Document:

exv10w12

 

Exhibit 10.12

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

PHARMATOP LICENSE AGREEMENT

 

 

License Agreement

This agreement (the “Agreement”) is entered into as of the 23rd day of December, 2002 by and
among SCR Pharmatop, a civil law partnership organized under the laws of France, having its head
office’s address at 10, Square St. Florentin, 78150 Le Chesnay, France, recorded with the Register
of Commerce and Companies of Versailles under No. 407552702 (“PHARMATOP”), and Bristol-Myers Squibb
Company, a corporation organized under the laws of the State of Delaware, USA, having its head
office’s address at 345 Park Avenue, New York, New York 10154 USA (referred to hereafter as “BMS”).

WITNESSETH

WHEREAS, PHARMATOP is the owner of certain patents, patent applications, and know-how relating to
parenteral paracetamol formulations;

WHEREAS, PHARMATOP has entered into a license agreement dated April 12, 1999 on these patents,
patent applications and know-how covering a certain number of countries in Europe, Africa, the
Middle East and Asia with UPSA S.A., a subsidiary of BMS; and

WHEREAS, BMS wishes to acquire an exclusive license under such patents, patent applications, and
know-how of PHARMATOP in the Territory (as defined below), and PHARMATOP is willing to grant BMS
such an exclusive license under the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the above premises and the covenants contained herein, the
parties agree as follows:

Article 1—Definitions

The following definitions apply for the purposes of this Agreement:

	1.1	 	The term “Affiliated Companies” shall mean any entity that directly or indirectly controls,
is controlled by or is under common control with a Party to this Agreement, and

Execution
version 12/23/03

 

 

	 	 	for such purpose “control” shall mean the power to direct or cause the direction of the
management or the policies of the entity, whether through the ownership of voting
securities, by contract or otherwise.
	 
	1.2	 	The term “Advertising and Promotion” means customary activities that are reasonably incident
to the advertising and promotion of the Product in a country in the Territory (it being
understood that Phase IV clinical studies are not part of Advertising and Promotion). The
term “Advertising and Promotional Costs” means the out-of-pocket costs and expenses paid by
BMS or its Affiliates to a Third Party (and a reasonable charge for internal copying expenses
for promotional materials).
	 
	1.3	 	The term “Calendar Quarter” shall mean each of the periods of time from (a) January 1 through
March 31; (b) April 1 through June 30; (c) July 1 through September 30; and (d) October 1
through December 31.
	 
	1.4	 	The term “Competing Product” means any one or more non-opiate analgesic
parenterally-administered liquid solution products, in a stable and readily injectible form
for the treatment of post-operative pain (but which can not be another Injectible APAP
Product). For purposes of this Agreement, [***] shall be deemed an opiate product, the
marketing of which shall not be restricted by this Agreement in any way.
	 
	1.5	 	The term “Derivative” of paracetamol means any compound whose chemical structure is derived
from the chemical structure for paracetamol through structural modifications and/or chemical
changes that retain those portions of paracetamol’s chemical structure that are known to
contribute materially to the activity, specificity and selectivity of paracetamol.
	 
	1.6	 	The term “Diligent Efforts” means the carrying out of obligations or tasks in a sustained
manner consistent with the efforts that BMS devotes to a product or a research, development or
marketing project of similar market potential, profit potential or strategic value resulting
from its own research efforts, based on conditions then prevailing.

 

			
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	1.7	 	The term “FDA” shall mean the U.S. FDA or corresponding administrative body in Canada,
Mexico, or in any other country elsewhere in the Territory.
	 
	1.8	 	The term “Injectible APAP Product” means any parenterally administered dosage form of
paracetamol or propacetamol, or any Derivative thereof, whether alone or in combination with
one or more other drugs (as defined, as of the Effective Date, in Section 201 of the United
States Federal Food, Drug and Cosmetic Act).
	 
	1.9	 	The term “Licensed Know-how” refers to precautions and procedures required to enable the
manufacture of the liquid paracetamol solution, stable and ready for use by injection, that
are owned by, controlled by, or licensed (with right to sublicense) to PHARMATOP at any time
during the term of this Agreement, whether or not described in the Patent and in the Patent
Applications, and that represent Confidential Information of PHARMATOP. The current said
precautions and procedures are described in Appendix 5 attached hereto, and made a
part hereof.
	 
	1.10	 	The term “Licensed Patents” shall mean (a) the Patent, (b) the Patent Applications, (c) any
other patents granted and patent applications applied for in the Territory relating to the
manufacture, formulation, use or sale of the Products that are owned by, controlled by, or
licensed to PHARMATOP during the term of this Agreement, and (d) any continuations,
continuations-in-part, divisions, reissues, re-examinations, extensions, and renewals of any
of the patent applications and patents listed in (a)-(c), and all patents which may be granted
on any patent applications in (b)-(d) in the Territory.
	 
	1.11	 	The term “Licensed Rights” shall mean the Licensed Patents and the Licensed Know-How.
	 
	1.12	 	The term “Marketing Period” shall mean, for a given country in the Territory, the period
running from the first day on which Products are sold in such country until the end of the
Agreement with respect to such country.
	 
	1.13	 	The term “NDA” shall mean a new drug application submitted to the FDA seeking approval to
manufacture, promote, market, distribute, or sell a Product in a country in the Territory.

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	1.14	 	The term “Net Sales” shall mean the total revenue invoiced by BMS, Affiliated Companies, or
sub-licensees from the sale of a Product to independent Third Parties less the following
amounts: (a) credits, allowances and rebates to, and chargebacks from the account of, such
customers for spoiled, damaged, out-dated and returned Product; (b) trade discounts, cash
discounts, quantity discounts, rebates and other price reduction programs, and other charge
back payments; (c) sales, value-added and other similar taxes (including duties or other
governmental charges levied on, absorbed or otherwise imposed on the sales of Products
including, without limitation, governmental charges otherwise measured by the billing amount);
(d) customs duties, surcharges and other governmental charges incurred in connection with the
exportation or importation of the Product; and (e) bad debts on Product sales written off in
accordance with generally accepted accounting principles, consistently applied. For the
purposes of this definition, samples distributed by BMS, its Affiliates, or sub-licensees to
their customers free of charge, and any Product used or provided for clinical or research
purposes, shall not be included in Net Sales.
	 
	1.15	 	The term “Patent” shall mean US patent No. 6,028,222 issued on 22nd February 2000,
a copy of which is attached hereto in Appendix 1 as Exhibit A and made a part
hereof, and any patent or supplementary protection certificate that PHARMATOP may obtain that
depends on such patent or that is granted based on the Patent Applications.
	 
	1.16	 	The term “Patent Applications” shall mean (a) international patent application PCT/FR
97/01452, filed on 5th August 1997, a copy of which is attached hereto in Appendix 1
as Exhibit B, (b) international patent application PCT/FR01/01749, filed on
6th June 2001, a copy of which is attached hereto in Appendix 1 as
Exhibit C, and (c) any other patent application that PHARMATOP may file that depends
on a Patent or is based on claims contained in the patent applications specified above.
	 
	1.17	 	The term “Presentation” shall mean dosage and pharmaceutical form.

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	1.18	 	The term “Primary Detail Equivalent (PDE)” shall mean either [***] where

	 	(a)	 	a [***] means [***] ; and
	 
	 	(b)	 	a [***] means [***] ; and
	 
	 	(c)	 	a [***] means [***].

	 	 	All PDEs shall be [***] and shall be reported by BMS in accordance with [***].
	 
	1.19	 	The term “Product” shall mean any parenterally administered dosage form containing
paracetamol (or any Derivative thereof) alone or in combination with one or more drugs (as
defined, as of the execution of this Agreement, in Section 201 of the United States Federal
Food, Drug and Cosmetic Act), and for which the manufacture, use or sale in a country in the
Territory (x) would otherwise infringe the Licensed Patents but for the license rights granted
to BMS in Article 2 hereof and/or (y) incorporates or uses to any material extent any Know-How
licensed to BMS under Article 2 hereof.
	 
	1.20	 	The term “Royalty Term” means, with respect to a given country in the Territory, the date
commencing with the date of first commercial sale of a Product in such country, and
terminating upon the later of (a) the date that is ten (10) years after such first commercial
sale of a Product in such country, or (b) the date that the manufacture, use or sale of a
Product in such country is no longer covered by any Valid Claim of a Licensed Patent licensed
to BMS hereunder in such country.
	 
	1.21	 	The term “Target Product Profile” means the target Product profile attached as Appendix
2 hereto.
	 
	1.22	 	The term “Tax” shall mean any tax, levy, impost, duty, charge, assessment or fee of any
nature (including interest, penalties and additions thereto) that is imposed by any government
or other taxing authority.
	 
	1.23	 	The term “Territory” shall mean the United States (including Puerto Rico and all U.S.
possessions and territories), Canada and Mexico.

 

			
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	1.24	 	The term “Third Party” means any person or entity other than PHARMATOP, BMS, and their
respective Affiliated Companies.
	 
	1.25	 	The term “U.S. FDA” shall mean the United States Food and Drug Administration and any
successors thereto.
	 
	1.26	 	The term “Valid Claim” shall mean a claim in any unexpired issued patent that has not been
held invalid or unenforceable by a non-appealed or unappealable decision by a court or other
appropriate body of competent jurisdiction, and which is not admitted to be invalid through
disclaimer, dedication to the public, and which has not been cancelled or abandoned in
accordance with or as permitted by the terms of this Agreement or by mutual written agreement.
	 
	1.27	 	The term “Year” means, as to a given country in the Territory, the period beginning on the
date of first commercial sale of Product in such country and ending on the first March 31,
June 30, September 30 or December 31 that is closest (before or after) to the date that is
twelve months following such first commercial sale, and each twelve (12) month period
thereafter during the Royalty Term.

Additional defined terms are as follows:

	 	 	 	 	 
	Defined Term	 	Section in Which Defined
	Affected Country

	 	 	6.2	(a)
	Combination Product

	 	 	7.2	(b)
	Confidential Information

	 	 	10.1	 
	Grace Period

	 	 	4.6	(c)
	Guaranteed Payments

	 	 	7.3	 
	ICC

	 	 	13.1	 
	Improvement

	 	 	8.1	 
	Inspection

	 	 	7.5	(b)
	Inventors

	 	 	6.1	(a)
	NewPharm

	 	 	6.1	(a)
	Registrational Information

	 	 	3.1	 

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	Defined Term	 	Section in Which Defined
	Retained Sum

	 	 	6.5	(a)
	Transaction

	 	 	4.6	(c)
	Transaction Date

	 	 	4.6	(c)

ARTICLE 2—License 

	2.1	 	PHARMATOP hereby grants to BMS an exclusive, royalty-bearing license, with right to
sublicense, under the Licensed Rights, to import, use, sell and offer for sale, make and have
made, Products in the Territory. Furthermore, PHARMATOP also hereby grants to BMS the right
to make and have made the Products outside the Territory for use within the Territory, subject
to the consent of UPSA S.A. for the countries for which an exclusive manufacturing right has
been granted by PHARMATOP to UPSA S.A. Except as may be otherwise agreed in writing by
PHARMATOP in its sole discretion, the license granted to BMS shall only permit it to sell
Products that are packaged, finished products ready for use, and the license shall not extend
to any sales in bulk or of semi-finished products except to BMS sublicensee(s).
	 
	2.2	 	PHARMATOP does not promise or undertake to continue its research and development work in the
field of the Licensed Rights. If, however, at its sole discretion, PHARMATOP does continue
such work, it agrees to keep BMS fully informed on the results of its work, and if it makes
any inventions or develops any Know-How relating to the Product, such inventions and know-how
will be licensed to BMS pursuant to Section 2.1.
	 
	2.3	 	PHARMATOP shall not itself use the Licensed Rights in any way, directly or indirectly,
including through licenses, for the manufacture, use, importation, and/or sale of Injectible
APAP Products in the Territory. PHARMATOP covenants and warrants that it shall not develop,
manufacture, or sell, or provide any assistance to any Third Party for the purpose of
developing, manufacturing or selling, any Injectible APAP Products for use in a country in the
Territory during the Marketing Period for such country. Notwithstanding the foregoing,
PHARMATOP shall have the right to use, manufacture, sell and license the Licensed Rights in
connection with other products other than Injectible APAP

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	 	 	Products in the Territory or any
other country where PHARMATOP has granted to BMS or one of its Affiliated Companies exclusive
rights under any of its patents and know- how to sell such products in such country, and any
such use shall not violate the
exclusivity provisions of this Agreement in respect of the Licensed Rights granted to BMS
hereunder; provided, however, that PHARMATOP shall give to BMS a right of
first refusal to license the right to use, manufacture and sell such other products in the
Territory under terms and conditions proposed by PHARMATOP.
	 
	2.4	 	PHARMATOP shall not assign or sell its rights under the Licensed Rights in the Territory to a
Third Party without (a) requiring the assignee or purchaser to assume all of PHARMATOP’s
obligations under this Agreement in its own name and (b) obtaining BMS’ prior consent in
writing, which may not be unreasonably withheld so long as PHARMATOP agrees to be jointly and
severally liable with the proposed assignee/purchaser for all obligations owed BMS under the
terms of this Agreement.
	 
	2.5	 	BMS may assign its rights under this Agreement to a Third Party, in whole or in part,
provided that (i) the assignee entity expressly assumes all of BMS’ obligations under this
Agreement, unconditionally and in writing, so that it becomes directly obligated towards
PHARMATOP, (ii) BMS remains jointly obligated with the assignee entity for all of its
obligations under this Agreement; and (iii) PHARMATOP has given its prior written consent to
such assignment, which consent shall not be unreasonably withheld or delayed. BMS may also
assign or otherwise transfer this Agreement and the license granted hereby to an Affiliated
Company or successor in connection with a merger, consolidation, reorganization, or sale or
other transfer of its entire business, provided, in such case, that any such assignee
or transferee has agreed in writing to be bound by the terms and provisions of this Agreement
or is so bound by operation of law.
	 
	2.6	 	BMS may grant sub-licenses to Affiliated Companies and Third Parties provided that (a) BMS
provides PHARMATOP with advance notice in writing of each sub-license, (b) no sub-license
attempts to reduce or limit any of PHARMATOP’s rights under this Agreement, (c) BMS agrees to
be liable for the actions of any sub-licensee, and (d) PHARMATOP is given the same right to
supervise the activities of the sub-licensee

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	 	 	as it has under the terms of this Agreement to
supervise BMS’ activities. BMS’ right to grant sub-licenses in accordance with this Section
shall include the right to delegate responsibility for marketing the Products in one or more
countries in the Territory.
	 
	2.7	 	If the Products are manufactured by a company other than BMS, whether an Affiliated Company
or not, BMS must provide PHARMATOP with the identity(ies) of the manufacturer(s), and provide
proof to PHARMATOP that (a) the manufacturer(s) has been informed in writing that the products
to be made are subject to the Licensed Patents held by PHARMATOP and (b) the manufacturer(s)
has agreed to manufacture the products only pursuant to agreement with BMS and solely for the
benefit of BMS and its sublicensees. The above restrictions do not apply to raw materials,
packaging items or other incidental articles from outside suppliers, or to the performance of
packing operations in accordance with customary practices in the pharmaceutical industry.
	 
	2.8	 	Any sub-licensee hereunder shall be required to assume all of the obligations of BMS under
this Agreement with respect to the rights sublicensed. BMS will indemnify and hold PHARMATOP
harmless from the failure of any sub-licensee to perform its obligations relating to Products
in the same manner as BMS is obligated to indemnify and hold PHARMATOP harmless under this
Agreement if BMS (rather than the sublicensee) had so failed to perform. PHARMATOP shall have
the same rights to audit any sub-licensee’s activities relevant to its sublicensing agreement,
and to inspect any sub-licensee’s facilities involved in the manufacture of Products, in the
same manner as PHARMATOP has with respect to BMS’ activities and facilities hereunder.
	 
	2.9	 	In the event that BMS makes sales of Products to an Affiliated Company or sub-licensee, then,
notwithstanding anything to the contrary in Section 1.14 hereof, the calculation of Net Sales
for purposes of determining royalties owed to PHARMATOP under Section 7.2 hereof shall be
based on the greater of (x) [***] and (y) [***].

 

			
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	2.10	 	Nothing in this Agreement shall be construed to grant a Party any rights in any intellectual
property rights, information or data owned or controlled by any other Party or its Affiliates,
except as expressly set forth in this Agreement.
	 
	2.11	 	Within [***] after the execution of this Agreement, BMS will inform PHARMATOP whether, and in
what other countries of the world where BMS does not already possess such rights, BMS is
interested in obtaining rights to develop and market the Product. If
BMS notifies PHARMATOP that BMS is interested, then the Parties will use all reasonable
efforts to conclude an agreement within [***] thereafter in which PHARMATOP grants BMS the
exclusive right in such countries in which BMS indicated an interest; provided that the
Parties can agree on mutually acceptable terms and conditions during such [***]. Should any
such negotiations terminate without the grant of an exclusive license to BMS in a given
country, PHARMATOP shall be free thereafter to conduct negotiations with any Third Party and
grant licenses to the Product to any Third Party in such country; provided,
however, that BMS shall be entitled to exercise a right of first refusal with
respect to any such country as follows: Before PHARMATOP may accept an offer from, or make
an offer to, a Third Party on financial terms more favorable to the Third Party, when taken
as a whole, than those last offered by PHARMATOP to BMS to acquire such rights in such
country, PHARMATOP will inform BMS of such offer and shall allow BMS a period of [***] in
which to elect whether to acquire such rights under such terms as are offered to or by
PHARMATOP with the Third Party.

Article 3—PHARMATOP’s Rights to Information 

	3.1	 	Subject to Section 3.3, PHARMATOP shall be entitled, for the protection and advancement of
its rights in the Licensed Rights outside the Territory, to either obtain from BMS, or have
the right to reference, all information and conclusions relating to or resulting from any
analytical, galenical, stability, toxicology or pharmacokinetic work and/or clinical studies
and clinical trials conducted by BMS relating to the Products and

 

			
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	 	 	all materials in the NDA
submitted to the U.S. FDA for the Products (collectively, the “Registrational
Information”) for the purpose of developing, manufacturing, registering, seeking marketing
approval for and selling an Injectible APAP Product in any country outside the Territory where
BMS or any of its Affiliates have not been licensed rights under any PHARMATOP patent or
know-how under a separate agreement with PHARMATOP; provided, however, that
BMS has the reciprocal right (subject to payment by BMS in the same manner as PHARMATOP is
obligated under Section 3.3) to obtain and use any such similar registrational information
obtained by
PHARMATOP’s licensees with respect to the development and marketing of any such Injectible
APAP Product in any such country. Subject to Section 3.3, BMS hereby expressly permits
PHARMATOP to use the Registrational Information to attempt to secure a licensee for the sale
and use of the Products outside the Territory in which BMS or any of its Affiliates does not
have exclusive license rights under any separate agreement with PHARMATOP, provided, that
the Registrational Information is treated as Confidential Information of BMS and is
disclosed to a potential licensee only pursuant to an appropriate confidentiality agreement
as set forth in Section 3.3 and that PHARMATOP remains responsible to BMS for any breach by
such potential licensee of its confidentiality and non-use obligations.
	 
