Document:

<PAGE>

                                                CONFIDENTIAL TREATMENT REQUESTED

                                                                  Exhibit 10. 13

     Quote 1090 - Revised 10/27/99, 12/22/99, 1/17/00, 2/11/00 and 2/16/00

                                      To

                              Durect Corporation

                               CBL Approval Page

Two signatures are required.

Tom Rice:           _________________________________________
                    Chief Executive Officer

John Botek:         _________________________________________
                    Chief Operating Officer

Narlin Beaty:       _________________________________________
                    Chief Operating Officer

Henry Clark:        _________________________________________
                    Director of Client Relations

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.
<PAGE>

                       CONFIDENTIAL TREATMENT REQUESTED

                               PROJECT PROPOSAL

TO: Barbara Laidlaw                      FROM: Charles Proby
    Durect Corporation                         Chesapeake Biological Labs., Inc.
    10240 Bubb Road                            1111 S. Paca Street
    Cupertino, CA 95014                        Baltimore, MD 21230

Issue Date: October 11, 1999              Quotation No.: 1090 - Revised 10/27/99
----------                                -------------
                                                                Revised 12/22/99
                                                                Revised 1/17/00
                                                                Revised 2/11/00
                                                                Revised 2/16/00
Subject:    Duros(R) Sufentanil
-------

Duration:   This quote is valid for 60 days from issue date.
--------

Schedule:   See CBL Scheduling Policy.
--------

CHESAPEAKE BIOLOGICAL LABORATORIES, INC. will provide materials and perform work
as described in the Scope of Work.  This quotation consists of the following
sections.

1.  Scope of Work
    A. Project Description
    B. Process Diagram
    C. Development and Validation Work
2.  Project Price or Budget
3.  CBL Scheduling Policy
4.  Cancellation and Postponement Policy
5.  Terms and Conditions

    **Hazardous waste will be manifested and discarded as required by state and
      federal laws.  This expense is not included in the quoted price and will
      be charged to the client at [* * *]
                                   -----

DURECT CORPORATION will provide the following:

1.  Pre-released active pharmaceutical ingredient, label text, MSDS,
    Certificate of Analysis and all

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 1 of 16

<PAGE>

     documentation necessary for release.
2.   Approval by signature of the batch record.
3.   Any necessary approvals for the use of the product.
4.   Perform all additional testing necessary for release of the product not
     performed by CBL.SCOPE OF WORK

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 2 of 16
<PAGE>

                                 SCOPE OF WORK

                              DURECT CORPORATION
================================================================================
CONTACT: Barbara Laidlaw       Phone: 408-777-3554   Fax:   408-777-3577

PRODUCT NAME: Duros(R) Sufentanil  (Schedule II)

PRODUCT USE:  Narcotic Analgesic

EXPECTED BATCH SIZE: ~500, 20 cc vials

BIOHAZARD: Yes                                     FDA STATUS: IND Phase II
================================================================================

Targeted fill date: See attached CBL Scheduling Policy.

General Project Description:

This project will consist of component receipt and control, formulation,
filtration, aseptic filling, inspection, testing, stability, labeling and
packaging.

1.   Client will supply active pharmaceutical ingredient, label text, MSDS,
     Certificate of Analysis and all documentation necessary for release. Label
                                                                          -----
     text must be received at CBL a minimum of 6 weeks prior to the date of
     ----------------------------------------------------------------------
     filling.
     -------
2.   [* * *]
3.   CBL will supply cGMP released chemicals, containers, closures, labels and
     processing and laboratory equipment.
4.   All product contact equipment will be virgin, product dedicated or released
     as clean, unless specified otherwise.
5.   Validation work as listed in this Scope of Work will, in general, precede
     sterile fill.
6.   A CBL batch record will be developed from the process diagram submitted by
     Client.
7.   Remaining bulk product and all inspection rejects will be returned to
     Client or destroyed at Client's instruction.
8.   At completion of all work, CBL will provide Client with a copy of the
     completed Batch Production Record including a Certificate of Analysis.
9.   The Quality Agreement (Appendix 2) defines the quality performance
     conditions agreed to between CBL and Client.

NOTE: DEA Schedule II; Respiratory protection required when handling drug
substance.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 3 of 16
<PAGE>

--------------------------------------------------------------------------------
                         DEVELOPMENTAL/VALIDATION WORK
--------------------------------------------------------------------------------

IQ/OQ/PQ of Custom Filling Equipment

Client will provide process and analytical equipment required for any novel
manufacturing methods. CBL will perform installation qualification (IQ),
operational qualification (OQ) and performance qualification (PQ) as required by
CBL SOP5211 and others.  A portion of the PQ will be the evaluation of
modifications which might be necessary to use the equipment in the clean room in
such a way as to eliminate the chance of particulate or microbiological
contamination during operation.  The cost estimate assumes that relatively
straightforward engineering solutions for clean room use of the equipment will
be found.  To minimize timing delays, CBL engineering staff will participate in
final stages of equipment qualification at Client facility prior to shipment of
equipment to CBL.
[* * *]

Fill Process Development

This refers to the aseptic design for operations within the clean area.  It
involves the arrangement of support equipment and sequence of assembly and
preparation operations.  Whenever more than the usual filling equipment is going
to be located within class 100 space, and additional time will be devoted to
that compounding/processing activity, then it is especially important, that
thorough consideration be given to possible generation of particulates.
Engineering Technical Services has the responsibility to design both the
physical and temporal operations, including preparation of a bill of materials
necessary to assure a smooth operation, without delays for unanticipated sterile
parts.  Fill process development will include the filling of pumps with
formulation or a suitable surrogate.  These pumps could be evaluated for
performance to ensure that the filling process is functioning correctly.

Aseptic Process Validation  (media fills)

Three media fill processes will be performed in the class 100 area simulating
the entire process up to and including the actual filling of vials. Each fill
requires NLT 14 days for incubation to determine sterility.  The purpose of
these fills is to demonstrate aseptic operations within the clean environment.

Assay Validation ([* * *] Sufentanil - Customer to supply).

Assays will be validated according compendial methods of the US Pharmacopeia 23
<1225>.  Typical analytical parameters will be considered in the validation of
all assays.  In particular, CBL will consider accuracy, precision, specificity,
limit of detection, limit of quantitation, linearity and range.  All of these
parameters are not necessarily suitable to every analytical test.  In addition
to the analytical parameters CBL will also consider ruggedness and robustness.
Clearly different test methods require different validation  schemes.  Category
I includes analytical methods for quantitation of major components of bulk drug
substances or active ingredients.  Category II includes analytical methods for
determination of impurities in bulk drug substances.  Category III is for
analytical methods used in the determination of performance characteristics.
CBL will generate a validation protocol consistent with USP 23 <1225>.  Data
will be collected and reviewed and a final validation report written.

