Document:

Certain portions of this agreement, for which confidential treatment has been requested, 

have been omitted and filed separately
with the Securities and Exchange Commission. 

Sections of the agreement where portions
have been omitted have been identified in the text. 

 

NOTE AGREEMENT

 

NOTE AGREEMENT (this
“Agreement”), dated as of March 13, 2012, between Flamel US Holdings, Inc., a Delaware corporation (“Purchaser”),
Flamel Technologies SA, a societe anonyme organized under the laws of the Republic of France (“Flamel”) and
Eclat Holdings, LLC, a Delaware limited liability company (“Eclat” and, together with Purchaser and Flamel,
the “Parties”).

 

WHEREAS, Purchaser
has purchased from Eclat all of the limited liability company interests
of Éclat Pharmaceuticals, LLC, a Delaware limited liability company (“Eclat Pharma”) and, as part of
the purchase price, has issued to Eclat a secured promissory note in the principal amount of twelve million Dollars ($12,000,000),

 

NOW, THEREFORE, in
consideration of the mutual agreements set forth herein, the Parties agree as follows:

 

ARTICLE
1

 

DEFINITIONS

 

Section
1.1           General Definitions. Wherever used in this
Agreement or the Exhibits attached hereto, unless the context otherwise requires, the following terms have the following meanings:

 

“Affiliate”
means, with respect to any Person, any other Person:

 

(i)          that
owns, directly or indirectly, in the aggregate more than 10% of the beneficial ownership interest of such Person;

 

(ii)         that
directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such
Person; or

 

(iii)        that
directly or indirectly is a general partner, controlling shareholder, or managing member of such Person.

 

“Anniversary”
has the meaning given to it in Section 2.1(a).

 

“Applicable
Laws” means all statutes, rules and regulations of the U.S. Food and Drug Administration (“FDA”) and of other
Governmental Authorities in the United States or elsewhere exercising regulatory authority similar to that of the FDA applicable
to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion,
sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by or on behalf of Flamel
or its Subsidiaries.

 

    	1

    	 

    

 

“Business
Day” means a day on which banks are open for business in The City of New York.

 

“Code”
means the Internal Revenue Code of 1986, as amended, and any Treasury Regulations promulgated thereunder.

 

“Default”
means any event which at the giving of notice or lapse of time would constitute an Event of Default.

 

“Deferred
Amortization” has the meaning given to it in Section 2.1(b)(i).

 

“Dollars”
and the “$” sign mean the lawful currency of the United States of America.

 

“Employment
Agreement” means the Employment Agreement dated the date hereof,
between Michael Anderson and Flamel.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified
from time to time.

 

“Event of
Default” has the meaning given to it in Section 4.4.

 

“Existing
Notes Documents” means (i) that certain Note Purchase Agreement, dated as of November 1, 2010, by and between Eclat
Pharma and Deerfield Private Design International, Limited, a British Virgin Island corporation, (ii) that certain Pledge and Security
Agreement, dated as of November 1, 2010, by and among Éclat, Eclat Pharma, Deerfield Management Company, L.P. Series C,
as collateral agent for the purchasers, and the other parties party thereto, and (iii) any agreement entered into in connection
with the foregoing from time to time.

 

“Exchange
Act” means the Securities Exchange Act of 1934, including the rules and regulations promulgated thereunder.

 

“FDA Approval”
means approval of a New Drug Application or an Abbreviated New Drug Application by the FDA under 21 USC Sec. 355.

 

“Final Payment”
means the amount necessary to repay the outstanding principal amount of the Note and any other amounts owing by Purchaser to Eclat
pursuant to this Agreement.

 

“Final Payment
Date” means the earlier of (i) the date on which Purchaser makes the Final Payment and (ii) the sixth anniversary of
the date hereof.

 

“GAAP”
means generally accepted accounting principles consistently applied as set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession).

 

    	2

    	 

    
 

“Government
Authority” means any government, governmental department, ministry, cabinet, commission, board, bureau, agency, tribunal,
regulatory authority, instrumentality, judicial, legislative, fiscal, or administrative body or entity, having jurisdiction over
the matter or matters and Person or Persons in question.

 

“Guaranty”
means the Guaranty, dated as of the date hereof, of Flamel in favor of Eclat.

 

“Hedging Obligations”
means all liabilities under take-or-pay or similar arrangements or under any interest rate swaps, caps, floors, collars and other
interest hedge or protection agreements, treasury locks, equity forward contracts, currency agreements or commodity purchase or
option agreements or other interest or exchange rate or commodity price hedging agreements and any other derivative instruments,
in each case, whether Flamel and its Subsidiaries is liable contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which liabilities Flamel or its Subsidiaries otherwise assures a creditor against loss.

 

“Indebtedness”
means the following:

 

(i)          all
indebtedness for borrowed money;

 

(ii)         the
deferred purchase price of assets or services (other than payables) which in accordance with GAAP would be shown to be a liability
(or on the liability side of a balance sheet);

 

(iii)        all
guarantees of Indebtedness;

 

(iv)        the
maximum amount of all letters of credit issued or acceptance facilities established for the account of Flamel and any of its Subsidiaries,
including without duplication, all drafts drawn thereunder;

 

(v)         all
capitalized lease obligations;

 

(vi)        all
indebtedness of another Person secured by any Lien on any property of Flamel or its Subsidiaries, whether or not such indebtedness
has been assumed or is recourse (with the amount thereof, in the case of any such indebtedness that has not been assumed by Flamel
or its Subsidiaries, being measured as the lower of (x) fair market value of such property and (y) the amount of the indebtedness
secured);

 

(vii)       all
Hedging Obligations; and

 

(viii)      indebtedness
created or arising under any conditional sale or title retention agreement.

 

“Indemnified
Person” has the meaning given to it in Section 5.11.

 

“Indemnity”
has the meaning given to it in Section 5.11.

 

“Interest
Agreement” means the Membership Interest Purchase Agreement dated as of the date hereof.

 

“Interest
Rate” means 7.5% simple interest per annum.

 

    	3

    	 

    

 

“IP”
has the meaning given to it in Section 3.1(vii).

 

“Launch Products”
has the meaning set forth in Exhibit A(1).

 

“Lien”
means any lien, pledge, preferential arrangement, mortgage, security interest, deed of trust, charge, assignment, hypothecation,
title retention, privilege or other encumbrance on or with respect to property or interest in property.

 

“Loss”
has the meaning given to it in Section 5.11.

 

“Major Transaction”
and “Major Transaction Notice” has the meaning set forth in the Warrant.

 

“Material
Adverse Effect” means a material adverse effect on (a) the business, operations, condition (financial or otherwise) or
assets of Flamel and its Subsidiaries, taken as a whole, (b) the validity or enforceability of any material provision of any Purchase
Document against any party thereto other than Eclat, (c) the ability of Flamel, the Purchaser and Eclat Pharma, taken as a whole,
to perform the Obligations or (d) the rights and remedies of Eclat against any party to the Purchase Documents.

 

“Net Sales”
means without duplication, the gross amount invoiced by or on behalf of Flamel or any of its Affiliates or any direct or indirect
assignee or licensee of Flamel or any of its Affiliates sold globally in bona fide, arm’s length transactions, less,
pursuant to the selling Person’s customary accounting methods as generally and consistently applied, customary deductions,
without duplication for: (i) cash or terms discounts, (ii) sales, use and value added taxes (if and only to the extent included
in the gross invoice amount), (iii) reasonable and customary accruals for third party relates and chargebacks, (iv) returns and
(v) recalls.

 

“Note”
means the note issued to Eclat in the form attached hereto as Exhibit B.

 

“Obligations”
means all obligations (monetary or otherwise) of Flamel, the Purchaser or Eclat Pharma arising in connection with the Purchase
Documents to which each is a party, as the case may be.

 

“Ordinary
Shares” means ordinary shares of Flamel, nominal value $0.122 Euros per share, the American Depository Shares evidencing
such shares, and the American Depository Receipts evidencing rights in such American Depository Shares.

 

“Permitted
Indebtedness” means:

 

(ix)         The
Obligations and any other obligations under the Purchase Documents;

 

(x)          Item
(ii) (including any earnout and other similar obligations incurred to a seller in an acquisition) under the definition of Indebtedness;

 

(xi)         Item
(v) under the definition of Indebtedness;

 

    	4

    	 

    

 

(xii)        Indebtedness
secured by purchase money Liens; provided that such Indebtedness when incurred by Flamel or any of its Subsidiaries shall
not exceed the purchase price of the asset(s) financed;

 

(xiii)       Indebtedness
of any Person acquired pursuant to an acquisition, provided that such Indebtedness is either (i) not incurred in contemplation
of or in connection with such acquisition or (ii) constitutes Indebtedness owing to the seller of the assets acquired in such acquisition;

 

(xiv)      Indebtedness
existing as of the date hereof and set forth on Exhibit C attached hereto;

 

(xv)       (x)
Indebtedness among Flamel and its Subsidiaries that guaranty the Obligations of the Purchaser under the Purchase Documents (y)
Indebtedness among the Subsidiaries of Flamel and (z) Indebtedness to Flamel of its Subsidiaries that are not party to the Purchase
Agreements.

 

(xvi)      Hedging
Obligations incurred in the ordinary course of business not for speculative purposes;

 

(xvii)     Indebtedness
for borrowed money subordinated to the Note by documentation that is reasonably acceptable to Eclat in form and content;

 

(xviii)    Indebtedness
in respect of letters of credit in an aggregate outstanding amount not to exceed $750,000 at any time;

 

(xix)       Performance
bonds, surety bonds, bank guaranties and similar instruments incurred in the ordinary course of business;

 

(xx)        Guarantees
with respect to any Permitted Indebtedness;

 

(xxi)       Indebtedness
evidenced by the Existing Note Documents;

 

(xxii)      Indebtedness
in an aggregate amount outstanding at any time of $500,000

 

(xxiii)     Indebtedness
in an aggregate amount of 15,000,000 Euros outstanding at any one time from a Government Authority of the Republic of France;

 

(xxiv)    Indebtedness
incurred to pay the promissory note provided for in Section 2(j) of the Warrant;

 

(xxv)     Indebtedness
incurred to purchase equipment of the Warrant; and

 

(xxvi)    Any
refinancings, renewals, extensions, increases or replacements of Indebtedness listed in clauses (ii), (iii), (iv) and (v) so long
as no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the
time of such refinancing.

