10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number: 000-51462

CHELSEA THERAPEUTICS INTERNATIONAL, LTD.

(Exact name of Registrant as specified in its charter)

Delaware	20-3174202
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

13950 Ballantyne Corporate Place, Suite 325, Charlotte, North Carolina 28277

(Address of principal executive offices, including zip code)

(704) 341-1516

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨ Accelerated Filer  ¨ Non-accelerated Filer  x

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of August 10, 2006, there were 19,707,129 shares of registrant’s Common Stock outstanding.

Index

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	15
PART II	OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 6.	Exhibits	17
	Signatures	18

Chelsea Therapeutics International, Ltd, Ivory Capital Corporation and Chelsea Therapeutics, Inc.

Except where the context provides otherwise, references to “the Company”, “we,” “us,” “our” and similar terms mean Chelsea Therapeutics International, Ltd., Ivory Capital Corporation and Chelsea Therapeutics, Inc. When we refer to business and financial information relating to periods prior to the merger with Ivory Capital Corporation dated February 11, 2005, we are referring to the business and financial information of Chelsea Therapeutics, Inc. unless the context requires otherwise.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2006			December 31, 2005
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	18,954,970		$	3,173,434
Prepaid contract research and manufacturing		949,807			106,952
Other prepaid expenses and other current assets		97,735			89,977
Total current assets		20,002,512			3,370,363
Property and equipment, net		60,510			43,200
Other assets		13,461			13,461
	$	20,076,483		$	3,427,024
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	537,276		$	504,416
Accrued compensation and related expenses		222,971			245,273
Accrued contract research and manufacturing		700,532			171,415
Other accrued expenses		109,704			121,516
Total liabilities		1,570,483			1,042,620
Commitments
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.0001 par value, 45,000,000 shares authorized, 19,707,129 and 12,383,188 shares issued and outstanding, respectively		1,971			1,238
Additional paid-in capital		33,576,195			13,315,447
Deficit accumulated during the development stage		(15,072,166	)		(10,932,281	)
Total stockholders’ equity		18,506,000			2,384,404
	$	20,076,483		$	3,427,024

See accompanying notes to condensed consolidated financial statements.

1

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended June 30,						For the six months ended June 30,						Period from April 3, 2002 (inception) to June 30, 2006
	2006			2005			2006			2005
Operating expenses:
Research and development	$	1,434,881		$	1,117,777		$	3,129,652		$	2,708,955		$	10,453,898
Sales and marketing		66,392			162,423			310,531			272,013			1,003,607
General and administrative		590,283			398,000			1,093,153			1,393,056			4,180,831
Total operating expenses		2,091,556			1,678,200			4,533,336			4,374,024			15,638,336
Operating loss		(2,091,556	)		(1,678,200	)		(4,533,336	)		(4,374,024	)		(15,638,336	)
Interest income		247,630			56,508			393,451			113,815			600,190
Interest expense		—			—			—			—			(34,020	)
Net loss	$	(1,843,926	)	$	(1,621,692	)	$	(4,139,885	)	$	(4,260,209	)	$	(15,072,166	)
Net loss per basic and diluted share of common stock	$	(0.09	)	$	(0.13	)	$	(0.23	)	$	(0.35	)
Weighted average number of basic and diluted common shares outstanding		19,608,096			12,368,525			17,838,791			12,262,442

See accompanying notes to condensed consolidated financial statements.

2

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF

STOCKHOLDERS’ EQUITY

(unaudited)

	Common stock			Additional Paid-In Capital			Deficit accumulated during the development stage			Total stock- holders’ equity
	Shares	Amount
Balance at January 1, 2006	12,383,188	$	1,238	$	13,315,447		$	(10,932,281	)	$	2,384,404
Sale and issuance of common stock with detachable warrants in February 2006 atapproximately $2.77 per share, net of issuance costs	7,166,666		717		19,854,935						19,855,652
Common stock issued in March 2006, at par, pursuant to net-share (cashless) exercise of common stock warrants	15,461		2		(2	)					—
Common stock issued in May 2006, at approximately $4.35 per share, for license fee	63,131		6		274,615						274,621
Employee stock options exercised	78,683		8		5,072						5,080
Stock-based compensation					122,054						122,054
Variable accounting for stock options granted to third party					4,074						4,074
Net loss								(4,139,885	)		(4,139,885	)
Balance at June 30, 2006	19,707,129	$	1,971	$	33,576,195		$	(15,072,166	)	$	18,506,000

See accompanying notes to condensed consolidated financial statements.