Bacteriostasis/Fungistasis (for Product)

B/F is required in order to establish the potential of the formulation to
interfere with sterility assays.  B/F testing can be performed on developmental
batches as long as they are prepared with material equivalent to that intended
for clinical use and have the same formulation as will the GMP batches.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 4 of 16
<PAGE>

Enhancement/Inhibition (for Product)

E/I evaluates the potential for interference by the formulation with the assay
used to measure endotoxin.  A preliminary E/I determination will be required to
allow quantitation of endotoxin in developmental batches. Full validation of E/I
is required once preparation of GMP batches begins.  Validation involves
performing E/I on three consecutive batches.

Cleaning Recovery Study

This product will use product-dedicated equipment only.  Contract manufacturers
must be able to assure themselves, their clients, and the FDA that no
significant chance exists for cross contamination to occur among products
sharing equipment which may conceivably contact product.   CBL requires
demonstration that products are easily removed from glass or stainless steel
surfaces (as appropriate) by the routine cleaning methods called for in CBL
cleaning procedures.  The cleaning study involves spotting product onto a
stainless steel coupon or tray and simulating the method for cleaning the
equipment.  Recovery of the product from a stainless steel surface and
evaluation of cleaning are monitored by TOC (Total Organic Carbon) analysis
which, while lacking the specificity of methods such as HPLC, compensates by
virtue of its sensitivity. The cleaning study is expected to demonstrate removal
of product from the steel or glass surface. While a negative result is not
expected, such a result would require additional evaluation of the data obtained
and close consultation with the Client regarding the ability of CBL to proceed.

Specifically, for swab recovery, data must be developed to demonstrate the
following:

a)   The swab does recover the material of interest.
b)   The amount of material recovered on the swab can be detected using a
     validated and appropriate analytical method.
c)   The quantity of material detected on the swab can be correlated to the mass
     of residual on the surface being cleaned.
d)   The correlation described above is strong and covers the range of interest.

Filling Machine Fill Volume Qualification

CBL will perform a fill volume study with the actual product (or placebo) to
assure machine process capability.  This study will set the target volume for
the fill using volume specifications or label data for the product.  Typically,
a minimum alert level is set at +/- 3 sigma from the target weight for the fill
volume.  The specification is then set slightly outside of those alert levels.

No fill volume qualification will be performed due to the unique filling machine
used for this process. The filling process for this product utilizes a fill
level check performed on each unit by a machine vision system.

[* * *]

Point 1: [* * *]                                Point 9:  [* * *]
Point 2: [* *]                                  Point 10: [* * *]
Point 3: [* *]                                  Point 11: [* * *]
Point 4: [* *]                                  Point 12: [* * *]
Point 5: [* *]                                  Point 13: [* * *]
Point 6: [* *]                                  Point 14: [* * *]
Point 7: [* *]                                  Point 15: [* * *]
Point 8: [* * *]

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 5 of 16
<PAGE>

[* * *]. The following document outlines [* * * ] is based on that described in
[* * *]

The following assumptions are made with regard to [* * *]:

>  [* * *] in this study.

>  [* * *] is included in the program.

>  [* * *] and should be considered [* * *]
                                     -----

>  [* * *] will be developed separately.

>  [* * *] and is not included in the program herein.

>  The [* * *] will only be included [* * *].
                                      -----

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------
     Activity         **              **               **                **            **      **
     ---------------------------------------------------------------------------------------------
     <S>          <C>     <C>     <C>     <C>      <C>      <C>      <C>      <C>      <C>     <C>
     [* * * ]     **      **      **      **       **       **       **       **       **      **
      ------
     ---------------------------------------------------------------------------------------------
     [* * * ]     **      **      **      **       **       **       **       **       **      **
     ---------------------------------------------------------------------------------------------
     [* * * ]     **      **      **      **       **       **       **       **       **      **
     ---------------------------------------------------------------------------------------------
     [* * * ]     **      **      **      **       **       **       **       **       **      **
     ---------------------------------------------------------------------------------------------
     [* * * ]         **              **               **                **            **      **
     ---------------------------------------------------------------------------------------------
     [* * * ]     **      **      **      **       **       **       **       **       **      **
     ---------------------------------------------------------------------------------------------
</TABLE>

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 6 of 16
<PAGE>

DURECT
Nbb 10/4/99

[Flow chart describing product supply, product manufacture and product testing
omitted pursuant to request for confidential treatment]

[* * *]

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 7 of 16
<PAGE>

Project Budget:
--------------

<TABLE>
<CAPTION>
    ----------------------------------------------------------------------------------------------------
                   Activity                                       Deliverable         Estimated Price
    ----------------------------------------------------------------------------------------------------
    <S>                                                           <C>             <C>
    IQ/OQ/PQ Custom Filling Equipment/(7)/                        Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Fill Process Development                                      Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Aseptic Process Validation (media fills)                      Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Assay Validation/Testing
        [* * *]                                                   Report          [* * *]
                                                                  Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Bacteriostasis/Fungistasis                                    Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Enhancement/Inhibition1                                       Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Cleaning Recovery Study                                       Report          [* * *]
    ----------------------------------------------------------------------------------------------------
    Total Development/Validation Package                                          [* * *]
    ----------------------------------------------------------------------------------------------------
    Fill Finish (3 lots at [* * /2/]                              Final Product   [* * *]
    ----------------------------------------------------------------------------------------------------
    Stability (excluding "release rate assay")                    Report          [* * *]
    Pump Release Rate Assay/4/                                                    [* * *]
    Maximum price at 12 months                                                    [* * *]
    ----------------------------------------------------------------------------------------------------
    Finished Product Pump Release Rate Assay/6/                   QC Batch        [* * *]
    Maximum estimate for 15 timepoints x 3 lots                   Record          [* * *]
    ----------------------------------------------------------------------------------------------------
    Project Management and Initiation Fee/3/                      NA              [* * *]
    ----------------------------------------------------------------------------------------------------
    TOTAL                                                                         [* * *]
    ----------------------------------------------------------------------------------------------------
</TABLE>
    /1/These studies must be performed three times and will be invoiced each
       time, once for each of the first three lots produced at CBL. Price
       represents the total cost.
    /2/Each lot will run for[* * * ]are produced, whichever comes first.

    /3/Project Management Fee to remain fixed independent of the number of
       fills.
    /4/[* * *]
    /5/[* * *]
    /6/Other finished product testing is included in the filling price.
    /7/[* * *]

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 8 of 16
<PAGE>

Terms:    Purchase Order for Quote 1090 is to be issued for the Total of[* * *]
-----
          . The Project Management and Initiation Fee must accompany the
            Purchase Order.
          . [* * *] of the Fill/Finish Price will be invoiced at completion of
            QC testing by CBL, or at product shipment, [* * *].
          . [* * *] of the Fill/Finish Price will be invoiced at shipment of
            completed batch record, [* * *].
          . The Pump Release Rate Assay will be invoiced with each time point,
            [* * *].
          . Qualification/Validation Studies will be invoiced with each report,
            [* * *].
          . Stability will be invoiced with each time point, [* * *].
          . The prices set forth in the Project Budget are firm quotes and shall
            be applicable unless the activities or services contemplated in this
            Quote 1090 are changed by mutual agreement of CBL and Client.

