use or consumption, including any sale to a wholesaler or distributor, of
such product in a country after the applicable Regulatory Authority has granted
Regulatory Approval. For purposes of this definition, any sale to an Affiliate
or Sublicensee will not constitute a First Commercial Sale.

39. "FORCE MAJEURE EVENT" means an event beyond the reasonable control of a
Party that prevents the performance, in whole or in part, by the Party of any of
its obligations hereunder, including by reason of any act of God, flood or other
inclement weather patterns, fire, explosion, earthquake, or war, terrorist act,
revolution, civil commotion, acts of public enemies, blockage or embargo, or the
like, or any injunction, law, order, ordinance, or requirement of any government
or of any subdivision, authority, or representative of any such government, if,
and only if, the Party affected shall have used commercially reasonable efforts
to avoid the effects of such occurrence and to remedy it promptly if it has
occurred.

40. "FTE RATE" means a rate of [***] U.S. dollars ($[***]) per [***] hours of
work performed by personnel during Calendar Years 2005 and 2006, said rate to be
increased as of January 1, 2007, and annually thereafter to reflect actual
increases in the applicable Party's expenses.

41. "GAAP" means United States generally accepted accounting principles of the
Party performing the applicable work, consistently applied.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-6

<PAGE>

42. "GOOD CLINICAL PRACTICES" means the international ethical and scientific
quality standards for designing, conducting, recording, and reporting trials
that involve the participation of human subjects. In the U.S. Territory, Good
Clinical Practices are established through FDA guidances (including ICH E6).

43. "GOOD LABORATORY PRACTICES" means the minimum standards for conducting
non-clinical laboratory studies that support or are intended to support
applications for research or marketing permits for products regulated by the FDA
or equivalent foreign Regulatory Authority, including food and color additives,
animal food additives, human and animal drugs, medical devices for human use,
biological products, and electronic products. In the U.S. Territory, Good
Laboratory Practices are established through FDA regulations (including 21 CFR
Part 58), FDA guidances, FDA current review and inspection standards, and
current industry standards.

44. "GOOD MANUFACTURING PRACTICES" means the minimum standards for methods to be
used in, and the facilities or controls to be used for, the manufacture,
processing, packing, or holding of a drug to assure that such drug meets the
requirements of the Federal Food, Drug and Cosmetic Act of 1938, or its foreign
equivalent, as amended, as to safety, and has the identity and strength and
meets the quality and purity characteristics that it purports or is represented
to possess. In the U.S. Territory, Good Manufacturing Practices are established
through FDA regulations (including 21 CFR Parts 210-211), FDA guidances, FDA
current review and inspection standards, and current industry standards.

45. "HOURLY FTE RATE" means the hourly rate obtained by dividing the FTE Rate by
[***] hours.

46. "HSR ACT" means the Hart-Scott-Rodino Act of 1976, as amended.

47. "IND" means (a) an Investigational New Drug Application (as defined in 21
CFR Section 312.3) that is required to bE filed with the FDA before beginning
clinical testing of a Product in human subjects, or any successor application or
procedure, or (b) any counterpart of a U.S. Investigational New Drug Application
that is required in any other country or region in the Territory before
beginning clinical testing of a Product in human subjects in such country or
region.

48. "INDEMNIFIED PARTY" has the meaning set forth in Section 11.3 of this
Agreement.

49. "INDEMNIFYING PARTY" has the meaning set forth in Section 11.3 of this
Agreement.

50. "INVENT" or "INVENTED" means (a) with respect to patentable Technology, to
invent or discover, as such terms are used in 35 U.S.C. Section 101 and (b) with
respect to non-patentable Technology, to discover, make or otherwise develop.

51. "IRB" means an Institutional Review Board or any constituted group that has
been formally designated by a clinical site to review and monitor biomedical
research involving human subjects.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-7

<PAGE>

52. "JOINT OVERSIGHT COMMITTEE" or "JOC" means the committee of PTI and King
representatives established pursuant to Section 2.1 of this Agreement to
administer the affairs of the Development Program.

53. "JOINT PATENT RIGHTS" means Patent Rights claiming Joint Technology, as set
forth on Schedule 53 hereto, which may be amended from time to time as necessary
to accurately reflect the foregoing.

54. "JOINT TECHNOLOGY" means any Technology jointly Invented by employees of
King and PTI, or Consultants to King and PTI, during and in the conduct of the
Development Program.

55. "KING" has the meaning set forth in the first paragraph of this Agreement.

56. "KING BACKGROUND TECHNOLOGY" means any Technology that is useful in the
Field or that is actually used in the Development, making or Marketing of
Products and that is Controlled by King on the Closing Date.