3

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the six months ended June 30,						Period from April 3, 2002 (inception) to June 30, 2006
	2006			2005
Operating activities:
Net loss	$	(4,139,885	)	$	(4,260,209	)	$	(15,072,166	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock-based compensation		122,054			48,458			222,902
Non-cash stock-based variable accounting compensation		4,074			304,831			62,668
Depreciation and amortization		16,270			12,178			53,168
Stock issued for license agreement		274,621			—			275,023
Non-cash interest expense		—			—			34,020
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(850,613	)		(366,649	)		(1,047,542	)
Accounts payable, accrued contract research and manufacturing expenses and other accrued expenses		550,165			816,192			1,347,513
Accrued compensation and related expenses		(22,302	)		(97,957	)		222,971
Net cash used in operating activities		(4,045,616	)		(3,543,156	)		(13,901,443	)
Investing activities:
Acquisitions of property and equipment		(33,580	)		(17,564	)		(113,679	)
Security deposits		—			—			(13,461	)
Net cash used in investing activities		(33,580	)		(17,564	)		(127,140	)
Financing activities:
Proceeds from borrowings from affiliate		—			—			1,745,000
Proceeds from sales of common stock, net of issuance costs		19,855,652			—			19,856,060
Proceeds from exercise of stock options		5,080			—			6,079
Proceeds from sales of equity securities, net of issuance costs		—			—			11,771,789
Recapitalization of the Company		—			(400,000	)		(400,000	)
Receipt of cash for stock subscription receivable		—			—			4,625
Net cash provided by (used in) financing activities		19,860,732			(400,000	)		32,983,553
Net increase (decrease) in cash and cash equivalents		15,781,536			(3,960,720	)		18,954,970
Cash and cash equivalents, beginning of period		3,173,434			10,977,140			—
Cash and cash equivalents, end of period	$	18,954,970		$	7,016,420		$	18,954,970

See accompanying notes to condensed consolidated financial statements.

4

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Supplemental disclosure of non-cash investing and financing activities:

During 2004, the Company converted a loan with an affiliate for aggregate principal of $1,745,000 and accrued interest of $34,020 into shares of the Company’s $0.0001 par value common stock, issuing 677,919 shares, at approximately $2.62 per share in lieu of repayment of this obligation.

During 2002, the Company issued 5,428,217 shares of its $0.0001 par value common stock for a subscription receivable of $4,625.

In conjunction with the merger and recapitalization of the Company dated February 11, 2005, the Company issued 11,911,357 shares of its $0.0001 par value common stock in exchange for all of the issued and outstanding shares of Chelsea Therapeutics, Inc. In addition, in conjunction with and as compensation for facilitating the merger, the Company issued warrants for the purchase of 105,516 shares of its $0.0001 par value common stock at an exercise price of $2.62 per share and an aggregate fair value of $26,700.

In December 2004, in conjunction with and as compensation for activities related to the December 2004 sale of equity securities, the Company issued warrants to purchase 483,701 shares of its $0.0001 par value common stock, with a purchase price of approximately $2.88 per share and an aggregate fair value of $14,400. In March 2006, 15,461 shares of the $0.0001 par value common stock of the Company were issued to holders upon exercise of warrants issued in December 2004 per the net share settlement provisions contained in the terms of the warrants.

In February 2006, in conjunction with and as compensation for activities related to the 2006 Placement (see Note 4), the Company issued warrants to purchase 716,666 shares of its $0.0001 par value common stock, with a purchase price of $3.30 per share and an aggregate fair value of approximately $705,000.

In May 2006, in conjunction with and as compensation for activities related to the licensing agreement with Dainippon Sumitomo Pharma Co., Ltd. and under a Finder’s Agreement, the Company issued warrants to purchase 250,000 shares of its $0.0001 par value common stock, with an exercise price of $4.31 per share. These warrants were not valued at June 30, 2006 as their exercise is conditioned on an event, the occurrence of which is undeterminable at June 30, 2006 and accordingly, had no reportable fair value at that date. If and when the event is deemed probable to occur the Company will record a charge based on the warrants’ then determined fair value (see Note 6).

See accompanying notes to condensed consolidated financial statements.

5

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS

The Company

On July 27, 2005, the stockholders approved an Agreement and Plan of Merger dated June 17, 2005 (the “Delaware reincorporation”) pursuant to which the Company merged with and into its newly created, wholly-owned subsidiary, Chelsea Therapeutics International, Ltd., a Delaware corporation (“Chelsea Delaware”), with Chelsea Delaware remaining as the surviving corporation.

The Delaware reincorporation also had the effect of the Company changing its corporate name to Chelsea Therapeutics International, Ltd. In addition, the Delaware reincorporation provided that each nine (9) shares of the no par value common stock of the Company outstanding at the date of the reincorporation was exchanged for one (1) share of the $0.0001 par value common stock of Chelsea Delaware (the “Share Exchange”). Fractional shares of Chelsea Delaware common stock were not issued in the Share Exchange and holders of the Company’s common stock who would have otherwise been entitled to receive a fractional share of Chelsea Delaware common stock received a cash payment equal to the fair market value of such fractional share as of the effective date of the reincorporation.