          FOB Sellers Dock, freight collect.

          Cancellation and Postponement and Terms and Conditions policies will
apply.

The opportunity to work with Durect Corporation on this project is appreciated.

Sincerely,

Charles Proby
Director, Sales

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 9 of 16
<PAGE>

                             CBL SCHEDULING POLICY

In order for CBL to maintain a smooth manufacturing schedule, and offer maximum
flexibility to our Clients without punitive fees, CBL adheres to this policy.
This policy allows our project managers to provide each Client with an estimated
filling date for the purposes of completing a timeline.  However, CBL's
manufacturing schedule will be set by the manufacturing division and only those
projects, which have achieved the following milestones will be put on the
schedule.

     !  Receipt of purchase order and requisite prepayment.
     !  All required validations/qualifications have been performed and
        approved.
     !  Production batch record signed by all parties.
     !  All equipment and preparation items in-house and available for use.
     !  Components, excipients, and/or active ingredients have been received and
        released.

Every effort will be made to schedule product fills as soon as practicable after
achieving the above, events. After CBL and Durect have agreed to a filling date,
then CBL will fill no later than five working days after the scheduled date.  We
recognize that some products have sensitive active ingredients that must be
chilled, filled and lyophilized within a short time window. Once on the
manufacturing schedule, the Client will be notified of the actual fill date and
charged for any postponement or cancellation caused by the Client.

CBL will work closely with you to ensure that your requirements are met. Should
scheduling changes be necessary, you will be notified immediately by your
project manager.

Effective: January 17, 2000

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 10 of 16
<PAGE>

                     CANCELLATION AND POSTPONEMENT POLICY

1.  Clean room and lyophilizer dates will not be assigned without a valid
    purchase order.

2.  All purchase orders must be accompanied by the Project Management and
    Initiation Fee.

3.  If a fill lot is CANCELED, the fee schedule in effect at the time of the
    cancellation will apply.  The current fee schedule is:

             Notification Prior to Fill Day                     Fee
             ----------------------------------------------------------

             >60 days                                           [* * *]
             ----------------------------------------------------------

             30 - 60 days                                       [* * *]
             ----------------------------------------------------------

             15- 29 days                                        [* * *]
             ----------------------------------------------------------

             8 - 14 days                                        [* * *]
             ----------------------------------------------------------

             <8 days                                            [* * *]
             ----------------------------------------------------------

4.  If a fill lot is POSTPONED, the fee schedule in effect at the time of the
    postponement will apply. The current fee schedule is:

             Notification Prior to Fill Day                     Fee
             ----------------------------------------------------------

             >60 days                                           [* * *]
             ----------------------------------------------------------

             30 - 60 days                                       [* * *]
             ----------------------------------------------------------

             21 - 29 days                                       [* * *]
             ----------------------------------------------------------

             15 - 20 days                                       [* * *]
             ----------------------------------------------------------

             8 - 14 days                                        [* * *]
             ----------------------------------------------------------

             <8 days                                            [* * *]
             ----------------------------------------------------------

5.  A postponement of a fill lot of greater than 60 days will be considered a
    cancellation of such lot. A new quote and purchase order will be required to
    renew the order.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 11 of 16
<PAGE>

                  ___________________________________________

                           PROPOSAL ACCEPTANCE SHEET
                           -------------------------
________________________________________________________________________________

Completion of this appendix signifies Durect, Inc. acceptance of CBL proposal
No. 1090, dated October 11, 1999, revised February 16, 2000, including the terms
and conditions listed on the reverse side of this form. These terms and
conditions will take precedence over any specified in the customer's
documentation.

Appendix 1 must be fully completed before CBL will schedule services and
allocate resources.  If Appendix 1 is incomplete when submitted (i.e., missing
the Purchase Order No., Accounts Payable contact information, required payment
or approval signature, etc.), delays in scheduling will result.

All invoicing for this contract is to be referenced against customer's Purchase
-------------------------------------------------------------------------------
Order No.:  ____________
----------

All invoicing is to be sent directly to:
         Accounts Payable                    Optional additional Addressee:
         Name: _____________________         Name: _________________________
         Telephone No.: ____________         Address: ______________________
         Address: __________________         _______________________________
         ___________________________         _______________________________
         ___________________________         _______________________________

Preferred Initial Payment Method [X]:  [_] Check Enclosed   [_] Wire Transfer

Any modifications of this Proposal must be made with an approved Change Order
and are subject to the same terms and conditions as this Proposal.

Durect, Inc._______________           Chesapeake Biological Laboratories, Inc.
                                      ----------------------------------------
Client

/s/ James E. Brown                /s/ Thomas P. Rice
___________________________       __________________________________
Signature                                Signature

Chief Executive Officer           President
__________________________        ----------------------------------
Title                                    Title

James E. Brown                    Thomas P. Rice
__________________________        ----------------------------------
Name (type or print)                     Name (type or print)

___________________________       __________________________________
Date                                     Date

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 12 of 16
<PAGE>

Please send this completed Proposal Acceptance Sheet via fax (410-843-4414) and
mail the original and required payment to:

                 Henry P. Clark, Director of Client Relations
                   Chesapeake Biological Laboratories, Inc.
                            1111 South Paca Street
                           Baltimore, Maryland 21230

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 13 of 16
<PAGE>

                   CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
     Terms and Conditions Precedent to the Acceptance of a Purchase Order

1.   CBL will be responsible for dutifully performing instructions according to
     a batch record, which has been jointly agreed to by the Customer and CBL.
     The customer acknowledges that the work to be performed by CBL is
     experimental in nature and portions of the work may not have been fully
     validated within generally accepted standards of the pharmaceutical
     industry.  As such, CBL will not be responsible for unexpected results that
     can be attributed to a process or procedure either supplied by, or
     requested by the Customer, that has not been fully validated provided that
     CBL has performed all procedures in accordance with instructions provided
     by Customer and that the instructions conform to applicable CBL procedures
     and cGMP's.

2.   All documentation and submissions to regulatory authorities in support of
     the Customer's product are the responsibility of the Customer.  No
     documentation will be provided by CBL except as specifically contracted
     between the Customer and CBL.

3.   CBL makes no representation or warranties regarding the suitability of the
     Customer's product for any purpose whatsoever, or for the efficacy of such
     product.

4.   The Customer is solely responsible for providing complete and accurate
     scientific data to CBL regarding Customer's product and Customer's
     requirements for formulation, fill and finish of Customer's product.