 

    	5

    	 

    

 

“Permitted
Liens” means:

 

(xxvii)   Liens
existing on the date hereof and set forth on Exhibit E attached hereto, and any renewals or extensions thereof, provided
that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby
is permitted by clause (iii), (iv) or (vi) of the definition of Permitted Indebtedness;

 

(xxviii)    Liens
in favor of Eclat;

 

(xxix)      Statutory
Liens created by operation of applicable law;

 

(xxx)       Liens
arising in the ordinary course of business and securing obligations that are not more than 30 days past due or are being contested
in good faith by appropriate proceedings;

 

(xxxi)      Liens
for taxes, assessments or governmental charges or levies not more than 30 days past due and payable or that are being contested
in good faith by appropriate proceedings;

 

(xxxii)     Liens
arising from judgments, decrees or attachments in circumstances not constituting an Event of Default;

 

(xxxiii)    Liens
in favor of financial institutions arising in connection with Flamel’s or its Subsidiaries’ accounts maintained in
the ordinary course of Flamel’s and its Subsidiaries’ business held at such institutions to secure standard fees for
services charged by, but not financing made available by, such institutions;

 

(xxxiv)     Liens
securing Indebtedness permitted pursuant to clauses (iii), (iv), (v) and (xiii) of the definition of Permitted Indebtedness;

 

(xxxv)      Lessor
liens;

 

(xxxvi)     Pledges
or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other
social security legislation, other than any Lien imposed by ERISA;

 

(xxxvii)    Deposits
to secure (i) the performance of tenders, bids, trade contracts, licenses and leases, statutory obligations, surety bonds, performance
bonds, bank guaranties and other obligations of a like nature incurred in the ordinary course of business (including earnest money
deposits in respect of any acquisition), or (ii) indemnification obligations relating to any disposition;

 

(xxxviii)   Easements,
rights of way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial
in amount, and which do not in any case materially interfere with the ordinary conduct of the business of the applicable Person;

 

    	6

    	 

    

 

(xxxix)     Leases,
licenses or subleases granted to others not interfering in any material respect with the business of Flamel and its Subsidiaries;

 

(xl)         Liens
of a collection bank arising under Section 4-210 of the Uniform Commercial Code (or equivalent in foreign jurisdictions) on
items in the course of collection;

 

(xli)        Licenses
of intellectual property granted by Flamel or any of its Subsidiaries in the ordinary course of business and not restricted by
this Agreement and not interfering in any material respect with the ordinary conduct of business of Flamel and its Subsidiaries;

 

(xlii)      Good
faith deposits required in connection with any acquisition;

 

(xliii)     To
the extent constituting a Lien, escrow arrangements securing indemnification obligations associated with any acquisition;

 

(xliv)      Liens
(i) on advances of cash or cash equivalents in favor of the seller of any property to be acquired by Flamel or any of its Subsidiaries
to be applied against the purchase price for such acquisition; provided, that (x) the aggregate amount of such advances of cash
or cash equivalents shall not exceed the purchase price of such acquisition and (y) the property is acquired within 90 days following
the date of the first such advance so made; and (ii) consisting of an agreement to dispose of any property in a disposition of
assets, in each case, solely to the extent such acquisition or disposition, as the case may be, would have been permitted on the
date of the creation of such Lien;

 

(xlv)        Liens
on cash collateral securing reimbursement obligations of Flamel and its Subsidiaries under letters of credit;

 

(xlvi)      Liens
securing the Indebtedness permitted by clause (xiii) of the definition of Permitted Indebtedness; and

 

(xlvii)     Liens
not otherwise permitted hereunder in respect of obligations in an aggregate amount not to exceed $500,000 at any time outstanding.

 

“Person”
means and includes any natural person, individual, partnership, joint venture, corporation, trust, limited liability company, limited
company, joint stock company, unincorporated organization, government entity or any political subdivision or agency thereof, or
any other entity.

 

“Purchase
Document” or “Purchase Documents” means this Agreement, the Note, the Security Agreements, the Guaranty,
the Interest Agreement, and any other document or instrument delivered in connection with any of the foregoing whether or not specifically
mentioned herein or therein (other than, for the avoidance of doubt, the Warrant and the Registration Rights Agreement).

 

“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, by and among Flamel and Eclat.

 

    	7

    	 

    

 

“Restricted
Payment” means any dividend or other distribution (whether in cash, securities or other Property) with respect to any
capital stock of Flamel or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such
capital stock or of any option, warrant or other right to acquire any such capital stock. The term “Restricted Payment”
shall not include (a) Restricted Payments made by any Subsidiary (directly or indirectly) to the holders of its capital stock and
(b) dividend payments and other distributions to the extent payable in the capital stock of the Person making such payment or distribution.

 

“Scheduled
Amortization” has the meaning given to it in Section 2.1(a).

 

“SEC”
means the United States Securities and Exchange Commission.

 

“Securities
Act” means the Securities Act of 1933, including the rules and regulations promulgated thereunder.

 

“Security
Agreements” means (a) the Pledge Agreement, dated as of the date hereof, between the Purchaser and Eclat and (b) the
Security Agreement dated as of the date hereof between Eclat Pharma and Eclat.

 

“Shareholder
Approval Date” has the meaning given to it in Section 1 of the Warrant.

 

“Shareholder
Approval” means the approvals set forth in the definition of Shareholder Approval Date.

 

“Subsidiary”
or “Subsidiaries” means any entity of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly
owned by Flamel.

 

“Threshold”
has the meaning given to it in Section 2.1(b)(i).

 

“Warrant”
has the meaning given to it in Section 2.5.

 

“Warrant Shares”
shall have the meaning given to them in Section 2(a) of the Warrant.

 

Section
1.2           Interpretation. In this Agreement, unless
the context otherwise requires, all words and personal pronouns relating thereto shall be construed as the number and gender of
the party or parties requires and the verb shall be read and construed as agreeing with the required word and pronoun; the division
of this Agreement into Articles and Sections and the use of captions is for convenience of reference only and shall not modify
or affect the interpretation of any provision of this Agreement; the words “herein,” “hereof,” “hereunder,”
“hereinafter” and “hereto” and words of similar import refer to this Agreement as a whole and not to any
particular Article or Section hereof; the words “include,” “including,” and derivations thereof shall be
deemed to have the phrase “without limitation” attached thereto unless otherwise expressly stated; references to a
specified Article or Section shall be construed as a reference to that specified Article or Section; and any reference to any Purchase
Document means as amended or supplemented and from time to time in effect.

 

    	8

    	 

    

 

ARTICLE
2

 

THE
NOTE

 

Section
2.1           Payment.

 

(a) Purchaser shall make
the Final Payment to Eclat on the earlier to occur of (i) the Final Payment Date and (ii)  the date the principal amount
of the Note becomes due and payable following an Event of Default in accordance with Sections 4.4 and 4.5 hereof. The Purchaser
may prepay the Note at any time, without premium or penalty. Subject to the provisions of subsection (b) below, Purchaser shall
remit to Eclat 25% of the original principal amount of the Note on each of the third, fourth, fifth and sixth anniversaries of
the date hereof (each such date, an “Anniversary”), in each case without premium (each such payment, a “Scheduled
Amortization”).

 

(b)

 

(i) Each
Scheduled Amortization and each Deferred Amortization (as defined below) in respect of a prior Anniversary shall be paid in full
on the applicable Anniversary only if on such Anniversary (a) 2 or more Launch Products have received FDA Approval, or (b) one
Launch Product has received FDA Approval and the cumulative Net Sales of such Launch Product is $40 million or more (each a “Threshold”).
Any portion of Scheduled Amortization not paid on an Anniversary as a result of the application of the provisions of this subsection
(i) shall be deferred and, subject to the provisions of subsection (ii) below, shall be payable on the next Anniversary if a Threshold
has been reached (“Deferred Amortization”).

 

(ii) If
on any Anniversary, only one Launch Product has received FDA Approval and the Net Sales of such Launch Product are less than $40
million, the Scheduled Amortization and the Deferred Amortization due and payable on such Anniversary shall equal the product of
the sum of such Scheduled Amortization and Deferred Amortization multiplied by a fraction, the numerator of which is the amount
of Net Sales and the denominator of which is $40 million. Any amount of Scheduled Amortization and Deferred Amortization not paid
on such Anniversary Date as a result of the foregoing sentence shall constitute Deferred Amortization and, subject to the provisions
of the foregoing sentence, shall be payable on the next Anniversary if a Threshold has been reached. Examples of the calculation
contemplated by this clause (ii) are set forth on Exhibit A (2).

 

(iii) If
a Threshold has not been reached by the sixth Anniversary, after the application of any payments on such date pursuant to subsection
(ii), above, the then outstanding principal amount of the Note, including any interest that remains capitalized pursuant to Section
2.3 after such application, shall be forgiven, all Obligations with respect to the Note and this Agreement shall be deemed paid
in full and the Note and this Agreement shall automatically terminate without any further action by either Party.

 

    	9

    	 

    

 

(c)          After
a Threshold has been reached, the Note shall be deemed prepaid without premium to the extent Eclat satisfies the payment of the
Exercise Price (as such term is defined in the Warrant) through a reduction of the principal amount outstanding under the Note
in accordance with Section 3(a)(i) of the Warrant.

 

(d)          Each
prepayment shall be applied first, to accrued and unpaid interest and second, to the remaining scheduled principal prepayments
in reverse order of maturity.

 

Section
2.2          Payments. Each payment shall be made in
immediately available funds prior to 11:00 a.m. New York City time on the date that such payment is due, at such account as Eclat
shall designate at least 5 Business Days prior to the date such payment is due. The Purchaser shall pay all costs imposed by any
financial institution, in connection with making any such payment, except for costs imposed by Eclat’s banks.

 

Section
2.3          Interest. The outstanding principal amount
of the Note shall bear interest at the Interest Rate (calculated on the basis of the actual number of days elapsed in each month).
Interest shall be paid quarterly in arrears commencing on July 2, 2012 and on the first Business Day of each October, January,
April and July thereafter (each an “Interest Payment Date”); provided, however, that if on any Interest Payment
Date, FDA Approval has not been received for at least one Launch Product, the interest payable on such date shall not be payable
but shall be added on such date to the outstanding principal amount of the Note. Purchaser shall pay any interest so accrued no
later than nine months after such FDA Approval. Upon such payment, such outstanding principal amount shall be reduced by the amount
thereof.

 

Section
2.4          Interest on Late Payments. Without limiting
the remedies available to Eclat under the Purchase Documents or otherwise, to the maximum extent permitted by applicable law, if
Purchaser fails to make any payment of principal or interest when due under the Note, the Purchaser shall pay on demand, in respect
of the outstanding principal amount and interest, interest at the rate per annum equal to 15% for so long as such payment remains
outstanding.

 

Section
2.5          Delivery of Warrant.

 

On the date hereof,
Flamel has issued and will deliver to Eclat, on behalf of the Purchaser, Warrants to purchase 2,200,000 and 1,100,000 Warrant respectively,
Shares at initial Exercise Prices (as defined in the Warrants) of $7.44 and $11.00 respectively, in the form attached hereto as
Exhibit F (the “Warrant”).