	3.2	 	Subject to Section 3.3, PHARMATOP or the licensee shall be entitled to use the Registrational
Information as part of new drug applications out of the Territory and shall not owe any
compensation to BMS for same. BMS shall have no liability or responsibility for any use made
by PHARMATOP and its licensees of the Registrational Information, and, subject to sections
12.3 and 12.4, PHARMATOP shall indemnify, defend and hold BMS and its Affiliates harmless from
any use made by PHARMATOP, its Affiliated Companies, or its or their licensees of the
Registrational Information.
	 
	3.3	 	Before PHARMATOP shall have the right to access or use any of the Registrational Information
as provided in this Article 3 for purposes of any regulatory filing, [***] shall reimburse
[***] of the [***] to develop or obtain the Registrational Information. [***]

 

			
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	 	 	shall not be
required to reimburse [***] for the purpose of sharing such Registrational Information, under
agreement of confidentiality, with a Third Party to the extent reasonably required for such
Third Party to determine its interest in licensing the Product in any countries where BMS and
its Affiliates do not have license rights; provided, that the Registrational
Information to be made available to the Third Party shall not include the actual
Investigational New Drug (IND) or NDA filing, any clinical trial or adverse event database, or
any study results which have not been made publicly available or filed to the NDA. Such
sharing may include such Third Party having reasonable access to such Registrational
Information at BMS, at PHARMATOP’s expense, in order to conduct
reasonably necessary due diligence. Such Third Party shall not have access to the
Registrational Information until it shall have executed a confidentiality agreement, in form
and substance acceptable to PHARMATOP and BMS, in which BMS either is a party to the
confidentiality agreement or is entitled to enforce such confidentiality as an express third
party beneficiary thereof under the terms of the confidentiality agreement and applicable
law.

ARTICLE 4—DEVELOPMENT AND USE OBLIGATIONS

	4.1	 	BMS shall use its Diligent Efforts to obtain NDA approvals (and other regulatory
authorizations) required to develop and market the Products in each country in the Territory.
	 
	4.2	 	Neither Party warrants, represents or guarantees that the Products will obtain NDA approvals
in the Territory.
	 
	4.3	 	During the preparation and pendency of the various NDAs, BMS shall advise PHARMATOP in
writing on a confidential basis at least [***] as to actions taken, or to be taken, the likely
date of presentation of NDAs, any problems encountered, and the likely date of NDA approvals.
Within [***] after the Effective Date and thereafter [***] until NDA Approval is received in
a given country, BMS will provide an estimate of the Product development timelines in such
country and for all studies that it is then

 

			
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	 	 	undertaking or that it plans to undertake within
the following [***] in such country and will update such timelines on a [***] basis
thereafter; provided, that it is understood that, all forecasts are estimates for
review by PHARMATOP only, are not guaranteed or warranted and may not be relied upon in any
way, and, except as permitted by Article 10, may not be disclosed to Third Parties. PHARMATOP
shall submit to BMS in writing any comments on studies or applications conducted or submitted
by BMS. BMS must reply to any such comments in reasonable detail, so that PHARMATOP can make
an assessment of BMS’ performance of its obligations with respect to this Article 4; provided
that BMS shall remain solely responsible for the development and regulatory strategy for the
Product.
	 
	4.4	 	If any matter or issue (including, but not limited to, an unexpected safety issue,
manufacturing problems or significant additional studies are required by U.S. FDA) arises
which is likely to materially obstruct or significantly delay the issue of an NDA approval in
a given country by more than [***], particularly the U.S. NDA approval, BMS must inform
PHARMATOP immediately and the parties must then consult with each other to examine and
determine whether any corrective measures should be undertaken to supplement or amend the NDA
in such country. If the proposed corrective measures are not economically or technically
viable to implement, then BMS may elect to terminate this Agreement as to such country (and if
the affected country is the United States, then it may elect to do so either as to all
countries or just the U.S.), in which case [***] all licenses and rights granted to BMS
hereunder shall immediately terminate with respect to such country(ies), and PHARMATOP shall
recover its entire freedom with respect to the Licensed Rights in such country(ies) [***]
(and without BMS being liable to PHARMATOP in any manner on account of such termination) and
the terms of Section 9.3(b) shall apply.
	 
	4.5	 	Once an NDA approval has been obtained, along with any other necessary approvals, BMS shall
use Diligent Efforts to market the Products in the country in which approval has been
obtained. BMS shall, at least [***], provide to PHARMATOP a written report

 

			
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	 	 	on the means and
operations used by it to promote the Products. Within [***] and thereafter [***] until the
end of the Royalty Term for a given country, BMS will provide its sales forecast for the
following [***] and will update such forecast (and provide actual sales performance results by
Presentation) on a [***] basis thereafter; provided, that it is understood that all
sales forecasts are estimates for review by PHARMATOP only, are not guaranteed or warranted
and may not be relied upon in any way, and may not be disclosed to Third Parties. On
receiving these reports, PHARMATOP may ask BMS in writing for reasonable further information
and/or clarifications that directly concerns the Product and that BMS may lawfully provide so
as to enable PHARMATOP to assess BMS’ performance of its obligations under this Section.
	 
	4.6 	 	 

	 	(a)	 	Except as provided in section 4.6(c), BMS agrees that, during the Marketing
Period for a given country in the Territory, it will not sell and/or market any
Injectible APAP Product other than the Product. BMS represents that it currently has
no intention of developing and/or marketing other Injectible APAP Product for use in
the Territory. For any country in the Territory where BMS is already marketing a
propacetamol product on the Effective Date of this Agreement, BMS agrees that, subject
to any legal commitments it may have to Third Parties as of the Effective Date and
consistent with any requirements of applicable law, BMS will (1) upon launch of the
Product in such country, cease active promotion and marketing of the propacetamol
product in such country and transition customers of the propacetamol product over to
the Product in a manner that does not unduly jeopardize BMS’ customer relationships and
allows for BMS’ inventory of propacetamol products to be appropriately worked down; and
(2) not sell or license its rights to the propacetamol product to any Third Party for
sale or use in such country.
	 
	 	(b)	 	Subject to Section 7.4, nothing in this Agreement shall restrict or affect BMS’
ability to develop and market at any time during the term of this Agreement, in

 

			
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	 	 	 	any
country in the Territory, one or more parenterally-administered products containing an
analgesic or an opiod (as long as such product is not another Injectible APAP Product).
BMS shall inform PHARMATOP promptly of any decision to market any parenteral opiate or
non-opiate product for the treatment of post-operative pain.
	 
	 	(c)	 	Nothing in any provision of this Agreement shall, expressly or impliedly,
preclude or restrict BMS (or any of its Affiliated Companies) in any way from (1)
acquiring the voting stock or other securities, or the assets, of any Third Party, (2)
selling voting stock or other securities, or any of their assets, to any Third Party,
or (3) merging, amalgamating, taking over or consolidating (or engaging in any similar
transaction) with any Third Party (any of the foregoing a
“Transaction”), where such Third Party is developing or marketing its own
Injectible APAP Product, subject to the following: If such Third Party becomes an
Affiliated Company of BMS by reason of such Transaction and is then marketing its
own Injectible APAP Product in a country in the Territory, then BMS shall inform
PHARMATOP in writing, within [***] after the consummation of such Transaction has
been publicly announced (“Transaction Date”), whether BMS will divest or
cause the divestiture of the competing Injectible APAP Product in such country(ies).
If BMS informs PHARMATOP that it plans to so divest, then BMS shall use
commercially reasonable efforts to divest itself of such competing Injectible APAP
Product in a manner consistent with its reasonable business judgement and to
complete such divestiture of the competing Injectible APAP Product as promptly as
practicable following notification by BMS to PHARMATOP of the decision to divest.
BMS shall have until the date that is [***] after the applicable Transaction Date to
complete such divestiture (the “Grace Period”); provided, that, so
long as BMS demonstrates to PHARMATOP’s reasonable satisfaction that BMS used
commercially reasonable efforts to effect such divestiture within such [***] Grace
Period, but was unable reasonably to effect such divestiture, then such [***] Grace
Period shall be

 

			
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	 	 	 	extended for such additional [***] periods thereafter as is
necessary to enable such competing Injectible APAP Product to be in fact divested,
so long as BMS continues to demonstrate to PHARMATOP’s reasonable satisfaction that
BMS is using commercially reasonable efforts to effect such divestiture within such
period, and provided further that in no event shall the aggregate Grace Period
exceed [***]. BMS shall keep PHARMATOP reasonably informed of its efforts and
progress in effecting such divestiture until it is completed. The sale, promotion
or marketing of any such competing Injectible APAP Product by BMS or any of its
Affiliated Companies within the Territory during such Grace Period pursuant to this
Section 4.6(c) shall not be grounds for termination of this Agreement under Section
4.6(a). Nothing in this Paragraph is intended to affect
BMS’ obligation to use Diligent Efforts to market the Product during the Grace
Period.

If BMS notifies PHARMATOP that BMS does not plan to divest the competing
Injectible APAP Product, then, BMS shall have [***] after the Transaction
Date in which to sublicense or sell the rights to the Product to a Third
Party, and if BMS is unable to do so within such [***], then PHARMATOP may
terminate this Agreement with respect to the affected country(ies) at any
time thereafter upon not less than [***] written notice to BMS and the
terms of Section 9.3(b) shall apply.

	4.7	 	All INDs and NDAs for any Product shall be owned solely by BMS, and BMS shall be responsible
for all regulatory filings to be made thereto.

Article 5—Patent Application Examination 

	5.1	 	PHARMATOP shall use its best efforts to diligently prosecute the Patent Applications and to
have the Patent Applications granted by the patent offices concerned, within the customary
timeframes. PHARMATOP agrees to keep BMS informed on the progress of the examination of the
applications; to reply diligently in consultation with BMS to comments made by the examiners
(and Third Parties where appropriate); and, to take

 

			
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	 	 	other reasonable and customary actions to
avoid delays with the issuance of the patents or a reduction to the scope thereof.

	 	(a)	 	PHARMATOP will promptly notify BMS in writing after each Notice of Allowance
and patent issuance in the Territory. The parties will cooperate to ensure a timely
filing in the Orange Book with respect to an issued patent.
	 
	 	(b)	 	PHARMATOP and BMS will cooperate to ensure timely filings for any available
Patent Term Restoration on the Product (currently, filings must be made within 60 days
after NDA Approval).
	 
	 	(c)	 	With respect to any Patent Right filed, prosecuted or maintained by PHARMATOP,
each patent application, office action, response to office action, request for terminal
disclaimer, voluntary amendment, interference proceeding
filing or action, and request for reissue or re-examination of any patent issuing
from such application shall be provided by PHARMATOP to BMS sufficiently prior to
any such application, filing or request to allow reasonable time for adequate review
and comment by BMS. PHARMATOP will also provide BMS copies of all correspondence
and other material documents received or prepared by PHARMATOP in the prosecution,
maintenance, and enforcement of the Licensed Patent Rights.
	 
	 	(d)	 	PHARMATOP shall provide to BMS, on a quarterly basis, a written patent report
that includes the serial number, docket number and status of each Licensed Patent.
	 
	 	(e)	 	Within 90 days after execution of this Agreement, PHARMATOP will also ensure
that a signed and duly notarized Assignment Document, assigning the entire right, title
and interest in US Patent No. 6,028,222 from Francois Dietlin and Daniele Fredj to SCR
Pharmatop, is filed in the United States Patent and Trademark Office.
	 
	 	(f)	 	PHARMATOP will ensure that Patent Applications filed in the Territory will
include at least the same claims as filed in the PCT Applications as of the Effective
Date.

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	5.2	 	PHARMATOP will, to the greatest extent practicable, prosecute the Patent Applications as
currently filed (or that will be filed in the Territory pursuant to section 5.1(f)), and
agrees not to alter the terms so as to materially narrow the scope thereof or abandon any
material pending claims unless consented to by BMS, or as otherwise is reasonable in light of
the prosecution of the Patent Applications. PHARMATOP does not guarantee to BMS that the
patents will be issued in terms similar to those of the Patent Applications. PHARMATOP will
not abandon any issued claims or admit that any such issued claims of the Patents are
unenforceable by disclaimer or otherwise, without BMS’ prior written consent.
	 
	5.3	 	During the entire period of examination of the Patent Applications, BMS will comply with all
its obligations towards PHARMATOP, including, but not limited to its financial
obligations, and shall not be entitled to suspend them on the ground that the examiners or
Third Parties have commented on or challenged the filed Patent Applications. BMS will be
entitled to terminate this Agreement with respect to a particular country, or obtain a
reduction in the royalty rate for sales therein, in accordance with Sections 6.2 and 6.3
below, as a result of a final patent office decision that definitively rejects a Patent
Application in such country(ies).
	 
	5.4	 	 

	 	(a)	 	PHARMATOP shall pay the annual fees due to the patent offices in a timely
manner to maintain the Patents in force until their expiry. [***] will reimburse
[***], commencing from and after the [***] of the Effective Date of this Agreement, for
its payment of the annual maintenance fees in any country in the Territory where no
Products have been sold as of the time of such payment, provided that [***]
provides proof of such payment and requests such reimbursement. For budgeting
purposes, [***] shall provide to [***], on February 1 and August 1 of each Year, a
reasonably detailed estimate of the out-of-pocket expenses it expects to incur, in the
next six (6) months, with respect to Licensed Patents.

 

			
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	 	(b)	 	If PHARMATOP files for and obtains new Patents in a country in the Territory
based on Inventions made after the Effective Date of this Agreement that is likely to
have the effect of extending BMS’ period of marketing exclusivity, [***] will reimburse
[***] for [***] of its costs of filing and prosecuting the corresponding patent
applications in such country, including [***] reasonable out-of-pocket legal fees and
expenses, on presentation of appropriate supporting documents; provided,
however, that (a) [***] shall not be obligated to make any such reimbursement
to [***] prior to the [***] of the Marketing Period in such country or in any year in
which an Injectible APAP Product is marketed by a Third Party in such country, and (b)
any such reimbursement paid by [***] for a given country will be returned to [***] if,
prior to the [***] of the Marketing Period in such country, an Injectible APAP
Product which does not infringe the Patents is marketed in such country.

Article 6—Additional Provisions Affecting the Patents 

6.1

	 	(a)	 	PHARMATOP represents and warrants that Francois Dietlin and Daniele Fredj (the
“Inventors”) solely discovered or derived the inventions covered by the
Patents, as well as the Know-How embodied in the formulation of the Product, through
their own research and efforts and without misappropriating the trade secrets or
confidential information of any Third Party, and that the Inventors have never been
employed by or provided services to Fresenius. It further represents that the portion
of the inventions covered by U.S. patent No. 6,028,222 was duly assigned by the
Inventors to Newpharm, a company organized under the laws of France having its head
office’s address at 10, square St. Florentin, 78150 Le Chesnay, France
(“Newpharm”) which obtained French patent No. 2.751.875 and that Newpharm
subsequently assigned the associated ongoing research and priority rights to PHARMATOP
as set forth in the agreement attached as Exhibit

 

			
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	 	 	 	 D and confirmed by Newpharm
in the letter attached hereto as Exhibit E. PHARMATOP also represents that it
is the sole owner of the Licensed Rights, and otherwise has the sole right to
exclusively license and grant rights to them, and that, to the best of its knowledge,
each invention is patentable.
	 
	 	(b)	 	BMS represents that, to its knowledge as of the Effective Date, and having
examined the Patent and the Patent Applications, it has not identified, and otherwise
has no knowledge of, any reasons why the Patent might be invalid or why the Patent
Applications could not be granted under conditions enabling the license herein to be
effectively implemented.
	 
	 	(c)	 	PHARMATOP represents and warrants to BMS that: (i) there is no action, suit or
proceeding pending or threatened in writing as of the Effective Date by any Third Party
against PHARMATOP, its Affiliated Companies, or any of the Inventors named in the
Patents which, if adversely determined, would have a material adverse effect upon the
issued claims of the Patents in the Territory as of the
Effective Date or upon the issuance of any claims of the Patent Applications in the
Territory as of the Effective Date; (ii) the issued claims of the Patent in the
Territory which cover the manufacture, use, importation or sale of Product are not
dominated by any issued patents of any Third Party in the Territory; and (iii)
except as disclosed in Appendix 3 (re Fresenius), it is not aware of any
infringement by any Third Party as of the Effective Date of any of the Patents in
the Territory.

6.2

	 	(a)	 	If PHARMATOP is:

	 	(i)	 	unable to obtain, without material alteration or restriction as
to scope and content, issuance in the Territory of the claims being prosecuted
as of the Effective Date on the PCT Patent Applications filed as of the
Effective Date; or
	 
	 	(ii)	 	unable to maintain, or a material alteration of the scope or
content occurs with respect to, any of the claims under any of the Patents
issued as of the

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	 	Effective Date or on any patents issued on Patent Applications
filed as of the Effective Date;

	 	 	 	then BMS may at its option terminate this Agreement for any of the countries so
affected (an “Affected Country”), or, if the affected country is the United States,
then either as to the United States or as to all countries in the Territory. Any
such termination shall require (A) not less than [***] prior written
notice, if after [***] in the [***] or (B) not less than [***] prior written notice,
if [***] in the [***].
	 
	 	(b)	 	If a Third Party should market in any country in the Territory a
parenterally-administered liquid solution product, in a stable and readily injectible
form, that (x) contains paracetamol and one or more other analgesic ingredients, (y)
uses any of the technology contained within any issued claim of any Licensed Patent in
such country or any Licensed Know-How, and (z) is not considered to infringe
any Patent within the Licensed Rights in such country (whether by judicial
determination or settlement, by joint agreement of PHARMATOP and BMS, or by both
Parties failure to prosecute such Third Party for infringement under Section 6.5),
then BMS may elect to terminate this Agreement pursuant to Section 9.3(a) for any
such Affected Country, or, if the Affected Country is the United States, then as to
all countries in the Territory.
	 