5.   In accepting its obligations under the terms of the Purchase Order, CBL has
     relied upon the accuracy, completeness and correctness of the data and
     information provided by the Customer in developing the project, any
     associated time line and the estimated or fixed cost for the project.  It
     is understood by the Customer that additional charges may be billed to the
     Customer in the event that any data or information provided by the customer
     proves to be incorrect, incomplete or in error and as a result requires
     more effort by CBL than anticipated in the original project proposal.

6.   The Customer warrants to CBL that all substances delivered by Customer to
     CBL will be free of hazardous or toxic material and that no specific safe
     handling instructions are applicable to any such substance or materials,
     except as disclosed to CBL in writing by Customer in sufficient time for
     review by CBL and prior to delivery to CBL.

7.   The Customer represents and warrants to CBL that all finished product
     delivered by CBL to Customer will be held and/or used or disposed of by
     Customer in a safe and responsible manner, and in accordance with all
     applicable laws, rules and regulations.

8.   Prepayment fees (not including Commencement/Project initiation fees), where
     applicable, are refundable less charges under CBL's Cancellation and
     Postponement Policy and/or the expenses incurred by CBL prior to the
     cancellation or postponement.  Other payments including
     Commencement/Project Initiation fees are non-refundable.

9.   CBL hereby represents and warrants to customer that the services and goods
     rendered shall be provided in accordance with this Proposal and applicable
     Good Laboratory Practice and current Good Manufacturing Practice, and the
     products will conform to applicable specifications provided by Customer.
     In the event that the foregoing warranty is not met, CBL shall at
     Customer's option re-perform the non-conforming services immediately or
     refund to Customer the applicable purchase price.  The Customer
     acknowledges and agrees that CBL's monetary liability to Customer is
     limited to the value of the amounts invoiced by CBL and that CBL's
     obligations to Customer are limited to performance by CBL of services
     (formulation, sterilization, fill and finish) in accordance with the master
     batch record and applicable Good Manufacturing Practices (GMP's).

10.  The arrangement between CBL and Customer is one of service provider and
     Customer.  No joint venture, partnership or agency is to be created or
     deemed as between CBL and Customer.

11.  Except for the matters for which CBL is required to indemnify Customer as
     set forth in Paragraph 12, the Customer agrees to indemnify and hold CBL
     and its employees and agents harmless from any claim or liability,
     including attorney's fees, incurred or made against CBL arising out of or
     relating to any breach of any representation or warranty made by Customer
     hereunder, or otherwise, including, without limitation, any claim or
     liability asserted by any organization, clinic, patient or any other group
     or participant in any clinical trial of Customer's product.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 14 of 16
<PAGE>

12.  CBL shall indemnify and hold harmless Customer, its officers, agents,
     employees and affiliates from any claim or liability, including attorney's
     fee, incurred or made against any of them arising out of or relating to any
     breach of any representation of warranty made by CBL to customer hereunder
     or CBL's negligence or willful misconduct.

13.  CBL will acquire no rights of any kind with respect to the product, active
     agent, methods developed by or exclusively for Customer as work product as
     part of this Proposal, materials, compounds, formulations, methodology or
     procedures provided by Customer under the terms hereunder. All such rights
     shall be owned exclusively by Customer or its nominee and CBL agrees to
     execute any required assignments as necessary in order for Customer or its
     nominee to attain full and marketable title to any such rights.

14.  CBL agrees to maintain in confidence all information provided by customer
     to CBL hereunder in accordance with the Confidentiality Agreement dated
     September 2, 1999.

                                  Appendix 2
                               Quality Agreement

Supplier:           Chesapeake Biological Laboratories, Inc.
Client:             Durect Corporation
Supplier Quote:     Quote 1090, Duros(R) Sufentanil

1.   All activities specified in the Quote listed above, which could potentially
     affect the quality of the Duros(R) Sufentanil product must be performed in
     compliance with Code of Federal Regulation 21 Part 210 Current Good
     Manufacturing Practice in Manufacturing, Processing, Packaging, or Holding
     of Drugs: General and Part 211-Current Good Manufacturing Practices for
     Finished Pharmaceuticals, any applicable Food and Drug Guidance to Industry
     document and recognized industry standard.

2.   All validation protocols including but not limited to facility validation,
     equipment qualification, analytical method validation, cleaning validation
     and stability protocols generated as part of the above quote will be
     submitted to Durect Corporation for review and approval, prior to
     implementation.

3.   All activities performed in compliance with a CBL approved procedure will
     indicate the procedure number.

4.   Durect Corporation retains the right to perform a compliance audit of CBL's
     facility, processes and systems to evaluate the level of compliance to CFR
     21, 210 & 211, prior to initiation of the activities specified in this
     Quote. Furthermore, Durect Corporation retains the right to have a man in
     the plant all times during the execution of the activities specified in
     this Quote.

5.   CBL will submit validation report for each validation activity required as
     part of the activities specified in this Quote. The report will include
     among others:
 .  A summary of the data generated in support of each validation activity,
 .  A list of all suspect or non-conforming data identified and considered
   acceptable upon investigation,
 .  A list of all un-planned deviations,
 .  Results of any investigations performed as a result of deviations or suspect
   analytical data and corrective action taken.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 15 of 16
<PAGE>

6.   Validation reports which are for the facility or general use can be
     reviewed at CBL. Copies of all CBL procedures used as a basis for any of
     the Durect specific GMP activities performed as a part of this quote will
     be made available to Durect for retention in their files. General SOP's or
     SOP's serving multiple clients can be reviewed at CBL.

7.   All documents generated in support of products manufactured for Durect will
     be retained for a minimum of 3 years, or one year after the expiration date
     and will be made available to Durect at their request for retention in
     their files.

8.   A preliminary copy of the production batch record, less the QC section will
     be provided to Durect five (5) working days after the completion of
     finished product sterility testing.

9.   A copy of the completed Batch Record will be submitted to Durect within ten
     working days from completion of the last processing step (completion of
     finished product testing).

10.  Durect will be notified in writing of any changes agreed upon requirements
     prior to implementation of said changes.

11.  Durect will be notified in writing of any verified out of specification
     results within 48 hours of verification. No product-re-testing will be
     performed without Durect's approval.

12.  Durect retains the right to perform a document audit, at CBL's facility, of
     all GMP documentation generated in support of this project prior to release
     of clinical supplies.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                 Page 16 of 16
<PAGE>

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

                           PROPOSAL ACCEPTANCE SHEET
                           -------------------------

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

Completion of this appendix signifies Durect, Inc. acceptance of CBL proposal
No. 1090, dated October 11, 1999, revised February 16, 2000, including the terms
and conditions listed on the reverse side of this form. These terms and
conditions will take precedence over any specified in the customer's
documentation.

Appendix 1 must be fully completed before CBL will schedule services and
allocate resources. If Appendix 1 is incomplete when submitted (i.e., missing
the Purchase Order No., Accounts Payable contact information, required payment
or approval signature, etc.), delays in scheduling will result.