In accordance with the Share Exchange, Chelsea Delaware issued an aggregate of 12,368,514 shares of its common stock to the stockholders of the Company in exchange for the 111,317,378 shares of the Company’s common stock issued and outstanding as of the date of the Share Exchange. Accordingly, the Company has retroactively restated all share and per share data contained herein as if such exchange had occurred at the beginning of the earliest period presented.

The Chelsea Delaware Certificate of Incorporation authorizes the issuance of up to 45,000,000 shares of common stock, $0.0001 par value per share and 5,000,000 shares of preferred stock, $0.0001 par value per share.

On February 11, 2005, pursuant to an Agreement and Plan of Merger dated as of January 17, 2005 (the “Merger Agreement”), Chelsea Therapeutics, Inc. (“Chelsea”) merged with and into Chelsea Acquisition Corp. (the “Merger”), a wholly-owned subsidiary of Ivory Capital Corporation (“Ivory”), which at that time was a reporting public corporation with no operations. In accordance with the Merger Agreement, each share of the outstanding preferred and common stock of Chelsea automatically converted into approximately 10.563 shares of the no par value common stock of Ivory. Accordingly, and after giving effect for the Delaware reincorporation and in connection with the Merger, Ivory issued an aggregate of 11,911,357 shares of its common stock to the former stockholders of Chelsea. At the date of the Merger, there were 457,157 shares of Ivory’s capital stock issued and outstanding. After giving effect to the issuance of shares in the Merger and the Delaware reincorporation, Ivory had outstanding 12,368,514 shares of common stock. In addition, immediately prior to the Merger, there were outstanding options and warrants to purchase 1,592,876 shares of the common stock of the Company. In conjunction with and immediately prior to the Merger, Chelsea issued additional warrants for the purchase of 105,516 shares of its common stock as consideration for events that facilitated the Merger.

Immediately after the date of the Merger, the parties who immediately prior thereto held common stock of Ivory continued to own an aggregate of 457,157 shares of the $0.0001 par value common stock of Ivory, equaling 3.25% of the outstanding common stock of Ivory on a fully diluted basis assuming exercise of all stock options, warrants and any other instruments convertible into equity.

Immediately after the Merger, Chelsea purchased all of the revolving notes outstanding with a face value of $33,292 under the a credit agreement between Ivory and its principal stockholders, together with all related rights (including the option to convert the amounts due under the revolving notes into up to 444,444 shares of Ivory’s common stock), for $400,000 in cash. In connection with such purchase, the holders of such revolving notes released any and all claims against Ivory and Chelsea, including conversion rights as outlined in the note agreements.

6

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

The terms of the Merger provided that the sole officer and director of Ivory would be replaced by the officers and directors of Chelsea and having had no significant business activity for a number of years, upon the effective time of the Merger, Ivory adopted the business plan of Chelsea. The transaction was therefore accounted for as a reverse acquisition with Chelsea as the acquiring party and Ivory as the acquired party, in substance, a reorganization of Chelsea. Accounting principles generally accepted in the United States of America require, among other considerations, that a company whose stockholders retain a majority interest in a business combination be treated as the acquirer for accounting purposes. Accordingly, the results of operations for the periods prior to the Merger are those of Chelsea.

Chelsea was incorporated in the State of Delaware on April 3, 2002 as Aspen Therapeutics, Inc. On July 8, 2004, Aspen amended its Certificate of Incorporation with the State of Delaware to change its name to Chelsea Therapeutics, Inc. Chelsea Therapeutics International, Ltd. was incorporated in the State of Delaware on June 17, 2005. Chelsea is a specialty pharmaceutical company focused on the acquisition, development and commercialization of innovative pharmaceutical products. The Company’s currently licensed compounds target a variety of prevalent medical conditions; particularly rheumatoid arthritis, psoriasis, cancer, other immunological disorders and nuerogenic orthostatic hypotension.

As a result of the Merger of Ivory and Chelsea in February 2005, and the reincorporation in Delaware in July 2005, Chelsea Therapeutics International, Ltd. is the reporting company and is the 100% owner of Chelsea Therapeutics, Inc. The separate existence of Ivory Capital ceased in connection with the Delaware reincorporation in July 2005. Except where the context provides otherwise, references to “the Company”, “we”, “us”, “our” and similar terms mean Ivory, Chelsea Delaware and Chelsea as applicable.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiary, which shall collectively be referred to as the “Company”. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the three and six months ended June 30, 2006 are not necessarily indicative of the results for the year ending December 31, 2006. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K filed on March 8, 2006 and available on the website of the United States Securities and Exchange Commission (www.sec.gov).

Since inception, the Company has focused primarily on acquiring and developing pharmaceutical technologies, raising capital, establishing office facilities and recruiting personnel. The Company is a development stage company and has generated no revenue since inception.

