LICENSE AGREEMENT BETWEEN DURECT CORPORATION AND EPICEPT CORPORATION LICENSE AGREEMENT

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidential treatment request. Omissions are designated as * * *. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Confidential

Exhibit 10.49

LICENSE AGREEMENT

BETWEEN

DURECT CORPORATION

AND

EPICEPT CORPORATION

LICENSE AGREEMENT

This LICENSE AGREEMENT (the "Agreement"), entered into on the "Effective Date" (as defined below), is made by and between the EPICEPT CORPORATION, a Delaware corporation having a principal place of business at 777 Old Saw Mill River Road, Tarrytown, NY 10591 ("EpiCept"), and DURECT CORPORATION, a Delaware corporation having a principal place of business at 2 Results Way, Cupertino, California 95014 ("Durect"), each a "Party" and collectively the "Parties" to this Agreement.

WITNESSETH :

W HEREAS , EpiCept owns certain patent rights relating to methods and compositions for use in the topical treatment of back pain, muscle tensions and myo-fascial pain, where such methods and compositions feature a topical carrier system containing a local anesthetic agent and are intended for use on intact mammalian skin and/or outer synovial membranes, and certain additional patent rights relating to methods and compositions that include the use of certain intradermal pharmaceutical penetration enhancing excipients;

W HEREAS , Durect is engaged in the development, approval, commercialization and marketing of certain proprietary pharmaceutical products for the treatment of pain, including transdermal products containing analgesic and/or anesthetic pharmaceutical agents;

W HEREAS , Durect desires to obtain from EpiCept, and EpiCept desires to grant to Durect, certain exclusive rights under the EpiCept Licensed Patents and other EpiCept Technology suitable for the manufacture, development, registration and commercialization of Licensed Products in the Territory (each as defined herein below); and

W HEREAS , EpiCept has previously granted certain exclusive rights and licenses under the EpiCept Licensed Patents and EpiCept Technology by way of a license agreement with Endo Pharmaceuticals Inc., dated 18 December 2003, and a license agreement with Adolor Corporation, dated 23 July 2003.

N OW T HEREFORE , in consideration of the foregoing premises and the covenants, conditions, undertakings and agreements hereinafter set forth in this Agreement, the Parties intending to be legally bound, hereby agree as follows:

1. DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth in this Section 1:

1.1 " AAA " has the meaning set forth in Section 12.13 of this Agreement.

1.2 " Affiliate " means a Person or entity that directly or indirectly through one or more intermediates, controls, is controlled by, or is under common control with the person or entity specified. For the purpose of this definition, "control" shall mean with respect to an entity, the direct or indirect ownership of (a) more than fifty percent (50%) of the capital stock or share capital entitled to vote for the election of directors of the entity or (b) more than fifty percent (50%) of equity or voting interest of the entity. An entity will be an Affiliate for purposes of this Agreement only so long as it satisfies the definition set forth herein.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.3 " ANDA " means an abbreviated new drug application that is submitted to the FDA for approval to manufacture and/or sell a pharmaceutical product in the United States pursuant to the FDC Act.

1.4 " Annual Net Sales Period " has the meaning set forth in Section 4.3 of this Agreement.

1.5 " Applicable Law " shall mean all laws (including common law), treaties, statutes, ordinances, rules, regulations, standards and guidelines as may be in effect from time to time and that relate to the development, marketing, manufacturing, packaging or sale of the Licensed Product in the Territory or the performance of either Party’s obligations under this Agreement including all laws, treaties, regulations and guidelines governing the import, export, development, marketing, distributions and sale of the Licensed Product in the Territory, to the extent applicable and relevant, and including all marketing authorization applications in each jurisdiction of the Territory, all good clinical manufacturing or practices standards or guidelines promulgated by the FDA or other Regulatory Authorities and including trade association guidelines, where applicable, as well as the United States’ export control laws and the U.S. Foreign Corrupt Practices Act.

1.6 " Back Pain " means any kind of back pain, including acute and chronic pain and having any etiology and/or cause including, but not limited to, pain deriving in whole or in part from myofascial, muscle tension, and/or any combinations thereof.

14.22 1.7 " Clinical " means, when used with respect to studies or data, studies that are carried out in humans and data obtained therefrom.