57. "KING INDEMNITEES" has the meaning set forth in Section 11.1 of this
Agreement.

58. "KING PATENT RIGHTS" means all Patent Rights that are Controlled by King and
that claim King Technology, as set forth on Schedule 58 hereto, which may be
amended from time to time as necessary to accurately reflect the foregoing.

59. "KING PROGRAM TECHNOLOGY" means any Technology that is (a) Invented by
employees of, or Consultants to, King, alone or jointly with Third Parties
(other than Consultants of PTI), in the conduct of the Development Program or
(b) useful in the Field or that is actually used in the Development,
manufacturing or Marketing of Products and that are acquired by King after the
Closing Date pursuant to a Third Party Agreement.

60. "KING TECHNOLOGY" means, collectively, King Background Technology and King
Program Technology.

61. "KNOWLEDGE" means the actual knowledge of a Party having taken reasonable
steps to be informed of applicable actions and activities in the normal course
of business.

62. "LICENSE AGREEMENT" means that certain License Agreement to be executed by
the Parties in the form attached hereto as Exhibit A.

63. "LOSSES" has the meaning set forth in Section 11.1 of this Agreement.

64. "MAJOR MARKET COUNTRY" means one of Canada, Germany, the United Kingdom,
France, Spain, Italy, or Japan; and "MAJOR MARKET COUNTRIES" means,
collectively, all of the foregoing countries.

65. "MANUFACTURING/CMC PLANS" means the written CMC and manufacturing plans
(which shall include a detailed strategy, budget, and proposed timelines)
describing the API, synthesis, choice of manufacturers and Third Party
suppliers, expected manufacturing scale-up,

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-8

<PAGE>

manufacture, formulation, process development, development-stage manufacture,
clinical supplies manufacturing, quality assurance/quality control development,
stability, filling, packaging and labeling, and shipping requirements for each
Product (in accordance with customary standards for a product of comparable
market potential), including all CMC, and the activities to be carried out by
each Party during the applicable Calendar Year. Each Manufacturing/CMC Plan will
be set forth in a written document prepared by the Parties pursuant to Section
3.5 of this Agreement, and a separate Manufacturing/CMC Plan will be generated
and approved with respect to each Product.

66. "MARKET" or "MARKETING" means any and all activities directed to the
marketing, detailing, and promotion of a Product for commercial sale and shall
include pre-launch and post-launch marketing, mandated and non-mandated
risk-management policies and procedures, market surveillance activities,
promoting, detailing, distributing (including the cost and distribution of
Product samples), offering to sell, and selling a Product, importing a Product
for sale, and any and all Product Development conducted after obtaining
marketing approval for any Product that is not performed as a condition to the
first Regulatory Approval for a Product. If a Phase IV trial is performed as a
condition to fulfill an obligation for Regulatory Approval for a Product, such
trial shall be considered a Development activity (but not Product Development).

67. "NDA" means a New Drug Application (or an abbreviated New Drug Application)
to market the Product in the Territory or similar application submitted to the
FDA, or its foreign equivalent submitted to any Regulatory Authority in the
Territory, and all supplements and amendments thereto.

68. "NET SALES" means the gross amount invoiced by King its Affiliates or
Sublicensees, to Third Parties for sale of Products, less, to the extent
deducted from such amount or on such invoice consistent with GAAP, the following
items: (a) quantity, trade or cash discounts, chargebacks, returns, allowances,
rebates (including any and all federal, state or local government rebates, such
as Medicaid rebates) and price adjustments, to the extent actually allowed; (b)
sales and other excise taxes and duties or similar governmental charges levied
on such sale, to the extent such items are included in the gross invoice price;
(c) amounts actually refunded due to rejected, spoiled, damaged, outdated or
returned Product; and (d) freight, shipment and insurance costs actually
incurred in transporting Product to a Third Party purchaser. If any Products are
sold to Third Parties in transactions that are not at arm's length between the
buyer and seller, or for consideration other than cash, then the gross amount to
be included in the calculation of Net Sales for such sales shall be the amount
that would have been invoiced had the transaction been conducted at arm's
length, which amount shall be determined, whenever possible, by reference to the
average selling price of the relevant Product in arm's-length transactions in
the country of sale at the time of sale. Net Sales shall not include amounts
invoiced for the supply, disposal of Product for, or use of Product, in clinical
or pre-clinical trials or as free samples (such samples to be in quantities
common in the industry for this sort of Product).

69. "NON-DEBTOR PARTY" has the meaning set forth in Section 9.4.1(a) of this
Agreement.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                    Annex A-9

<PAGE>

70. "NON-DEFAULTING PARTY" has the meaning set forth in Section 3.8 of this
Agreement.