All invoicing for this contract is to be referenced against customer's Purchase
--------------------------------------------------------------------------------
Order No.: 021700-01
--------------------

All invoicing is to be sent directly to:
     Accounts Payable                        Optional additional Addressee:
     Name: /s/ Surabhi Desai                 Name: /s/ Scott Wheelwright
          --------------------------              ----------------------------
     Telephone No.: 408-346-1056             Address:  Durect Corporation
                   -----------------                 -------------------------
     Address: Durect Corporation                       10240 Bubb Rd.
             -----------------------         ---------------------------------
              10240 Bubb Rd.                           Cupertino, CA 95014
     -------------------------------         ---------------------------------
              Cupertino, CA 95014
     -------------------------------

Preferred Initial Payment Method (X):  [_] Check Enclosed  [_] Wire Transfer

Any modifications of this Proposal must be made with an approved Change Order
and are subject to the same terms and conditions as this Proposal.

Durect, Inc.                      Chesapeake Biological Laboratories, Inc.
-----------------------           ----------------------------------------
Client

/s/ James E. Brown                /s/ Thomas P. Rice
-----------------------           -------------------------------------
Signature                         Signature

CEO                               President
-----------------------           -------------------------------------
Title                             Title

James E. Brown                    Thomas P. Rice
-----------------------           -------------------------------------
Name (type or print)              Name (type or print)

2-17-00                           2/16/00
-----------------------           -------------------------------------
Date                              Date

Please send this completed Proposal Acceptance Sheet via fax (410-843-4414) and
mail the original and required payment to:

                 Henry P. Clark, Director of Client Relations
                   Chesapeake Biological Laboratories, Inc.
                            1111 South Paca Street
                           Baltimore, Maryland 21230<PAGE>

                                                                   EXHIBIT 10.14

                        DURECT THERAPEUTICS CORPORATION

                             EMPLOYMENT AGREEMENT
                             --------------------

          This Employment Agreement (the "Agreement") is dated as of June 19,
                                          ---------
1998, by and between James E. Brown ("Employee") and Durect Therapeutics
                                      --------
Corporation, a Delaware corporation (the "Company").
                                          -------

          1.  Term of Agreement.  This Agreement shall commence on the date
              -----------------
hereof and shall have a term of three years (the "Original Term").  This
                                                  -------------
Agreement may be extended for an additional one year after the end of the
Original Term if the parties mutually agree in writing to such extension.

          2.  Duties.
              ------

              (a)   Position. Employee shall be employed as Chief Executive
                    --------
Officer and President of the Company, and as such will have responsibility for
establishing the Company's goals and objectives, setting the Company's strategic
focus and plan, arranging funding for the Company, establishing corporate
alliances and agreements, arranging the hiring of the Company's management team,
and overseeing the management of the Company in a manner that is consistent with
the achievement of the Company's goals and objectives, and such other duties
that are consistent with the positions of Chief Executive Officer and President,
as reasonably directed by the Board of Directors of the Company from time to
time. Employee will report to the Board of Directors of the Company.

              (b)   Obligations to the Company. Employee agrees to the best of
                    --------------------------
his ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the express and implicit terms hereof. During the term of Employee's
employment relationship with the Company, and except as provided below, Employee
further agrees that he will devote all his business time and attention to the
business of the Company, the Company will be entitled to all of the benefits and
profits arising from or incident to all such work services and advice, Employee
will not render commercial or professional services of any nature to any person
or organization, whether or not for compensation, provided, however, that the
Company acknowledges that Employee expects to perform services for Alza
Corporation ("Alza") during the term of this Agreement as an employee or
consultant, such services to Alza to require no more than one-half of Employee's
working time, with the amount of time to be determined jointly by the Company,
Employee and Alza; Company agrees that Employee's performance of such services
to Alza, even to the extent that the performance reduces the number of hours
that Employee works for the Company, shall not be considered to be a violation
of the terms of this Agreement. After the first twelve (12) months of the term
of this Agreement, Employee will become a full-time employee of the Company,
while potentially retaining a relationship with Alza. The Company agrees that
Employee may, in Employee's discretion, serve on boards of directors of other
companies, with or without compensation. Employee will comply with and be bound
by the Company's operating policies, procedures and practices from time to time
in effect during the term of Employee's

<PAGE>

employment, to the extent such policies, procedures and practices do not
conflict with the terms of this Agreement.

          3.  At Will Employment.  The Company and Employee acknowledge that
              ------------------
Employee's employment is and shall continue to be at will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by Employee at any time for any or no reason and may be terminated by
the Company in accordance with the provisions of Section 5(a)(i), 5(a)(iii) and
5(a)(iv) of this Agreement.  If Employee's employment terminates for any reason,
Employee shall not be entitled to any payments, benefits, damages, award or
compensation other than as provided in this Agreement, and the Company shall
have no right of repurchase with respect to Common Stock of the Company
purchased by Employee pursuant to that certain Common Stock Purchase Agreement,
dated April 2, 1998 by and between the Company and the Employee, except as
provided in such Common Stock Purchase Agreement.

          4.  Compensation.  For the duties and services to be performed by
              ------------
Employee hereunder, the Company shall pay Employee, and Employee agrees to
accept, the salary, stock options, bonuses and other benefits described below in
this Section 4.

              (a)   Salary.  Employee shall receive a monthly salary of Eighteen
                    ------
Thousand Seven Hundred Fifty Dollars ($18,750), which is equivalent to Two
Hundred Twenty-Five Thousand Dollars ($225,000) on an annualized basis,
provided, however, that Employee's monthly salary shall be reduced while
-----------------
Employee is employed by Alza to reflect the fraction of Employee's time that is
devoted to performing services for the Company.  Employee's monthly salary will
be payable pursuant to the Company's normal payroll practices.  In the event
this Agreement is extended beyond the Original Term, the base salary shall be
reviewed at the time of such extension by the Board, and any increase will be
effective as of the date determined appropriate by the Board or its Compensation
Committee.

              (b)   Stock Options and Other Incentive Programs. Employee shall
                    ------------------------------------------
be eligible to participate in any stock option or other incentive programs
available to officers or employees of the Company.

              (c)   Bonuses. Employee's entitlement to incentive bonuses from
                    -------
the Company is discretionary and shall be determined by the Board or its
Compensation Committee in good faith based upon the extent to which Employee's
individual performance objectives and the Company's profitability objectives and
other financial and nonfinancial objectives are achieved during the applicable
bonus period.

              (d)   Additional Benefits. Employee will be eligible to
                    -------------------
participate in the Company's employee benefit plans of general application,
including without limitation, those plans covering medical, disability and life
insurance in accordance with the rules established for individual participation
in any such plan and under applicable law. Employee will be eligible for
vacation and sick leave in accordance with the policies in effect during the
term of this Agreement and will receive such other benefits as the Company
generally provides to its other employees of comparable position and experience.

                                      -2-
<PAGE>

          (e)  Reimbursement of Expenses.  Employee shall be authorized to incur
               -------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.