 

ARTICLE
3

 

REPRESENTATIONS
AND WARRANTIES

 

Section
3.1         Representations and Warranties of Flamel. 
Each of Flamel and the Purchaser represents and warrants as of the date hereof that except as set forth in an Exhibit to this Agreement:

 

(i)          No
Default or Event of Default has occurred under any Purchase Document.

 

    	10

    	 

    

 

(ii)         Flamel
(i) is capable of paying its debts as they fall due, is not unable and has not admitted its inability to pay debts as they fall
due and (ii) is not bankrupt or insolvent. Flamel has not taken action, and no such action has been taken by a third party, for
Flamel’s winding up, dissolution, or liquidation or similar executory or judicial proceeding or for the appointment of a
liquidator, custodian, receiver, trustee, administrator or other similar officer for Flamel or any or all of its assets or revenues.

 

(iii)        No
Lien exists on Flamel’s or any of its Subsidiaries’ assets, except for Permitted Liens.

 

(iv)        The
obligation of the Purchaser to make any payment under this Agreement is absolute and unconditional, and there exists no right of
setoff or recoupment, counterclaim, cross-claim or defense of any nature whatsoever to any such payment.

 

(v)         No
Indebtedness of Flamel or any of its Subsidiaries exists other than Permitted Indebtedness.

 

(vi)        Each
Purchase Document has been duly authorized, executed and delivered by Flamel, the Purchaser and Eclat Pharma, as the case may be,
and constitutes valid, legal and binding obligations of Flamel, the Purchaser and Eclat Pharma, as the case may be, enforceable
in accordance with its terms, except as such enforceability may be limited by (i) applicable insolvency, bankruptcy, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity). The execution, delivery and performance of the Purchase Documents by Flamel, the
Purchaser and Eclat Pharma, as the case may be, will not (A) conflict with or result in a breach or violation of any of the provisions
of, or constitute a default under, or result in the creation or imposition of any Lien (other than a Permitted Lien) upon any assets
of Flamel or any Subsidiary pursuant to any agreement (other than the Existing Notes Documents) to which Flamel or any Subsidiary
is a party or by which Flamel or any Subsidiary is bound or to which any of the assets of Flamel or any Subsidiary is subject,
(B) result in any violation of or conflict with, the provisions of the organizational documents of Flamel or any Subsidiary or
(C) result in the violation of any law or any judgment, order, rule, regulation or decree of any Governmental Authority, except,
in the case of clause (C) above, for any such violation that would not, individually or in the aggregate, have a Material Adverse
Effect. No material consent, approval, authorization or order of, or registration or filing with any Governmental Authority is
required for the execution, delivery and performance by Flamel, the Purchaser and the Eclat Pharmaceuticals LLC, as the case may
be, of any Purchase Document (other than any consent, approval, authorization or order that has been obtained, or registration
or filing that has been made, and in each case, is in full force and effect); and each of Flamel, the Purchaser and Eclat Pharma
has the power and authority to enter into and perform each Purchase Document to which each is a party.

 

    	11

    	 

    

 

(vii)       Each
of Flamel and its Subsidiaries owns or has the right to use pursuant to a valid and enforceable written license, implied license
or other legally enforceable right, all of the Intellectual Property (as defined below) that is necessary for the conduct of their
respective businesses as currently conducted (the “IP”) except as would not reasonably be expected to have a
Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, (A) to the knowledge of
Flamel, no person has infringed, or misappropriated any IP; (B) all of the IP that is registered with or issued by a Governmental
Authority is valid and enforceable; (C) there is no outstanding, pending, or, to the knowledge of Flamel, threatened action, suit,
other proceeding or claim by any third person challenging or contesting the validity, scope, use, ownership, enforceability, or
other rights of Flamel or its Subsidiaries in or to any IP and Flamel and its Subsidiaries have not received any written notice
regarding, any such action, suit, or other proceeding; (D) to Flamel’s knowledge, neither Flamel nor any of its Subsidiaries
has infringed or misappropriated any material Intellectual Property rights of others; (E) there is no pending or to Flamel’s
knowledge, threatened action, suit, other proceeding or claim by others that Flamel or any of its Subsidiaries infringes upon,
violates or uses the Intellectual Property rights of others without authorization, and Flamel and its Subsidiaries have not received
any written notice regarding, any such action, suit, other proceeding or claim; and (F) neither Flamel nor any of its Subsidiaries
is a party to or bound by any options, licenses, or agreements with respect to Intellectual Property. The term “Intellectual
Property” as used herein means (i) all patents, patent applications, patent disclosures and inventions (whether patentable
or unpatentable and whether or not reduced to practice), (ii) all trademarks, service marks, trade dress, trade names, slogans,
logos, and corporate names and Internet domain names, together with all of the goodwill associated with each of the foregoing,
(iii) copyrights, copyrightable works, and licenses, (iv) registrations and applications for registration for any of the foregoing,
(v) computer software (including but not limited to source code and object code), data, databases, and documentation thereof, (vi)
trade secrets and other confidential information, (vii) other intellectual property, and (viii) copies and tangible embodiments
of the foregoing (in whatever form and medium).

 

(viii)      Neither
Flamel nor any of its Subsidiaries has granted rights to develop, manufacture, produce, assemble, distribute, license, market or
sell any of the Launch Products to any other Person and is not bound by any agreement that affects the exclusive right of Flamel
to develop, manufacture, produce, assemble, distribute, license, market or sell any of the Launch Products.

 

(ix)         {Reserved}.

 

(x)          Subsequent
to September 30, 2011, Flamel has not declared or paid any dividends or made any distribution of any kind with respect to its Ordinary
Shares; and there has not been any change in the capital stock (other than a change in the number of outstanding Ordinary Shares
due to the issuance of shares upon the exercise of outstanding options) or any issuance of options, warrants, convertible securities
or other rights to purchase Ordinary Shares, or any Material Adverse Effect or any development which would reasonably be expected
to result in any Material Adverse Effect

 

(xi)         All
of the issued and outstanding Ordinary Shares are duly authorized and validly issued, fully paid and nonassessable, have been issued
in compliance with all applicable securities laws and were not issued in violation of any preemptive rights or other rights to
subscribe for or purchase securities that have not been waived in writing. Except for (i) options and warrants issued pursuant
to Flamel’s option plans and free share plans and (ii) the preemptive rights of the holders of Ordinary Shares with respect
to any new issuance of Ordinary Shares, there are no preemptive rights, options, warrants or other rights to subscribe for or to
purchase, or any restriction upon the voting or transfer of any Ordinary Shares pursuant to Flamel’s organizational documents
or any agreement, to which Flamel or any of its Subsidiaries is a party or by which Flamel or any of its Subsidiaries is bound.
All of the issued and outstanding shares of capital stock of each of Flamel’s Subsidiaries have been duly and validly authorized
and issued and in the case if any Subsidiary that is a corporation, are fully paid and nonassessable, and Flamel owns of record
and beneficially, free and clear of any Liens (other than those imposed by law that constitute Permitted Liens and those described
in clause (xx) of the definition of Permitted Liens) all of the issued and outstanding capital stock of the Subsidiaries.

 

    	12

    	 

    

 

(xii)        The
Subsidiaries are set forth on Exhibit G.

 

(xiii)       The
Annual Report for 2010 on Form 20-F of Flamel filed with the SEC does not make any untrue statement of a material fact or to omit
to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were
made, not misleading.

 

Section
3.2           Flamel and Purchaser Acknowledgment. Each
of Flamel and the Purchaser acknowledges that it has made the representations and warranties referred to in Section 3.1 with the
intention of persuading Eclat to enter into the Purchase Documents and that Eclat has entered into the Purchase Documents on the
basis of, and in full reliance on, each of such representations and warranties.

 

Section
3.3           Representations and Warranties of Eclat.
Eclat represents and warrants to Flamel as of the date hereof that:

 

(i)          It
is acquiring the Warrant solely for its account for investment, not as an agent or nominee, and not with a view to or for resale
in connection with any distribution of the Warrant or Warrant Shares or any part thereof.

 

(ii)         The
Warrant and, if Shareholder Approval is obtained, the Warrant Shares, must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption for such registration is available.

 

(iii)        Neither
the Warrant nor the Warrant Shares may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions
are met.

 

(iv)        It
will not make any disposition of all or any part of the Warrant or Warrant Shares until:

 

(a)          Flamel
shall have received a letter secured by Eclat or its counsel from the SEC stating that no action will be recommended to the SEC
with respect to the proposed disposition;

 

(b)          There
is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is
made in accordance with said registration statement; or

 

    	13

    	 

    

 

(c)          Eclat
shall have notified Flamel of the proposed disposition and, in the case of a sale or transfer in a so-called “4(1) and a
half” transaction, shall have furnished counsel for Flamel with an opinion of counsel, substantially in the form annexed
as Exhibit C to the Warrant. Flamel agrees that it will not require an opinion of counsel with respect to transactions under Rule
144 or Rule 144A of the Securities Act.

 

It understands and
agrees that all certificates evidencing the Warrant Shares may bear a legend as set forth in the Warrant.

 

(v)         Eclat
is an “accredited investor” as defined in Regulation D promulgated the Securities Act.

 

(vi)        Eclat
is duly organized and validly existing under the laws of the jurisdiction of its formation.

 

(vii)       Each
Purchase Document to which it is a party has been duly authorized, executed and delivered by Eclat and constitutes the valid and
legally binding obligation of Eclat, enforceable in accordance with its terms, except as such enforceability may be limited by
(a) applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’ rights generally,
and (b) applicable equitable principles (whether considered in a proceeding at law or in equity).

 

ARTICLE
4

 

PARTICULAR
COVENANTS AND EVENTS OF DEFAULT

 

Section
4.1          Affirmative Covenants. From and after the
date hereof, unless Eclat shall otherwise agree:

 

(i)          Flamel
shall and shall cause its Subsidiaries to maintain its existence and qualify and remain qualified to do its business as currently
conducted, except where the failure to so maintain such qualification would not reasonably be expected to have a Material Adverse
Effect.

 

(ii)         Flamel
shall and shall cause its Subsidiaries to comply in all material respects with all Applicable Laws, except where the necessity
of compliance therewith is contested in good faith by appropriate proceedings or where the failure to comply would not have a Material
Adverse Effect.

 

(iii)        Flamel
shall obtain and shall cause its Subsidiaries to make and keep in full force and effect all licenses, certificates, approvals,
registrations, clearances, authorizations and permits required to conduct their corporation businesses, except where the failure
to do so would not have a Material Adverse Effect

 

(iv)        Flamel
shall promptly notify Eclat of the occurrence of (i) any Default or Event of Default and (ii) any claims, litigation, arbitration,
mediation or administrative or regulatory proceedings that are instituted or threatened against Flamel or any of its Subsidiaries
that could reasonably be expected to have a Material Adverse Effect, and (iii) each event which, at the giving of notice, lapse
of time, determination of materiality or fulfillment of any other applicable condition (or any combination of the foregoing), would
constitute an event of default (however described) under any Purchase Document.