	 	(c)	 	If BMS opts to terminate this Agreement pursuant to section 6.2(a) or section
6.2(b) with respect to one or more Affected Countries, it shall be under the terms and
conditions of section 9.3(b). BMS shall not be entitled to obtain from PHARMATOP the
return of any sums paid to PHARMATOP before the date of said termination unless BMS can
establish that the refusal to issue the patent (or the withdrawal thereof) is due to a
knowingly inaccurate representation made by PHARMATOP in Section 6.1 of this Agreement.
BMS shall be permitted thereafter to sell Products already manufactured by such
termination date, provided that it pays PHARMATOP the contractual royalties on such
sales provided for in Article 7. BMS shall not be restricted in any way thereafter
from

 

			
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	 	 	 	manufacturing and selling another Injectible APAP Product in such terminated
country(ies) for which the manufacture or sale in such country (x) does not infringe
the Licensed Patents and (y) does not use to any material extent any Licensed Know-How.
	 
	 	(d)	 	In the event that BMS opts to maintain the Agreement in effect in an Affected
Country under section 6.2(a) or 6.2(b), then:

	 	(i)	 	if such Affected Country is [***], the Guaranteed Payment
provision (section 7.3) shall be [***] thereafter effective as of the [***] in
which BMS elected to maintain the Agreement and each [***] thereafter; and
	 
	 	(ii)	 	the royalty rate on all Net Sales in such country for any
quarter in a given Year will be reduced by [***]
for each such quarter in which:

	 	(x)	 	[***]
	 
	 	(y)	 	[***].

6.3

	 	(a)	 	Should the Patents (or their inventorship) be the subject of an administrative
or judicial challenge by a Third Party, PHARMATOP will undertake at its expense, in
consultation and liaison with BMS, to take all appropriate measures to oppose the
challenge by the Third Party. Subject to Sections 12.3 and 12.4, PHARMATOP shall
defend, indemnify and hold harmless BMS from any liabilities, losses, costs or damages,
which shall include costs or judgements whether for money or equitable relief, and
reasonable legal expenses and reasonable attorney’s fees, arising out of any such
claims, suits or challenges. PHARMATOP shall not enter into a settlement agreement
with such Third Party without the written consent of BMS, which shall not be
unreasonably withheld. PHARMATOP shall not enter into a settlement agreement with such
Third Party without the written consent of BMS, which shall not be unreasonably
withheld. BMS shall have the right to participate and be represented in any such suit
by its own counsel at its own expense. The pendency of any administrative or judicial

 

			
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	 	 	 	claim or action by a Third Party challenging the Patents will not permit BMS to cease
or suspend its performance of its obligations under this Agreement, including its
financial obligations. If the Third Party’s claim or action succeeds so as to deprive
PHARMATOP of any of its rights on Licensed Patents in a country in the Territory, then
BMS may terminate this Agreement as to such country in the same manner as it would have
been entitled to terminate pursuant to Section 6.2(a)(ii) and 6.2(c) (with BMS
providing the same written notice of termination required thereby unless the outcome of
such Third Party’s claim or action would require BMS to cease marketing of the Product
prior to the end of the notice period) or to continue to market the Product subject to
Section 6.2(d).
	 
	 	(b)	 	In the event that PHARMATOP fails or elects not to defend any such action,
suit, or challenge, then BMS may defend such action, suit or proceeding at its own
expense, in its own name and the name of PHARMATOP, and entirely under BMS’ own
direction and control. PHARMATOP will reasonably assist BMS (at
BMS’ expense) in any action or proceeding being prosecuted or defended by BMS, if so
requested by BMS or required by law. PHARMATOP shall have the right to participate
and be represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope or affects the
enforceability of a Licensed Patent may be entered into by BMS without the prior
consent of PHARMATOP, which consent shall not be unreasonably withheld. If the
Third Party’s claim or action succeeds so as to deprive PHARMATOP of any of its
rights on Licensed Patents in a country in the Territory, then BMS may terminate
this Agreement as to such country in the same manner as it would have been entitled
to terminate pursuant to Section 6.2(a)(ii) and 6.2(c) (with BMS providing the same
written notice of termination required thereby unless the outcome of such Third
Party’s claim or action would require BMS to cease marketing of the Product prior to
the end of the notice period) or to continue to market the Product subject to
Section 6.2(d).

	6.4	 	PHARMATOP represents that, to its knowledge, the manufacture and sale of the Products in
Territory will not infringe any intellectual property right of any Third Parties

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	 	 	and, subject
to sections 12.3 and 12.4, PHARMATOP will hold BMS harmless against any Third Party action or
claim asserting an infringement of such rights. In the event such an action or claim is
brought by a Third Party, then, subject to section 6.3, BMS will be obligated to continue to
perform its obligations under this Agreement, including its financial obligations.

6.5

	 	(a)	 	In the event that a Third Party is manufacturing and/or marketing anywhere in
the Territory an Injectible APAP Product for which the manufacture, use or sale thereof
infringes a Valid Claim under the Licensed Patents, the Parties shall consult with each
other in order to attempt to end such infringement, and shall take all appropriate
action to do so. BMS shall have the right in the first instance, but not the
obligation, to initiate legal action against an infringing party under its own
direction and control. PHARMATOP will reasonably assist BMS ([***]) in
any action or proceeding being prosecuted if so requested, and will lend its name to
such actions or proceedings if requested by BMS or required by law. No settlement
of any such action which restricts the scope, or adversely affects the
enforceability, of a Licensed Patent may be entered into by BMS without the prior
written consent of PHARMATOP, which consent shall not be unreasonably withheld.
	 
	 	(b)	 	If BMS elects not to bring any action for infringement described in Section
6.5(a) and so notifies PHARMATOP in writing, then PHARMATOP may bring such action at
its own expense, in its own name and entirely under its own direction and control. BMS
will reasonably assist PHARMATOP ([***]) in any action or proceeding being
prosecuted if so requested, and will lend its name to such actions or proceedings if
requested by PHARMATOP or required by law. No settlement of any such action which
restricts the scope, or adversely affects the enforceability, of any Licensed Patent
may be entered into by PHARMATOP

 

			
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	 	 	 	without the prior written consent of BMS, which
consent shall not be unreasonably withheld.
	 
	 	(c)	 	If either Party brings such an action or defends such a proceeding under this
Section 6.5 and subsequently ceases to pursue or withdraws from such action or
proceeding, it shall promptly notify the other Party and the other Party may substitute
itself for the withdrawing Party under the terms of this Section 6.5.
	 
	 	(d)	 	In the event either Party exercises the rights conferred in this Section 6.5
and recovers any damages or other sums in such action, suit or proceeding or in
settlement thereof, such damages or other sums recovered shall first be applied to all
out-of-pocket costs and expenses incurred by the Parties in connection therewith,
including attorneys fees. If such recovery is insufficient to cover all such costs and
expenses of both Parties, it shall be shared in proportion to the total of such costs
and expenses incurred by each Party. If after such reimbursement
any funds shall remain from such damages or other sums recovered, such funds shall
be retained by [***]; provided, [***].
	 
	 	(e)	 	BMS will be obliged to continue performing its obligations towards PHARMATOP
during the pendency of any legal action against a Third Party; provided,
however, that, during such period of time [***] shall pay [***] of the
royalties contractually due on Net Sales in the country where the infringing injectible
APAP Product is being marketed, with the balance (the “Retained Sums”)
temporarily retained by [***]. If the outcome of the litigation is the invalidation of
a Patent, the provisions of Section 6.2 will be applicable, and, if [***] elects to
continue as provided in Section 6.2(c), [***] .
	 
	 	(f)	 	Any infringement of the Patents by an Affiliated Company of BMS whom BMS has
not sublicensed shall be deemed to be a breach of Agreement by BMS.

	6.6	 	PHARMATOP does not make any representations of warranties with respect to the Patents other
than those expressly stated in this Article 6.

 

			
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	6.7	 	[***].
	 
	6.8	 	In the event that
BMS reasonably
believes after
consultation with
PHARMATOP that it
is required to
obtain a license
from a Third Party
in order to
practice the
Licensed Patents
and Know-how, then
any license fees or
other royalties
payable by BMS to
such Third Party
with respect to
same shall be
[***].

Article 7—License Fees and Royalties 

	7.1	 	BMS shall make the following lump sum, non-refundable (except as provided in section 12.3 or
as may be otherwise expressly provided in this Agreement) payments to PHARMATOP:

	 	(a)	 	Within fifteen (15) business days following execution of this Agreement, the
sum of
	 
	 	(b)	 	Within ten (10) business days [***], the sum of [***]. This amount will be
paid only [***].

7.2

	 	(a)	 	Subject to the Guaranteed Payments provided for in Section 7.3 and to sections
6.2, 6.5(e), 6.8, 7.2(b), 7.2(c) and 12.3 hereof, BMS shall make the following royalty
payments to PHARMATOP:

	 	(i)	 	[***] percent ([***]%) of the Net Sales of Products during
the [***] and [***] in a given country;
	 
	 	(ii)	 	[***] percent ([***]%) of the Net Sales of Products during the
[***] in a given country;
	 
	 	(iii)	 	[***] percent ([***]%) of the Net Sales of Products during
the [***] in a given country; and

 

			
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	 	(iv)	 	[***] percent ([***]%) of Net Sales of Products during the
[***], and all subsequent [***] of the Royalty Term thereafter in a given
country, unless this Agreement is sooner terminated in such country.

	 	 	 	Upon payment of all royalties due PHARMATOP in a given country through the end of
the Royalty Term for such country, BMS shall have a fully paid-up license under
Section 2.1 to use the Licensed Rights in such country to develop, make, use and
sell the Products.

	 
	 	(b)	 	[***] then the effective royalty rate for sales of such Combination Products
shall be [***] of the royalty rate paid by BMS to such Third Party for the Combination
Product, subject to a [***] of the royalty payable to PHARMATOP of [***]. BMS
will provide evidence, reasonably satisfactory to PHARMATOP, of any [***].
	 
	 	(c)	 	[***].

	7.3	 	Subject to Section 12.3 hereof, during each of the first [***] of the Marketing Period in the
United States, BMS shall pay royalties to PHARMATOP equal to the greater of (i) [***] or (ii)
the [***] do not conform in all respects [***]. Further, in any quarter in any Year in [***]
be multiplied by a fraction the numerator of which is [***] and the denominator of which is
the sum of the numerator plus [***] using a mutually agreed upon methodology for calculating
[***] during such quarter. [***]. The Parties
will review the procedures [***] from time to
time to ensure that they are fair and equitable to both Parties.

7.4

	 	(a)	 	In the event that BMS markets a Competing Product in a country in the Territory
during the Royalty Term for such country, BMS agrees that:

	 	(i)	 	During the [***] period following the launch of such Competing
Product (commencing with the [***] of the [***] following such launch), BMS
will continue to provide for the Product at least [***] of the Primary

 

			
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	 	 	 	Detail
Equivalents (PDEs) and will continue to spend on the Product at least [***] of
the Advertising and Promotional Costs that it spent, as determined on an [***]
for the Product during the [***] period preceding such Competing Product
launch; and
	 
	 	(ii)	 	During the [***] period following the launch of such Competing
Product, BMS will continue to provide for the Product at least [***] of the
Primary Detail Equivalents (PDEs) and will continue to spend on the Product at
least [***] of the Advertising and Promotional Costs that it spent, as
determined on an [***] for the Product during the [***] period preceding such
Competing Product launch and the [***] period following such Competing Product
launch; and
	 
	 	(iii)	 	During the [***] period following the launch of such Competing
Product, BMS will continue to provide for the Product at least [***] of the
Primary Detail Equivalents (PDEs) and will continue to spend on the Product at
least [***] of the Advertising and Promotional Costs that it spent, as
determined on an [***] for the Product
during the [***] period following such Competing Product launch.

	 	 	 	Notwithstanding the foregoing, in the event that such Competing Product is launched
during the period that Guaranteed Payments under Section 7.3 are payable, then
subsections 7.4(a)(i)-(iii) shall not apply except with respect to those full [***]
periods following such Competing Product launch that occur after the expiration of
the payment of such Guaranteed Payments during such [***].
	 
	 	 	 	Further, this Section 7.4(a) shall only apply to the [***] Competing Product that
BMS may launch within each country in the Territory
	 
	 	(b)	 	BMS will provide PHARMATOP, within [***] after the end of each [***] period
following such Competing Product launch with sufficient information regarding BMS’ PDE
detailing and Advertising and Promotional spending to enable PHARMATOP to make a
reasonable, competent assessment as to whether BMS has fulfilled its obligations under
Section 7.4(a) above.
	 
	 	(c)	 	In the event that BMS fails to fulfill any of (i), (ii) or (iii) under section
7.4(a) above, then PHARMATOP may, upon ninety days written notice to BMS, terminate
this Agreement at any time within thirty days after PHARMATOP

 

			
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	 	 	 	receives the information
from BMS required for PHARMATOP to determine that BMS has failed to fulfill such
obligations, in which event [***], all licenses and rights granted to BMS hereunder
shall immediately terminate, and PHARMATOP shall recover its entire freedom with
respect to the Licensed Rights in such country [***] and the terms of Section 9.3(b)
shall apply. If PHARMATOP elects to terminate BMS’ rights, such termination shall be
PHARMATOP’s sole remedy and BMS shall not be liable for any additional damages to
PHARMATOP with respect to such failure.

7.5

	 	(a)	 	The contractual royalties will be calculated and will be payable quarterly for
sales made in each Calendar Quarter in the Royalty Term. A detailed statement, country
by country and by Presentation, will be prepared and sent by BMS to PHARMATOP within
[***] of the end of each Calendar Quarter ([***] after the last quarter in an Agreement
Year to allow for additional time to determine any adjustments required to be made on
an annual basis), accompanied by payment of the royalties due PHARMATOP. If the annual
reconciliation shows an amount due by either Party to the other, the amount due shall
be paid as follows: BMS shall pay any amount due by it at the same time as it provides
the reconciliation to PHARMATOP. PHARMATOP shall repay any amount due by it to BMS
within [***] after the receipt by it of such reconciliation report.
	 
	 	(b)	 	PHARMATOP may, on reasonable (but not less than [***]) written notice to
BMS, have a calculation statement audited at its own expense by an accounting firm
selected by PHARMATOP that is reasonably acceptable to BMS and that is bound by a
written agreement of confidentiality to BMS. The, auditor’s assignment will be limited
to reviewing the accuracy of a calculation statement sent by BMS (the
“Inspection”), and to disclosing only if there are any errors in payment and,
if an error exists, the amount of such error(s) and the calculation thereof, and no
additional or any other information. If an audit discloses that the

 

			
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	 	 	 	amount of
royalties owed to PHARMATOP was understated by more than [***], then [***] must
reimburse [***] for the cost of the audit, in addition to paying the additional
royalties together with interest on the additional amounts, calculated from the date on
which the additional amount should have been paid, as provided
in section 7.7. Such audit rights may be exercised [***], and any such audit shall
apply [***].

	7.6	 	BMS shall make all payments to PHARMATOP in United States Dollars by electronic funds
deposit, to a French bank and account number designated in writing by the Gerant of PHARMATOP.
Each Party shall bear its own expenses with respect to any such electronic funds transfer.
When products are sold for monies other than United States dollars, the monies due will first
be determined in the foreign currency of the country in which such products were sold and then
converted into equivalent United States currency, on a monthly basis, using the applicable
U.S. Federal Reserve rate in effect on the last business day of each calendar month. Each
quarterly Royalty Payment shall cover three (3) such monthly conversions. PHARMATOP agrees
that it will be solely responsible for all payments owed to Newpharm or the Inventors.
	 
	7.7	 	Any amounts not paid on its due date by BMS to PHARMATOP will bear simple interest on the
outstanding balance at the [***] the applicable period, calculated from the contractual due
date until the date of payment, without the need for a formal notice to pay or any other
notice.
	 
	7.8	 	Neither the payment of interest by BMS nor the acceptance of the same by PHARMATOP shall
effect a waiver of any of PHARMATOP’s rights or remedies under this Agreement.
	 
	7.9	 	BMS shall pay any and all excise, sales, use, value added, and other similar Taxes solely
arising as a result of Product sales under this Agreement. Where required to withhold any tax
in connection with any payment hereunder to PHARMATOP due to applicable law, treaty, rule or
order of a governmental body, BMS shall deposit such taxes with the

 

			
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	 	 	appropriate tax or revenue
authorities as a deduction from such royalty or other payment, and shall notify PHARMATOP and,
upon request of PHARMATOP, BMS shall furnish satisfactory evidence of such withholding and
payment. [***] shall not be required to gross up or reimburse [***] for any such
withholdings. BMS shall reasonably cooperate
with PHARMATOP in obtaining exemption from withholding taxes where available under
applicable law. PHARMATOP shall be solely responsible for all taxes levied on PHARMATOP’s
revenues, profits or income arising out of this Agreement.
	 
	7.10	 	BMS agrees that it will not engage in any fraudulent transactions relating to sales of the
Products that are specifically designed to reduce or avoid royalty payments to PHARMATOP.

Article 8—Improvements made by BMS 

BMS shall promptly inform PHARMATOP of any adaptation, improvement, enhancement or upgrade
(collectively, an “Improvement”) BMS makes with respect to the formulation and/or manufacture of
the Products, whether such Improvement can be protected by patent or not. BMS will remain the
owner of any such Improvement that it makes to the Products; provided, however, that BMS must grant
to PHARMATOP, upon request, a non-exclusive, [***] license to practice and use the Improvement, including the right
to grant sublicenses, outside of the Territory solely in connection with the manufacture, use or
sale of the Products; provided, that any sub-licensee of such rights shall have granted reciprocal
rights to PHARMATOP which can be sublicensed to BMS.

Article 9—Term / Termination

	9.1	 	Unless terminated earlier pursuant to the terms of this Agreement, the term of this Agreement
shall run on a country-by-country basis until the end of the Marketing Period. Upon the
expiration of this Agreement in a country, BMS will have no further financial obligations
towards PHARMATOP for sales made in such country after such expiration.

 

			
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	9.2	 	Should either Party fail to perform any of material obligations of this Agreement, and fail
to cure such breach or default within ninety (90) days alter receiving a written notice from
the non-breaching Party specifying the breach and demanding that it be cured, then the
non-breaching Party shall have the right to terminate this Agreement; provided, that
if
the material breach is restricted to a given country, termination shall be as to such
country only.