The Company has sustained operating losses since its inception and expects such losses to continue over the next several years. Management plans to continue financing the operations with a combination of equity issuances and debt arrangements. If adequate funds are not available, the Company might be required to delay, reduce the scope of, or eliminate one or more of its research or development programs, or cease operations.

For presentation purposes, the Company has restated all information contained in this report related to shares authorized, issued and outstanding and related disclosures of weighted average shares and earnings per share to reflect the results of the Delaware reincorporation in July 2005 as if the Delaware reincorporation had occurred at the beginning of each of the periods presented.

7

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

Basis of Consolidation

All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases estimates on its historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results might differ from these estimates under different assumptions or conditions.

NOTE 2 STOCK-BASED COMPENSATION

For periods prior to February 11, 2005, the date of the Merger (see Note 1), the Company followed Statement of Financial Accounting Standard No. 123 (“SFAS 123”), Accounting for Stock-based Compensation. Effective February 11, 2005, the Company adopted Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”), “Share-based Payment in accounting for its stock options. The adoption of SFAS 123(R) was applied using modified prospective application to all grants made after February 11, 2005. The adoption of SFAS 123(R) had no effect on the financial results of the Company from the application of the original provisions of SFAS 123.

Options granted to consultants, advisors or other independent contractors that provide services to the Company are accounted for under the provisions of SFAS 123(R) and Emerging Issues Task Force Issue No. 96-18 (“EITF 96-18”), Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

The Company has a stock incentive plan (the “Plan”) under which incentive stock options may be granted. On April 25, 2006, the Board approved an amendment to the Plan, increasing the number of shares available for grant to 2,645,000 shares of its $0.0001 par value common stock. In January 2006, the Board approved an amendment to the Plan that increased the number of shares available for grant to 1,596,432 shares of its $0.0001 par value common stock. These increases were approved by the Company’s stockholders at the 2006 Annual Meeting on June 19, 2006. Grants under the Plan may be made to employees (including officers), directors, consultants, advisors or other independent contractors who provide services to the Company or its subsidiaries.

During the three months ended June 30, 2006 and 2005, the Company granted stock options to employees for the purchase of 167,585 and 11,111 shares of its $0.0001 par value common stock, respectively. The grant made during the three months ended June 30, 2006 had an exercise price of $3.90 per share, a fair value of approximately $1.62 per share and an exercise price greater than the market value resulting in zero intrinsic value as of June 30, 2006. The grant made during the three months ended June 30, 2005 had an exercise price of $4.95 per share, a fair value of $2.11 per share and an exercise price greater than the market value resulting in zero intrinsic value as of June 30, 2006. Each option granted to employees during the three months ended June 30, 2006 and 2005 vest as to 25% of the shares on the first, second, third and fourth anniversary of the vesting commencement date. Following the vesting periods, options are exercisable until the earlier of 90 days after the employee’s termination with the Company or the ten-year anniversary of the initial grant, subject to adjustment under certain conditions.

During the six months ended June 30, 2006 and 2005, the Company granted stock options to employees and non-employee directors for the purchase of 618,085 and 756,451 shares of its $0.0001 par value common stock, respectively. The

8

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

grants made during the six months ended June 30, 2006 had a weighted average exercise price of $3.59 per share, a weighted average fair value of approximately $1.47 per share and aggregate intrinsic value as of June 30, 2006 of approximately $0.1 million. The grants made during the six months ended June 30, 2005 had a weighted average exercise price of $2.66 per share, a weighted average fair value of $0.47 per share and an aggregate intrinsic value as of June 30, 2006 of approximately $0.9 million. Each option granted to employees and non-employee directors during the six months ended June 30, 2006 and 2005 vest as to 25% of the shares on the first, second, third and fourth anniversary of the vesting commencement date except that each grant made to non-employee directors during the six months ended June 30, 2005 vest as to 100% of the shares on the first anniversary of the vesting commencement date. Following the vesting periods, options are exercisable until the earlier of 90 days after the employee’s termination with the Company or the ten-year anniversary of the initial grant, subject to adjustment under certain conditions.

The Company utilizes the Black-Scholes-Merton valuation model for estimating the fair value of the stock options granted. The table below summarizes the assumptions utilized in estimating the fair value of the stock options granted for the three and six months ended June 30, 2006 and 2005:

	For the three months ended		For the six months ended
	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Risk-free interest rate	5.12%	3.89%	4.31% to 5.12%	3.72% to 3.89%
Expected life of options	5 years	5 years	5 years	5 years
Expected dividend yield	0%	0%	0%	0%
Expected volatility	37.66%	41.31%	37.66%	0% to 41.31%
Forfeitures	0%	0%	0%	0%

All grants made to employees and non-employee directors during the three months ended March 31, 2005 were made prior to the Company’s adoption of SFAS 123(R). As such, the Company utilized the minimum value model, under the provisions of SFAS 123, and assumed no volatility in determining the fair value of options granted.