 

    	14

    	 

    

 

(v)         [Reserved.]

 

(vi)        (i)
If Flamel is not required to file reports pursuant to the Exchange Act, Flamel will provide unaudited quarterly consolidated financial
statements of Flamel and its Subsidiaries within 45 days after the end of each of the first three fiscal quarters of each calendar
year, and audited annual consolidated financial statements of Flamel and its Subsidiaries within 120 days after the end of each
calendar year prepared in accordance with GAAP (subject, in the case of unaudited financial statements, to the absence of footnotes
and other presentation items and to normal year-end adjustments) with, in the case of annual financial statements, a report thereon
by Flamel’s independent certified public accountants, (ii) Flamel will timely file with the SEC (subject to appropriate extensions
made under the Exchange Act) any annual reports, quarterly reports and other periodic reports required to be filed pursuant to
the Exchange Act, and (iii) Flamel and its Subsidiaries will provide to Eclat copies of all documents, reports, financial data
and other information that Eclat may reasonably request.

 

(vii)       As
promptly as practicable after the date hereof, but not later than September 30, 2012, Flamel shall convene a meeting of the holders
of Ordinary Shares in accordance with French law and Flamel’s organizational documents for the purpose of voting on the approvals
set forth in the definition of Shareholder Approval Date.

 

Section
4.2          Negative Covenants.  From and after the
date hereof until the Final Payment Date, unless Eclat shall otherwise agree:

 

(i)          Flamel
shall not and shall not permit any Subsidiary to (a) liquidate, provided that a Subsidiary may merge into the Flamel or any other
Subsidiary, or dissolve (unless such Subsidiary ceases to own any operating assets or conduct business), or (b) enter into any
merger, consolidation or reorganization, unless (x) Flamel or a Subsidiary is the surviving corporation or (y) in connection with
a disposition of a Subsidiary permitted under the Purchase Documents. Flamel shall not maintain or establish any Subsidiary unless
such Subsidiary executes and delivers to Eclat a guarantee substantially in the form of the Guaranty, if such Subsidiary is organized
outside of the United States, and in the form of the Guaranty of Eclat Pharma, dated as of the date hereof, to Eclat, if such Subsidiary
is organized within the United States.

 

    	15

    	 

    

 

(ii)         Flamel
shall not and shall not permit any Subsidiary to (a) prior to the third anniversary of the date hereof, enter into any management
contract or similar arrangement whereby a substantial part of its business is managed by another Person other than the Employment
Agreement, unless the Employment Agreement is terminated on account of death, disability or cause or Michael Anderson resigns as
Chief Executive Officer of Flamel prior to such third anniversary other than as a result of Flamel’s breach of the Employment
Agreement, or (b) make any Restricted Payment, to any shareholder of Flamel or an Affiliate of such shareholder except in arms’
length transaction in the ordinary course of business; provided, however, that (a) Flamel may repurchase its capital stock issued
to its employees and directors in an amount necessary to satisfy such individual’s income tax withholding obligations relating
to the vesting of any restricted stock grants that have been approved by Flamel’s Board of Directors or the appropriate committee
thereof, (b) Flamel may repurchase its capital stock issued to employees, directors or managers upon the death, disability or termination
of employment of such person or pursuant to the terms of any subscription, stockholder or other agreement or plan approved by Flamel’s
Board of Directors and (c) to the extent constituting a Restricted Payment, (I) payment of reasonable compensation and fees to
directors. officers and employees of Flamel and its Subsidiaries and (II) customary indemnification provisions issued by Flamel
or any of its Subsidiaries to officers and directors of Flamel and its Subsidiaries.

 

(iii)        Flamel
shall not and shall not permit any Subsidiary to (a) create, incur or suffer any Lien upon any of its assets, now owned or hereafter
acquired, except Permitted Liens or (b) assign, sell, transfer or otherwise dispose of, any Purchase Document, or the rights and
obligations thereunder.

 

(iv)        Flamel
shall not and shall not permit any Subsidiary to create, incur, assume, guarantee or remain liable with respect to any Indebtedness,
other than Permitted Indebtedness.

 

Section
4.3         Major Transaction. Within 5 days after the
receipt of a Major Transaction Notice at any time after a Threshold has been reached, Eclat, in the exercise of their sole discretion,
may deliver a written notice to the Purchaser (the “Put Notice”), that the Final Payment shall be due and payable.
If Eclat deliver a Put Notice, then simultaneously with such consummation, the Purchaser shall make the Final Payment to Eclat
and upon Eclat’s receipt of the Final Payment, this Agreement and the Note and the Obligations in respect of the foregoing
shall terminate. Flamel shall not consummate any Major Transaction without complying with the provisions of this Section 4.3.

 

Section
4.4         General Acceleration Provision upon Events of
Default. (a) If any event specified in this Section 4.4 (other than an event specified in any of clauses (ii), (iii), (v) and
(viii)) shall have happened and be continuing beyond any applicable cure period at (an “Event of Default”),
Eclat, by notice to the Purchaser, may declare the principal of and accrued and unpaid interest on the Note (together with any
other Obligations) to be, and the same shall thereupon become, immediately due and payable, without any further notice and without
any presentment, demand, or protest of any kind, all of which the Purchaser expressly waives, and take any further action available
at law or in equity, including, without limitation, the sale of the Note:

 

(i)          The
Purchaser shall have failed to make payment of (a) principal when due, or (b) interest and any other amounts due under the Note
within five (5) Business Days of their due date.

 

(ii)         Flamel
or the Purchaser shall have failed to comply with the due observance or performance of any covenant contained in any Purchase Document
to which it is a party (other than the covenant described in (i) above) and such failure shall not have been cured by Flamel or
the Purchaser within 30 days after receiving notice of such failure from Eclat.

 

    	16

    	 

    

 

(iii)        Any
representation or warranty made by Flamel or the Purchaser in any Purchase Document which it is a party shall have been incorrect,
false or misleading in any material respect as of the date it was made.

 

(iv)        (i)
Flamel or the Purchaser shall generally be unable to pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts as they come due or shall make a general assignment for the benefit of creditors; (ii) Flamel or the Purchaser
shall declare a moratorium on the payment of its debts; (iii) the commencement by Flamel or the Purchaser of proceedings to be
adjudicated bankrupt or insolvent, or the consent by it to the commencement of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking reorganization, intervention or other similar relief under any applicable
law, or the consent by it to the filing of any such petition or to the appointment of an intervenor, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of all or substantially all of its assets; (iv) the commencement against Flamel
or the Purchaser of a proceeding in any court of competent jurisdiction under any bankruptcy or other applicable law (as now or
hereafter in effect) seeking its liquidation, winding up, dissolution, reorganization, arrangement, adjustment, or the appointment
of an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or other similar official), and any such proceeding shall
continue undismissed, or any order, judgment or decree approving or ordering any of the foregoing shall continue unstayed or otherwise
in effect, for a period of ninety (90) days; or (v) any other event shall have occurred which under any applicable law in the United
States, France or another jurisdiction would have an effect analogous to any of those events listed above in this subsection.

 

(v)         One
or more money judgments against Flamel or the Purchaser or attachments against any of its property (not covered by insurance),
which in the aggregate exceed $500,000, or which could reasonably be expected to have a Material Adverse Effect remain(s) unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days from the date of entry of such judgment.

 

(vi)        [Reserved:]

 

(vii)       Any
material provision of the Purchase Documents for any reason, other than a partial or full release in accordance with the terms
thereof or any authorization by a Government Authority necessary for the execution, delivery or performance of any Purchase Document
is not given or ceases to be in full force and effect or is declared to be null and void.

 

(viii)      Flamel
or any of its Subsidiaries fails to perform any agreement relating to Indebtedness (other than any Indebtedness arising out of,
or in respect of the Warrant, including, without limitation, a promissory note in the form of Exhibit D to the Warrant) of Flamel
or any of its Subsidiaries having an aggregate outstanding principal amount in excess of $500,000, in each case after the expiration
of any applicable cure period, resulting in a right by the holder of such Indebtedness to accelerate the maturity thereof.

 

(ix)         [Reserved].

 

(x)          Michael
Anderson does not become Chief Executive Officer of Flamel as contemplated by the Employment Agreement.

 

    	17

    	 

    

 

(xi)         Michael
Anderson is removed as the Chief Executive Officer of Flamel prior to the third anniversary of the date hereof for any reason other
than on account of death, disability, or cause (as such term is defined in the Employment Agreement).

 

(xii)        Michael
Anderson voluntarily resigns as Chief Executive Officer of Flamel prior to the third anniversary of the date hereof because Flamel
has breached its agreements in the Employment Agreement.

 

(xiii)       Eclat
Pharma shall cease conducting the business it currently conducts and proposes to conduct and such business, with the direct or
indirect consent of Flamel, shall be conducted by any other Person.

 

(xiv)      Any
asset of Eclat Pharma shall be sold, assigned, licensed or otherwise transferred except in the ordinary course of business and
except for (i) transfers of property subject to casualty or condemnation proceeding, (ii) used, worn-out, obsolete or surplus equipment,
(iii) the abandonment of intellectual property rights which, in the reasonable good faith determination of Flamel, are no longer
used or useful to the business of Eclat Pharma, (iv) Restricted Payments permitted pursuant to Section 4.2(ii)(b), and (v) any
such asset with a fair market value of not more than $75,000.

 

(xv)       The
Limited Liability Company Agreement of Eclat Pharmaceuticals LLC shall be amended in any manner adverse to the interests of Eclat
in any material respect under the Purchase Documents or the transactions contemplated thereby.

 

(b)          If
an Event of Default specified in clauses (ii), (iii), (v), or (viii) occurs and is continuing, and a Threshold has been reached,
Eclat, by notice to the Purchaser may exercise the acceleration rights with respect to the principal of and accrued and unpaid
interest on the Note and the other Obligations of the Purchaser and Flamel set forth in Section 4.4(a) of this Agreement.

 

Section
4.5          Automatic Acceleration on Dissolution or Bankruptcy.
Notwithstanding any other provisions of this Agreement, if an Event of Default under Section 4.4(iv) shall occur on or prior to
a Threshold having been reached or at any time thereafter, the principal of the Note (together with any other amount accrued or
payable under this Agreement) shall thereupon become immediately due and payable without any presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived by the Purchaser.

 

Section
4.6          Recovery of Amounts Due. If any amount payable
hereunder is not paid as and when due, the Purchaser authorizes Eclat to proceed, to the fullest extent permitted by applicable
law, without prior notice, by right of set-off, banker’s lien or counterclaim, against assets of the Purchaser to the full
extent of such amount.