1.8 " Clinical Trial " means an investigation in human subjects and/or patients intended to discover or verify the clinical, pharmacological and/or other pharmacodynamic effects of an investigational product, and/or to identify any adverse reactions to an investigational product, and/or to study absorption, distribution, metabolism, and excretion of an investigational product with the objective of ascertaining its safety and/or efficacy.

1.9 [* * *]

1.10 " Commercially Reasonable Efforts " with respect to any activity shall mean the efforts and resources that an established pharmaceutical company would devote to such activity with respect to its own comparable product, taking into account the reasonable sales and profitability potential of the product while promoting the therapeutic profile and benefits of the product in the most commercially reasonable beneficial and responsible manner, duly respecting external factors outside the Party’s control.

1.11 [* * *]

1.12 " Control " or " Controlled " means possession by a Party or its Affiliate of the right to grant to the other Party a license, sublicense or other right to use, of the scope provided for in this Agreement, to intangible or intellectual property rights (including Patents, Know-How, trade secrets, data and rights to access or cross-reference regulatory filings) without violating the terms of any Applicable Law, agreement or other arrangement with any third party existing at the time such Party or such Affiliate would be first required hereunder to grant the other Party such license, sublicense or other right.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.13 " Dispute " has the meaning set forth in Section 12.13 of this Agreement.

1.14 " Durect Know-How " means Know-How related to controlled release systems and transdermal pharmaceutical patch products in general, and to Licensed Product in particular, that is (a) Controlled by Durect or any of its Affiliates during the Term of this Agreement and (b) useful or any way related to developing, making, having made, using, commercializing and/or registering Licensed Product.

1.15 " Durect Improvements " means any and all Patents or Durect Know-How Controlled by Durect during the Term of this Agreement but arising or otherwise obtained after the Effective Date and relating to any improvement, enhancement, modification and/or extension of a Licensed Product.

1.16 " Durect Indemnified Parties " has the meaning set forth in Section 9.2 of this Agreement.

1.17 " EDGAR " means the U.S. Government’s stated Education Department General Administrative Regulations and, when used in connection with a particular document, refers to the copy of that document as available from the U.S. Government Securities and Exchange website (www.sec.gov/) in the form existing as of the Effective Date of this Agreement.

1.18 " EDGAR Licenses " have the meaning set forth in Section 7.2(j) of this Agreement.

1.19 " Effective Date " means the date upon which this Agreement is fully executed by the Parties and the Hercules Consent is fully executed by Durect and Hercules Technology Growth Capital, Inc.

1.20 " EpiCept Improvements " means any and all Patents or EpiCept Know-How Controlled by EpiCept during the Term of this Agreement but arising or otherwise obtained after the Effective Date and relating to any improvement, enhancement, modification and/or extension of a Licensed Product, wherein the practice of such EpiCept Improvements, in the absence of a license, would infringe a Valid Claim within the EpiCept Licensed Patents.

1.21 " EpiCept Indemnified Parties " has the meaning set forth in Section 9.1 of this Agreement.

1.22 " EpiCept Know-How " means any and all Know-How that is Controlled by EpiCept or any of its Affiliates during the Term of this Agreement and is necessary or useful for Durect, or its Affiliates and/or licensees to make, have made, develop, use, register, sell, have sold, import, export, market and/or commercialize Licensed Product in the Territory.

1.23 " EpiCept Licensed Patents " means the Patents Controlled by EpiCept as of the Effective Date and necessary to make, have made, develop, use, register, sell, have sold, import, export, market and/or commercialize Licensed Product in the Territory. For clarity, the EpiCept Licensed Patents include the patent rights detailed in Schedule 1.22 to this Agreement

1.24 " EpiCept Technology " means the EpiCept Licensed Patents, the EpiCept Know-How, and the EpiCept Improvements.

1.25 " FDA " shall mean the United States Food and Drug Administration or any successor thereto.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.26 " FDC Act " means the Federal Food, Drug and Cosmetic Act set forth in 21 U.S.C. §§321 et seq ., as amended, and the regulations promulgated thereunder from time to time.

1.27 " Field " shall mean all pharmaceutical applications for the palliative, prophylactic and/or therapeutic treatment of Back Pain in humans.