The Company recorded compensation expense for the three and six months ended June 30, 2006 of $67,512 and $122,054, respectively, and compensation expense for the three and six months ended March 31, 2005 of $24,469 and $48,458, respectively, in conjunction with option grants made to employees and non-employee directors. As of June 30, 2006, the Company had total unrecognized compensation expense related to options granted to employees and non-employee directors of approximately $1.0 million, which will be recognized over a remaining average period of 3.3 years.

In November 2005, the Company granted a stock option to a third-party contractor to purchase 5,000 shares of its $0.0001 par value common stock at an exercise price of $3.10 per share. The option vests 25% at each calendar quarter end date from the date of issuance. For the three months ended June 30, 2006, based on the fair value of these options, the Company recorded a reduction in compensation expense of $3,213 and for the six months ended June 30, 2006 recorded total compensation expense of $4,074.

In December 2004, the Company granted a stock option to a third-party contractor to purchase 58,683 shares of its $0.0001 par value common stock at an exercise price of $2.62 per share. The option was to vest monthly over a 36-month period. On October 31, 2005, the Company terminated its relationship with this contractor and the vested portion of the options subsequently expired unexercised after thirty (30) days. For the three months ended June 30, 2005, based on the fair value of these options, the Company recorded a reduction in compensation expense of $176,287 and for the six months ended June 30, 2005 recorded total compensation expense of $304,831.

As of June 30, 2006, there were 1,591,342 options outstanding under the Plan with a weighted average remaining life of 8.93 years, a weighted average fair value of $0.80 per share and an intrinsic value of approximately $1.8 million. Also, options for 368,726 shares had vested and were exercisable at June 30, 2006 with a weighted average remaining contractual

9

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

life of 8.34 years, a weighted average fair market value of $0.30 per share and an intrinsic value of approximately $0.8 million. During the three and six months ended June 30, 2006, options for 78,683 shares were exercised with a weighted average exercise price of $0.06 per share and an aggregate intrinsic value as of the dates of exercise of approximately $0.3 million. No options were exercised during the three and six months ended June 30, 2005.

NOTE 3 LOSS PER SHARE

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. For the periods presented, basic and diluted net loss per common share are identical. Potentially dilutive securities from stock options and stock warrants would be antidilutive as the Company incurred a net loss. The number of shares of common stock potentially issuable at June 30, 2006 and 2005 upon exercise or conversion that were not included in the computation of net loss per share totaled 5,266,782 and 1,709,503 shares, respectively.

NOTE 4 PRIVATE PLACEMENT OF COMMON STOCK

On February 13, 2006, the Company raised gross proceeds of approximately $21.5 million through the sale of 7,166,666 shares of its $0.0001 par value common stock plus warrants for the purchase of 2,149,999 shares of its $0.0001 par value common stock (the “2006 Placement”). The aggregate fair value of these warrants was approximately $1,488,000. The warrants permit the holders to purchase the underlying common shares, for cash only, at $4.20 each and are exercisable in whole at any time, or in part from time to time, for five years from the date of issuance. The warrants are redeemable at par value at the Company’s option in the event that the Company’s volume weighted-average closing bid price of its common stock is greater than $9.00 per share for any twenty (20) consecutive trading days provided that the Company gives thirty (30) business days’ written notice to the holders and simultaneously calls all warrants on the same terms. Under the terms of the 2006 Placement, we agreed to and filed a registration statement with the SEC within 30 days of the closing for the shares of common stock sold and the shares of common stock underlying the warrants and such registration became effective on March 29, 2006.

In connection with this offering, the Company engaged Paramount BioCapital, Inc., a related party, as placement agent and paid commissions and other offering-related expenses of approximately $1.6 million in cash and issued warrants to purchase 716,666 shares of its common stock with an exercise price equal to 110% of the price of the shares sold in the offering, or $3.30 per share. The aggregate fair value of these warrants was approximately $705,000.

NOTE 5 EXERCISE OF COMMON STOCK WARRANTS

On March 6, 2006, a warrant holder exercised the right to purchase 15,221 shares of the $0.0001 par value common stock of the Company pursuant to a cashless exercise whereby the Company, in a net share settlement, issued 7,507 shares of its $0.0001 par value common stock to the warrant holder based on the excess of the market price of $5.70 per share over the exercise price of $2.88 per share.

On March 13, 2006, a warrant holder exercised the right to purchase 15,221 shares of the $0.0001 par value common stock of the Company pursuant to a cashless exercise whereby the Company, in a net share settlement, issued 7,954 shares of its $0.0001 par value common stock to the warrant holder based on the excess of the market price of $6.05 per share over the exercise price of $2.88 per share.