 

    	18

    	 

    

 

ARTICLE
5

 

MISCELLANEOUS

 

Section
5.1           Notices. Any notice or other communication
to be given or made under this Agreement, the Note or the Security Agreement shall be in writing and shall be deemed to have been
duly given or made when it shall be delivered by hand, overnight mail, courier (confirmed by facsimile), electronic mail or facsimile
(with a hard copy delivered within two (2) Business Days to the Party to which it is required or permitted to be given or made
at such Party’s address specified below or at such other address as such Party shall have designated by notice to the other
Party.

 

For Purchaser:

 

Flamel Technologies S.A.

33, avenue du Dr. Georges Levy

Parc Club du Moulin à Vent

69693 Vénissieux Cedex – France

Attention: Stephen H. Willard

 

For Eclat:

 

Eclat Holdings, LLC

c/o Deerfield Management Company, L.P.

780 Third Avenue, 37th Floor

New York, NY 10017

Attention: Structured Products

 

with a courtesy copy to:

 

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022-2585

Facsimile: (212) 894-5827

Attention: Mark I. Fisher

 

Section
5.2           Waiver of Notice. Whenever any notice is
required to be given to Eclat or Purchaser under any Purchase Document, a waiver thereof in writing signed by each person entitled
to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

 

Section
5.3           Reimbursement of Legal and Other Expenses.
If any amount owing to Eclat under any Purchase Document shall be collected through enforcement of such Purchase Document, any
refinancing or restructuring in the nature of a work-out, settlement, negotiation, or any process of law, or shall be placed in
the hands of third Persons for collection, Purchaser shall pay (in addition to all monies then due or otherwise payable under any
Purchase Document) all reasonable and documented out-of-pocket attorneys’ and other fees and expenses incurred in respect
of such collection.

 

    	19

    	 

    

 

Section
5.4          Applicable Law and Consent to Non-Exclusive
New York Jurisdiction.

 

(i)          Each
Purchase Document shall be governed by and construed in accordance with the laws of the State of New York, without giving effect
to the conflicts of laws principles thereof other than Sections 5-1401 and 5-1402 of the General Obligations Law of such State.

 

(ii)         Each
Party hereby irrevocably agrees that any legal action, suit or other proceeding arising out of any Purchase Document may be brought
in the courts of the State of New York or of the United States of America for the Southern District of New York. Each Party irrevocably
consents to the service of any process in any such legal action, suit or other proceeding by the mailing of copies of such process
to such Party at its address specified in Section 5.1 by registered mail, return receipt requested. By the execution and delivery
of this Agreement, each Party hereby irrevocably consents and submits to the jurisdiction of any such court in any such action,
suit or other proceeding. Final judgment against each Party in any such action, suit or other proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit on the judgment. Nothing contained in any Purchase Document shall affect the
right of the Parties to commence legal proceedings in any court having jurisdiction, or concurrently in more than one jurisdiction,
or to serve process, pleadings and other legal papers upon the other Parties in any manner authorized by the laws of any such jurisdiction.

 

(iii)        Each
Party irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to
the laying of venue of any action, suit or other proceeding arising out of or relating to any Purchase Document, brought in the
courts of the State of New York or in the United States District Court for the Southern District of New York, and any claim that
any such action, suit or other proceeding brought in any such court has been brought in an inconvenient forum.

 

(iv)        Each
Party hereby waives any and all rights to demand a trial by jury in any action, suit or other proceeding arising out of any Purchase
Document or the transactions contemplated by any Purchase Document.

 

(v)         To
the extent that each Party may, in any suit, action or other proceeding brought in any court arising out of or in connection with
any Purchase Document, be entitled to the benefit of any provision of law requiring another Party in such suit, action or other
proceeding to post security for the costs of another Party, or to post a bond or to take similar action, each Party hereby irrevocably
waive such benefit, in each case to the fullest extent now or hereafter permitted under any applicable law.

 

(vi)        The
Purchaser waives its rights under Article 14 and Article 15 of the French Civil Code.

 

    	20

    	 

    

 

Section
5.5          Successors and Assigns. This Agreement shall
bind and inure to the respective successors and assigns of the Parties, except that Purchaser may not assign or otherwise transfer
any part of its rights and liabilities under this Agreement without the prior written consent of Eclat. Eclat may assign or otherwise
transfer all or any part of its rights or obligations under this Agreement without the prior written consent of the Purchaser and
shall give the Purchaser notice thereof.

 

Section
5.6          Entire Agreement. The Purchase Documents
contain the entire understanding of the Parties with respect to the matters covered thereby and supersede any and all other written
and oral communications, negotiations, commitments and writings with respect thereto. The provisions of the Purchase Documents
may be waived, modified, supplemented or amended only by an instrument in writing signed by the authorized officer of each Party.

 

Section
5.7          Severability. If any provision of any Purchase
Document shall be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

 

Section
5.8          Counterparts. Each Purchase Document may
be executed in several counterparts, and by each Party on separate counterparts, each of which and any photocopies and facsimile
copies thereof shall be deemed an original, but all of which together shall constitute one and the same agreement.

 

Section
5.9          Survival.

 

(i)          This
Agreement and all agreements, representations and warranties made by a Party in the Purchase Documents, shall be considered to
have been relied upon by the other Party and shall survive the execution and delivery of this Agreement regardless of any investigation
made by or on behalf of such other Party and shall continue in force until all amounts payable under this Agreement and the Note
shall have been fully paid in accordance with the provisions hereof and thereof; provided, however, that such agreements, representations
and warranties made in the Security Agreements, the Guaranty and the Interest Agreement shall continue in force until terminated
pursuant to the provisions of such agreements. Upon payment in full of all amounts due under the Note, including pursuant to Section
2.1(b)(iii), the Note Agreement and the Note shall automatically terminate without any further action by either Party. In connection
with any such termination, Eclat shall promptly execute and deliver to Purchaser, at Purchaser’s expense, all documents that
Purchaser shall reasonably request to evidence such termination. Promptly following the termination of this Agreement and the Note,
Eclat shall return to Purchaser (i) the Note, or (ii) in the case of any loss, theft or destruction of the Note, a customary lost
note affidavit in form and substance reasonably satisfactory to Purchaser.

 

(ii)         The
obligations of Purchaser and Eclat under this Article 5 shall survive and remain in full force and effect regardless of the repayment
of the Note, or the termination of any provision of this Agreement.

 

    	21

    	 

    

 

Section
5.10        Waiver. Neither the failure of, nor any delay on the
part of, any Party in exercising any right, power or privilege under any Purchase Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under the Purchase Documents preclude other or further exercise
thereof or the exercise of any other right, power or privilege; nor shall any waiver of any right, power, or privilege under any
Purchase Document, constitute a waiver of any other right, power or privilege or constitute a waiver of any default of the same
or of any other provision. No course of dealing and no delay in exercising, or omission to exercise, any right, power or privilege
hereunder accruing to Eclat upon any default under any Purchase Document shall impair any such right, power or privilege or be
construed to be a waiver thereof or an acquiescence therein; nor shall the action of Eclat in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or privilege of Eclat in respect of any other default. All rights,
power or privileges provided in any Purchase Document are cumulative and not exclusive of any rights, power or privileges otherwise
provided by law.

 

Section
5.11        Indemnity.

 

(i)          The
Parties shall, at all times, indemnify and hold each other harmless (the “Indemnity”) and each of their respective
directors, partners, officers, employees, agents, counsel and advisors (each, an “Indemnified Person”) in connection
with any losses, claims (including the cost of defending against such claims), damages, liabilities, penalties, or other expenses
arising out of, or relating to, the Purchase Documents (other than the Interest Agreement) which an Indemnified Person may incur
or to which an Indemnified Person may become subject (each, a “Loss”). The Indemnity shall not apply to the
extent that a court or arbitral tribunal with jurisdiction over the subject matter of the Loss, and over Eclat, Flamel or the Purchaser,
as applicable, and such other Indemnified Person that had an adequate opportunity to defend its interests, determines that such
Loss resulted from the gross negligence or willful misconduct of the Indemnified Person, which determination results in a final,
non-appealable judgment or decision of a court or tribunal of competent jurisdiction. The Indemnity is independent of and in addition
to any other agreement of any Party under any Purchase Document (other than the Interest Agreement) to pay any amount to Eclat,
and any exclusion of any obligation to pay any amount under this subsection shall not affect the requirement to pay such amount
under any other section hereof or under any other agreement.

 

(ii)         Without
prejudice to the survival of any other agreement of any of the Parties hereunder, the agreements of the Parties contained in this
Section 5.11 shall survive the termination of each other provision hereof and the payment of all amounts payable to Eclat hereunder.

 

Section
5.12        No Usury. This Agreement and the Note are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the amount paid or
agreed to be paid to Eclat under the Note exceed the maximum amount permissible under applicable law. If from any circumstance
whatsoever fulfillment of any provision hereof, at the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstance Eclat shall ever receive anything which might be deemed interest under applicable law,
that would exceed the highest lawful rate, such amount that would be deemed excessive interest shall be applied to the reduction
of the principal amount owing under the Note, or if such deemed excessive interest exceeds the unpaid balance of principal under
the Note, such deemed excess shall be refunded to Purchaser. All sums paid or agreed to be paid to Eclat on account of the Note
shall, to the extent permitted by applicable law, be deemed to be amortized, prorated, allocated and spread throughout the full
term of the Note until payment in full so that the deemed rate of interest on account of the Note is uniform throughout the term
thereof. The terms and provisions of this Section shall control and supersede every other provision of this Agreement and the Note.

 

    	22

    	 

    

 

Section
5.13        Further Assurances. From time to time, Flamel and the
Purchaser shall perform any acts and execute and deliver to Eclat such additional documents as reasonably requested by Eclat to
carry out the purposes of any Purchase Document and to preserve and protect Eclat’s rights as contemplated therein.

 

Section
5.14        Currency. All amounts owing under this Agreement, the
Note and the Security Agreement shall be paid in Dollars

 

Section
5.15        Judgment Currency.

 

(i)          If,
for the purpose of obtaining or enforcing judgment against Flamel or the Purchaser in any court in any jurisdiction with respect
to this Agreement, the Note and/or the Security Agreement, it becomes necessary to convert into any other currency (such other
currency being hereinafter in this Section 5.15(i) referred to as the “Judgment Currency”) an amount due in
United States dollars, the conversion shall be made at the last exchange rate published in the Wall Street Journal on the business
day immediately preceding (the “Exchange Rate”):

 

(a)          the
date actual payment of the amount is due, in the case of any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to payment being due on such date; or

 

(b)          the
date on which the French or any other non U.S. court determines, in the case of any proceeding in the courts of any other jurisdiction
(the date as of which such payment is made pursuant to this Section 5.15(i)(b) being hereinafter referred to as the “Judgment
Payment Date”).