9.3

	 	(a)	 	BMS may, in its sole discretion, terminate this Agreement at any time during
the Marketing Period with respect to a given country at any time, provided that (i) it
gives written notice at least [***] in advance, and (ii) BMS has paid all amounts due
under this Agreement as of the date of such notice. If BMS terminates this Agreement
pursuant this section 9.3(a), then BMS agrees not to market any other Injectible APAP
Product in such country for a period of [***] following termination;
provided, that this section 9.3(a) shall not apply to any Injectible APAP
product marketed by BMS (x) that is thereafter acquired by BMS or any of its Affiliates
as a result of a Transaction (as such term is defined in section 4.6(c)) that occurs
following the giving of such notice of termination and which was a marketed product of
the Third Party at the Transaction Date or (y) that is marketed by BMS in accordance
with the last sentence of section 6.2(c) as a result of a termination by BMS pursuant
to section 6.2(c) or 6.3(a).
	 
	 	(b)	 	Upon the effective date of a termination by BMS pursuant to this Section 9.3,
BMS will transfer to PHARMATOP, at PHARMATOP’s expense, the NDA approvals, so that
PHARMATOP may take over, in the affected country(ies) in the Territory, the marketing
of the Products (directly or through any Third Parties of its choice). The Parties
shall in good faith consult on the procedures for this transfer of the marketing
information and contracts (covering stocks, current orders, official records, etc),
endeavoring to ensure that the marketing is disturbed, as little as possible, by the
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	 	 	 	comply with its obligations under applicable
law. BMS shall also license or assign to PHARMATOP without charge any
trademark/tradename used by BMS that is specific to the Products; however, no rights
will be assigned or licensed to
PHARMATOP under any names, marks, or logos used by BMS and its Affiliates on the
Product that are also used on their other products (e.g., the Bristol-Myers Squibb
name). At its option, PHARMATOP may commence marketing the Products (directly or
indirectly) at any time after its receipt of the termination notice. The Parties
agree to negotiate in good faith a smooth transition of marketing for the Product as
well as an orderly disposition of BMS’ Product inventory during the [***] notice period referred to in section 9.3(a).

	9.4	 	PHARMATOP shall have the right to terminate this Agreement on ninety (90) days’ written
notice if BMS either opposes any of the Patent Applications or challenges or contests the
validity or enforceability of any of the Licensed Patents.
	 
	9.5	 	In the event that this Agreement is terminated or rejected by a Party or its receiver or
trustee under applicable bankruptcy laws due to such Party’s bankruptcy, then all rights and
licenses granted under or pursuant to this Agreement by such Party to the other Party are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United
States Bankruptcy Code and any similar law or regulation in any other country, licenses of
rights to “intellectual property” as defined under Section 101(35A) of Title 11 of the
Bankruptcy Code. The Parties agree that all intellectual property rights licensed hereunder,
including without limitation any patents or patent applications in any country of a Party
covered by the license grants under this Agreement, are part of the “intellectual
property” as defined under Section 101(35A) of the Bankruptcy Code subject to the
protections afforded the non-terminating Party under Section 365(n) of the U.S. Bankruptcy
Code, and any similar law or regulation in any other country.

 

			
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Article 10—Confidentiality and Publicity

	10.1	 	All information of a proprietary or confidential nature disclosed by one Party to the other
or developed by the other Party under this Agreement (“Confidential Information”)
shall be maintained in confidence, not disclosed to any Third Party, and used only for the
purposes of this Agreement. Each Party may disclose the other Party’s Confidential
Information to Affiliated Companies, agents, legal and financial representatives, or
consultants under obligations of confidentiality, non-disclosure and non-use at least
equivalent to the obligations set forth in this Article. The obligations of
confidentiality, non-disclosure and non-use set forth in this Agreement shall expire five
(5) years after the date of termination or expiration of this Agreement.
	 
	10.2	 	The obligations of confidentiality, non-disclosure and non-use set forth shall not apply to
information: (a) that was previously known to the receiving Party or any of its Affiliated
Companies free of restriction as evidenced by the records of such Party; (b) that is or
becomes generally available to the public through no fault of the receiving Party; (c) that is
acquired in good faith by the receiving Party or any of its Affiliated Companies from a Third
Party not under an obligation of secrecy to the disclosing Party with respect to such
information; or (d) that is independently developed by employees or agents of the receiving
Party or any of the Affiliated Companies without reliance on Confidential Information
disclosed under this Agreement.
	 
	10.3	 	Notwithstanding the obligations of confidentiality, non-disclosure, and non-use set forth
herein, a Party may:

	 	(a)	 	disclose Confidential Information to a regulatory agency that is necessary to
obtain regulatory approval in a particular jurisdiction or as otherwise required by law
or judicial process;
	 
	 	(b)	 	disclose Confidential Information to a government official or agency if the
disclosure is necessary to protect the health and safety of a Party’s workers or the
public or as required by law or for defending, enforcing, or prosecuting patent
applications and patents; and

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	 	(c)	 	disclose Confidential Information reasonably required in connection with the
development, manufacture, use, sale, external testing, or marketing of Products in the
Territory in accordance with the terms of this Agreement.

	10.4	 	Except as set forth in this section, neither Party shall disclose the nature or existence of
this Agreement to any Third Party, or the relationship between the parties hereunder, without
the prior written consent of the other Party, except that each Party shall be permitted,
without the prior permission of the other Party, to disclose the existence of this Agreement
and the nature of the licenses granted hereunder as required by law or judicial process and to
its accountants and attorneys. PHARMATOP shall be permitted, without the prior permission of
BMS, to disclose the existence of this Agreement and the nature of the licenses granted
hereunder on a confidential basis to a) potential licensees pursuant the provisions of section
3.1, but not other terms and conditions; and b) as to the terms of this Agreement, its
existing or potential investors and commercial bankers. BMS shall be permitted, without the
prior permission of PHARMATOP, to disclose the existence and terms of this Agreement on a
confidential basis to potential sublicensees, copromotion partners, merger and acquisition
candidates and collaborators.
	 
	10.5	 	The provisions of this Article shall govern the exchange of Confidential Information between
the parties on or after the execution of this Agreement. The rights and obligations of this
Article shall survive termination of this Agreement.

Article 11—Warranties, Representations and Acknowledgements

	11.1	 	PHARMATOP warrants and
represents that it is a
partnership duly organized
and validly existing under
the laws of France, and has
all power and authority to
carry on its business as now
being conducted and to own
its properties and is duly
licensed or qualified in each
jurisdiction in which its
failure to qualify would have
a material adverse effect on
its business, financial
condition or operations.
PHARMATOP represents that, as
of the Effective Date, the
assets of PHARMATOP,
excluding the Patents and
Patent

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	 	 	Applications, are
valued at less than [***] and
that its revenues for
calendar year 2002 will be
less than [***].

	11.2	 	PHARMATOP warrants and represents that it has full legal power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby; that the execution,
delivery and performance of this Agreement by it has been duly authorized by all requisite
legal action; and that this Agreement has been duly executed and delivered by it and
constitutes a valid and binding obligation enforceable in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, reorganization, insolvency, moratorium, and other
laws affecting creditors’ rights generally from time to time in effect.
	 
	11.3	 	PHARMATOP represents and warrants that neither PHARMATOP nor any of its respective Affiliated
Companies is a party to, subject to or bound by any agreement or any judgment, award, order,
writ, injunction or decree of any court, governmental body or arbitrator that would conflict
with or be breached by the execution, delivery or performance of this Agreement by it or that
could prevent the carrying out of this Agreement.
	 
	11.4	 	PHARMATOP represents and warrants that to the best of its knowledge there is no (i) action,
suit, dispute, or governmental, administrative, arbitration, or regulatory proceeding pending
or threatened in writing or (ii) any investigation pending or threatened in writing against or
relating to PHARMATOP, its Affiliated Companies, or their officers, general partners, and
stockholders that, in either case could prevent the carrying out of this Agreement.
	 
	11.5	 	PHARMATOP warrants and represents that it exclusively owns or controls by agreement or
license all right, title and interest in and to the Licensed Rights as defined herein and that
it has the full right and authority to enter into this Agreement and to carry out the
transactions contemplated herein.

 

			
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	11.6	 	PHARMATOP warrants and represents that it has no outstanding encumbrances or agreements,
either written or oral, relating to the use of the Licensed Rights in the Territory, and that
it has not granted nor will grant during the term of this Agreement or any renewal hereof, any
similar rights, license, consent, or privilege in the Territory to any Third Party with
respect to the rights granted herein.
	 
	11.7	 	BMS represents and warrants that BMS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
	 
	11.8	 	BMS represents and warrants that it has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby; that the execution, delivery
and performance of this Agreement have been duly authorized by all requisite corporate action;
and that this Agreement has been duly executed and delivered by BMS and constitutes a valid
and binding obligation of BMS, enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, reorganization, insolvency, moratorium, and other laws
affecting creditors’ rights generally from time to time in effect.
	 
	11.9	 	BMS represents and warrants that neither it nor any of its Affiliated Companies, is a party
to, subject to or bound by any agreement or any judgment, award, order, writ, injunction or
decree of any court, governmental body or arbitrator, which would conflict with or be breached
by the execution, delivery or performance of this Agreement by BMS or which could prevent the
carrying out of this Agreement.
	 
	11.10	 	BMS represents and warrants that to the best of its knowledge there is no (i) action, suit,
dispute, or governmental, administrative, arbitration, or regulatory proceeding pending or
threatened in writing or (ii) any investigation pending or threatened in writing against or
relating to BMS, its Affiliated Companies, or their officers and stockholders that, in either
case could prevent the carrying out of this Agreement.
	 
	11.11	 	BMS represents and warrants that all consents of Third Parties, including, without
limitation, governmental authorities and non-governmental self-regulatory agencies which
regulate the business of BMS, necessary to the execution and delivery of this

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	 	 	Agreement by BMS
or to its performance as of the Effective Date of the transactions contemplated hereby have
been obtained and all filings with and notifications to such governmental authorities
(including non-governmental self-regulatory agencies), regulatory agencies or other entities
have been effected.
	 
	11.12	 	BMS covenants that it will use its commercially reasonable efforts such that all Products
manufactured, labeled, advertised, and sold by or on behalf of BMS under this Agreement shall
comply in all material respects with all applicable requirements of the U.S. Food, Drug and
Cosmetic Act and all other laws and regulations applicable thereto.
	 
	11.13	 	Except as disclosed in Appendix 3 (re Fresenius), PHARMATOP represents that, as of
the date of full execution of this Agreement, there are, to the best of its knowledge, no
Third Party patents that would materially affect BMS’ ability to sell Products or PHARMATOP’s
ability to obtain patent protection for Licensed Rights.
	 
	11.14	 	The representations and warranties of the parties set forth in this Article and in Section
6.1 shall survive the termination, cancellation or expiration of this Agreement without
limitation.

Article 12—Indemnification; Limitation on Liability 

	12.1	 	Subject to Sections 12.3 and 12.4, each Party hereby agrees to indemnify, defend and hold the
other Party, its Affiliates, its licensees, and its and their officers, directors, employees,
consultants, contractors, sublicensees and agents (collectively, the “Indemnitees”)
harmless from and against any and all damages or other amounts payable to a Third Party
claimant (by enforceable judgement, settlement or otherwise), as well as any reasonable
attorneys’ fees and costs of litigation incurred by such Indemnitee as to any such Claim (as
defined in this Section 12.1) until the indemnifying Party has acknowledged that it will
provide indemnification hereunder with respect to such Claim as provided below, (collectively,
“Damages”) resulting from claims, suits, proceedings or causes of action
(“Claims”) brought by such Third Party against such Indemnitee based on: (a) a breach
of a representation or warranty by the indemnifying Party contained in this Agreement; (b)
breach of this Agreement or applicable law by such indemnifying

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	 	 	Party; (c) negligence or
willful misconduct of a Party, its Affiliates or (sub)licensees, or their respective
employees, contractors or agents in the performance of this Agreement; and/or (d) breach of a
contractual or fiduciary obligation owed by it to a Third Party (including without limitation
misappropriation of trade secrets).
	 
	12.2	 	Subject to Section 12.4, BMS hereby agrees to indemnify, defend and hold harmless PHARMATOP
and its directors, agents and employees from and against any and all damages and other amounts
payable to a Third Party claimant (by enforceable judgement, settlement or otherwise), as well
as any reasonable attorneys’ fees and costs of litigation incurred by such PHARMATOP
indemnitee as to any Claim (as defined below) until BMS has acknowledged that it will provide
indemnification hereunder with respect to such Claim, as a result of any suits, claims,
actions, and demands (“Claims”) made by such Third Party against such PHARMATOP
Indemnitee that are based, directly or indirectly, on the manufacture, use, or sale of any
Products by BMS or its Affiliates, agents or sublicensees, except to the extent such Claims
result from (a) a breach of a representation or warranty by PHARMATOP contained in this
Agreement; (b) breach of this Agreement or applicable law by PHARMATOP; (c) negligence, fraud,
or willful misconduct by PHARMATOP or its employees, contractors or agents; and/or (d) breach
of a contractual or fiduciary obligation owed by PHARMATOP or an of its employees or
shareholders to a Third Party (including without limitation misappropriation of trade
secrets), or as provided in section 6.3(a).
	 
	12.3	 	In the event that PHARMATOP is obligated to indemnify BMS as to a given amount for a given
Claim under this Agreement or is obligated to BMS for any damages of any character for any
breach of this Agreement (such damages and Claims, together, a “PHARMATOP Payment
Obligation”), BMS shall only be entitled to recover from PHARMATOP with respect to such
PHARMATOP Payment Obligation as follows:

	 	(a)	 	If such PHARMATOP Payment Obligation relates to a breach by PHARMATOP of any of
its representations or warranties under this Agreement, BMS may recover directly from
PHARMATOP (or, if PHARMATOP fails to meet its obligations, from its general partners)
damages with respect to such

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	 	 	 	PHARMATOP Payment Obligation up to an amount that does not
exceed [***] of all amounts then paid to PHARMATOP by BMS pursuant to sections [***]
and [***], less all amounts previously paid directly by PHARMATOP to BMS (i.e., other
than by royalty offset) with respect to any other PHARMATOP Payment Obligations
pursuant to this subsection (a) and pursuant to section
12.3(b). To the extent that such amount is not sufficient to cover the entire
amount due BMS, BMS may recover any remaining amount due it only by offsetting and
withholding the amount due against any future royalties due BMS under section 7.2 or
7.3 until such amount is paid.
	 
	 	(b)	 	If such PHARMATOP Payment Obligation relates to a breach by PHARMATOP of any
provisions of this Agreement other than its representations and warranties under this
Agreement, BMS may recover directly from PHARMATOP (or, if PHARMATOP fails to meet its
obligations, from its general partners) damages with respect to such PHARMATOP Payment
Obligation up to an amount that does not exceed [***] of all amounts then paid to
PHARMATOP by BMS pursuant to section [***] and [***], less all amounts previously paid
directly by PHARMATOP to BMS (i.e., other than by royalty offset) with respect to any
other PHARMATOP Payment Obligations pursuant to this subsection (b) and, to the extent
relating to amounts previously paid by BMS pursuant to sections [***] and [***], with
respect to any other PHARMATOP Payment Obligations previously paid directly by
PHARMATOP to BMS pursuant to section [***]. To the extent that such amount is not
sufficient to cover the entire amount due BMS, BMS may recover any remaining amount due
it only by offsetting and withholding the amount due against any future royalties due
BMS under section [***] or [***] until such amount is paid.

	 	 	For the avoidance of doubt, it is expressly agreed between the Parties that these
limitations are intended to be cumulative to cover all PHARMATOP Payment Obligations. In
other words, if monies are paid or deducted under 12.3(a) (from amounts

 

			
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	 	 	other than payments
under section 7.1), such payments or deductions reduce monies available for payment or
deduction under 12.3(b), and vice-a-versa.
	 
	12.4	 	As used in this section 12.4, “Indemnitee” shall mean a party entitled to indemnification
under the terms of Section 12.1 or 12.2. It shall be a condition precedent to an Indemnitee’s
right to seek indemnification under such Section 12.1 or 12.2:

	 	(a)	 	shall inform the indemnifying Party under such applicable Section of a Claim as
soon as reasonably practicable after it receives notice of the Claim;
	 
	 	(b)	 	shall, if the indemnifying Party acknowledges that such Claim falls within the
scope of its indemnification obligations hereunder, permit the indemnifying Party to
assume direction and control of the defense, litigation, settlement, appeal or other
disposition of the Claim (including the right to settle the claim solely for monetary
consideration); provided, that the indemnifying Party shall seek the prior
written consent (not to be unreasonably withheld or delayed) of any such Indemnitee as
to any settlement which would materially diminish or materially adversely affect the
scope, exclusivity or duration of any Patents licensed under this Agreement, would
require any payment by such Indemnitee, would require an admission of legal wrongdoing
in any way on the part of an Indemnitee, or would amend this Agreement; and
	 
	 	(c)	 	shall fully cooperate (including providing access to and copies of pertinent
records and making available for testimony relevant individuals subject to its control)
as reasonably requested by, and at the expense of, the indemnifying Party in the
defense of the Claim.

	 	 	Provided that an Indemnitee has complied with the foregoing, the indemnifying Party shall
provide attorneys reasonably acceptable to the Indemnitee to defend against any such Claim.
Subject to the foregoing, an Indemnitee may participate in any proceedings involving such
Claim using attorneys of its/his/her choice and at its/his/her expense. In no event may an
Indemnitee settle or compromise any Claim for which it/he/she intends to seek
indemnification from the indemnifying Party hereunder without the prior written

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	 	 	consent of
the indemnifying Party, or the indemnification provided under such Section 12.1 or 12.2 as
to such Claim shall be null and void.

	12.5	 	PHARMATOP represents and warrants that it is a general partnership under French law, that its
general partners are Daniele Fredj and Francois Dietlin, and that under French law, each of
the general partners are responsible for the liabilities of PHARMATOP.
	 