10

CHELSEA THERAPEUTICS INTERNATIONAL, LTD. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2006

(Unaudited)

NOTE 6 LICENSING AGREEMENT AND ASSET PURCHASE

In May 2006, the Company entered into an agreement with Dainippon Sumitomo Pharma Co., Ltd. (“DSP”) for a worldwide, exclusive, sub-licensable license and rights to certain intellectual property and proprietary information (the “DSP Agreement”) relating to L-threo-3,4-dihydroxyphenylserine (“L-DOPS” or “Droxidopa”) including, but not limited to all information, formulations, materials, data, drawings, sketches, designs, testing and test results, records and Regulatory Documentation. As consideration for these rights, the Company paid DSP $100,000 and issued 63,131 shares of its $0.0001 par value common stock, with a value of approximately $4.35 per share, or $274,621. As additional consideration, the Company agreed to pay DSP and or its designees (1) royalties on the sales should any compound be approved for commercial sale; and (2) milestone payments, payable upon achievement of milestones as defined in the DSP Agreement. At June 30, 2006, remaining future milestone payments, subject to the Company’s right to terminate the license agreement, totaled $4.0 million, some of which may be payable in equity.

In May 2006, in conjunction with and as consideration for activities related to the execution of the DSP Agreement, the Company entered into a Finder’s Agreement with Paramount BioCapital, Inc., a related party. Under the terms of the Finder’s Agreement, the Company paid Paramount BioCapital, Inc. an initial payment of $35,000 and issued warrants, to Paramount BioCapital, Inc. or its affiliates, for the purchase of 250,000 shares of its $0.0001 par value common stock at an exercise price of $4.31 per share. These warrants were not valued at June 30, 2006 as their exercise is conditioned on an event, the occurrence of which is undeterminable at June 30, 2006 and accordingly, had no reportable fair value at that date. If and when the event is deemed probable to occur the Company will record a charge based on the warrants’ then determined fair value. As additional consideration, the Company agreed to (1) make future milestone payments, upon achievement of milestones as defined in the Finder’s Agreement, to Paramount that totaled $185,000 as of June 30, 2006; (2) pay royalties on sales should any licensed compound become available for commercial sale; and (3) compensate a stated third-party consultant for services rendered in the evaluation of the transaction with DSP.

NOTE 7 DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

Effective May 2006, the Company entered into a development and commercialization agreement (the “Development Agreement”) with Active Biotech AB (“AB”) to co-develop and commercialize the I-3D portfolio of orally active, Dihydroorotate dehydrogenase (DHODH) inhibiting compounds for the treatment of autoimmune diseases and transplant rejection. Under the terms of the license and co-development agreement, an initial payment of $1.0 million was made to AB during the quarter ended June 30, 2006 with such funds to be utilized to cover the initial costs of research and development efforts jointly approved by both parties. Subsequent clinical development efforts shall be jointly conducted and funded by the Company and AB via a Joint Development Committee with equal representation from both parties. The partnership also establishes a licensing agreement providing Chelsea with the exclusive North and South American commercial rights to all drugs within this portfolio, while Active Biotech will retain rights for the remaining global markets. In addition to sharing development costs, both Chelsea and Active Biotech will pay the other partner royalty payments on sales in their respective markets. Active Biotech will also receive certain defined milestone payments related to clinical development and receipt of revenue from commercialization of the compounds. Unless terminated by either party with six months written notice, the Development Agreement shall remain in effect until the earlier of (1) the expiration of the last to expire patent rights indicated under the Development Agreement or (2) fifteen (15) years from the date of the first commercial sale of the product. As of June 30, 2006, remaining future milestone payments, subject to the Company’s right to terminate the Development Agreement, totaled $15.5 million.

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. We intend that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In particular, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements that reflect our current views with respect to future events and financial performance. We use words such as we “expect,” “anticipate,” “believe,” and “intend” and similar expressions to identify forward-looking statements. A number of important factors could, individually or in the aggregate, cause actual results to differ materially from those expressed or implied in any forward-looking statement.

Overview

Since inception, we have focused primarily on acquiring and developing pharmaceutical technologies, raising capital and recruiting personnel. We are a development stage company and have generated no revenue since inception. We do not anticipate generating any revenue unless and until we successfully obtain approval from the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates. However, developing pharmaceutical products is a lengthy and expensive process. Even if we do not encounter unforeseen safety issues during the course of developing our currently licensed product candidates, we would not anticipate receiving regulatory approval to market such products until at least 2009. Currently, development expenses are being funded with proceeds from private equity financings completed in December 2004 and February 2006. To the extent we are successful in acquiring additional product candidates for our development pipeline and as we move our products into more extensive clinical trials, our need to finance research and development costs will continue to increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of the products.