     5.   Termination of Employment and Severance Benefits.
          ------------------------------------------------

          (a)  Termination of Employment.  This Agreement may be terminated
               -------------------------
during its Original Term (or any extension thereof) only upon the occurrence of
any of the following events:

               (i)    This Agreement may be terminated by the Company following
the Company's reasonable determination in good faith that it is terminating
Employee for good cause related to Employee's performance;

               (ii)   This Agreement may be terminated by Employee following a
change in Employee's status such that a Constructive Termination has occurred.
Constructive Termination shall be deemed to occur if (A)(1) there is a material
adverse change in Employee's position causing such position to be of materially
reduced stature or responsibility, or (2) Employee's refusal to relocate to a
facility or location more than 50 miles from the Company's current location; and
(B) within the 30-day period immediately following such material change or
reduction Employee elects to terminate employment;

               (iii)  This Agreement may be terminated without cause by the
Company following a reasonable determination by the Company's Board of Directors
that such termination would be in the reasonable best interests of the Company
("Termination Without Cause"); or

               (iv)   Following Employee's death or Disability (as defined in
Section 7 below).

          (b)  Severance Benefits.  Employee shall be entitled to receive
               ------------------
severance benefits upon termination of employment only as set forth in this
Section 5(b):

               (i)    Involuntary Termination. If Employee's employment is
                      -----------------------
terminated under 5(a)(iii) above (such termination, an "Involuntary
                                                        -----------
Termination"), Employee will be entitled to receive payment of severance
-----------
benefits equal to Employee's regular monthly salary for the remainder of the
Original Term (the "Severance Period") which payments shall not limit Employee's
rights against Company for any breach of this Agreement. Such payments shall be
made ratably over the Severance Period according to the Company's standard
payroll schedule. Employee will also be entitled to receive payment on the date
of termination of any bonus payable under Section 4(C). Health insurance
benefits with the same coverage provided to Employee prior to the termination
(e.g. medical, dental, optical, mental health) and in all other respects
significantly comparable to those in place immediately prior to the termination
will be provided at the Company's cost over the Severance Period.

               (ii)   Termination for Cause. If Employee's employment is
                      ---------------------
terminated for cause (as described in Section 5(a)(i)), then Employee shall not
be entitled to receive payment of any severance benefits. Employee will receive
payment(s) for all salary and unpaid vacation

                                      -3-
<PAGE>

accrued as of the date of Employee's termination of employment and Employee's
benefits will be continued under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination and in accordance with applicable law.

          (iii)  Termination by Reason of Death or Disability.  In the event
                 --------------------------------------------
that Employee's employment with the Company terminates as a result of Employee's
death or Disability (as defined in Section 7 below), Employee or Employee's
estate or representative will receive all salary and unpaid vacation accrued as
of the date of Employee's death or Disability and any other benefits payable
under the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of death or Disability and in
accordance with applicable law.

          (iv)   Constructive Termination.  If the Employee terminates his
                 -------------------------
employment pursuant to this Agreement following a Constructive Termination, then
the Company shall (A) within five (5) days after such termination, pay to
Employee a lump sum equal to all salary payments that the Company would have
paid to Employee during the twelve-month period following such termination and
(B) provide health insurance benefits with the same coverage provided to
Employee prior to the termination for the twelve month period following such
termination.

          (v)    Survival. The Company's obligations to Employee pursuant to
                 --------
this Section 5 of the Agreement shall survive any termination of this Agreement.

     6.   [Reserved.]
           --------

     7.   Definition of Disability.  For purposes of this Agreement,
          ------------------------
"Disability" shall mean that Employee has been unable to perform his duties
hereunder as the result of his incapacity due to physical or mental illness, and
such inability, which continues for at least 180 consecutive calendar days or
240 calendar days during any consecutive twelve-month period, if shorter, after
its commencement, is determined to be total and permanent by a physician
selected by the Company and its insurers and acceptable to Employee or to
Employee's legal representative (with such agreement on acceptability not to be
unreasonably withheld).

     8.   Confidentiality Agreement.  Employee shall sign, or has signed, a
          -------------------------
Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
--------------------------
Exhibit A, the terms of which Confidentiality Agreement must first be agreed to
---------
by Alza and the Company.  Employee hereby represents and warrants to the Company
that he has complied with all obligations under the Confidentiality Agreement
and agrees to continue to abide by the terms of the Confidentiality Agreement
and further agrees that the provisions of the Confidentiality Agreement shall
survive any termination of this Agreement or of Employee's employment
relationship with the Company.

     9.   Noncompetition Covenant.  Except in connection with his employment
          -----------------------
by Alza, as contemplated by Section 2(b) of this Agreement, Employee hereby
agrees that he shall not, during the term of his  employment pursuant to this
Agreement, do any of the following without the prior written consent of the
Company's Board of Directors:

                                      -4-
<PAGE>

          (a) Compete.  Carry on any business or activity (whether directly or
              -------
indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) which is competitive with the business conducted by the
Company (as conducted now or during the term of Employee's employment), nor
engage in any other activities that conflict with Employee's obligations to the
Company.

          (b) Solicitation of Employees, Consultants and Other Parties.
              --------------------------------------------------------
Employee agrees that during the term of Employee's employment with the Company,
and for a period of twenty-four (24) months immediately following the
termination of Employee's employment with the Company for any reason, whether
with or without cause, Employee shall not solicit any of the Company's employees
or consultants to terminate their relationship with the Company, or attempt to
solicit employees or consultants of the Company, either for Employee or for any
other person or entity.  Further, for a period of twenty-four (24) months
following termination of Employee's employment with the Company for any reason,
with or without cause, Employee shall not solicit any licensor to or customer of
the Company or licensee of the Company's products, in each case, that are known
to Employee, with respect to any business, products or services that are
competitive to the products or services offered by the Company or under
development as of the date of termination of Employee's employment with the
Company.

     10.  Conflicts. The Company acknowledges that Employee may, pursuant to his
          ---------
employment agreement with Alza, as contemplated by Section 2(b) of this
Agreement, be required to develop intellectual property for Alza during the term
of this Agreement and to assign all rights to such intellectual property to
Alza. The Company also acknowledges that Employee has developed intellectual
property for Alza in the past and Employee may, in addition to his other
obligations to Alza, be subject to certain confidentiality, non-disclosure and
non-competition agreements with Alza. The Company has reviewed the terms and
conditions of Employee's employment agreement with Alza and all other agreements
between Employee and Alza, and the Company represents and warrants to Employee
that the Company has made all appropriate arrangements with Alza so that
Employee's obligations to the Company and Employee's performance of the terms
and conditions of this Agreement do not conflict with any of Employee's
obligations to Alza or the terms and conditions of Employee's employment
agreement with Alza. Employee has not, and will not during the term of this
Agreement, enter into any other oral or written agreement (other than those with
Alza) in conflict with any of the provisions of this Agreement. Employee further
represents that he is entering into or has entered into an employment
relationship with the Company of his own free will and that he has not been
solicited as an employee in any way by the Company.