 

(ii)         If
in the case of any proceeding in the court of any jurisdiction referred to in Section 5.15(i)(b) above, there is a change in the
Exchange Rate on the date of calculation prevailing between the Judgment Payment Date and the date of actual payment of the amount
due, Flamel or the Purchaser shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of United States dollars
which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Payment Date.

 

(iii)        Any
amount due from Flamel or the Purchaser under this Section 5.15 shall be due as a separate debt and shall not be affected by judgment
being obtained for any other amount due under or in respect of this Agreement and/or the Note.

 

    	23

    	 

    

 

Section
5.16         Minutes. The Purchaser shall provide to Eclat promptly
executed copies of the minutes of a meeting of the Board of Directors of Flamel consistent with the text attached hereto as Exhibit
H.

 

[SIGNATURE PAGE FOLLOWS]

 

    	24

    	 

    

 

IN WITNESS WHEREOF,
Eclat, Flamel, and the Purchaser have caused this Agreement to be duly executed as of the date set forth above.

 

	ECLAT HOLDINGS, LLC:	 
	 	 	 
	By:	/s/ Alex Karnal	 
	 	 
	Name:  Alex Karnal	 
	Title:    Secretary	 
	 	 	 
	FLAMEL US HOLDINGS, INC.	 
	 	 	 
	By:	/s/ Stephen H. Willard	 
	 	 
	Name:   Stephen H. Willard	 
	Title:     President	 
	 	 	 
	FLAMEL TECHNOLOGIES, SA:	 
	 	 	 
	By:	/s/ Stephen H. Willard	 
	 	 
	Name:   Stephen H. Willard	 
	Title:     Chief Executive Officer	 

 

    	25

    	 

    

 

EXHIBIT A(2)

 

Assumptions:

 

1. 3rd Anniversary:
Neither Threshold reached.

 

2. Net Sales: $30 million
between 3rd and 4th Anniversaries.

 

Amortization Payments:

 

3rd Anniversary: 25% (Scheduled
Amortization) deferred.

 

4th Anniversary: 25% (Scheduled
Amortization) + 25% (3rd Anniversary Deferred Amortization) multiplied by 30/40 = 37.5%.

 

5th Anniversary: 25% (Scheduled
Amortization) + 12.5% (4th Anniversary Deferred Amortization) multiplied by 30/40 = 28.125%.

 

6th Anniversary: 25% (Scheduled
Amortization) + 9.375% (5th Anniversary Deferred Amortization) multiplied by 30/40 = 25.78125%.

 

    	26

    	 

    

 

EXHIBIT A(1)

 

LAUNCH PRODUCTS

 

1.     [***]*

2.     [***]*

3.     [***]*

4.     [***]*

5.     [***]*

 

		*	CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

  

    	27

    	 

    
 

EXHIBIT B

 

INSTALLMENT SALE NOTE

 

March 13, 2012

 

FOR VALUE RECEIVED,
Flamel US Holdings, Inc., a Delaware corporation (the “Maker”), by means of this Installment Sale Note (this
“Note”), hereby unconditionally promises to pay to Eclat Holdings, LLC (the “Payee”), the
principal amount of $12,000,000, in lawful money of the United States of America and in immediately available funds, on the dates
provided in the Note Agreement referred to below.

 

This Note is the “Note”
referred to in the Note Agreement dated as of the date hereof between the Maker and the Payee (as modified and supplemented and
in effect from time to time, the “Note Agreement”), and is subject in its entirety to the terms of the Note
Agreement. Capitalized terms used and not expressly defined in this Note shall have the respective meanings assigned to them in
the Note Agreement.

 

This Note shall bear
interest on the outstanding principal amount hereof pursuant to the provisions of the Note Agreement.

 

The Maker shall make
all payments to the Payee of interest and principal under this Note in the manner provided in the Note Agreement. Subject to Section
2.1 of the Note Agreement, the outstanding principal amount of this Note shall be due and payable in full on the Maturity Date.

 

If any Event of Default
has occurred and is continuing, this Note shall, at the Payee’s option exercised at any time upon or after the occurrence
and during the continuance of any such Event of Default and pursuant to the provisions of the Note Agreement, become immediately
due and payable.

 

All payments due to
the Payee from the Maker pursuant to this Note shall be made in the full face amount thereof.

 

Other than those notices
required to be provided by Payee to Maker pursuant to the Note Agreement, the Maker and every endorser of this Note, or the obligations
represented hereby, expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect
to this Note and the Note Agreement or the performance of the obligations under this Note and/or the Note Agreement. No renewal
or extension of this Note or the Note Agreement, no release of any Person primarily or secondarily liable on this Note or the Note
Agreement, including the Maker and any endorser (other than as provided in Sections 2.1 and 5.9(i) of the Note Agreement), no delay
in the enforcement of payment of this Note or the Note Agreement, and no delay or omission in exercising any right or power under
this Note or the Note Agreement shall affect the liability of the Maker or any endorser of this Note.

 

    	28

    	 

    

 

No delay or omission
by the Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any
default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise
of any other power or right. The provisions of this Note may be waived only in a writing signed by the Payee. This Note may be
prepaid in whole or in part pursuant to the Note Agreement.

 

The Maker hereby irrevocably
agrees that any legal action, suit or other proceeding arising out of this Note may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York, and hereby consents that service of any process
may be made as set forth in Section 5.4 of the Note Agreement, which service the Maker agrees shall be sufficient and valid. The
Maker hereby waives its right to demand a trial by jury in any such action, suit or other proceeding.

 

This Note shall be
governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed
in such State, without giving effect to the conflicts of laws principles thereof other than Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York.

 

IN WITNESS WHEREOF,
an authorized representative of the Maker has executed this Note as of the date first written above.

 

	 	FLAMEL US HOLDINGS, INC.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	29Execution Copy

 

GUARANTY

 

GUARANTY, dated as of
March 13, 2012, made by Flamel Technologies, SA, a societe anonyme organized under the laws of the Republic of France (“Guarantor”),
in favor of the Holder (as defined below).

 

WITNESSETH:

 

Whereas,
pursuant to that certain Note Agreement (the ”Note Agreement”) dated as of the date hereof between Guarantor,
Flamel US Holdings, Inc. (the “Purchaser”) and the Holder, the Purchaser has issued to the Holder an Installment
Sale Note dated the date hereof, in the principal amount of $12,000,000 (the “Note”);

 

Whereas,
the maturity date of the Note is the sixth anniversary of the date of this Guaranty and the interest rate of the Note is 7.5%
simple interest per annum.

 

Whereas,
the Purchaser directly holds all of the equity interests in Éclat Pharmaceuticals, LLC (“Éclat”)
pursuant to a membership interest purchase agreement entered into between the Purchaser and the Holder dated as of the date hereof
whereby the Purchaser purchased from the Holder all of equity interests held in Éclat;

 

Whereas,
in order to induce the Holder to accept the Note, Guarantor has agreed to guaranty the Obligations (as defined below) in accordance
with the terms set forth in this Guaranty,

 

NOW, THEREFORE,
in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Guarantor hereby agrees with the Holder as follows:

 

SECTION
1.  DEFINED TERMS

 

1.1           Definitions

 

(a)  Capitalized
terms used herein and not otherwise defined herein shall have the meanings given to them in the Note Agreement.

 

(b)  The
following terms shall have the following meanings:

 

“Event of
Default” means (i) until the Obligations (other than contingent indemnification obligations that have not yet been asserted)
in respect of the Note Agreement have been paid in full, an “Event of Default” as such term is defined in the Note
Agreement and (ii) thereafter if any Obligations remains outstanding, (x) an “Acceleration Trigger Event” as such term
is defined in the Interest Agreement and (y) the failure by Guarantor, Eclat (solely in respect of any obligations of Eclat to
the Holder under the Purchase Agreement), or the Purchaser to comply with the due observance or performance of any covenant contained
in the Interest Agreement after the expiration of any grace periods and the giving of any required notices.

 

    	 

    	 

    

 

“Guaranty”
means this Guaranty, as the same may be amended or supplemented from time to time.

 

“Holder”
means Éclat Holdings, LLC and its successors and assigns.

 

“Obligations”
mean the collective reference to all obligations and liabilities of the Purchaser and Éclat to the Holder under the Note
Agreement, the Security Agreements and the Interest Agreement (including, without limitation, default interest accruing at the
then applicable rate provided in the Note and after the maturity thereof interest accruing at the then applicable rate after the
filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the
Purchaser or Éclat, and post-filing or post-petition interest, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Note Agreement,
the Security Agreements and the Interest Agreement, or any other document executed and delivered in connection therewith (other
than, for the avoidance of doubt, that certain Warrant to Purchase American Depositary Shares of Flamel Technologies S.A. issued
to the Holder), in each case whether on account of principal, interest, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all reasonable fees and disbursements of counsel to the Holder that are required to be paid by the Purchaser
or Éclat pursuant to the terms of any of the foregoing agreements).

 

“Person”
shall mean and include an individual, a partnership, a corporation, a limited liability company, an unincorporated association,
a joint venture or other entity or a governmental authority.

 

1.2           Other
Definitional Provisions. The words “hereof,” “herein”, “hereto” and
“hereunder” and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and
not to any particular provision of this Guaranty, and Section references are to this Guaranty unless otherwise specified. The
meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

SECTION
2.  GUARANTY

 

2.1           Guaranty.
Guarantor hereby absolutely, unconditionally and irrevocably guarantees to the Holder, the prompt and complete payment and performance
by the Purchaser and Éclat of the Obligations when due (whether at the stated maturity, by acceleration or otherwise).

 

    	2

    	 

    

 

2.2           Nature
of Guaranty. Guarantor’s liability under this Guaranty shall be unlimited, open and continuous for so long as this Guaranty
remains in force. Guarantor intends to guaranty the performance and prompt payment of the Obligations when due, whether at maturity
or earlier by reason of acceleration or otherwise. Accordingly, no payments made upon the Obligations will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions of the Obligations which subsequently arises or
is thereafter incurred. No payment made by the Purchaser or Éclat, or any other Person or received or collected by the Holder
from the Purchaser or Éclat, or any other Person by virtue of any action or other proceeding or any set-off or appropriation
or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of Guarantor hereunder which shall, notwithstanding any such payment (other than payment
and performance in full of the Obligations), remain liable for the Obligations until the Obligations are paid and performed in
full.