	12.6	 	The liability, limitation of liability, and indemnification provisions set forth in this
Section 12 shall survive the termination, cancellation or expiration of this Agreement [***]

Article 13—Arbitration

	13.1	 	Any controversy or claim arising out of or relating to this Agreement or the validity,
inducement, or breach thereof, shall be settled by arbitration before a arbitration tribunal
of three (3) arbitrators appointed and ruling in accordance with the Arbitration Rules of the
International Chamber of Commerce Arbitration Association (“ICC”) then pertaining,
except where those rules conflict with this provision, in which case this provision controls.
Any court with jurisdiction shall enforce this clause and enter judgment on any award. The
arbitrators shall be attorneys who have at least fifteen (15) years of experience with a law
firm or corporate law department of over twenty five (25) lawyers or who were a judge of a
court of general jurisdiction. They shall not be a citizen of the United States, Mexico,
Canada, or France and shall not have its usual professional office in one of these countries.
They shall be selected within ten (10) days of commencement of the arbitration by common
consent of Parties or if Parties fall to agree in the stated time, through selection
procedures administered by the ICC. The arbitration shall be held in the city of Paris,
France. Within forty-five (45) days of initiation of arbitration, the parties shall reach
agreement upon and thereafter follow procedures assuring that the arbitration will be
concluded and the award rendered within no more than six months from selection of the
arbitrator. Failing such agreement, the ICC will design and the parties will follow
procedures that meet such a time schedule.

 

			
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	13.2	 	[***]. All proceedings shall be conducted, and all documents submitted, in the English
language. [***].
	 
	13.3	 	Each Party has the right prior to the commencement of an arbitration and, if the arbitrators
cannot hear the matter within an acceptable period or can not award effective relief, during
the arbitration, to seek and obtain from an appropriate court provisional remedies such as
attachment, preliminary injunction, or replevin, to avoid irreparable harm, maintain the
status quo or preserve the subject matter of the arbitration.

Article 14—General provisions

	14.1	 	Any delays in or failures of performance by a Party under this Agreement shall not be
considered a breach of this Agreement if and to the extent caused by occurrences beyond the
reasonable control of the Party affected, including but not limited to acts of God; acts,
regulations or laws of any government; strikes or other concerted acts of workers; fires;
floods; explosions; riots; wars; rebellions; and sabotage.
	 
	14.2	 	BMS shall obtain any and all governmental approvals required to authorize, implement or
enforce this Agreement or any of the terms and conditions hereof.
	 
	14.3	 	No change in, addition to or waiver of any of the provisions of this Agreement shall be valid
or binding unless in writing and duly executed by the Party against whom enforcement of the
change, addition or waiver is sought. Any such waiver shall constitute a waiver only with
respect to the specific matter described in such writing and shall in no way impair the rights
of the Party granting such waiver in any other respect or at any other time.
	 
	14.4	 	Neither the waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges hereunder.

 

			
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	14.5	 	Headings herein are for the parties’ convenience only, and shall not be used to interpret
this Agreement.
	 
	14.6	 	Except to the extent otherwise provided herein, each Party, shall bear its own expenses and
costs in connection with the transactions contemplated hereby, including the preparation,
execution and delivery of this Agreement and compliance herewith.
	 
	14.7	 	All matters affecting the interpretation, validity, performance and enforcement of this
Agreement shall be governed by the laws of the state of New York (USA), without regard or
giving effect to its choice or conflict of law principles other than Section 5-1401 of the New
York General Obligations Law.
	 
	14.8	 	If any provision of this Agreement is invalid or unenforceable in any jurisdiction, the
remaining provisions hereof shall remain in effect and such invalidity or unenforceability
shall not affect the validity or enforceability of such provision in any other jurisdiction.
The parties shall replace such ineffective provision for such jurisdiction with a valid and
enforceable provision which most closely approaches the purpose of this Agreement, and in
particular, the provision to be replaced.
	 
	14.9	 	PHARMATOP and BMS are independent contractors and shall not be deemed to be partners, joint
venturers or each other’s agents, and neither shall have the right to act on behalf of the
other except as expressly provided hereunder or otherwise expressly agreed to in writing.
	 
	14.10	 	The parties have incorporated in this Agreement all representations, warranties, covenants,
commitments and understandings on which they have relied in entering into this Agreement and,
except as provided for herein, neither Party has made any covenant or other commitment to the
other concerning its future action. Accordingly, this Agreement, together with the appendixes
and exhibits attached hereto, (i) constitute the entire agreement and understanding between
the parties with respect to the matters contained herein, and there are no promises,
representations, conditions, provisions or
terms related thereto other than those set forth in this Agreement, and (ii) supersede all

-44-

 

	 	 	previous understandings, agreements and representations between the parties, written or oral
relating to the subject matter hereof.
	 
	14.11	 	All communications, reports, payments and notices required by this Agreement shall be made
in writing and addressed to the parties at their respective addresses set forth below or to
such other address as requested by a Party by notice in writing to the other parties:

If to PHARMATOP:

SCR Pharmatop

10, square St. Florentin

78150 Le Chesnay

FRANCE

Attention: Gerant

Phone: 33-1-39-545577

If to BMS:

Bristol-Myers Squibb Company

Route 206 and Province Line Road

Princeton, New Jersey 08540-4000

Attn: President for Consumer Medicines

	 	 	with a copy to the Vice President and Senior Counsel, BMS Consumer Medicines, at the same
address.
	 
	 	 	All such notices, reports, payments and communications shall be deemed given or made and
effective (i) when delivered personally; or (ii) when received, if sent by recognized
overnight courier or by registered or certified mail, return receipt requested and postage
prepaid.

-45-

 

	14.12	 	In order to insure that this license can be used validly against Third Parties, extracts of
this Agreement will be registered on the patent offices’ registers by BMS as deemed necessary
by BMS, at its expense.

[The next page is the signature page]

-46-

 

     IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused this
Agreement to be executed in triplicates by their duly authorized representatives as of the 23rd day
of December 2002.

	 	 	 
	SCR PHARMATOP

	 	BRISTOL-MYERS SQUIBB COMPANY
	 
	 	 
	By:   /s/ Daniele Fredj

	 	By:   /s/ [Unintelligible]
	Name: Daniele Fredj

	 	Name:
	Title: Gerant

	 	Title:
	 
	 	 
	By:   /s/ Francois Dietlin
	 	 
	Name: Francois Dietlin
	 	 
	Title: Gerantexv10w13

 

Exhibit 10.13

LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated February 17, 2006 by and among
OXFORD FINANCE CORPORATION (“Oxford”); SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 (“SVB”) (SVB and
Oxford each individually a “Lender”, and collectively the “Lenders”), and CADENCE PHARMACEUTICALS,
INC., a Delaware corporation, whose address is 12730 High Bluff Drive, Suite 410, San Diego,
California 92130 (“Borrower”) provides the terms on which Lenders shall lend to Borrower and
Borrower shall repay Lenders. The parties agree as follows:

1 ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations
and determinations must be made following GAAP. The term “financial statements” includes the notes
and schedules. The terms “including” and “includes” always mean “including (or includes) without
limitation,” in this or any Loan Document. Capitalized terms in this Agreement shall have the
meanings as set forth in Section 13. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are
defined therein.

2 LOANS AND TERMS OF PAYMENT

2.1 Promise to Pay.

     Borrower will pay Lenders the unpaid principal amount of all Credit Extensions hereunder with
all interest, fees and finance charges due thereon as and when due in accordance with this
Agreement.

     2.1.1 Growth Capital Loan Facility.

     (a) Availability. Subject to the terms and conditions of this Agreement, Lenders
agree, severally and not jointly, to lend to Borrower from time to time prior to the Growth Capital
Commitment Termination Date, two (2) advances (each a “Growth Capital Advance” and collectively the
“Growth Capital Advances”) in an aggregate amount not to exceed the Growth Capital Loan Commitment
according to each Lender’s pro rata share of the Growth Capital Loan Commitment (based upon the
respective Growth Capital Commitment Percentage of each Lender). When repaid, the Growth Capital
Advances may not be re-borrowed. Lenders’ obligation to lend hereunder shall terminate on the
earlier of (i) the occurrence and continuance of an Event of Default, or (ii) the Growth Capital
Commitment Termination Date.

     (b) Borrowing Procedure. To obtain a Growth Capital Advance, Borrower must notify
Lenders by facsimile or telephone by 12:00 p.m. Pacific Time seven (7) Business Days prior to the
date the Growth Capital Advance is to be made. If such notification is by telephone, Borrower must
promptly confirm the notification by delivering to Lenders a completed Payment/Advance Form in the
form attached as Exhibit B. In addition, a Note payable to each Lender in the form of
Exhibit D must be signed by a Responsible Officer or designee. On the Growth Capital
Funding Date, each Lender shall credit and/or transfer (as applicable) to Borrower’s deposit
account, an amount equal to its Growth Capital Commitment Percentage multiplied by the amount of
the Growth Capital

1

 

Advance. Each Lender may make Growth Capital Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without instructions if the
Growth Capital Advances are necessary to meet Obligations which have become due. Each Lender may
rely on any telephone notice given by a person whom such Lender reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify each Lender for any loss Lender suffers
due to such reliance.

               2.2 Termination of Commitment to Lend.

     Each Lender’s obligation to lend the undisbursed portion of the Obligations shall terminate
if, in such Lender’s sole discretion made in good faith, there has been a Material Adverse Change.

               2.3 Repayment of Credit Extensions on Growth Capital Advances.

     (a) Principal and Interest Payments on Payment Dates.

          (i) Growth Capital Advance. For each Growth Capital Advance, Borrower shall make
monthly payments of interest only commencing on the first Business Day of the month following the
month in which the Growth Capital Funding Date occurs with respect to such Growth Capital Advance
and continuing thereafter on the first Business Day of each successive calendar month (each a
“Growth Capital Interest Only Payment Date”) during the Growth Capital Interest Only Period.
Commencing on the Growth Capital Amortization Date, Borrower shall make thirty (30) equal monthly
payments of principal and interest which would fully amortize the outstanding Growth Capital
Advances as of the Growth Capital Amortization Date over the Growth Capital Repayment Period
(individually, the “Growth Capital Scheduled Payment,” and collectively, “Growth Capital Scheduled
Payments”) and on the first Business Day of each successive month and continuing thereafter during
the Growth Capital Repayment Period on the first Business Day of each successive calendar month
(each a “Growth Capital Scheduled Payment Date ”). All unpaid principal and accrued interest is
due and payable in full on the Growth Capital Maturity Date with respect to such Growth Capital
Advance. A Growth Capital Advance may only be prepaid in accordance with Sections 2.3(c) and
2.3(d). Each Growth Capital Interest Only Payment Date and each Growth Capital Scheduled
Payment Date are sometimes referred to as a “Growth Capital Payment Date.”

          (ii) Payments received as to a Growth Capital Advance after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day.

     (b) Interest Rate.

          (i) Growth Capital Loans. Borrower shall pay interest on each Growth Capital Payment
Date on the unpaid principal amount of each Growth Capital Advance until the Growth Capital Advance
has been paid in full, at the fixed rate equal to the greater of (a) 10.83%, and (b) six and
one-quarter percent (6.25%) per annum in excess of the Treasury Rate as of the date the Note for
the Growth Capital Advance is prepared, determined by Lenders for each Growth Capital Advance.
Interest is computed on the basis of a 360 day year of twelve 30-day months.

          (ii) Default Rate. Any amounts outstanding under the Growth Capital Advances during
the continuance of an Event of Default shall bear interest at a per annum rate equal to the Default
Rate.

2

 

     (c) Mandatory Prepayment Upon an Acceleration. If the Growth Capital Advances are
accelerated following the occurrence of an Event of Default or otherwise, Borrower shall
immediately pay to Lenders an amount equal to the sum of: (i) all outstanding principal plus
accrued interest, plus (ii) the Prepayment Fee, plus (iii) all other sums, if any, that shall have
become due and payable, including interest at the Default Rate with respect to any past due
amounts.

     (d) Permitted Prepayment of Loans. Borrower shall have the option to prepay all, but
not less than all, of the Growth Capital Advances advanced by Lenders under this Agreement,
provided Borrower (i) provides written notice to Lenders of its election to prepay the Growth
Capital Advances at least thirty (30) days prior to such prepayment, and (ii) pays, on the date of
such prepayment (A) all outstanding principal plus accrued interest, plus (B) the Prepayment Fee
(except as provided in Section 7.3), plus (C) all other sums, if any, that shall have
become due and payable, including interest at the Default Rate with respect to any past due
amounts.

     (e) Debit of Accounts. SVB may debit any of Borrower’s deposit accounts including
Account Number [___] for principal and interest payments or any other amounts Borrower owes
SVB hereunder, when due and payable. These debits shall not constitute a set-off. Borrower shall
separately set up an ACH payment structure in favor of Oxford, satisfactory to Oxford.

               2.4 Fees.

     Borrower will pay to Lenders:

     (a) Loan Fee. A fully earned, non-refundable Loan Fee of $20,000 (to be shared
between SVB ($10,000) and Oxford ($10,000)) on the Effective Date.

     (b) Prepayment Fee. The Prepayment Fee, as defined herein, if and when applicable.

     (c) Lenders Expenses. All Lenders Expenses (including reasonable attorneys’ fees and
reasonable expenses) incurred through and after the Effective Date, when due. Borrower has paid
Lenders a good faith deposit of $20,000 (the “Good Faith Deposit”). Any portion of the Good Faith
Deposit not utilized to pay Lenders Expenses in connection with the documentation, negotiation and
closing of this Agreement and the Loan Documents shall be refunded to Borrower promptly after the
determination of such Lenders Expenses.

3 CONDITIONS OF LOANS

               3.1 Conditions Precedent to Initial Credit Extension.

     The Lenders’ agreement to make the initial Credit Extension is subject to the condition
precedent that Lenders shall have received, in form and substance satisfactory to Lenders, such
documents and completion of such other matters, as Lenders may reasonably deem necessary or
appropriate, including, without limitation, the following:

     (a) this Agreement;

     (b) a certificate of the Secretary of Borrower with respect to articles, by-laws, incumbency
and resolutions authorizing the execution and delivery of this Agreement;

     (c) Perfection Certificate by Borrower;

3

 

     (d) Warrants to Purchase Stock;

     (e) financing statements (Forms UCC-1);

     (f) Account Control Agreement/Investment Account Control Agreements (SVB and other financial
institutions);

     (g) insurance certificate;

     (h) payment of the fees and Lenders Expenses then due specified in Section 2.4 hereof;

     (i) Certificate of Foreign Qualification (California);

     (j) Certificate of Good Standing/Legal Existence; and

     (k) such other documents, and completion of such other matters, as Lenders may reasonably deem
necessary or appropriate.

               3.2 Conditions Precedent to all Credit Extensions.

     The obligations of Lenders to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

     (a) timely receipt of any Payment/Advance Form.

     (b) Borrower shall have duly executed and delivered to each Lender a Note in the amount of
such Lender’s Growth Capital Advance.

     (c) the representations and warranties in Section 5 shall be true in all material
respects on the date of the Payment/Advance Form and on the effective date of each Credit Extension
and no Event of Default shall have occurred and be continuing, or result from the Credit Extension.
Each Credit Extension is Borrower’s representation and warranty on that date that the
representations and warranties in Section 5 remain true in all material respects.

4 CREATION OF SECURITY INTEREST

     4.1 Grant of Security Interest. Borrower hereby grants to each Lender, to secure the payment
and performance in full of all of the Obligations and the performance of each of Borrower’s duties
under the Loan Documents, a continuing security interest in, and pledges and assigns to each Lender
the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower warrants and represents that the security interest granted
herein shall be a first priority security interest in the Collateral. SVB may place a “hold” on
any certificates of deposit or deposit or investment accounts pledged as Collateral to secure cash
management services, corporate business credit cards or letters of credit separately issued or
supplied by SVB under separate agreements between SVB and Borrower.

     Borrower agrees that any disposition of the Collateral in violation of this Agreement, by
either the Borrower or any other Person, shall be deemed to violate the rights of the Lenders under
the Code. If this Agreement is terminated, Lenders’ lien and security interest in the Collateral
shall continue until Borrower fully satisfies its Obligations. If Borrower shall at any time,
assert or file a commercial tort claim, Borrower shall promptly notify Lenders in a writing signed
by Borrower of

4

 

the brief details thereof and grant to Lenders in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to Lenders.

     Upon the indefeasible payment in full in cash of all Obligations under this Agreement and the
termination of any obligation of any Lender to make Credit Extensions hereunder, Lenders shall
execute and deliver to Borrower, at Borrower’s sole cost and expense, all documents and instruments
as shall be reasonably necessary to evidence termination of the security interest in the Collateral
created hereunder, including a UCC-3 Termination Statement.

               4.2 Authorization to File Financing Statements.

     Borrower hereby authorizes Lenders to file financing statements, without notice to Borrower,
with all appropriate jurisdictions, in order to perfect or protect Lenders’ interest or rights
hereunder. As of the date of this Agreement, Lenders are not currently contemplating recording any
fixture filings with the applicable recording office, but reserve their right to do so. Lenders
acknowledge that, to the extent Borrower has any fixtures, Lenders may need to file a real property
related financing statement under section 9-502(b) of the Code for their security interests to have
priority over certain conflicting interests in such fixtures.

               4.3 Account Control.

     Unless an Event of Default has occurred and is continuing, each Lender hereby agrees that: (i)
it will not send a “notice of control” under any applicable account control agreements, and (ii) as
to accounts maintained by it, it shall not place a “hold” on any such accounts, except SVB may
place a “hold” on any certificates of deposit or deposit or investment accounts pledged as
Collateral to secure cash management services, corporate business credit cards or letters of credit
separately issued or supplied by SVB under separate agreements between SVB and Borrower.

5 REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to each Lender as follows:

               5.1 Due Organization and Authorization.

     Borrower and each of its Subsidiaries is duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing in, any state in which
the conduct of its business or its ownership of property requires that it be qualified, except
where the failure to do so could not reasonably be expected to cause a Material Adverse Change. In
connection with this Agreement, the Borrower delivered to Lenders a certificate signed by the
Borrower and entitled “Perfection Certificate”. The Borrower represents and warrants to each
Lender that: (a) the Borrower’s exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof; (b) the Borrower is an organization of the type, and is organized
in the jurisdiction, set forth in the Perfection Certificate; (c) the Perfection Certificate
accurately sets forth the Borrower’s organizational identification number or accurately states that
the Borrower has none; (d) the Perfection Certificate accurately sets forth the Borrower ’s place
of business, or, if more than one, its chief executive office as well as the Borrower’s mailing
address if different, and (e) all other information set forth on the Perfection Certificate
pertaining to the Borrower is accurate and complete. If the Borrower does not now have an
organizational identification number, but later

5

 

obtains one, Borrower shall forthwith notify the Lenders of such organizational identification
number.

     The execution, delivery and performance of the Loan Documents have been duly authorized, and
do not conflict with Borrower’s certificate of incorporation or bylaws, nor constitute an event of
default under any material agreement by which Borrower is bound. Borrower is not in default under
any agreement to which or by which it is bound in which the default would reasonably be expected to
cause a Material Adverse Change.