71. "PARTY" or "PARTIES" has the meaning set forth in the first paragraph of
this Agreement.

72. "PATENT RIGHTS" means the rights and interests in and to issued patents and
pending patent applications (which for purposes of this Agreement shall be
deemed to include certificates of invention and applications for certificates of
invention and priority rights) in any country, including all provisional
applications, substitutions, continuations, continuations-in-part, divisions,
and renewals, all letters patent granted thereon, and all reissues,
reexaminations and extensions thereof.

73. "PHASE II" means a human clinical trial or trial program in any country that
is intended to evaluate the safety and efficacy of a Product's dose and dose
regimen in a specific indication the Product is intended to treat.

74. "PHASE II MEETING" means, with respect to a Product, the meeting with the
FDA held at the end of Phase II, it being agreed that King shall have the right
to participate in the preparations and planning conducted in anticipation of or
in connection with such meeting.

75. "PHASE III" means a human clinical trial in any country that would otherwise
meet the definition of 21 CFR 312.21(c), or its foreign equivalent.

76. "PRODUCT" means (a) any dosage form of Remoxy, and (b) any other product in
the Field (i) that incorporates the SABER Technology and is covered by the
rights licensed to PTI under the DLA, and (ii) that is Developed or Marketed
pursuant to this Agreement. For purposes of clarity, "Product" includes those
products within the Field that the Parties have agreed to Develop and Market as
of the Effective Date, as well as any and all other products in the Field that
King actually designates to be Developed or Marketed under this Agreement during
the Term thereof.

77. "PRODUCT DEVELOPMENT" means (a) with respect to the U.S. Territory, the
conduct by King and its Affiliates of additional clinical studies of a Product
that has previously received Regulatory Approval from the FDA, which additional
clinical studies are conducted using CTM that is in the same formulation and
dosage form as the Product for which Regulatory Approval was previously
obtained, and (b) with respect to the ROW, the conduct by King, its Affiliates,
or its Sublicensees of clinical studies of a Product, which additional clinical
studies are conducted using CTM that is in the same formulation and dosage form
as the Product for which Regulatory Approval was previously obtained in the U.S.
Territory (or if Regulatory Approval has not yet been obtained in the U.S.
Territory, then using CTM in the same formulation(s) and dosage form(s) then
being utilized by PTI under the Development Plan for such Product in the U.S.
Territory). For purposes of clarity, Product Development shall include the right
(i) to use the clinical data generated in such clinical studies to seek
additional Regulatory Approvals for a Product and engage in associated
regulatory activities and (ii) to develop new indications for a Product with the
same formulation and dosage form and to develop additional support for the
Product generally.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                   Annex A-10

<PAGE>

78. "PRODUCT TRADEMARK(S)" means any trademarks and trade names, whether or not
registered, and any trademark applications, renewals, extensions or
modifications thereto in the Territory together with all goodwill associated
therewith, trade dress and packaging which are applied to or used with Products,
and any promotional materials relating thereto.

79. "PROGRAM FEE" has the meaning set forth in Section 6.2 of this Agreement.

80. "PROGRAM PLANS" means the Development Plans, the Manufacturing/CMC Plans,
and the Yearly Brand Plans.

81. "PROPRIETARY MATERIALS" means any tangible chemical, biological or physical
research materials.

82. "PTI" has the meaning set forth in the first paragraph of this Agreement.

83. "PTI BACKGROUND TECHNOLOGY" means any Technology that is useful in the Field
or that is actually used in the Development, manufacturing or Marketing of
Products and that is Controlled by PTI on the Closing Date, expressly including
all rights licensed to PTI pursuant to the DLA.

84. "PTI INDEMNITEES" has the meaning set forth in Section 11.2 of this
Agreement.

85. "PTI PATENT RIGHTS" means all Patent Rights that are Controlled by PTI and
that claim PTI Technology, expressly including all rights licensed to PTI
pursuant to the DLA, all as set forth on Schedule 85 hereto, which may be
amended from time to time as necessary to accurately reflect the foregoing.

86. "PTI PROGRAM TECHNOLOGY" means any Technology that is (a) Invented by
employees of, or Consultants to, PTI, alone or jointly with Third Parties (other
than Consultants of King), in the conduct of the Development Program or (b)
useful in the Field or that is actually used in the Development, manufacturing
or Marketing of Products and that are acquired by PTI after the Closing Date
pursuant to a Third Party Agreement.

87. "PTI TECHNOLOGY" means, collectively, PTI Background Technology and PTI
Program Technology.

88. "REGULATORY APPROVAL" means approval by the FDA or other Regulatory
Authority to market a product in a regulatory jurisdiction.