1.28 " Final Regulatory Approval " means a Regulatory Approval that allows for the immediate marketing and sale of Licensed Product in a jurisdiction within the Territory. With regard to the United States, Final Regulatory Approval shall mean the written final approval of an NDA by the FDA permitting the immediate marketing and sale of Licensed Product in the United States.

1.29 " First Commercial Sale " means with respect to any jurisdiction within the Territory, after a Regulatory Authority in the Territory has granted Final Regulatory Approval of Licensed Product, the first sale (as evidenced by an invoice or receivable) for use, consumption or resale of such Licensed Product by Durect to a third party in a bona fide arms-length transaction in such jurisdiction. A sale to an Affiliate shall not constitute a First Commercial Sale unless the Affiliate is the end-user of such Licensed Product. For avoidance of doubt, the provision of a reasonable number of free samples of Licensed Product shall not be construed to constitute a sale, use, consumption or resale of Licensed Product for purposes of this definition.

1.30 " Force Majeure " means causes beyond a reasonable control of the Party, including acts of God; changes in regulations or laws of any government; war; terrorism; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of public utilities or common carriers.

1.31 " GAAP " means accounting procedures that are in accordance with United States generally accepted accounting principles.

1.32 " Generic Product " means: (i) a generic transdermal patch pharmaceutical product containing bupivacaine as the only active ingredient that is bioequivalent to and substitutable (i.e., "AA" or "AB" therapeutic equivalence code or other therapeutic equivalence code hereafter created with similar meaning) for Licensed Product and is sold under an ANDA pursuant to the FDC Act or, if sold outside the United States, pursuant to the Applicable Law of the relevant jurisdiction following expiry of any and all Marketing Exclusivity Rights for Licensed Product in such jurisdiction; (ii) a generic transdermal patch pharmaceutical product containing bupivacaine as the only active ingredient that is bioequivalent to and substitutable for Licensed Product and sold under Article 10 of the EU Directive 2001/83/EC or other Applicable Laws of the relevant jurisdiction following expiry of any and all Marketing Exclusivity Rights for Licensed Product in such jurisdiction; or (iii) a generic bupivacaine product that is bioequivalent to and substitutable for Licensed Product under the Applicable Laws relating to generic pharmaceutical products of the relevant jurisdiction in the Territory other than in the United States or the EU. For clarity, a Generic Product shall not include any product sold by Durect, its Affiliates or licensees.

1.33 " Hercules Consent " means the fully executed Consent to License Agreement and Use of Collateral agreement between Durect and Hercules Technology Growth Capital, Inc., a copy of which is included as Schedule 1.33 to this Agreement.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.35 " IND " means an investigational new drug application (together with all subsequent submissions, supplements and amendments thereto, and any materials, documents or information referred to or relied upon thereby), as defined in the U.S. Federal Food, Drug and Cosmetic Act ("FDC Act") as amended, and the regulations promulgated thereunder, or the equivalent thereto as specified in any succeeding legislation, and all supplements and amendments that may be filed and enacted with respect to the foregoing.

1.36 " Indemnified Party " has the meaning set forth in Section 9.3 of this Agreement.

1.37 " Indemnifying Party " has the meaning set forth in Section 9.3 of this Agreement.

1.38 " Know-How " means all technical information and other technical subject matter, including any and all compounds, materials, methods, equipment, specifications, ideas, concepts, formulations, discoveries, inventions, devices, technology, trade secrets, compositions, designs, formulae, know-how, show-how, specifications, drawings, techniques, data, results, processes, procedures, designs, documentation and other technology, whether or not patented or patentable, and whether or not protected or protectable as a trade secret.

1.39 " Knowledge " means the actual knowledge of a Party’s executive officers.

1.40 " Losses " has the meaning set forth in Section 9.1 of this Agreement.

1.41 " Launch " when used as a noun, means, on a jurisdiction-by-jurisdiction basis, the First Commercial Sale of Licensed Product to a major retail chain or a major distributor (as those terms are commonly understood in the industry) after Final Regulatory Approval in such jurisdiction, and when used as a verb, means to consummate such First Commercial Sale.

1.42 " Licensed Product " means a transdermal pharmaceutical patch product for sale only by prescription containing bupivacaine as the only active ingredient, indicated and approved by a Regulatory Authority for use in the Field, wherein such product and/or indication is covered by a Valid Claim of the EpiCept Licensed Patents or a Valid Claim of a Patent under the EpiCept Improvements.