 

2.3           Duration
of Guaranty. This Guaranty will take effect when received by the Holder without the necessity of any acceptance by the Holder,
or any notice to Guarantor, and will continue in full force until the Obligations shall have been fully paid and satisfied and
all other obligations of Guarantor under this Guaranty shall have been performed in full. All renewals, extensions, substitutions,
and modifications of the Obligations, release of any other guarantor or termination of any other guaranty of the Obligations shall
not affect the liability of Guarantor under this Guaranty. This Guaranty is irrevocable and is binding upon Guarantor and Guarantor’s
successors and assigns so long as any of the Obligations remain unpaid.

 

2.4           No
Subrogation. Notwithstanding any payment made by Guarantor hereunder or any set-off or application of funds of Guarantor by
the Holder, Guarantor shall not be entitled to be subrogated to any of the rights of the Holder against the Purchaser or Éclat
or any other guarantor or guaranty or right of offset held by the Holder for the payment of the Obligations, nor shall Guarantor
seek or be entitled to seek any contribution or reimbursement from the Purchaser or Éclat or any other guarantor in respect
of payments made by Guarantor hereunder, until all amounts owing to the Holder by the Purchaser or Éclat on account of the
Obligations are paid in full. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Holder, segregated
from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to the Holder in the exact form received
by such Guarantor (duly indorsed by Guarantor to the Holder, if required), to be applied against the Obligations, whether matured
or unmatured, in such order as the Holder may determine.

 

2.5           Amendments,
Etc. With Respect to The Obligations. Guarantor shall remain obligated hereunder notwithstanding that, without any reservation
of rights against Guarantor and without notice to or further assent by Guarantor, any demand for payment or performance of any
of the Obligations made by the Holder may be rescinded by the Holder and any of the Obligations continued, and the Obligations,
or the liability of any other Person upon or for any part thereof, or guaranty therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered
or released by the Holder, and the Note Agreement and, the Security Agreements and the Interest Agreement and any other documents
executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the
Holder may deem advisable from time to time, and any guaranty or right of offset at any time held by the Holder for the payment
of the Obligations may be sold, exchanged, waived, surrendered or released.

 

    	3

    	 

    
 

2.6           Guaranty
Absolute and Unconditional. Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by the Holder upon the guaranty contained in this Section 2 or acceptance
of the guaranty contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guaranty contained in this Section 2; and
all dealings between the Purchaser and Éclat and Guarantor, on the one hand, and the Holder, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon the guaranty contained in this Section 2. Guarantor
hereby waives, to the extent permitted by law, diligence, presentment, protest, demand for payment and notice of default or nonpayment
to or upon the Purchaser or Éclat or Guarantor with respect to the Obligations. Guarantor understands that the guaranty
contained in this Section 2 shall be construed as a continuing, absolute and unconditional guaranty of payment and performance
without regard to (a) the validity or enforceability of the Note Agreement, the Security Agreements and the Interest Agreement,
any of the Obligations or any other guaranty or right of offset with respect thereto at any time or from time to time held by the
Holder, (b) any defense, set-off or counterclaim (other than a defense of actual payment and performance of all Obligations) which
may at any time be available to or be asserted by the Purchaser or Éclat or any other Person against the Holder, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of Guarantor) which constitutes, or might be construed
to constitute, an equitable or legal discharge of the Purchaser or Éclat for the Obligations, or of Guarantor under the
guaranty contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing
its rights and remedies hereunder against Guarantor, the Holder may, but shall be under no obligation to, make a similar demand
on or otherwise pursue such rights and remedies as they may have against the Purchaser or Éclat or any other Person or against
any other guaranty for the Obligations or any right of offset with respect thereto, and any failure by the Holder to make any such
demand, to pursue such other rights or remedies or to collect any payments from the Purchaser or Éclat or any other Person
or to realize upon any such other guaranty or to exercise any such right of offset, or any release of the Purchaser or Éclat
or any other Person or any such other guaranty or right of offset, shall not relieve Guarantor of any obligation or liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Holder
against Guarantor.

 

The obligations of the
Guarantor are principal and independent obligations from the obligations of the parties to the Note Agreement, the Security Agreements,
the Interest Agreement or any other agreement. Therefore, the Guarantor cannot, in order to delay or to avoid the unconditional
and immediate performance of its obligations under this Guaranty, invoke any defense or exception relating to or resulting from
any current or future relationships (including legal relationships) nor any contentious or non-contentious claims, between the
Purchaser and the Holder or any other third party, or any other challenge or the Purchaser or of a third party.

 

    	4

    	 

    
 

2.7           Reinstatement.
The guaranty contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Purchaser or Éclat, Guarantor or any other guarantor of the
Obligations, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer
for the Purchaser or Éclat, Guarantor or any other guarantor of the Obligations or any substantial part of its property,
or otherwise, all as though such payments had not been made.

 

2.8           Payments.
Guarantor hereby guarantees that payments hereunder will be paid to the Holder without set-off or counterclaim in U.S. dollars
at the address set forth in the Note Agreement or by wire transfer pursuant to instructions provided to Guarantor by the Holder.

 

SECTION
3.  REPRESENTATIONS AND WARRANTIES

 

Guarantor represents
and warrants to the Holder that as of the date hereof:

 

3.1           Organization,
Good Standing and Subsidiaries. Guarantor is a legal entity duly organized, validly existing and in good standing under the
laws of the Republic of France and has all requisite power and authority to carry on its business as now conducted and own its
properties. Guarantor does not have any Subsidiaries, except as set forth in a Schedule to the Note Agreement.

 

3.2           Authorization.
Guarantor has full power and authority and has taken all requisite action necessary for (i) the authorization, execution and delivery
of this Guaranty and (ii) authorization of the performance of all obligations of Guarantor hereunder. This Guaranty constitutes
legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.

 

3.3           Consents.
The execution, delivery and performance by Guarantor of this Guaranty require no consent of, action by or in respect of, or filing
with, any Person.

 

3.4           No
Conflict, Breach, Violation or Default; Compliance with Law. The execution, delivery and performance of this Guaranty by Guarantor
will not conflict with or result in a breach or violation of any of the provisions of, or constitute a default under, Guarantor’s
organizational documents as in effect on the date hereof. Guarantor (i) is not in violation of any statute, rule or regulation
applicable to Guarantor or its assets, (ii) is not in violation of any judgment, order or decree applicable to Guarantor or its
assets, and (iii) is not in breach or violation of any agreement to which it or its assets are a party or are bound or subject,
excluding, in each case described in clauses (i), (ii) and (iii) above, violations and breaches which would not have a Material
Adverse Effect. Guarantor has not received notice from any Person of any claim or investigation that, if adversely determined,
would render the preceding sentence untrue or incomplete.

 

    	5

    	 

    
 

3.5           No
Limitation of Guaranty. No representations, warranties or agreements of any kind have been made to or with Guarantor that would
limit or qualify in any way the terms of this Guaranty.

 

3.6           Borrower’s
Request. This Guaranty is executed at request of the Purchaser and Éclat and not at the request of the Holder.

 

3.7           Obtaining
Borrower Information. Guarantor has established adequate means of obtaining from the Purchaser and Éclat on a continuing
basis information regarding the Purchaser’s and Éclat’s financial condition.

 

3.8           Solvency.
As of the date hereof and after giving effect to the transactions contemplated hereby, (a) the property of Guarantor, at a fair
valuation, will not exceed its debt; (b) the capital of Guarantor will not be unreasonably small to conduct its business; (c) Guarantor
will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and (d) the
present fair salable value of the assets of Guarantor will be greater than the amount that will be required to pay its probable
liabilities (including debts) as they become absolute and matured. For purposes of this Section 3.8, “debt” means any
liability on a claim, and “claim” means (i) the right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or unsecured, or (ii) the
right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right
to an equitable remedy is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, secured
or unsecured.

 

3.9           Litigation
Matters. There are no actions, suits or other proceedings by or before any arbitrator or Governmental Authority pending against
or threatened against or affecting Guarantor which would have a Material Adverse Effect.

 

3.10         Compliance
with Laws and Agreements. Guarantor is in compliance with all laws applicable to it or its property and all agreements binding
upon it or its Property except where such noncompliance would not have a Material Adverse Effect.

 

3.11         Taxes.
Guarantor has timely filed or caused to be filed all tax returns and reports required to have been filed and has paid or caused
to be paid all taxes required to have been paid, except taxes that are being contested in good faith by appropriate proceedings
and for which Guarantor has set aside on its books adequate reserves.

 

    	6

    	 

    

 

3.12         Disclosure.
None of the written reports on financial or other information, in each case furnished by Guarantor to Holder in connection with
the negotiation of this Guaranty (as modified or supplemented by other information so furnished) contains any material misstatement
of fact or omits to state any fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not materially misleading.

 

SECTION
4.  COVENANTS

 

The provisions of Sections 4.1 and 4.2 of
the Note Agreement applicable to the Purchaser, Éclat and Guarantor are incorporated herein by reference, mutatis
mutandis, such incorporation to continue after the termination of the Note Agreement.

 

SECTION
5.  WAIVERS; SUBORDINATION

 

5.1           Guarantor’s
Waivers.

 

(a)  Holder’s
Actions. Guarantor waives any right to require the Holder to resort for payment from, or to proceed directly or at once against,
any Person, including the Purchaser and Éclat or any other guarantor.

 

(b)  Insolvency.
If the Purchaser or Éclat shall become insolvent, until such time as the Obligations have been paid and performed in full,
Guarantor hereby waives and relinquishes in favor of the Holder and its respective successors and assigns, any claim or right to
payment Guarantor may now have or hereafter have or acquire against the Purchaser or Éclat, by subrogation or otherwise,
such that at no time shall Guarantor be or become a “creditor” of the Purchaser or Éclat at such time that Holder
is a creditor with respect to the Obligations.

 

(c)  Guarantor’s
Rights and Defenses. Guarantor also waives any and all rights or defenses arising by reason of (i) any law that may prevent
the Holder from bringing any action, including a claim for deficiency, against Guarantor, before or after the commencement or completion
of any foreclosure action, either judicially or by exercise of a power of sale, (ii) any election of remedies by the Holder which
destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against the
Purchaser or Éclat for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of
any law limiting, qualifying, or discharging the Obligations, (iii) any disability or other defense of the Purchaser and Éclat,
of any other guarantor, or of any other Person, or by reason of the cessation of the Purchaser’s or Éclat’s
liability from any cause whatsoever, other than payment in full of the Obligations, (iv) any statute of limitations, if at the
time any action or other suit brought by the Holder against Guarantor is commenced there is outstanding Obligations which are not
barred by any applicable statute of limitations, (v) any defenses given to guarantors at law or in equity other than actual payment
and performance of the Obligations, or (vi) any act, omission, election or waiver by the Holder of the type set forth in this Guaranty.

 

(d)  No
Set-off, Counterclaim, Etc. Guarantor further waives and shall not assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of set-off, counterclaim, counter demand, recoupment or similar right.