89. "REGULATORY AUTHORITY" means the FDA, the Drug Enforcement Administration,
or any counterpart of such agencies outside the United States, or other
national, supra-national, regional, state, or local regulatory agency,
department, bureau, commission, council, or other governmental entity with
authority over the distribution, importation, exportation, manufacture,
production, use, storage, transport, or clinical testing, pricing, or sale of a
Product, including any device incorporating the Product.

90. "REGULATORY FILINGS" means, collectively, any and all INDs and drug master
files, NDAs, applications for any device incorporating the Product, applications
for designation of a

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                   Annex A-11

<PAGE>

Product as an "Orphan Product(s)" under the Orphan Drug Act or any other similar
filings (including any foreign equivalents and further including any related
correspondence and discussions), and all data contained therein, as may be
required by or submitted to any Regulatory Authority for the Regulatory
Approval.

91. "REMOXY" means a drug product in the Field that contains oxycodone as its
opioid API and that is formulated using the SABER Technology.

92. "ROW" means all countries and jurisdictions in the Territory, other than the
U.S. Territory.

93. "SABER INFRINGEMENT" has the meaning set forth in Section 10.2(c) of this
Agreement.

94. "SABER TECHNOLOGY" means the pharmaceutical formulation technology and
methods of use that are covered by the rights granted to PTI pursuant to the
DLA.

95. "SCIENTIFIC FAILURE" has the meaning set forth in Section 9.2.2(b) of this
Agreement.

96. "SUBLICENSEE" means any Third Party to which a Party or both Parties grant a
sublicense of some or all of the rights granted to such Party under this
Agreement or the License Agreement, as permitted by this Agreement or the
License Agreement.

97. "TAXES" means, collectively, taxes, deductions, duties, levies, fees, or
charges (including any interest or penalties imposed thereon or related thereto.

98. "TECHNOLOGY" means and includes all inventions, discoveries, improvements,
trade secrets and proprietary methods and materials, including Proprietary
Materials, whether or not patentable, relating to the Field, including (a)
samples of, methods of production or use of, and structural and functional
information pertaining to, chemical compounds, proteins or other biological
substances and (b) data, formulations, techniques and know-how (including any
negative results).

99. "TECH TRANSFER" means cooperation between the Parties in effecting an
orderly transition of the matters in question with respect to a Product,
including transferring all information and files, and disclosing all necessary
Technology, to the transferee. To the extent Applicable Law requires the
transferee to control original documents, such original documents will be
provided to the transferee as part of the Tech Transfer. Unless otherwise
provided, all costs associated with Tech Transfers will be deemed Collaboration
Costs.

100. "TERM" means the term of this Agreement as set forth in Section 9.1 of this
Agreement.

101. "TERMINATION PROCEDURES" has the meaning set forth in Section 9.2.3 of this
Agreement.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                   Annex A-12

<PAGE>

102. "TERRITORY" means worldwide, including the U.S. Territory, but excluding
Australia and New Zealand.

103. "TERMINATED PRODUCT" has the meaning set forth in Section 3.1.4 of this
Agreement.

104. "THIRD PARTY" means any person or entity other than King and PTI and their
respective Affiliates.

105. "THIRD PARTY AGREEMENTS" has the meaning set forth in Section 3.8 of this
Agreement.

106. "U.S. TERRITORY" means the United States, including Puerto Rico, and any
other U.S. protectorates, territories, and possessions.

107. "VALID CLAIM" means a claim of a pending patent application or an issued
unexpired patent which, in each case, shall not have been withdrawn, canceled or
disclaimed, or held unpatentable, invalid or unenforceable by a court or other
tribunal of competent jurisdiction in an unappealed or unappealable decision.

108. "YEARLY BRAND PLANS" means the written Marketing plans (which shall include
a detailed strategy and proposed timelines to be undertaken) describing the
activities to be carried out by King during each applicable Calendar Year
pursuant to this Agreement. Each Yearly Brand Plan will be set forth in a
written document prepared by King and reviewed by the JOC pursuant to Section
3.6 of this Agreement, and a separate Yearly Brand Plan will be generated and
approved with respect to each Product.

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.


                                   Annex A-13

<PAGE>

                                                                       EXHIBIT A

                                LICENSE AGREEMENT

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                SCHEDULE 10.2 (D)

[***]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                   SCHEDULE 22

[***]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                  SCHEDULE 53

[***]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                   SCHEDULE 58

[***]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

                                   SCHEDULE 85

[***]

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

<PAGE>

  PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
  SECRETARY OF THE COMMISSION PURSUANT TO THE COMPANY'S APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.