     11.  Successors. Any successor to the Company (whether direct or indirect
          ----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

                                      -5-
<PAGE>

     12.  Miscellaneous Provisions.
          ------------------------

          (a) No Duty to Mitigate.  Employee shall not be required to mitigate
              -------------------
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.

          (b) Amendments and Waivers.  Any term of this Agreement may be amended
              ----------------------
or waived only with the written consent of the parties.

          (c) Notices.  Any notice required or permitted by this Agreement shall
              -------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.

          (d) Choice of Law.  The validity, interpretation, construction and
              -------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.

          (e) Severability.  If one or more provisions of this Agreement are
              ------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith.  In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.

          (f) Counterparts.  This Agreement may be executed in counterparts,
              ------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

          (g) Arbitration.  Any dispute or claim arising out of or in connection
              -----------
with this Agreement will be finally settled by binding arbitration in San Jose,
California in accordance with the rules of the American Arbitration Association
by one arbitrator appointed in accordance with said rules.  The arbitrator shall
apply California law, without reference to rules of conflicts of law or rules of
statutory arbitration, to the resolution of any dispute.  Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph, without breach of this
arbitration provision.  This Section 12(g) shall not apply to the
Confidentiality Agreement.

          (h) Advice of Counsel.  EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
              -----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL,

                                      -6-
<PAGE>

AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE
DRAFTING OR PREPARATION HEREOF.

                           [Signature Page Follows]

                                      -7-
<PAGE>

     The parties have executed this Agreement the date first written above.

                              DURECT THERAPEUTICS CORPORATION

                              By:    /s/ Thomas A. Schreck
                                     -------------------------------------
                              Title: President
                                     -------------------------------------

                              Address: ___________________________________

                                       ___________________________________

                                       ___________________________________

                              EMPLOYEE

                              Signature:  /s/ James E. Brown
                                          --------------------------------

                              Address: ___________________________________

                                       ___________________________________

                                       ___________________________________

                                      -8-
<PAGE>

                                   EXHIBIT A
                                   ---------

                         CONFIDENTIAL INFORMATION AND

                        INVENTION ASSIGNMENT AGREEMENT
<PAGE>

                              DURECT CORPORATION

                         CONFIDENTIAL INFORMATION AND
                        INVENTION ASSIGNMENT AGREEMENT

     As a condition of my becoming employed (or my employment being continued)
by or retained as a consultant (or my consulting relationship being continued)
by Durect Corporation, a Delaware corporation or any of its current or future
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
                                                                    -------
and in consideration of my employment or consulting relationship with the
Company and my receipt of the compensation now and hereafter paid to me by the
Company, I agree to the following:

     1.   Employment or Consulting Relationship.  I understand and acknowledge
          -------------------------------------
that this Agreement does not alter, amend or expand upon any rights I may have
to continue in the employ of, or in a consulting relationship with, or the
duration of my employment or consulting relationship with, the Company under any
existing agreements between the Company and me or under applicable law.  Any
employment or consulting relationship between the Company and me, whether
commenced prior to or upon the date of this Agreement, shall be referred to
herein as the "Relationship."
               ------------

     2.   At-Will Employment.  I understand and acknowledge that my Relationship
          ------------------
with the Company is and shall continue to be at-will, as defined under
applicable law, meaning that either I or the Company may terminate the
Relationship at any time for any reason or no reason, without further obligation
or liability.

     3.   Confidential Information.
          ------------------------

          (a) Company Information.  I agree at all times during the term of my
              -------------------
Relationship with the Company and thereafter, to hold in strictest confidence,
and not to use, except for the benefit of the Company, or to disclose to any
person, firm, corporation or other entity without written authorization of the
Board of Directors of the Company, any Confidential Information of the Company
which I obtain or create.  I further agree not to make copies of such
Confidential Information except as authorized by the Company.  I understand that
"Confidential Information" means any Company proprietary information, technical
 ------------------------
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, suppliers, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or
with whom I became acquainted during the Relationship), prices and costs,
markets, software, developments, inventions, laboratory notebooks, processes,
formulas, technology, designs, drawings, engineering, hardware configuration
information, marketing, licenses, finances, budgets or other business
information disclosed to me by the Company either directly or indirectly in
writing, orally or by drawings or observation of parts or equipment or created
by me during the period of the Relationship, whether or not during working
hours. I understand that "Confidential Information" includes, but is not limited
                          ------------------------
to, information pertaining to any aspects of the Company's business which is
either information not known by actual or potential competitors of the Company
or is proprietary information of the Company or its customers or suppliers,
whether of a technical nature or otherwise.  I further understand that
Confidential Information does not include any of the foregoing items which has
become publicly and widely known and made generally available through no
wrongful act of mine or of others who were under confidentiality obligations as
to the item or items involved.

          (b) Former Employer Information.  I represent that my performance of
              ---------------------------
all terms of this Agreement as an employee or consultant of the Company have not
breached and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by me in confidence or trust prior or
subsequent to the commencement of my Relationship with the Company, and I will
not disclose to the Company, or induce the Company to use, any inventions,
confidential or proprietary information or material belonging to any previous
employer or any other party.

          (c) Third Party Information.  I recognize that the Company has
              -----------------------
received and in the future will receive confidential or proprietary information
from third parties subject to a duty on the Company's part to

                                       10
<PAGE>

maintain the confidentiality of such information and to use it only for certain
limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party.

     4.   Inventions.
          ----------

          (a) Inventions Retained and Licensed.  I have attached hereto, as
              --------------------------------
Exhibit A, a list describing with particularity all inventions, original works
---------
of authorship, developments, improvements, and trade secrets which were made by
me prior to the commencement of the Relationship (collectively referred to as
"Prior Inventions"), which belong solely to me or belong to me jointly with
-----------------
another, which relate in any way to any of the Company's proposed businesses,
products or research and development, and which are not assigned to the Company
hereunder; or, if no such list is attached, I represent that there are no such
Prior Inventions.  If, in the course of my Relationship with the Company, I
incorporate into a Company product, process or machine a Prior Invention owned
by me or in which I have an interest, the Company is hereby granted and shall
have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license
(with the right to sublicense) to make, have made, copy, modify, make derivative
works of, use, sell and otherwise distribute such Prior Invention as part of or
in connection with such product, process or machine.

          (b) Assignment of Inventions.  I agree that I will promptly make full
              ------------------------
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title and interest throughout the world in and to any and all
inventions, original works of authorship, developments, concepts, know-how,
improvements or trade secrets, whether or not patentable or registrable under
copyright or similar laws, which I may solely or jointly conceive or develop or
reduce to practice, or cause to be conceived or developed or reduced to
practice, during the period of time in which I am employed by or a consultant of
the Company (collectively referred to as "Inventions"), except as provided in
                                          ----------
Section 4(e) below.  I further acknowledge that all inventions, original works
of authorship, developments, concepts, know-how, improvements or trade secrets
which are made by me (solely or jointly with others) within the scope of and
during the period of my Relationship with the Company are "works made for hire"
                                                           -------------------
(to the greatest extent permitted by applicable law) and are compensated by my
salary (if I am an employee) or by such amounts paid to me under any applicable
consulting agreement or consulting arrangements (if I am a consultant), unless
regulated otherwise by the mandatory law of the state of California.