On February 11, 2005, we completed a Merger with Ivory Capital Corporation, a publicly traded Colorado corporation, in which a wholly-owned subsidiary of Ivory Capital was merged with and into Chelsea, and Chelsea became a wholly-owned subsidiary of Ivory Capital. As a result of the Merger, Ivory Capital, which previously had no material operations, acquired the business of Chelsea. Each outstanding share of common stock and Series A Preferred Stock of Chelsea was converted into approximately 10.56 shares of common stock of Ivory Capital and outstanding options and warrants to purchase either common stock or Series A Preferred Stock of Chelsea were assumed by Ivory Capital and converted into options and warrants to purchase shares of common stock at the same ratio. The Merger resulted in a change of control of Ivory Capital, with the former stockholders of Chelsea owning approximately 96.75% assuming the conversion of all outstanding options and warrants.

In addition, the terms of the Merger provided that the sole officer and director of Ivory Capital would be replaced by the officers and directors of Chelsea. Further, having had no significant business activity for a number of years, upon the effective time of the Merger, Ivory Capital adopted the business plan of Chelsea. The transaction was therefore accounted for as a reverse acquisition with Chelsea as the acquiring party and Ivory Capital as the acquired party, in substance, a reorganization of Chelsea. Accordingly, when we refer to our business and financial information related to periods prior to the merger, we are referring to the business and financial information of Chelsea unless the context indicates otherwise.

On June 17, 2005, Ivory Capital Corporation formed a wholly-owned subsidiary in Delaware named Chelsea Therapeutics International, Ltd. for purposes of reincorporating in Delaware. On July 28, 2005, Ivory Capital Corporation merged with Chelsea Therapeutics International, Ltd., with Chelsea Therapeutics International, Ltd. as the surviving corporation. As a result, Chelsea Therapeutics International, Ltd. is the public reporting company and is the 100% owner of Chelsea Therapeutics, Inc., its operating subsidiary.

When we refer to business and financial information for periods between January 1, 2005 and July 28, 2005, we are referring to the business and financial information of Ivory Capital Corporation. Except as noted, all share numbers included herein reflect the conversion of every nine shares of Ivory Capital Corporation common stock for one share of Chelsea Therapeutics International, Ltd. common stock that occurred in connection with our Delaware reincorporation on July 28, 2005.

12

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Our significant accounting policies are more fully described in Note 1 to the financial statements. The following accounting policies are critical in fully understanding and evaluating our reported financial results.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, management evaluates their estimates and judgments. Management bases its estimates on historical experience and on various other factors that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results might differ from these estimates under different assumptions or conditions.

Research and Development Expense. Research and development expenditures are expensed as incurred.

Accounting for Stock-Based Compensation. We account for our employee stock options and warrants using the fair value method of Statement of Financial Accounting Standards No. 123(R) (“SFAS 123(R)”), Share-based Payment. SFAS 123(R) defines a fair value based method of accounting for employee stock options or similar equity instruments. In determining the fair value of the equity instrument, we considered, among other factors, (i) the risk-free interest rate, (ii) the expected life of the option granted, (iii) the anticipated dividend yield, (iv) the estimated future volatility of the underlying equity and (v) anticipated future forfeitures. Our results include non-cash compensation expense as a result of the issuance of stock option grants utilizing this method. We expect to record additional non-cash compensation expense in the future, which might be significant.

Results of Operations

Three Months Ended June 30, 2006 and 2005

Research and development expenses. For the three months ended June 30, 2006, research and development expenses were approximately $1.4 million, or 69% of operating expenses, an increase of approximately $0.3 million when compared to $1.1 million, or 67% of operating expenses, for the corresponding period ended June 30, 2005. Expenses for each period consisted primarily of expenses incurred for compensation and related expenses and amounts paid to outside contract manufacturing and contract research organizations relating to our product candidates. During the three months ended June 30, 2006, we paid licensing fees of approximately $0.4 million and carried out significant manufacturing, pre-clinical, Phase I and Phase II activities, generating expenses of approximately $0.6 million. For the three months ended June 30, 2005, our expenditures were focused on outside contract manufacturing and contract research activities generating expenses of approximately $0.8 million.

Sales and marketing expenses. Although we had no formalized selling activities for the three months ended June 30, 2006, we did incur expenses of approximately $66,000, a decrease of $96,000 when compared to expenses of approximately $162,000 for the three months ended June 30, 2005. Sales and marketing expenses related primarily to business development activity, including compensation and related costs, promotional activities and certain legal expenses. The decrease during the three months ended June 30, 2006 relates primarily to relocation expenses that were incurred in 2005 and not in 2006 as well as a reduction in legal expenses associated mainly with intellectual property activities.