1.43 " Marketing Exclusivity Right s" means: (i) a marketing or data exclusivity right conferred as a result of designation as a drug for rare diseases or conditions under Sections 525 et seq. of the FDC Act, an exclusive right to sell under an NDA pursuant to Section 505(j)(5) or 505(c)(3)(D)(ii) and (iii) of the FDC Act or any relevant subsequent legislation, rules or regulations, or the exclusive right granted by the FDA upon completion of pediatric studies requested by the FDA under Section 505A(a) of the FDC Act or any successor legislation; (ii) a marketing or data exclusivity right conferred as a result of Article 10 of EU Directive 2001/83/EC and/or Article 3(3) of EU Regulation 726/2004/EC or EU Regulations 141/2000/EC and/or 847/2000/E, as applicable; or (iii) any equivalent or similar rights in any jurisdiction in the Territory, successor legislations of any of the foregoing or subsequent legislation that has the effect of extending marketing or data exclusivity right to a pharmaceutical product.

1.44 " NDA " means an application (whether original, supplementary or abbreviated) to the applicable Regulatory Authority in a country of the Territory, for approval by such Regulatory Authority, necessary for the commercial sale of Licensed Product in such country. An NDA, together with all supplemental filings referencing the initial NDA filing, shall be deemed one and the same NDA for the purposes of this Agreement.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.45 " Negotiation Period " has the meaning set forth in Section 6.1(a) of this Agreement.

1.46 " Net Sales " means the gross amount invoiced by Durect or its Affiliates or sublicensees for sale of Licensed Product in commercial arms-length sales to a third party (including third party distributors and wholesalers), commencing with the First Commercial Sale, less deductions for: (i) normal and customary trade, cash and quantity discounts actually given, credits, price adjustments or allowances for damaged products, returns or rejections of products; (ii) chargeback payments and rebates (or the equivalent thereof) granted to group purchasing organizations, managed health care organizations or to federal, state/provincial, local and other governments, including their agencies, or to trade customers; (iii) freight, shipping insurance and other transportation expenses (if separately identified in such invoice); (iv) sales, value-added, excise taxes, tariffs and duties, and other taxes directly related to the sale, to the extent that such items are included in the gross invoice price (but not including taxes assessed against the income derived from such sale). Sales between Durect and any of its Affiliates or sublicensees for resale shall not be a commercial sale by Durect for the purposes of this Section 1.46, and in such case, Net Sales shall be based on the gross amount invoiced for the Licensed Products by such Affiliate or sublicensee. In addition, any use of Licensed Product for promotional, sampling or compassionate use purposes shall not be considered in determining Net Sales. Except as specifically provided above, Net Sales shall be calculated in accordance with GAAP, consistently applied.

1.47 [* * *]

1.48 " Party " and " Parties " have the meaning set forth in the Preamble of this Agreement.

1.49 " Patent " and " Patents " mean issued patents and patent applications, including any and all provisionals, continuations, divisionals, continuation-in-part applications, foreign counterparts, substitutions, reissues, renewals, re-examinations, supplementary protection certificates, patent term extensions, adjustments or restoration rights, registrations, confirmations, successor protective rights or subsequently issued protective rights of similar nature of any of the above.

1.50 " Patent Term Extension " has the meaning set forth in Section 11.3 of this Agreement.

1.51 " Person " means an individual or a corporation, partnership, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

1.52 " Phase III Clinical Trial " means an expanded controlled or uncontrolled clinical trial as required by 21 C.F.R. §312 performed after preliminary evidence suggesting effectiveness of a Licensed Product has been obtained, the primary purpose of which is to establish effectiveness and safety of Licensed Product in patients with the particular indication or indications being studied and to provide an adequate basis for physician labeling.

1.53 " Proof of Concept Trial " means a Clinical Trial of Licensed Product in patients that demonstrates efficacy on an efficacy endpoint and therefore justifies proceeding with pivitol Phase III Clinical Trials or other pivitol registration Clinical Trials required for Final Regulatory Approval of Licensed Product.