               5.2 Collateral.

     Borrower has good title to the Collateral, free of Liens except Permitted Liens. Borrower has
no deposit account, other than the deposit accounts with SVB and deposit accounts described in the
Perfection Certificate delivered to Lenders in connection herewith. The Accounts are bona fide,
existing obligations, and the service or property has been performed or delivered to the account
debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor.
Except as described in the Perfection Certificate, the Collateral is not in the possession of any
third party bailee (such as a warehouse). Except as hereafter disclosed to the Lenders in writing
by Borrower, none of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Lenders and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Lenders. All Inventory is in all material
respects of good and marketable quality, free from material defects, other than Inventory
consisting of clinical trial material which is usable as contemplated. Borrower is the sole owner
or exclusive licensee of the Intellectual Property. Each Patent is valid and enforceable and no
part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part,
and no claim has been made that any part of the Intellectual Property violates the rights of any
third party, except to the extent such claim would not reasonably be expected to cause a Material
Adverse Change.

               5.3 Litigation.

     Except as shown in the Perfection Certificate, there are no actions or proceedings pending or,
to the knowledge of Borrower’s Responsible Officers, threatened by or against Borrower or any of
its Subsidiaries in which an adverse decision would reasonably be expected to cause a Material
Adverse Change.

               5.4 No Material Deterioration in Financial Statements.

     All consolidated financial statements for Borrower, and any of its Subsidiaries, delivered to
Lenders fairly present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations. There has not been any material deterioration in
Borrower’s consolidated financial condition since the date of the most recent financial statements
submitted to Lenders, although Borrower’s cash may have declined to pay necessary and ordinary
course business expenses.

6

 

               5.5 Solvency.

     The fair salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital
after the transactions in this Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.

               5.6 Regulatory Compliance.

     Borrower is not an “investment company” or a company “controlled” by an “investment company”
under the Investment Company Act. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards
Act. Borrower has not violated any laws, ordinances or rules, the violation of which would
reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s
properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally or the violation of which would not reasonably be expected
to cause a Material Adverse Change. Borrower and each Subsidiary has timely filed (within any
applicable extension period) all required tax returns and paid, or made adequate provision to pay,
all material taxes, except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted, except where the failure to make such
declarations, notices or filings would not reasonably be expected to cause a Material Adverse
Change.

               5.7 Subsidiaries.

     Borrower does not own any stock, partnership interest or other equity securities except for
Permitted Investments.

               5.8 Full Disclosure.

     No written representation, warranty or other statement of Borrower in any certificate or
written statement given to any Lender (taken together with all such written certificates and
written statements given to any Lender) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained in the certificates or
statements not misleading, as of the date of such representation, warranty or other statement, it
being recognized by Lenders that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that actual results during the
period or periods covered by such projections and forecasts may differ from the projected or
forecasted results.

6 AFFIRMATIVE COVENANTS

     Borrower shall do all of the following for so long as any Lender has an obligation to make any
Credit Extension, or there are outstanding Obligations:

7

 

               6.1 Government Compliance.

     Borrower shall maintain its and all of its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of formation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to cause a Material Adverse Change.
Borrower shall comply, and have each of its Subsidiaries comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which would reasonably be expected to cause
a Material Adverse Change.

               6.2 Financial Statements, Reports, Certificates.

     (a) So long as Borrower is not subject to the reporting requirements of Sections 12 or 15 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Borrower shall deliver to
Lenders: (i) as soon as available, but no later than thirty (30) days after the last day of each
month (unless the month is a quarter-end month in which case no later than forty-five (45) days
after the last day of such month ), a company prepared consolidated balance sheet and income
statement covering Borrower’s consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Lenders; (ii) copies of Borrower’s quarterly financial
statements including a balance sheet, income statement and statement of cash flows, each prepared
by Borrower in accordance with GAAP consistently applied by Borrower (not including footnotes
required under GAAP) and certified by Borrower’s Chief Financial Officer within forty-five (45)
days after the close of each of Borrower’s first three fiscal quarters; (iii) as soon as available,
but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP, consistently applied, together with
an unqualified opinion on the financial statements from an independent certified public accounting
firm reasonably acceptable to Lenders; and (iv) annual financial projections approved by Borrower’s
Board of Directors consistent in form and detail with those provided to Borrower’s venture capital
investors as soon as available, but no later than forty five (45) days after the last day of
Borrower’s fiscal year.

     (b) In the event that Borrower becomes subject to the reporting requirements of Sections 12 or
15 of the Exchange Act, Borrower shall deliver to Lenders, within five (5) days of filing with the
Securities and Exchange Commission, copies of, or electronic links to (in the case of electronic
links being provided to Lenders, Borrower shall still be required to submit to Lenders the
applicable compliance certificate in the form of Exhibit C), all statements, reports and
notices made available to Borrower’s security holders or to any holders of Subordinated Debt and
all reports on Form 10-K, 10-Q and 8-K so filed.

     (c) In addition, Borrower shall deliver to Lenders: (i) a prompt report of any legal actions
pending or threatened in writing against Borrower or any Subsidiary that would reasonably be
expected to result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000.00) or more; and (ii) such other financial information as Lenders may reasonably
request from time to time.

     (d) Within thirty (30) days after the last day of each month (unless the month is a
quarter-end month in which case no later than forty-five (45) days after the last day of such
month), Borrower shall deliver to Lenders with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit C.

     (e) Allow Lenders to audit or inspect Borrower’s Collateral; provided that any such
inspections shall be at Borrower’s expense and shall be conducted no more often than every twelve

8

 

(12) months unless an Event of Default has occurred and is continuing; provided further that
any such audits shall only be conducted if an Event of Default has occurred and is continuing and
shall be at Borrower’s expense.

               6.3 Inventory; Returns.

     Borrower shall keep all Inventory in good and marketable condition, free from material
defects. Returns and allowances between Borrower and its account debtors shall follow Borrower’s
customary practices as they exist at the Effective Date or as required by GAAP. Borrower must
promptly notify Lenders of all returns, recoveries, disputes and claims, which involve more than
$50,000.

               6.4 Taxes.

     Borrower shall make, and cause each Subsidiary to make, timely payment of all material
federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will
deliver to Lenders, on demand, appropriate certificates attesting to such payments.

               6.5 Insurance.

     Borrower shall keep its business and the Collateral insured for risks in amounts, as
reasonable and customary for a corporation with similar size and business as Borrower and as
Lenders may reasonably request. Insurance policies shall be in a form, with companies, and in
amounts that are reasonably satisfactory to Lenders. All property policies covering Collateral
shall have a lender’s loss payable endorsement showing each Lender as an additional loss payee and
waive subrogation against Lenders, and all liability policies shall show, or have endorsements
showing, each Lender as an additional insured. All policies (or the loss payable and additional
insured endorsements) shall provide that the insurer must give Lenders at least thirty (30) days
notice before canceling, amending, or declining to renew its policy. At Lenders’ request, Borrower
shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable
under any policy shall, at Lenders’ option, be payable to Lenders on account of the Obligations.
Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy up to $25,000, in
the aggregate, toward the replacement or repair of destroyed or damaged property; provided that any
such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired
Collateral and (ii) shall be deemed Collateral in which Lenders have been granted a first priority
security interest, and (b) after the occurrence and during the continuance of an Event of Default,
all proceeds payable under such casualty policy shall, at the option of Lenders, be payable to
Lenders on account of the Obligations. If Borrower fails to obtain insurance as required under
this Section 6.5 or to pay any amount or furnish any required proof of payment to third
persons and Lenders, Lenders may make all or part of such payment or obtain such insurance policies
required in this Section 6.5, and take any action under the policies Lenders deem prudent.

               6.6 Accounts.

     (a) On or before the earlier of (a) February 28, 2006 and (b) the first Growth Capital Funding
Date and until all Obligations have been repaid, Borrower shall maintain Borrower’s primary
depository and operating accounts and securities accounts with SVB or administered

9

 

through SVB, which accounts shall represent at least 80% of the dollar value of the Borrower’s
accounts at all financial institutions.

     (b) Borrower shall identify to Lenders, in writing, any bank or securities account opened by
Borrower with any institution other than SVB. In addition, for each such account that the Borrower
at any time opens or maintains, Borrower shall, at the Lenders’ request and option, pursuant to an
agreement in form and substance acceptable to the Lenders cause the depository bank or securities
intermediary to agree that such account is the collateral of Lenders pursuant to the terms
hereunder. The provisions of the previous sentence shall not apply to deposit accounts exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit
of the Borrower’s employees.

               6.7 Intellectual Property.

     Borrower shall: (i) use its commercially reasonable efforts to protect, defend and maintain
the validity and enforceability of the Intellectual Property; (ii) promptly advise Lenders in
writing of material infringements of the Intellectual Property; and (iii) not allow any
Intellectual Property material to the Borrower’s business to be abandoned, forfeited or dedicated
to the public without Lenders’ written consent.

               6.8 Further Assurances.

     Borrower shall execute any further instruments and take further action as Lenders reasonably
request to perfect or continue Lenders’ security interest in the Collateral or to effect the
purposes of this Agreement.

7 NEGATIVE COVENANTS

     Borrower shall not do any of the following without the Lenders’ prior written consent for so
long as any Lender has an obligation to make Credit Extensions or there are any outstanding
Obligations:

               7.1 Dispositions.

     Convey, sell, lease, transfer or otherwise dispose of (collectively a “Transfer”), or permit
any of its Subsidiaries to Transfer, all or any part of its business or property, except for
Transfers (i) of Inventory in the ordinary course of business; (ii) of worn-out or obsolete
Equipment; (iii) of non-exclusive licenses for the use of the Intellectual Property of Borrower or
its Subsidiaries; (iv) exclusive licenses for the use of the Intellectual Property of Borrower or
its Subsidiaries for a particular field of use or geographic area and approved by Borrower’s Board
of Directors; (v) contemplated pursuant to the Pharma Transaction (as defined below) which shall
not in any event include the grant of a security interest in any Intellectual Property of Borrower
or its Subsidiaries other than the Pharma Intellectual Property or Intellectual Property of
Borrower or its Subsidiaries arising out of the development and/or commercialization of Pharma
Intellectual Property (or the associated pharmaceutical product); or (vi) other Transfers in the
ordinary course of business up to $100,000 per fiscal year. For the avoidance of doubt, the
following shall not be considered a Transfer hereunder: payments of cash to vendors or other third
parties for goods provided or to be provided or services rendered or to be rendered to or on behalf
of Borrower or any of its Subsidiaries. The “Pharma Transaction” means the transaction which
Borrower is negotiating [as of

10

 

January 26, 2006] with a third party (“Pharma”) whereby Pharma would sell or license certain
Intellectual Property (the “Pharma Intellectual Property”) to Borrower.

               7.2 Changes in Business, Ownership, Management or Locations of Collateral.

     Engage in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto, or have a material
change in its ownership (other than by the sale of Borrower’s equity securities in a public
offering or to venture capital investors so long as Borrower identifies to Lenders the venture
capital investors prior to the closing of the investment), or a change in or a change in a
Responsible Officer unless a replacement is approved by a majority of Borrower’s Board of
Directors, including a majority of those members of the Board of Directors who were members of the
Board of Directors and not employees of Borrower (the “Outside Directors”), within 120 days of the
date of termination of such Responsible Officer, provided that if a majority of the Outside
Directors determine that such Responsible Officer shall not be replaced, then Borrower shall notify
Lenders within 30 days of such determination. Borrower shall not, without at least thirty (30) days
prior written notice to Lenders: (i) relocate its chief executive office, or add any new offices or
business locations, including warehouses (unless such new offices or business locations contain
less than Five Thousand Dollars ($5,000) in Borrower’s assets or property), or (ii) change its
jurisdiction of organization, or (iii) change its organizational structure or type, or (iv) change
its legal name, or (v) change any organizational number (if any) assigned by its jurisdiction of
organization.

               7.3 Mergers or Acquisitions.

     Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any
other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of
the capital stock or property of another Person; provided, however, if Lenders do not consent to
any such transaction, then Borrower shall be entitled to prepay all of the Obligations without
payment of the Prepayment Fee (as more fully set forth in Section 2.3(d) of this Agreement).
Notwithstanding the foregoing, (i) a Subsidiary may merge or consolidate into another Subsidiary or
into Borrower, and (ii) Borrower may merge or consolidate so long as: (A) the entity that results
from such merger or consolidation (the “Surviving Entity”) shall have executed and delivered to
Lenders an agreement in form and substance reasonably satisfactory to Lenders, containing an
assumption by the Surviving Entity of the due and punctual payment and performance of all
Obligations and performance and observance of each covenant and condition of Borrower in the Loan
Documents; (B) all such obligations of the Surviving Entity to Lenders shall be guaranteed by any
entity, if any, that directly or indirectly owns or controls more than 50% of the voting stock of
the Surviving Entity; (C) immediately after giving effect to such merger or consolidation, no
Default or Event of Default shall have occurred and be continuing; and (D) the credit risk to
Lenders, in their sole discretion, of the Surviving Entity shall not be increased. In determining
whether the proposed merger or consolidation would result in an increased credit risk, Lenders may
consider, among other things, changes in Borrower’s management team, employee base, access to
equity markets, venture capital support, financial position and/or disposition of intellectual
property rights which may reasonably be anticipated as a result of the transaction.

               7.4 Indebtedness.

     Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so,
other than Permitted Indebtedness.

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               7.5 Encumbrance.

     Except as permitted under Section 7.1, create, incur, or allow any Lien on any of the
Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not
to be subject to the first priority security interest granted herein, except for Permitted Liens as
to which the Collateral may be subject. Borrower shall not sell, transfer, assign, mortgage,
pledge, lease, grant a security interest in, or encumber, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Lenders) with any Person which directly
or indirectly prohibits or has the effect of prohibiting Borrower from selling, transferring,
assigning, mortgaging, pledging, leasing, granting a security interest in or upon, or encumbering
any of Borrower’s Intellectual Property, except for Transfers of (i) non-exclusive licenses for the
use of the Intellectual Property of Borrower or its Subsidiaries, (ii) exclusive licenses for the
use of the Intellectual Property of Borrower or its Subsidiaries for a particular field of use or
geographic area and approved by Borrower’s Board of Directors, and (iii) contemplated pursuant to
the Pharma Transaction which shall not in any event include the grant of a security interest in any
Intellectual Property of Borrower or its Subsidiaries other than the Pharma Intellectual Property
or Intellectual Property of Borrower or its Subsidiaries arising out of the development and/or
commercialization of Pharma Intellectual Property (or the associated pharmaceutical product).

               7.6 Distributions; Investments.

     (i) Directly or indirectly acquire or own any Person, or make any Investment in any Person,
other than Permitted Investments or mergers or acquisitions permitted by Section 7.3 above, or
permit any of its Subsidiaries to do so; or (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock except (a) dividends and distributions
payable solely in capital stock of Borrower and (b) repurchases of stock from former employees,
consultants or directors of Borrower under the terms of applicable repurchase agreements in an
aggregate amount not to exceed $50,000 in the aggregate in any fiscal year provided that no Event
of Default has occurred, is continuing or would exist after giving effect to any such repurchase.

               7.7 Transactions with Affiliates.

     Directly or indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower except for (i) transactions that are in the ordinary course of Borrower’s
business, upon fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person, (ii) Borrower’s sale of
equity securities to venture capital investors, or (iii) compensation and benefit arrangements
(including the granting of options or other equity compensation arrangements) and any
indemnification arrangements with employees, officers, directors or consultants approved by or
pursuant to any plan approved by the majority of the disinterested members of the board of
directors of Borrower.

               7.8 Subordinated Debt.

     (i) Make or permit any payment on any Subordinated Debt, except under the terms of the
Subordinated Debt, or (ii) amend any provision in any document relating to the Subordinated Debt
that would breach any applicable subordination agreement entered into in favor of Lenders or that
would reasonably be expected to cause a Material Adverse Change.

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               7.9 Compliance.

     Become an “investment company” or a company controlled by an “investment company,” under the
Investment Company Act of 1940 or undertake as one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation would reasonably be expected to cause
a Material Adverse Change, or permit any of its Subsidiaries to do so.

               7.10 Indebtedness Payments.

     (i) Prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the
scheduled repayment thereof any Indebtedness for borrowed money (other than amounts due under this
Agreement or due any Lender) or lease obligations, (ii) amend, modify or otherwise change the terms
of any Indebtedness for borrowed money or lease obligations so as to accelerate the scheduled
repayment thereof or (iii) repay any notes to officers, directors or shareholders.

8 EVENTS OF DEFAULT

     Any one of the following is an Event of Default:

               8.1 Payment Default.

     Borrower fails to pay any of the Obligations within three (3) Business Days after their due
date. During the additional three (3) Business Day period the failure to cure the default shall not
constitute an Event of Default (but no Credit Extension shall be made during such cure period).

               8.2 Covenant Default.

     (a) If Borrower fails to perform any obligation under Sections 6.2 or 6.7 or violates
any of the covenants contained in Section 7 of this Agreement, or

     (b) If Borrower fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and any Lender and as to
any default under such other term, provision, condition, covenant or agreement that can be cured,
has failed to cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period, and such default is
likely to be cured within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days after the end of such 10 day period) to
attempt to cure such default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that no Credit Extensions will be made
during such cure period).

               8.3 Material Adverse Change. A Material Adverse Change occurs.

               8.4 Attachment.

     (i) Any material portion of Borrower’s assets is attached, seized, levied on, or comes into
possession of a trustee or receiver and the attachment, seizure or levy is not removed in

13

 

ten (10) days; (ii) the service of process upon the Borrower seeking to attach, by trustee or
similar process, any funds of the Borrower on deposit with the Lenders and/or Agent, or any entity
under the control of Lenders and/or Agent (including a subsidiary) and the service of process is
not rescinded or withdrawn within ten (10) days; (iii) Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business; (iv) a judgment or other
claim becomes a Lien on a material portion of Borrower’s assets; or (v) a notice of lien, levy, or
assessment is filed against any of Borrower’s assets by any government agency and not paid within
ten (10) days after Borrower receives notice. These are not Events of Default if stayed or if a
bond is posted pending contest by Borrower (but no Credit Extensions shall be made during the cure
period).

               8.5 Insolvency.

     (i) Borrower is unable to pay its debts (including trade debts) as they mature; (ii) Borrower
begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against Borrower and
not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made before
any Insolvency Proceeding is dismissed).

               8.6 Other Agreements.

     If there is a default in any agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could otherwise result in a Material Adverse Change.