 

    	7

    	 

    
 

5.2           Guarantor’s
Understanding With Respect to Waivers. Each of the waivers set forth herein is made with Guarantor’s full knowledge of
its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy
or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective
only to the extent permitted by law or public policy.

 

5.3           Subordination
of Debts to Guarantor. The Obligations shall be prior to any claim that Guarantor may now have or hereafter acquire against
the Purchaser or Éclat, whether or not the Purchaser or Éclat becomes insolvent. Guarantor hereby expressly subordinates
to the Obligations any claim Guarantor may have against the Purchaser or Éclat, upon any account whatsoever (including without
limitation all intercompany obligations owing to Guarantor from the Purchaser or Éclat), to any claim that the Holder may
now or hereafter have against the Purchaser or Éclat; provided, however, that the Purchaser and Éclat may
make payments on, and Guarantor may receive payments with respect to, such claims that represent bona fide claims for money lent
to, property transferred to, or services performed for, the Purchaser or Éclat in the ordinary course of the business of
Guarantor, the Purchaser and Éclat or in respect of any other obligation of the Purchaser and Éclat permitted under
the Note Agreement, and Guarantor may receive dividends and other distributions from the Purchaser, in each case unless and until
an Event of Default shall have occurred and be continuing. In the event of any dissolution, winding up, liquidation, readjustment,
reorganization or similar proceedings, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation,
or otherwise, the assets of the Purchaser and Éclat applicable to the payment of the claims of both the Holder and Guarantor
shall be paid to the Holder.

 

SECTION
6.  MISCELLANEOUS

 

6.1           Amendments
In Writing. None of the terms or provisions of this Guaranty may be amended, supplemented or otherwise modified except by an
instrument in writing signed by Guarantor and the Holder, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.

 

6.2           Notices.
All notices, requests and demands to or upon the Guarantor and the Holder shall be effected in the manner provided for in the Note
Agreement.

 

6.3           No
Waiver By Course Of Conduct; Cumulative Remedies. The Holder shall not by any act (except by a written instrument pursuant
to Section 6.1), be deemed to have waived any right, power or privilege hereunder or to have acquiesced in any Event of Default.
No failure to exercise, nor any delay in exercising, on the part of the Holder, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A waiver by the Holder of any right, power or privilege
hereunder on any one occasion shall not be construed as a bar to any right, power or privilege that the Holder would otherwise
have on any future occasion. The rights, powers and privileges hereunder provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights and remedies provided by law.

 

    	8

    	 

    

 

6.4           Enforcement
Expenses; Indemnification

 

(a)  If
any amount owing to the Holder under this Guaranty shall be collected through enforcement thereof, any refinancing or restructuring
in the nature of a work-out, settlement, negotiation, or any process of law, or shall be placed in the hands of third Persons for
collection, Guarantor shall pay (in addition to all monies then due or otherwise payable under this Guaranty all reasonable and
documented out-of-pocket attorneys’ and other fees and expenses incurred in respect of such collection.

 

(b)  Guarantor
shall pay, and save the Holder harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes (other than any taxes based upon the Holder’s net income) that may be payable
or determined to be payable in connection with any of the transactions contemplated by this Guaranty.

 

(c)  Guarantor
shall pay, and save the Holder harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Guaranty.

 

(d)  The
agreements in this Section shall survive repayment of the Obligations.

 

6.5           Successors
And Assigns. This Guaranty shall be binding upon the successors of Guarantor and shall inure to the benefit of the Holder;
provided that Guarantor may not assign, transfer or delegate any of its rights or obligations under this Guaranty without
the written consent of the Holder..

 

6.6           Set-Off.
Guarantor hereby irrevocably authorizes the Holder at any time and from time to time while an Event of Default shall have occurred
and be continuing, without notice to Guarantor or any other guarantor of the Obligations, any such notice being expressly waived
by Guarantor, to set-off and appropriate and apply any and all amounts, credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Holder to or for
the credit or the account of Guarantor, or any part thereof, in such amounts as the Holder may elect, against and on account of
the Obligations, whether or not the Holder has made any demand for payment and although the Obligations may be contingent or unmatured.
The Holder shall notify Guarantor promptly of any such set-off and the application made by the Holder of the proceeds thereof,
provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights
of the Holder under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off)
which the Holder may have.

 

6.7           Facsimile.
This Guaranty may be executed by facsimile.

 

    	9

    	 

    
 

6.8           Severability.
Any provision of this Guaranty which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

6.9           Section
Headings. The Section headings used in this Guaranty are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.

 

6.10         Integration.
This Guaranty represent the agreement of Guarantor and the Holder with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Holder relative to subject matter hereof not expressly set forth or referred
to herein.

 

6.11         Acknowledgements.
Guarantor hereby acknowledges that:

 

(a)  it
has been advised by counsel in the negotiation, execution and delivery of this Guaranty;

 

(b)  the
Holder has no fiduciary relationship with or duty to Guarantor arising out of or in connection with this Guaranty or otherwise,
and the relationship between Guarantor, on the one hand, and the Holder, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and

 

(c)  no
joint venture is created hereby or otherwise exists by virtue of the transactions contemplated hereby among Guarantor and the Holder.

 

6.12         Applicable
Law and Consent to Non-Exclusive New York Jurisdiction.

 

(a)  This Guaranty
shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts
of laws principles thereof other than Sections 5-1401 and 5-1402 of the General Obligations Law of such State.

 

(b)  Guarantor
hereby irrevocably agrees that any legal action, suit or other proceeding arising out of this Guaranty may be brought in the courts
of the State of New York or of the United States of America for the Southern District of New York. Guarantor irrevocably consents
to the service of any process in any such legal action, suit or other proceeding by the mailing of copies of such process to such
Party at its address specified in Section 6.2 by registered mail, return receipt requested. By the execution and delivery of this
Agreement, Guarantor hereby irrevocably consents and submits to the jurisdiction of any such court in any such action, suit or
other proceeding. Final judgment against Guarantor in any such action, suit or other proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment. Nothing contained in this Guaranty shall affect the right of the Holder
to commence legal proceedings in any court having jurisdiction, or concurrently in more than one jurisdiction, or to serve process,
pleadings and other legal papers upon Guarantor in any manner authorized by the laws of any such jurisdiction.

 

    	10

    	 

    

 

(c)  Guarantor
irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the
laying of venue of any action, suit or other proceeding arising out of or relating to this Guaranty, brought in the courts of the
State of New York or in the United States District Court for the Southern District of New York, and any claim that any such action,
suit or other proceeding brought in any such court has been brought in an inconvenient forum.

 

(d)  Guarantor
hereby waives any and all rights to demand a trial by jury in any action, suit or other proceeding arising out of this Guaranty
or the transactions contemplated hereby.

 

(e)  To the extent
that Guarantor, in any suit, action or other proceeding brought in any court arising out of or in connection with this Guaranty,
be entitled to the benefit of any provision of law requiring the Holder in such suit, action or other proceeding to post security
for the costs of Guarantor, or to post a bond or to take similar action, Guarantor hereby irrevocably waive such benefit, in each
case to the fullest extent now or hereafter permitted under any applicable law.

 

(f)  The Guarantor
waives its rights (a) under Article 14 and Article 15 of the French Civil Code and (b) to object to an action for summary judgment
in lieu of a complaint pursuant to NY CPLR Section 3213

 

6.13         Currency.
All amounts owing under this Guaranty shall be paid in United States Dollars.

 

6.14         Judgment
Currency.

 

(a)   If, for the
purpose of obtaining or enforcing judgment against Flamel or the Purchaser in any court in any jurisdiction with respect to this
Agreement, the Note and/or the Security Agreement, it becomes necessary to convert into any other currency (such other currency
being hereinafter in this Section 6.14(a) referred to as the “Judgment Currency”) an amount due in United States
dollars, the conversion shall be made at the last exchange rate published in the Wall Street Journal on the business day immediately
preceding (the “Exchange Rate”):

 

(i)          the
date actual payment of the amount is due, in the case of any proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to payment being due on such date; or

 

(ii)         the
date on which the French or any other non U.S. court determines, in the case of any proceeding in the courts of any other jurisdiction
(the date as of which such payment is made pursuant to this Section 6.14 being hereinafter referred to as the “Judgment
Payment Date”).

 

    	11

    	 

    
 

(b)  If in the
case of any proceeding in the court of any jurisdiction referred to above, there is a change in the Exchange Rate on the date of
calculation prevailing between the Judgment Payment Date and the date of actual payment of the amount due, Guarantor shall pay
such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange
Rate prevailing on the date of payment, will produce the amount of United States dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Payment
Date.

 

(c)  Any amount
due from Guarantor under this Section 6.14 shall be due as a separate debt and shall not be affected by judgment being obtained
for any other amount due under or in respect of the Note.

 

6.15         Indirect
Taxes. If and whenever the Holder shall be subject to any VAT, goods and services tax, sales tax or any other indirect tax
(together, the “Indirect Taxes”) imposed, levied or assessed by any Governmental Authority measured, in whole
or in part, by reference to any payments due hereunder to the Holder, then the amount of such sums due to the Holder hereunder
shall be increased by the amount of such Indirect Taxes assessed so that after the withholding of such Indirect Taxes, the Holder
shall receive the sum it would have received had no such Indirect Taxes been assessed. If any Indirect Taxes are later refunded
or credited by the applicable Government Authority directly to the Holder, the Holder will refund such amounts to the Purchaser.

 

6.16         Direct
Taxes. (a) Guarantor shall be responsible for any French income, profits or withholding taxes that may apply to any payments
by Guarantor due under this Guaranty.

 

(b)  If and whenever the
Holder shall be subject to any French income, profits or withholding taxes imposed on any payments due hereunder to the Holder,
then the amount of any such sums due to the Holder hereunder shall be increased by the amount of such income, profits or withholding
tax or taxes assessed so that after the withholding of such income, profits or withholding tax or taxes, the Holder shall receive
the sum it would have received had no such income, profits or withholding tax or taxes been assessed.

 

(c)  Guarantor and the
Holder shall reasonably cooperate to eliminate or reduce any taxes payable with regard to any payments due hereunder by way of
any double tax treaty exemption or reduction application.

 

[SIGNATURE PAGE FOLLOWS]

 

    	12

    	 

    

 

IN WITNESS WHEREOF, the
undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

 

	 	GUARANTOR:
	 	 
	 	FLAMEL TECHNOLOGIES, S.A.
	 	 
	 	By:	/s/ Stephen H. Willard
	 	Name:    Stephen H. Willard
	 	Title:      Chief Executive Officer

 

	ACCEPTED:	 
	 	 
	ÉCLAT HOLDINGS, LLC	 
	 	 
	By:	/s/ Alex Karnal	 
	Name:       Alex Karnal	 
	Title:         Secretary	 

 

    	13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}]]