1.54 " Regulatory Approval " means the technical, medical and scientific licenses, registrations, authorizations and approvals (including, without limitation, approvals of NDAs, supplements and amendments, pre- and post-approvals, pricing and reimbursement approvals, and labeling approvals) of a Regulatory Authority, necessary for the development (including the conduct of Clinical Trials), manufacture, distribution, storage, transport, marketing, promotion, offer for sale, use, import, reimbursement, export or sale of Licensed Product in a regulatory jurisdiction within the Territory.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.55 " Regulatory Authority " means any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council, ministry or other governmental entity involved in the granting of Regulatory Approval in any jurisdiction within the Territory.

1.56 " Reversion of Rights " has the meaning set forth in Section 3.4 of this Agreement.

1.57 " Reverted Asian/Pacific Rights " has the meaning set forth in Section 3.4 of this Agreement.

1.58 " Reverted European Rights " has the meaning set forth in Section 3.4 of this Agreement.

1.59 " Reverted Latin American Rights " has the meaning set forth in Section 3.4 of this Agreement.

1.60 " ROFR Notice " has the meaning set forth in Section 6.1(a) of this Agreement.

1.61 " ROFR Reply " has the meaning set forth in Section 6.1(a) of this Agreement.

1.62 " Royalties " has the meaning set forth in Section 4.3 of this Agreement.

1.63 " Royalty Term " has the meaning set forth in Section 4.3 of this Agreement.

1.64 " Rules " has the meaning set forth in Section 12.13(c) of this Agreement.

1.65 " Serious Adverse Drug Experience " means any adverse drug experience occurring at any dose that results in any of the following outcomes: death; a life-threatening adverse drug experience; inpatient hospitalization or prolongation of existing hospitalization; a persistent or significant disability/incapacity; or a congenital anomaly/birth defect. Important medical events that may not result in death, be life-threatening, or require hospitalization may be considered a Serious Adverse Drug Experience when, based upon appropriate medical judgment, they may jeopardize the patient or subject and may require medical or surgical intervention to prevent one of the outcomes listed in this definition.

1.66 " Term " has the meaning set forth in Section 10.1 of this Agreement.

1.67 " Territory " means worldwide.

1.68 " Third Party Offer " has the meaning set forth in Section 6.1(a) of this Agreement.

1.69 " Valid Claim " means a claim of any pending or issued unexpired EpiCept Licensed Patent and/or a claim of any pending or issued unexpired Patent within the EpiCept Improvements, including any patent term extensions thereto, where such claim has not been revoked or held invalid or unenforceable by decision of a court or other governmental agency of competent jurisdiction from which no appeal can be or has been taken and has not been held or admitted to be disclaimed, invalid or unenforceable through re-examination or disclaimer, opposition procedure, nullity or invalidity suit or otherwise, which claim covers a Licensed Product; provided, however, that if a claim of a pending patent application shall not have issued within five (5) years after the filing date from which such claims takes priority entitlement such claim shall not constitute a Valid Claim for the purposes of this Agreement unless and until such claim shall issue.

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

1.70 " Withholding Taxes " has the meaning set forth in Section 5.3 of this Agreement.

1.71 Interpretation

(a) Whenever any provision of this Agreement uses the term "including" (or "includes"), such term shall be deemed to mean "including without limitation" and "including but not limited to" (or "includes without limitations" and "includes but is not limited to") regardless of whether the words "without limitation" or "but not limited to" actually follow the term "including" (or "includes");

(b) "Herein", "hereby", "hereunder", "hereof" and other equivalent words shall refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which any such word is used;

(c) All definitions set forth herein shall be deemed applicable whether the words defined are used herein in the singular or the plural;

(d) Wherever used herein, any pronoun or pronouns shall be deemed to include both the singular and plural and to cover all genders;

(e) The recitals set forth at the start of this Agreement, along with the Schedules to this Agreement, and the terms and conditions incorporated in such recital and Schedules shall be deemed integral parts of this Agreement and all references in this Agreement to this Agreement shall encompass such recitals and Schedules and the terms and conditions incorporated in such recitals and Schedules, provided , that in the event of any conflict between the terms and conditions of this Agreement and any terms and conditions set forth in the Schedules, the terms of this Agreement shall control;

(f) In the event of any conflict between the terms and conditions of this Agreement and any terms and conditions that may be set forth on any order, invoice, verbal agreement or otherwise, the terms and conditions of this Agreement shall govern;

(g) The Agreement shall be construed as if both Parties drafted it jointly, and shall not be construed against either Party as principal drafter;

(h) Unless otherwise provided, all references to Sections and Schedules in this Agreement are to Sections and Schedules of and to this Agreement;

(i) All references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters or calendar years unless otherwise expressly provided;

(j) Any reference to any federal, national, state, local or foreign statute or law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless the context requires otherwise;

(k) Any requirements of notice or notification by one Party to another shall be construed to mean written notice in accordance with Section 12.5; and

(l) Wherever used, the word "shall" and the word "will" are each understood to be imperative or mandatory in nature and are interchangeable with one another.