               8.7 Judgments.

     If a judgment or judgments for the payment of money in an amount, individually or in the
aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of ten (10) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such judgment).

               8.8 Misrepresentations.

     If Borrower or any authorized Person acting for Borrower makes any material misrepresentation
or material misstatement now or later in any warranty or representation in this Agreement or in any
writing delivered to Lenders or to induce Lenders to enter this Agreement or any Loan Document.

               8.9 Guaranty.

     (i) Any guaranty of any Obligations terminates or ceases for any reason to be in full force;
or (ii) any Guarantor does not perform any obligation under any guaranty of the Obligations; or
(iii) any material misrepresentation or material misstatement exists now or later in any warranty
or representation in any guaranty of the Obligations or in any certificate delivered to Lenders in
connection with the guaranty; or (iv) any circumstance described in Sections 8.3, 8.4, 8.5, or
8.8 occurs to any Guarantor, or (v) the liquidation, winding up, termination of existence, or
insolvency of any Guarantor.

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9 RIGHTS AND REMEDIES

               9.1 Rights and Remedies.

     When an Event of Default occurs and continues either Lender may, without notice or demand, do
any or all of the following:

     (a) Declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.5 occurs all Obligations are immediately due and payable without any action by
Lenders);

     (b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and any Lender;

     (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms
and in any order that Lenders consider advisable and notify any Person owing Borrower money of
Lenders’ security interest in such funds and verify the amount of such account. Borrower shall
collect all payments in trust for Lenders and, if requested by Lenders, immediately deliver the
payments to Lenders in the form received from the account debtor, with proper endorsements for
deposit;

     (d) Make any payments and do any acts it considers necessary or reasonable to protect their
security interest in the Collateral. Borrower shall assemble the Collateral if Lenders request and
make it available as Lenders designate. Lenders may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Lenders a license to enter and occupy any of its premises,
without charge, to exercise any of Lenders’ rights or remedies;

     (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any
amount held by any Lender owing to or for the credit or the account of Borrower;

     (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Lenders are hereby granted a non-exclusive, royalty-free license or
other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or
any similar property as it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Lenders’ exercise of their rights under
this Section, Borrower’s rights under all licenses and all franchise agreements inure to Lenders;

     (g) Place a “hold” on any account maintained with any Lender (provided that, except with
respect to any certificates of deposit or deposit or investment accounts pledged as Collateral to
secure cash management services, corporate business credit cards or letters of credit separately
issued or supplied by SVB under separate agreements between SVB and Borrower, Lenders agree not to
take any of the actions described in this clause (g) unless an Event of Default has occurred and is
continuing);

     (h) Deliver a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any control agreement or similar agreements providing control of any
Collateral (provided that, Lenders agree not to take any of the actions described in this clause
(h) unless an Event of Default has occurred and is continuing);

15

 

     (i) Demand and receive possession of Borrower’s Books; and

     (j) Exercise all rights and remedies and dispose of the Collateral according to the Code.

               9.2 Power of Attorney.

     Borrower hereby irrevocably appoints each Lender as its lawful attorney-in-fact, to be
effective upon the occurrence and during the continuance of an Event of Default, to: (i) endorse
Borrower’s name on any checks or other forms of payment or security; (ii) sign Borrower’s name on
any invoice or bill of lading for any Account or drafts against account debtors, (iii) settle and
adjust disputes and claims about the Accounts directly with account debtors, for amounts and on
terms such Lender determines reasonable; (iv) make, settle, and adjust all claims under Borrower’s
insurance policies; and (v) transfer the Collateral into the name of such Lender or a third party
as the Code permits. Borrower hereby appoints each Lender as its lawful attorney-in-fact to sign
Borrower’s name on any documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred until all Obligations have been
satisfied in full and Lenders are under no further obligation to make Credit Extensions hereunder.
Each Lender’s foregoing appointment as Borrower’s attorney in fact, and all of such Lender’s rights
and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid
and performed and Lenders’ obligation to provide Credit Extensions terminates.

               9.3 Accounts, Notification and Collection.

     In the event that an Event of Default occurs and is continuing, Lenders may notify any Person
owing Borrower money of Lenders’ security interest in the funds and verify and/or collect the
amount of the Account. After the occurrence of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Lenders, and, if requested by Lenders, Borrower
shall immediately deliver such receipts to Lenders in the form received from the account debtor,
with proper endorsements for deposit.

               9.4 Lenders Expenses

     Any amounts paid by Lenders as provided herein are Lenders Expenses and are immediately due
and payable and shall bear interest at the then applicable rate and be secured by the Collateral.
No payments by Lenders shall be deemed an agreement to make similar payments in the future or
Lenders’ waiver of any Event of Default.

               9.5 Lenders’ Liability for Collateral.

     So long as Lenders comply with their obligations, if any, under the Code, neither Lender
shall in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral.

               9.6 Remedies Cumulative.

     Lenders’ rights and remedies under this Agreement, the Loan Documents, and all other
agreements are cumulative. Lenders have has all rights and remedies provided under the Code, by
law, or in equity. Lenders’ exercise of one right or remedy is not an election, and Lenders’ waiver
of

16

 

any Event of Default is not a continuing waiver. Lenders’ delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by each Lender and then is only
effective for the specific instance and purpose for which it was given.

               9.7 Demand Waiver.

     Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees held by Lenders on which
Borrower is liable. In all cases, Lenders’ recourse under this Agreement is limited to the amount
of the Obligations and any other payments for which Borrower is responsible hereunder.

10 NOTICES

     Notices or demands by any party about this Agreement must be in writing and personally
delivered or sent by an overnight delivery service, or by certified mail, postage prepaid, return
receipt requested, or by telefacsimile at the addresses listed below. A party may change its
notice address by written notice to the other party.

	 	 	 	 	 
	 

	 	If to Borrower:
	 	Cadence Pharmaceuticals, Inc.
	 

	 	 	 	12730 High Bluff Drive, Suite 410
	 

	 	 	 	San Diego, CA 92130
	 

	 	 	 	Attn: Chief Executive Officer
	 

	 	 	 	Fax: (858) 436-1401
	 
	 	 	 	 
	 

	 	If to SVB:
	 	Silicon Valley Bank
	 

	 	 	 	4442 Eastgate Mall, Suite 110
	 

	 	 	 	San Diego, California 92121
	 

	 	 	 	Attn: Susan L. Worsham
	 

	 	 	 	Fax: (858) 622-1424
	 
	 	 	 	 
	 

	 	If to Oxford:
	 	Oxford Finance Corporation
	 

	 	 	 	133 N. Fairfax Street
	 

	 	 	 	Alexandria, VA 22314
	 

	 	 	 	Attn: Michael J. Altenburger, Chief Financial Officer
	 

	 	 	 	Telephone: (703) 519-4900
	 

	 	 	 	Facsimile: (703) 519-5225

11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Lenders each submit to the exclusive jurisdiction of the State and Federal courts in
California and Borrower accepts jurisdiction of the courts and venue in Santa Clara County,
California. NOTWITHSTANDING THE FOREGOING, THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH
THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE THE LENDERS’ RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

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     TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND EACH LENDER WAIVE THEIR RIGHT
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE
LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

     WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the
parties hereto agree that any and all disputes or controversies of any nature between them arising
at any time shall be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior
Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the
course of any dispute, a party desires to seek provisional relief, but a judge has not been
appointed at that point pursuant to the judicial reference procedures, then such party may apply to
the Santa Clara County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which
shall be conducted in the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all
discovery rules and order applicable to judicial proceedings in the same manner as a trial court
judge. The parties agree that the selected or appointed private judge shall have the power to
decide all issues in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise self-help remedies,
foreclose against collateral, or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and enforceability of this
paragraph.

12 GENERAL PROVISIONS

               12.1 Successors and Assigns.

     This Agreement binds and is for the benefit of the successors and permitted assigns of each
party. Except as permitted under Section 7.3, Borrower may not assign this Agreement or
any rights or Obligations under it without Lenders’ prior written consent which may be granted or
withheld in Lenders’ discretion. Lenders have the right, without the consent of or notice to
Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or
any interest in, Lenders’ obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement, including, without limitation, an assignment to any Affiliate or related
party.

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               12.2 Indemnification.

     Borrower hereby indemnifies, defends and holds Lenders and their respective officers,
employees, and agents harmless against: (a) all obligations, demands, claims, and liabilities
asserted by any other party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Lenders Expenses incurred, or paid by Lenders from, following, or
consequential to transactions between Lenders and Borrower (including reasonable attorneys’ fees
and expenses), except, as to (a) and (b), for losses caused by a Lender’s gross negligence or
willful misconduct.

               12.3 Attorneys’ Fees, Costs and Expenses.

     In any action or proceeding between Borrower and any Lender arising out of the Loan Documents
the prevailing party will be entitled to recover its reasonable attorneys’ fees and other
reasonable costs and expenses incurred, in addition to any other relief to which it may be
entitled.

               12.4 Right of Set-Off.

     Borrower hereby grants to each Lender, a lien, security interest and right of set-off as
security for all Obligations to such Lender, hereunder, whether now existing or hereafter arising
upon and against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of such Lender or any entity under the control of such
Lender (including a subsidiary of Lender) or in transit to any of them. At any time after the
occurrence and during the continuance of an Event of Default, without demand or notice, a Lender
may set-off the same or any part thereof and apply the same to any liability or obligation of
Borrower even though unmatured and regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

               12.5 Time of Essence.

     Time is of the essence for the performance of all Obligations in this Agreement.

               12.6 Severability of Provision.

     Each provision of this Agreement is severable from every other provision in determining the
enforceability of any provision.

               12.7 Amendments in Writing, Integration.

     All amendments to this Agreement must be in writing and signed by both Lenders and Borrower.
This Agreement and the Loan Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements, understandings, representations,
warranties, and negotiations between the parties about the subject matter of this Agreement and the
Loan Documents merge into this Agreement and the Loan Documents.

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               12.8 Counterparts.

     This Agreement may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, are an original, and all taken
together, constitute one Agreement.

               12.9 Survival.

     All covenants, representations and warranties made in this Agreement continue in full force
while any Obligations remain outstanding. The obligations of Borrower to indemnify any Lender,
including without limitation Section 12.2, shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

               12.10 Confidentiality.

     In handling any confidential information of Borrower or Borrower’s Affiliates, each Lender
shall exercise the same degree of care that it exercises for its own proprietary information, but
disclosure of information may be made: (i) to a Lender’s subsidiaries or affiliates in connection
with their business with Borrower; (ii) to prospective transferees or purchasers of any interest in
the Credit Extensions (provided, however, such Lender shall use commercially reasonable efforts in
obtaining such prospective transferee’s or purchaser’s agreement to the terms of this provision);
(iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with
a Lender’s examination or audit; and (v) as Lenders consider appropriate in exercising remedies
under this Agreement. Confidential information does not include information that either: (a) is in
the public domain or in a Lender’s possession when disclosed to Lenders, or becomes part of the
public domain after disclosure to Lenders through no fault of Lenders; or (b) is disclosed to a
Lender by a third party, if Lenders do not know that the third party is prohibited from disclosing
the information.

               12.11 Effective Date.

     Notwithstanding anything set forth in this Agreement or any Loan Document to the contrary,
this Agreement and all of the Loan Documents shall not be effective until the date on which each
Lender executes this Agreement as indicated on the signature page to this Agreement.

13 DEFINITIONS

               13.1 Definitions.

     In this Agreement:

     “Accounts” are all existing and later arising accounts, contract rights, and other obligations
owed Borrower in connection with its sale or lease of goods (including licensing software and other
technology) or provision of services, all credit insurance, guaranties, other security and all
merchandise returned or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing, as such definition may be amended from time to time according to the Code.

     “Affiliate” is a Person that owns or controls directly or indirectly the Person, any Person
that controls or is controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that is a limited
liability company, that Person’s managers and members.

20

 

     “Borrower’s Books” are all Borrower’s books and records including ledgers, records regarding
Borrower’s assets or liabilities, the Collateral, business operations or financial condition and
all computer programs or discs or any equipment containing the information.

     “Business Day” is any day that is not a Saturday, Sunday or a day on which SVB is closed.

     “Code” is the Uniform Commercial Code as adopted in California as amended and in effect from
time to time.

     “Collateral” is any and all properties, rights and assets of the Borrower granted by the
Borrower to Lenders or arising under the Code, now, or in the future, described on Exhibit
A.

     “Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all
obligations from any interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the primary obligation for which the
Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability
for it determined by the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

     “Copyrights” are all copyright rights, applications or registrations and like protections in
each work or authorship or derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.

     “Credit Extension” is each Growth Capital Advance or any other extension of credit by any
Lender for Borrower’s benefit made pursuant to this Agreement.

     “Default Rate” means for each Growth Capital Advance, five percent (5%) above the highest rate
otherwise applicable thereto.

     “Dollars” and “$” each means the lawful currency of the United States

     “Effective Date” is the date Lenders execute this Agreement and as indicated on the signature
page hereof.

     “Equipment” is all present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

     “ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.

     “GAAP” is generally accepted accounting principles.

     “Growth Capital Advance” or “Growth Capital Advances” is defined in Section 2.1.1.

21

 

     “Growth Capital Amortization Date” means, for each Growth Capital Advance, the one hundred
eightieth (180th) day after its Growth Capital Funding Date, or if such date is not the first day
of the month, then the first day of the calendar month immediately following such date.

     “Growth Capital Commitment Percentage” means fifty percent (50%) with respect to SVB, and
fifty percent (50%) with respect to Oxford.

     “Growth Capital Commitment Termination Date” is June 30, 2006.

     “Growth Capital Funding Date” is any date on which a Growth Capital Advance is made to or on
account of Borrower.

     “Growth Capital Interest Only Period” means, for each Growth Capital Advance, the
period of time commencing on its Growth Capital Funding Date through the day before the Growth
Capital Amortization Date.

     “Growth Capital Loan Commitment” is Seven Million Dollars ($7,000,000).

     “Growth Capital Maturity Date” is, for each Growth Capital Advance, the earliest of (a) the
thirtieth (30th) Growth Capital Scheduled Payment Date for each Growth Capital Advance,
or (b) the occurrence of an Event of Default and acceleration of the Obligations as a consequence
thereof.

     “Growth Capital Payment Date” is defined in Section 2.3(a)(i).

     “Growth Capital Scheduled Payment Date” is defined in Section 2.3(a)(i).

     “Growth Capital Repayment Period” is a period of time equal to thirty (30) consecutive months
commencing on the Growth Capital Amortization Date.

     “Guarantor” is any present or future guarantor of the Obligations.

     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations and (d) Contingent Obligations.

     “Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

     “Intellectual Property” is:

     (a) Copyrights, Trademarks, Patents, Know-How and Mask Works including amendments, renewals,
extensions;

     (b) All licenses or other rights to use and all license fees and royalties from the use of the
intellectual property rights in (a) above and (c) and (d) below;

22

 

     (c) Any trade secrets and any intellectual property rights in methods, processes,
technologies, computer software and computer software products now or later existing, created,
acquired or held;

     (d) All design rights which may be available to Borrower now or later created, acquired or
held;

     (e) Any claims for damages (past, present or future) for infringement of any of the rights
above, with the right, but not the obligation, to sue and collect damages for use or infringement
of the intellectual property rights in (a), (b), (c) and (d) above;

     (f) All Proceeds and products of the foregoing, including all insurance, indemnity or warranty
payments,

In the case of each of (a), (b), (c) and (d) to the extent such intellectual property rights are
(A) owned by or exclusively licensed to Borrower (or any Subsidiary) or (B) material to the
operation of Borrower’s business (taken as a whole) as then conducted.

     “Inventory” is present and future inventory in which Borrower has any interest, including
merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including insurance proceeds) from
the sale or disposition of any of the foregoing and any documents of title.

     “Investment” is any beneficial ownership of (including stock, partnership interest or other
securities) any Person, or any loan, advance or capital contribution to any Person.

     “Know-How” means all ideas, inventions, scientific information, procedures, instructions,
techniques, designs, formulas, methods, data, technical information (including toxicological,
pharmaceutical, non-clinical, clinical and medical data, health registration data and marketing
data), processing specifications, pricing studies and market evaluation materials and all
intellectual property rights therein owned, licensed or sublicensed by Borrower.

     “Lenders Expenses” are all audit fees and expenses and reasonable costs or expenses (including
reasonable attorneys’ fees and expenses) for preparing, negotiating, administering, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).

     “Letter-of-Credit Right” means a right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to demand payment or
performance.

     “Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.

     “Loan Documents” are, collectively, this Agreement, any note, or notes or guaranties executed
by Borrower and any other present or future agreement between Borrower and/or Guarantor for the
benefit of Lenders in connection with this Agreement, all as amended, extended or restated.

23

 

     “Mask Works” are all mask works or similar rights available for the protection of
semiconductor chips, now owned or later acquired.

     “Material Adverse Change” is: (i) a material impairment in the perfection or priority of
Lenders’ security interest in the Collateral; or (ii) a material impairment of the prospect of
repayment of any portion of the Obligations.

     “Note” means for each Growth Capital Advance, one of the secured promissory notes of Borrower
substantially in the form of Exhibit D.

     “Obligations” are debts, principal, interest, Prepayment Fee, Lenders Expenses, and other
amounts Borrower owes either of the Lenders now or later under or in connection with this
Agreement, including cash management services, letters of credit and foreign exchange contracts, if
any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Lenders.

     “Patents” are patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions and continuations in part of the same.

     “Permitted Indebtedness” is:

     (a) Borrower’s indebtedness to Lenders under this Agreement or the Loan Documents;

     (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate,
including any existing Indebtedness to any Lender;

     (c) Subordinated Debt;

     (d) Indebtedness to trade creditors and with respect to surety bonds and similar obligations
incurred in the ordinary course of business;

     (e) Indebtedness secured by Permitted Liens;

     (f) Indebtedness of Borrower to any Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of Borrower (provided that the primary obligations are not prohibited
hereby), and Indebtedness of any Subsidiary to any other Subsidiary and Contingent Obligations of
any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);

     (g) Other Indebtedness not otherwise permitted by Section 7.4 not exceeding $50,000 in
the aggregate outstanding at any time;

     (h) Extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (g) above, provided that the then outstanding principal amount
thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be;

     (i) Purchase money Indebtedness incurred in connection with the acquisition of pharmaceutical
products or the rights related thereto so long as Borrower has raised additional equity financing
or Subordinated Debt from Borrower’s existing or future equity investors specifically for the
purpose, and in amount sufficient, to make: (1) all up-front and ongoing contractual payments

24

 

which would reasonably be expected to become due thereunder during the term of this Agreement
as determined in good faith by Borrower, and (2) the cash needs required under clause (j) of the
definition of Permitted Investments; and

     (j) Any real property lease.