          (c) Maintenance of Records.  I agree to keep and maintain adequate and
              ----------------------
current written records of all Inventions made by me (solely or jointly with
others) during the term of my Relationship with the Company.  The records may be
in the form of notes, sketches, drawings, flow charts, electronic data or
recordings, laboratory notebooks, and any other format.  The records will be
available to and remain the sole property of the Company at all times.  I agree
not to remove such records from the Company's place of business except as
expressly permitted by Company policy which may, from time to time, be revised
at the sole election of the Company for the purpose of furthering the Company's
business.

          (d) Patent and Copyright Rights.  I agree to assist the Company, or
              ---------------------------
its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, trademarks, mask
work rights, moral rights, or other intellectual property rights relating
thereto in any and all countries, including the disclosure to the Company of all
pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments, recordations, and all other
instruments which the Company shall deem necessary in order to apply for,
obtain, maintain and transfer such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive rights,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto.  I further
agree that my obligation to execute or cause to be executed, when it is in my
power to do so, any such instrument or papers shall continue after the
termination of this Agreement until the expiration of the last such intellectual
property right to expire in any country of the world.  If the Company is unable
because of my mental or physical incapacity or unavailability or for any other
reason to secure my signature to apply for or to pursue any application for any
United States or foreign patents or copyright registrations covering Inventions
or original works of authorship assigned to the Company as above, then I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney in fact, to act for and in my behalf and
stead to execute and file any such applications and to do all other lawfully
permitted acts to further the application for, prosecution, issuance,
maintenance or transfer of letters patent or copyright registrations thereon
with the same legal

                                       11
<PAGE>

force and effect as if originally executed by me. I hereby waive and irrevocably
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or hereafter have for infringement of any and all proprietary rights
assigned to the Company.

          (e) Exception to Assignments.  I understand that the provisions of
              ------------------------
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B).  I will advise the Company
                                      ---------
promptly in writing of any inventions that I believe meet such provisions and
are not otherwise disclosed on Exhibit A.
                               ---------

     5.   Returning Company Documents.  I agree that, at the time of termination
          ---------------------------
of my Relationship with the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, laboratory notebooks, materials, flow charts,
equipment, other documents or property, or reproductions of any aforementioned
items developed by me pursuant to the Relationship or otherwise belonging to the
Company, its successors or assigns.  I further agree that to any property
situated on the Company's premises and owned by the Company, including disks and
other storage media, filing cabinets or other work areas, is subject to
inspection by Company personnel at any time with or without notice.  In the
event of the termination of the Relationship, I agree to sign and deliver the
"Termination Certification" attached hereto as Exhibit C.
--------------------------                     ---------

     6.   Notification to Other Parties.
          -----------------------------

          (a) Employees.  In the event that I leave the employ of the Company, I
              ---------
hereby consent to notification by the Company to my new employer about my rights
and obligations under this Agreement.
          (b) Consultants.  I hereby grant consent to notification by the
              -----------
Company to any other parties besides the Company with whom I maintain a
consulting relationship, including parties with whom such relationship commences
after the effective date of this Agreement, about my rights and obligations
under this Agreement.

     7.   Solicitation of Employees, Consultants and Other Parties.  I agree
          --------------------------------------------------------
that during the term of my Relationship with the Company, and for a period of
twenty-four (24) months immediately following the termination of my Relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees or consultants to terminate their relationship with the
Company, or take away such employees or consultants, or attempt to solicit,
induce, recruit, encourage or take away employees or consultants of the Company,
either for myself or for any other person or entity.  Further, for a period of
twenty-four (24) months following termination of my Relationship with the
Company for any reason, with or without cause, I shall not solicit any licensor
to or customer of the Company or licensee of the Company's products, in each
case, that are known to me, with respect to any business, products or services
that are competitive to the products or services offered by the Company or under
development as of the date of termination of my Relationship with the Company.

     8.   Representations and Covenants.
          -----------------------------

          (a) Facilitation of Agreement.  I agree to execute promptly any proper
              -------------------------
oath or verify any proper document required to carry out the terms of this
Agreement upon the Company's written request to do so.

          (b) Conflicts.  I represent that my performance of all the terms of
              ---------
this Agreement will not breach any agreement to keep in confidence proprietary
information acquired by me in confidence or in trust prior to commencement of my
Relationship with the Company.  I have not entered into, and I agree I will not
enter into, any oral or written agreement in conflict with any of the provisions
of this Agreement.

          (c) Voluntary Execution.  I certify and acknowledge that I have
              -------------------
carefully read all of the provisions of this Agreement and that I understand and
will fully and faithfully comply with such provisions.

                                       12
<PAGE>

     9.   General Provisions.
          ------------------

          (a) Governing Law.  The validity, interpretation, construction and
              -------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.

          (b) Entire Agreement.  This Agreement sets forth the entire agreement
              ----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us.  No modification or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing signed by the party to be charged.  Any
subsequent change or changes in my duties, obligations, rights or compensation
will not affect the validity or scope of this Agreement.

          (c) Severability.  If one or more of the provisions in this Agreement
              ------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.

          (d) Successors and Assigns.  This Agreement will be binding upon my
              ----------------------
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.

          (e) Survival.  The provisions of this Agreement shall survive the
              --------
termination of the Relationship and the assignment of this Agreement by the
Company to any successor in interest or other assignee.

          (f) ADVICE OF COUNSEL.  I ACKNOWLEDGE THAT, IN EXECUTING THIS
              -----------------
AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL
COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT.  THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF
THE DRAFTING OR PREPARATION HEREOF.

                           [Signature Page Follows]

                                       13
<PAGE>

     The parties have executed this Agreement on the respective dates set forth
below:

COMPANY:                           EMPLOYEE:

DURECT                             JAMES E. BROWN, an Individual:
CORPORATION

/s/ Thomas A. Schreck              /s/ James E. Brown
-------------------------------    --------------------------------
Signature

By: ___________________________    ________________________________
                                   Printed Name
Title: ________________________

Date: _________________________    Date: __________________________

Address: ______________________    Address: _______________________

_______________________________             _______________________

                                       14
<PAGE>

                                   EXHIBIT A
                                   ---------

                           LIST OF PRIOR INVENTIONS
                        AND ORIGINAL WORKS OF AUTHORSHIP
                            EXCLUDED FROM SECTION 4

                                                             Identifying Number
        Title                         Date                  or Brief Description
-----------------------       ----------------------        --------------------

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