2. GRANT OF LICENSES AND EXCLUSIVITY

2.1 License Grant : Subject to the terms and conditions hereof, EpiCept hereby grants to Durect, and Durect hereby accepts, an exclusive (even as to EpiCept and its Affiliates), royalty-bearing right and license, with the right to grant sublicenses (pursuant to Sections 2.2 and 2.3 below) under the EpiCept Licensed Patents and Patents within the EpiCept Improvements to make, have made, develop, use, sell, offer for sale, have sold, and import Licensed Products in and for the Field throughout the Territory.

2.2 Subcontracting : Durect shall have the right to subcontract its responsibilities under this

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

Agreement (and grant any necessary sublicenses in connection therewith) without obtaining the written consent of EpiCept, provided however that Durect shall at all times remain primarily responsible and liable for all such responsibilities.

2.3 Sublicenses : [* * *]

3. DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCT

3.1 Development of Licensed Product : As between the Parties, Durect shall be solely responsible, at its own cost, expense and discretion, for designing, creating and finalizing a commercially reasonable plan for the development of Licensed Product sufficient to obtain Regulatory Approval of such product within the Territory, and then implementing and carrying out all activities contemplated under such development plan such as all research, development, scientific, medical, regulatory and other activities including, but limited to the design, production and/or implementation of all clinical studies, non-clinical studies, manufacturing process development, scale-up and validation, CMC activities, ICH registration batches, pre-approval inspection preparation, pharmaceutical development including quality control and stability, manufacturing, qualification and regulatory tasks. Notwithstanding the foregoing, Durect shall use Commercially Reasonable Efforts to develop and commercialize Licensed Product throughout the Territory.

3.2 Regulatory Matters : All Regulatory Approvals for Licensed Product in the Territory shall be filed, held, owned and maintained solely in Durect’s or Durect’s designee’s name. In this regard, Durect shall have the sole and exclusive control over, and all authority and responsibility for any and all development activities contemplated herein, as well as any and all regulatory strategies relating to development and commercialization of Licensed Product in the Territory including, without limitation, the preparation of any and all documents submitted to a Regulatory Authority in the Territory and the filing of all submissions relating to Regulatory Approval for Licensed Product, and all regulatory actions, communications and meetings with any Regulatory Authority with respect to Licensed Product, in each and every case, at Durect’s sole cost and expense.

3.3 Reports : Durect shall provide to EpiCept semi-annual written progress reports summarizing Durect’s activities toward achieving Regulatory Approval of Licensed Product. Such reports shall be provided until the Launch of the first Licensed Product by or for Durect.

3.4 Reversion of Rights : Durect shall be solely responsible, at its own cost and expense, to ensure its own diligence and conduct any and all commercialization activities with the intent of bringing Licensed Product to market in jurisdictions within the Territory and shall thus maintain sole discretion and responsibility with regard to all such matters, with the single proviso that the performance of such activities shall be subject to the following reversion rights ("Reversion of Rights"):

(a) If, within [* * *], then the license rights granted under Section 2.1 of this Agreement shall terminate only with respect to the European jurisdictions covered by a Valid Claim in the EpiCept Licensed Patents (the "Reverted European Rights") and thus allow EpiCept itself, or with the assistance of any third party, to pursue development and commercialization of Licensed Products under such Reverted European Rights;

(b) If, within [* * *], then the license rights granted under Section 2.1 of this Agreement shall terminate only with respect to the Asian/Pacific jurisdictions covered by a Valid Claim in the EpiCept Licensed Patents (the "Reverted Asian/Pacific Rights") and thus allow EpiCept itself, or with the assistance of any third party, to pursue development and commercialization of Licensed Products under such Reverted Asian/Pacific Rights; and

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

(c) If, within [* * *], then the license rights granted under Section 2.1 of this Agreement shall terminate only with respect to the Latin American jurisdictions covered by a Valid Claim in the EpiCept Licensed Patents (the "Reverted Latin American Rights") and thus allow EpiCept itself, or with the assistance of any third party, to pursue development and commercialization of Licensed Products under such Reverted Latin American Rights.