     “Permitted Investments” are:

     (a) Investments shown on the Perfection Certificate and existing on the Effective Date;

     (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United
States or its agency or any state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the highest rating from either
Standard & Poor’s Corporation or Moody’s Investors Service, Inc., (iii) SVB’s certificates of
deposit issued maturing no more than 1 year after issue, (iv) any other investments administered
through the Lenders and (v) any Investments permitted by Borrower’s investment policy, as amended
from time to time, provided that such investment policy (and any such amendment thereto) has been
approved by Lenders;

     (c) Investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business and (ii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;
which do not exceed $100,000 in the aggregate in any year, provided that no cash loans under this
clause (ii) may be made if an Event of Default is then occurring or would otherwise upon the making
thereof;

     (d) Investments (including debt obligations) received in connection with bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of business;

     (e) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates of Borrower, in the ordinary course
of business; provided that this paragraph (e) shall not apply to Investments of Borrower in any
Subsidiary;

     (f) Investments in joint ventures or strategic alliances (in the ordinary course of Borrower’s
business) consisting of the licensing of technology as permitted by Section 7.1, the
development of technology or the providing of technical support, provided that any cash investments
by Borrower do not exceed $50,000 in the aggregate in any fiscal year, provided that no such cash
investment may be made if an Event of Default is then occurring or would otherwise upon the making
thereof;

     (g) Investments pursuant to or arising under currency agreements or interest rate agreements
entered into in the ordinary course of business;

     (h) Investments consisting of deposit accounts and securities accounts of Borrower, subject to
the compliance by Borrower with the covenant set forth in Section 6.6 hereof;

25

 

     (i) Investments of Subsidiaries in or to other Subsidiaries of Borrower and Investments by
Borrower in Subsidiaries not to exceed $ 50,000 in the aggregate in any fiscal year, provided that
no Investments by Borrower in Subsidiaries may be made if an Event of Default is then occurring or
would otherwise upon the making thereof;

     (j) To the extent it is deemed to be an Investment, up-front fees, license fees, milestone
payments, royalty payments and other cash payments arising in connection with the acquisition of
rights to intellectual property of a third party, including without limitation, rights to a
pharmaceutical product, so long as Borrower has raised additional equity financing or Subordinated
Debt from Borrower’s existing or future equity investors specifically for the purpose, and in
amount sufficient, to make: (1) all up-front and ongoing payments which would reasonably be
expected to become due thereunder during the term of this Agreement as determined in good faith by
Borrower, and (2) the cash needs required under clause (i) of the definition of Permitted
Indebtedness; and

     (k) Other Investments not otherwise permitted by Section 7.6 not exceeding $50,000 in
the aggregate outstanding at any time.

     “Permitted Liens” are:

     (a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising
under this Agreement or other Loan Documents, including Liens in favor of either Lender;

     (b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains adequate reserves on
its Books, if they have no priority over any of Lenders’ security interests;

     (c) Purchase money Liens (and including for purposes of this clause Liens incurred in
connection with capital leases) (i) on Equipment acquired or held by Borrower incurred for
financing the acquisition of the Equipment securing no more than $500,000 in the aggregate amount
outstanding, or (ii) existing on equipment when acquired, if the Lien is confined to the property
and improvements and the proceeds of the equipment;

     (d) Leases or subleases and licenses or sublicenses granted in the ordinary course of
Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting
Lenders a security interest;

     (e) Statutory Liens securing claims or demands of materialmen, mechanics, carriers, repairmen,
or other like Liens imposed without the action of such parties arising in the ordinary course of
business; provided they have no priority over any of Lenders’ Liens and the aggregate amount of
such Liens does not at any time exceed $50,000;

     (f) Banker’s liens, rights of setoff and similar Liens incurred on deposits made in the
ordinary course of business subject to Borrower’s compliance with Section 6.6 hereof;

     (g) Liens arising from judgments, decrees or attachments in circumstances not constituting an
Event of Default under Sections 8.4 or 8.7;

     (h) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit accounts or securities accounts held at such institutions to secure payment of fees and
similar costs and expenses subject to Borrower’s compliance with Section 6.6 hereof;

26

 

     (i) Liens to secure payment for workers’ compensation, employment insurance, old age pensions,
social security or other like obligations incurred in the ordinary course of business, provided
they have no priority over any of Lenders’ Liens and the aggregate amount of the Indebtedness
secured by such Liens does not at any time exceed $50,000;

     (j) Easements, reservations, rights-of-way, restrictions, minor defects or irregularities in
title and similar charges or encumbrances affecting real property not constituting a material
adverse effect on the business or condition (financial or otherwise) of Borrower or otherwise
materially impairing the conduct of Borrower’s business;

     (k) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of custom duties in connection with the importation of goods;

     (l) Transfers, licenses or sublicenses permitted under Section 7.1; and

     (m) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described above, but any extension, renewal or replacement Lien must be limited to the
property encumbered by the existing Lien and the then outstanding principal amount of the
indebtedness may not increase.

     “Person” is any individual, sole proprietorship, partnership, limited liability company, joint
venture, company association, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate, entity or government
agency.

     “Prepayment Fee” shall be, for each Growth Capital Advance, an amount equal to: (1) if the
prepayment date is on or before one year after the Growth Capital Amortization Date, four percent
(4.0%) of the outstanding principal balance as of the prepayment date, (2) if the prepayment date
is more than one year after the Growth Capital Amortization Date, but on or before two years after
the Growth Capital Amortization Date, three percent (3.0%) of the outstanding principal balance as
of the prepayment date, and (3) if the prepayment date is more than two years after the Growth
Capital Amortization Date, two percent (2.0%) of the outstanding principal balance as of the
prepayment date. The “Prepayment Fee” for Growth Capital Advances shall be the sum of all of the
“Prepayment Fees” for every Growth Capital Advance.

     “Proceeds” has the meaning described in the Code as in effect from time to time.

     “Registered Organization” means an organization organized solely under the law of a single
state or the United States and as to which the state or the United States must maintain a public
record showing the organization to have been organized.

     “Responsible Officer” is each of the Chief Executive Officer, President and Chief Financial
Officer of Borrower.

     “Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s debt to Lenders
(pursuant to a subordination agreement entered into between the Lenders, the Borrower and the
subordinated creditor), on terms acceptable to Lenders.

     “Subsidiary” is any Person, corporation, partnership, limited liability company, joint
venture, or any other business entity of which more than 50% of the voting stock or other equity

27

 

interests is owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.

     “Supporting Obligation” means a Letter-of-Credit Right, secondary obligation or obligation of
a secondary obligor or that supports the payment or performance of an account, chattel paper, a
document, a general intangible, an instrument or investment property.

     “Trademarks” are trademark and service mark rights, registered or not, applications to
register and registrations and like protections, and the entire goodwill of the business of the
owner or licensee of such trademark and service mark rights connected with the trademarks and
service mark rights.

     “Treasury Rate” means the U.S. Treasury note yield to maturity for a 36-month term as quoted
in the Wall Street Journal on the day the Note for the applicable Growth Capital Advance is
prepared.

(Signatures are on the following page)

28

 

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

	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Theodore R. Schroeder	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Theodore R. Schroeder	 	 
	 

	 	 	 	Title: President & CEO	 	 
	 
	 	 	 	 	 	 
	 

	 	LENDERS:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	OXFORD FINANCE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael J. Altenburger	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael J. Altenburger	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Edgar Arvizu	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Edgar Arvizu	 	 
	 

	 	 	 	Title: Relationship Manager	 	 

Effective as of February 17, 2006

29

 

EXHIBIT A

     The Collateral consists of all right, title and interest of Borrower in and to the following:

     All goods, equipment, inventory, contract rights or rights to payment of money, license
agreements, franchise agreements, general intangibles (including payment intangibles), Accounts
(including health-care receivables), documents, instruments (including any promissory notes),
chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property, financial assets, whether now owned or hereafter
acquired, wherever located; all Supporting Obligations and any and all claims, rights and interests
in any of the above and all substitutions for, additions and accessions to and Proceeds thereof.

     All Letter-Of-Credit Rights (whether or not the letter of credit is evidenced by a writing);
and

     All Borrower’s Books relating to the foregoing and any and all claims, rights and interests in
any of the above and all substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of any or all of the
foregoing.

     The Collateral does not include:

     (a) Any Intellectual Property. Notwithstanding the foregoing, the Collateral shall include
all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or
relating to any of the foregoing Intellectual Property.

     (b) any contract, instrument or chattel paper in which the Borrower has any right, title or
interest if and to the extent any such contract, instrument or chattel paper includes a provision
containing a restriction on assignment such that the creation of a security interest in the right,
title or interest of Borrower therein would be prohibited and would, in and of itself, cause or
result in a default thereunder enabling another person party to such contract, instrument or
chattel paper to enforce any remedy with respect thereto (provided that the foregoing exclusion
shall not apply if (i) such prohibition has been waived or such person has otherwise consented to
the creation hereunder of a security interest in such contract, instrument or chattel paper or (ii)
such prohibition would be rendered ineffective pursuant to Sections 9-407(a) or 9-408(a) of the
Code, as applicable and as then in effect in any relevant jurisdiction, or any other applicable law
(including the federal bankruptcy code) or principles of equity; provided further that immediately
upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include,
and Borrower shall be deemed to have granted a security interest in, all its rights, title and
interest in and to such contract, instrument or chattel paper as if such provision had never been
in effect; and provided further that the foregoing exclusion shall in no way be construed so as to
limit, impair or otherwise affect Lenders’ unconditional continuing security interest in and to all
rights, title and interests of Borrower in or to any payment obligations or other rights to receive
monies due or to become due under any such contract, instrument or chattel paper and in any such
monies and other proceeds of such contract, instrument or chattel paper).

30

 

Negative Pledge on Intellectual Property:

Except as expressly permitted under the Loan Agreement, Borrower covenants and agrees that until
the full and complete payment of the obligations to Lenders, Borrower will not do any of the
following: sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber, or enter into any agreement, document, instrument or other arrangement (except with or in
favor of Lenders) with any Person which directly or indirectly prohibits or has the effect of
prohibiting Borrower from selling, transferring, assigning, mortgaging, pledging, leasing, granting
a security interest in or upon, or encumbering any of Borrower’s Intellectual Property, except for
(i) non-exclusive licenses for the use of the Intellectual Property of Borrower or its
Subsidiaries, (ii) exclusive licenses for the use of the Intellectual Property of Borrower or its
Subsidiaries for a particular field of use or geographic area and approved by Borrower’s Board of
Directors, and (iii) contemplated pursuant to the Pharma Transaction which shall not in any event
include the grant of a security interest in any Intellectual Property of Borrower or its
Subsidiaries other than the Pharma Intellectual Property or Intellectual Property of Borrower or
its Subsidiaries arising out of the development and/or commercialization of Pharma Intellectual
Property (or the associated pharmaceutical product).

Definitions:

Capitalized terms, not otherwise defined herein, shall have the meanings given such capitalized
terms in the Loan and Security Agreement among Lenders and Borrower dated as of February 17, 2006
(the “Loan Agreement”).

31

 

EXHIBIT B

Loan Payment/Advance Request Form

	 	 	 	 	 
	 

	 	Fax To:                                                             
	 	Date:

     LOAN PAYMENT:

	 	 	 
	 

	 	                                         (Borrower)
	From Account #

	 	                                         To Account #
	(Deposit Account #)

	 	                                         (Loan Account #)
	 
	                Principal $

	 	and/or Interest $

     All Borrower’s representation and warranties in the Loan and Security Agreement are true, correct and
complete in all material respects on the date of the telephone transfer request for an advance, but those
representations and warranties expressly referring to another date shall be true, correct and complete in
all material respects as of such date:

Authorized Signature:                                                                  
                Phone Number:

 

Loan Advance:

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an
outgoing wire.

	 	 	 
	From Account #

	 	To Account #
	(Loan Account #)

	 	(Deposit Account #)

Amount of Advance $

All Borrower’s representation and warranties in the Loan and Security Agreement are true, correct and complete in all
material respects on the date of the telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and complete in all material respects as of such
date:

     Authorized Signature:                                                                   
              Phone Number:

      

Outgoing Wire Request

Complete only if all or a portion of funds from the loan advance above are to be wired.

Deadline for same day processing is 12:00pm, P.S.T.

	 	 	 
	Beneficiary Name:

	 	Amount of Wire: $
	 
	 	 
	Beneficiary Bank:

	 	Account Number:
	 
	 	 
	City and State:
	 	 

Beneficiary Bank Transit (ABA) #: _ _ _ _ _ _ _ _ _ _ _ _  Beneficiary Bank Code (Swift, Sort, Chip, etc.):

(For International Wire Only)                                        

32

 

Intermediary Bank:                                         Transit (ABA) #:

For Further Credit to:

Special Instruction:

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance
with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which
agreements(s) were previously received and executed by me (us).

Authorized Signature:                                          2nd Signature (If Required):                      
                   

Print Name/Title:                                          Print Name/Title:

Telephone #                                          Telephone #                          
            
 

33

 

EXHIBIT C

COMPLIANCE CERTIFICATE

	 	 	 
	TO:

	 	SILICON VALLEY BANK and OXFORD FINANCE CORPORATION
	FROM:

	 	CADENCE PHARMACEUTICALS, INC.

     The undersigned authorized officer of CADENCE PHARMACEUTICALS, INC. certifies that under the
terms and conditions of the Loan and Security Agreement among Borrower and Lenders (the
“Agreement”), (i) Borrower is in complete compliance for the period ended ___ with all
required covenants except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached are the required
documents supporting the certification. In addition, the undersigned certifies that (1) Borrower
and each Subsidiary have timely filed all required tax returns and paid, or made adequate provision
to pay, all material taxes, except those being contested in good faith with adequate reserves under
GAAP and (ii) no liens have been levied or claims made against Borrower or any of its Subsidiaries
relating to unpaid employee payroll or benefits which Borrower has not previously notified in
writing to Lenders. The Officer certifies that any financial statements accompanying this
Compliance Certificate are based on books and records maintained in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer certifies that any quarterly or
annual financial statements accompanying this Compliance Certificate are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except as to the quarterly
financial statements as to which there are no footnotes. The Officer acknowledges that no
borrowings may be requested at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that compliance is determined not just at the date this
certificate is delivered.

     Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 	 	 
	 	 	Reporting Covenant	 	Required	 	Complies
	 

	 	Monthly financial statements with CC
	 	Monthly within 30 days*
	 	Yes
	 	No
	 	 	
*(unless the month is a quarter-end month in which case within 45 days)
	 	 
	 

	 	Annual (CPA Audited)
	 	FYE within 180 days
	 	Yes
	 	No
	 

	 	Quarterly
	 	Quarterly within 45 days
	 	Yes
	 	No
	 

	 	Annual projections
	 	FYE within 45 days
	 	Yes
	 	No
	 

	 	10-Q, 10-K and 8-K
	 	Within 5 days after filing
	 	Yes
	 	No
	 

	 	 	 	with SEC	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	Comments Regarding
Exceptions: See Attached.	 	 	 	 	LENDER USE ONLY	 	 	 
	 	Sincerely,

	 	 	 	 	Received by:	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	authorized signer	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	Date:	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Signature

	 	 	 	 	Verified:	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	authorized signer	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Title

	 	 	 	 	Date:	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Date	 	 	 	 	Compliance Status: Yes       No	 	 	 
	 	 	 	 	 	 

34

 

EXHIBIT D

FORM OF GROWTH CAPITAL ADVANCE NOTE

SECURED PROMISSORY NOTE

			
	$                                         

	 	Dated: [Date]

     FOR VALUE RECEIVED, the undersigned, CADENCE PHARMACEUTICALS, INC., a Delaware corporation
(“Borrower”), HEREBY PROMISES TO PAY to the order of [LENDER] (“Lender”) the
principal amount of                      Dollars ($                    ) or such lesser amount as shall equal the
outstanding principal balance of the Growth Capital Advance made to Borrower by Lender pursuant to
the Loan Agreement (defined below), and to pay all other amounts due with respect to the Growth
Capital Advance on the dates and in the amounts set forth in the Loan Agreement. (Capitalized
terms, unless defined in this Note, shall have the meaning given such capitalized term in the Loan
Agreement.)

     Interest on the principal amount of this Note from the date of this Note shall accrue at                     % per annum based on a 360-day year of twelve 30-day months or, if applicable, the Default
Rate. Borrower shall make payments of accrued interest only on the outstanding principal amount of
the Growth Capital Advance on the first Business Day of each month (“Payment Date”),
commencing                     , 200_, through and including                      1, 200_. Commencing on
                                         1, 2006, and continuing on consecutive Payment Dates thereafter, Borrower shall
make to Lender thirty (30) equal payments of principal and accrued interest on the then outstanding
principal amount in the amount of                      Dollars ($                    ).

     Principal, interest and all other amounts due with respect to the Growth Capital Advance, are
payable in lawful money of the United States of America to Lender as set forth in the Loan
Agreement. The principal amount of this Note and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Note.

     This Note is one of the Notes referred to in, and is entitled to the benefits of, the Loan and
Security Agreement, dated as of [Date], to which Borrower and Lender are parties (the “Loan
Agreement”). The Loan Agreement, among other things, (a) provides for the making of this
secured Growth Capital Advance to Borrower, and (b) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.

     This Note may not be prepaid except as set forth in Sections 2.3 and 7.3 of the Loan
Agreement. This Note and the obligation of Borrower to repay the unpaid principal amount of the
Growth Capital Advance, interest on the Growth Capital Advance and all other amounts due Lenders
under the Loan Agreement is secured under the Loan Agreement.

     Presentment for payment, demand, notice of protest and all other demands and notices of any
kind in connection with the execution, delivery, performance and enforcement of this Note are
hereby waived.

     Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable
attorneys’ fees and costs, incurred by Lenders in the enforcement or attempt to enforce

35

 

any of Borrower’s obligations hereunder not performed when due. This Note shall be governed by,
and construed and interpreted in accordance with, the laws of the State of California.

     IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers
thereunto duly authorized on the date hereof.

	 	 	 	 	 	 	 
	 	 	CADENCE PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

36

 

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Scheduled	 	 
	 	 	Principal	 	 	 	Payment	 	 
	Date	 	Amount	 	Interest Rate	 	Amount	 	Notation By
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 

1

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