4. PAYMENT OBLIGATIONS

4.1 Signing Fee : Within three (3) business days of the Effective Date and upon receipt of an invoice from EpiCept, Durect shall pay a one-time signing fee of one million U.S. Dollars (US$1,000,000), by wire transfer to an account designated in writing by EpiCept.

4.2 Milestone Payments : Durect shall provide EpiCept written notification identifying the relevant timing/condition and pay to EpiCept within three (3) business days the following one-time milestone payments upon satisfaction of the following specified timing and/or condition precedent by Durect, its Affiliates and/or sublicensees.

[* * * ]

4.3 Royalties : In respect of the license rights granted under Section 2.1 of this Agreement, Durect shall pay EpiCept a royalty on sales of Licensed Product in the Territory as follows. The aggregate of all royalty obligations that are due to EpiCept in any Annual Net Sales Period (as defined below) shall be referred to herein as "Royalties." Royalties shall begin to accrue, on a jurisdiction-by-jurisdiction basis, on Net Sales within the Territory on the date of the First Commercial Sale of Licensed Product in a jurisdiction and shall be payable in respect to such jurisdiction until the expiration of the last-to expire of the EpiCept Licensed Patents or Patents under the EpiCept Improvements containing one or more Valid Claims that cover such Licensed Product in such jurisdiction (a "Royalty Term"). Subject to Section 4.4 below, if a Royalty Term is in effect, Durect shall pay EpiCept Royalties equal to the following percentages of the aggregate annual Net Sales in all jurisdictions within the Territory:

[* * *]

(a) The Royalty rates set forth above shall apply only to that portion of Net Sales within the applicable tier of annual Net Sales.

(b) [* * *]

(c) The periods by which annual Net Sales are measured for purposes of this Section 4.3 shall be a calendar year (each, an "Annual Net Sales Period") except that the first Annual Net Sales Period shall begin on the first day of the calendar quarter preceding the First Commercial Sale of Licensed Product and continue to the end of the calendar quarter ending on December 31 ^st of that calendar year.

4.4 Generic Competition : During a Royalty Term, in the event that a Generic Product is Launched in a jurisdiction within the Territory, the Royalties otherwise payable to EpiCept under Section 4.3 shall be reduced by [* * *].

4.5 [* * *]

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidentiality has been requested with respect to the omitted portions.

5. REPORTS AND PAYMENTS

5.1 Payments : Beginning forty-five (45) days after the end of the calendar quarter in which the first Launch of Licensed Product in the Territory is made, and for each calendar quarter thereafter (no later than forty-five (45) days after the end of such calendar quarter), Durect shall submit a statement to EpiCept that shall set forth the amount of Net Sales in the Territory during such quarter and the calculation of Royalties due on such Net Sales for such quarter. Each such statement shall be accompanied by the payment, if any, due to EpiCept.

5.2 Currency Exchange : With respect to Net Sales invoiced in U.S. Dollars, the Net Sales and the amount of Royalties due to EpiCept hereunder shall be expressed in U.S. Dollars. With respect to Net Sales invoiced in a currency other than U.S. Dollars, the Net Sales shall be expressed in the local currency of the entity making the sale, together with the U.S. Dollar equivalent, calculated using the rate of exchange that is the commercial rate of exchange for the conversion of local currency to U.S. Dollars as published by The Wall Street Journal on the last business day immediately prior to the date of payment (or if such journal shall cease to publish currency exchange rates, then the commercial rate of exchange published by another leading U.S. financial publication or bank as mutually agreed to in writing by the Parties).

5.3 Taxes and Withholding : Any payments made by Durect to EpiCept under this Agreement shall be reduced by the amount required to be paid or withheld pursuant to any Applicable Law including, but not limited to, United States federal, state or local tax law ("Withholding Taxes"). Any such Withholding Taxes required by law to be paid or withheld shall be an expense of, and borne solely by, EpiCept. Upon written request, Durect shall submit to EpiCept reasonable proof of payment of Withholding Taxes, together with an accounting of the calculations of such taxes after such Withholding Taxes have been remitted to the proper tax authority. The Parties will cooperate reasonably in completing and filing documents required under the provisions of any applicable tax laws or any other Applicable Law in connection with the making of any required tax payment or withholding payment, or in connection with any claim to a refund of or credit for any such payment.

5.4 Mode of Payment : Durect shall make all payments required under this Agreement by wire transfer to any account specified by EpiCept or as otherwise directed by EpiCept from time to time in U.S. Dollars.

5.5 Records Retention : Durect and its Affiliates and sublicensees, as applicable, shall keep complete and accurate books and records pertaining to the sale of Licensed Product and the calculation of Net Sales in the Territory for a period of three (3) calendar years after the year in which such sales occurred. Such records and books shall contain sufficient detail to permit the accurate calculation consistent with GAAP of the Royalties due to EpiCept and any one-time milestone payments due to EpiCept pursuant to Section 4.2 above, including any records required to calculate any Royalty adjustments hereunder.

5.6 Audit Request : During the term of this Agreement and not more than once per calendar year, EpiCept shall have the right, at its sole expense, to engage an independent accounting firm reasonably acceptable to Durect, which shall have the right to examine in confidence the relevant Durect records as may be reasonably necessary to determine and/or verify the amount of Royalties and/or one-time milestone payments due under this Agreement. Such audit examination shall be conducted, and Durect shall make its records available, during normal business hours, after at least fifteen (15) days from receipt of prior written notice to Durect, and shall take place at the Durect facility where such records are normally maintained. Each such audit examination

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shall be limited to pertinent books and records for any year ending not more than twenty-four (24) months prior to the date of the request; provided that, unless an error is uncovered, EpiCept shall not be permitted to audit the same period of time more than once. Prior to permitting EpiCept’s independent accounting firm to have access to such books and records, Durect may require such accounting firm and its personnel involved in the audit examination to sign a reasonable confidentiality agreement pertaining to any confidential information that is to be provided to such accounting firm or to which such accounting firm shall have access while conducting its audit examination. EpiCept’s independent accounting firm shall prepare and provide to each Party a written report stating whether the Royalties and Net Sales reports submitted and the amounts paid by Durect to EpiCept are correct or incorrect and the details concerning any discrepancies. Such accounting firm shall not reveal to EpiCept any information learned in the course of such audit examination other than the amount of any such discrepancies. EpiCept hereby agrees to hold in strict confidence all information disclosed to it by the accounting firm, except to the extent necessary for EpiCept to enforce its rights under this Agreement, or if such disclosure is required by law.

5.7 Cost of Audit : Unless expressly provided for herein below, EpiCept shall bear the full cost of the performance of any audit examination requested pursuant to Section 5.6 of this Agreement. If, as a result of any audit examination of the books and records of Durect, it is shown that payments made by Durect to EpiCept under this Agreement were less than the amount that should have been paid, then, subject to Section 5.8, below, Durect shall make all payments required to be made to eliminate any discrepancy revealed by said inspection within 30 days after EpiCept’s demand therefor. In addition, if, as a result of any such audit examination, it is shown that payments made by Durect to EpiCept under this Agreement were less than the amount that should have been paid, and such deficiency is greater than 5 percent (5%) of the total aggregate amount Royalties due to EpiCept under this Agreement, then, subject to Section 5.8 below, Durect shall further reimburse EpiCept for reasonable costs actually incurred by EpiCept for performance of the subject audit examination. In the event that the audit examination shows that an overpayment has been made by Durect then, subject to Section 5.8, such amounts shall be deducted from Royalties owed to EpiCept and/or any other payment owing to EpiCept under Section 4 of this Agreement. If such overpayment amounts have not been settled by such deductions from Royalties and/or any other payment owing to EpiCept under this Agreement within one year from the date originally overpaid, then EpiCept shall promptly make all payments required to be made to Durect to eliminate any such overpayment.

5.8 Resolution of Dispute as to Audit : Notwithstanding anything in Section 5.7 to the contrary, in the event that the Parties do not agree within thirty (30) days on the amount of overpayment or underpayment revealed by the audit examination report, each Party shall select an independent public accou