General and administrative expenses. For the three months ended June 30, 2006, general and administrative expense were $0.6 million, an increase of $0.2 million, or 48%, when compared to expenses of approximately $0.4 million for the three months ended June 30, 2005. These costs, focused on support of administrative activities, consisted primarily of compensation and related expenses, consulting and professional fees, travel costs, insurance and facility expenses. The increase in general and administrative expenses is primarily related to recording a reduction to compensation expense during the three months ended June 30, 2005 of approximately $0.2 million related to the variable accounting treatment for certain stock options (see Note 2). Also contributing to the increase were increases in travel costs, compensation and fees related to our registration on NASDAQ, offset by decreases in accounting fees and relocation costs.

13

Interest income. For the three months ended June 30, 2006, interest income was approximately $248,000, an increase of approximately $191,000 when compared with interest income for the three months ended June 30, 2005 of $57,000. Our cash and investments position in 2006 reflects the proceeds of approximately $21.5 million received from the 2006 Placement (see Note 4). Interest income consisted of interest earned on short-term, liquid investments made by us from cash on deposit.

Six Months Ended June 30, 2006 and 2005

Research and development expenses. For the six months ended June 30, 2006, research and development expense were approximately $3.1 million, or 69% of operating expenses, an increase of approximately $0.4 million when compared to $2.7 million, or 62% of operating expenses, for the corresponding period ended June 30, 2005. The increase during the six months ended June 30, 2006 consisted primarily of an increase in licensing fees paid of approximately $0.4 million related to our licensing agreement with DSP for Droxidopa (see Note 6). Expenses for each period consisted primarily of expenses incurred for compensation and related expenses, licensing costs and amounts paid to outside contract manufacturing and contract research organizations relating to our product candidates.

Sales and marketing expenses. Although we had no formalized selling activities for the six months ended June 30, 2006, we did incur expenses of approximately $0.3 million, an increase of approximately $38,000 when compared to the six months ended June 30, 2005. Sales and marketing expenses related primarily to business development activity, including compensation and related costs, promotional activities and certain legal expenses. The increase reflects higher expenditures for contractor expenses, travel expenses and legal costs during the period offset by a reduction in relocation expenses.

General and administrative expenses. For the six months ended June 30, 2006, general and administrative expenses were $1.1 million, a decrease of $0.3 million, or 22%, when compared to expenses of approximately $1.4 million for the six months ended June 30, 2005. These costs, focused on support of administrative activities, consisted primarily of compensation and related expenses, consulting and professional fees, travel costs, insurance and facility expenses. The decrease in general and administrative expenses is primarily related to recording approximately $0.3 million in compensation expense during the six months ended June 30, 2005 for the variable accounting treatment of certain stock options (see Note 2). Also contributing to the decrease were reductions in legal fees, accounting fees, marketing and contractor expense, offset by increases in fees related to our registration on NASDAQ and travel expenses.

Interest income. For the six months ended June 30, 2006, interest income was approximately $0.4 million, an increase of approximately $0.3 million when compared with interest income for the six months ended June 30, 2005. Our cash and investments position in 2006 reflects the proceeds of approximately $21.5 million received from the 2006 Placement (see Note 4). Interest income consisted of interest earned on short-term, liquid investments made by us from cash on deposit.

Liquidity and Capital Resources

From inception to June 30, 2006, we have incurred an aggregate net loss of approximately $15.1 million, as a result of expenses similar in nature to those described above. As of June 30, 2006, we had working capital of approximately $18.4 million and cash and cash equivalents of approximately $19.0 million.

We have incurred negative cash flow from operations since inception. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials and our continuing efforts to secure in-licensing opportunities. We have financed our operations since inception primarily through equity and debt financing. Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing. Such additional funds might not become available on acceptable terms and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. We will continue to fund operations from cash on hand and through similar sources of capital, which may include public or private financing activities. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. Based on our resources at June 30, 2006, we expect to end the year with cash and cash equivalents of approximately $12.0 million and anticipate that this will cover our operating requirements into the fourth quarter of 2007. We will need additional financing thereafter until we can begin generating revenue and achieve profitability, if ever.

14

However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:

• the progress of our research activities;

• the number and scope of our research programs;

• the progress of our pre-clinical and clinical development activities;

• the progress of the development efforts of parties with whom we have entered into research and development agreements;

• our ability to maintain current research and development programs and to establish new research and development and licensing arrangements;

• our ability to achieve our milestones under licensing arrangements;

• opportunities to sub-license our existing compounds to others;

• potential acquisitions of other compounds or companies;

• the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and

• the costs and timings of regulatory approvals.

We have based our estimate on assumptions that might prove to be incorrect. We might need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of equity or debt and other sources. We might seek to access the public or private equity markets when and if conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we might be unable to carry out our business plan. As a result, we might have to significantly delay certain activities or limit our operations and our business, financial condition and results of operations would be materially harmed.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Due to the nature of our short-term investments and our lack of material debt, we have concluded that we face no material market risk exposure. Therefore, no quantitative tabular disclosures are required.

Item 4. Controls and Procedures

(a) Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that they will meet their objectives. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

(b) No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

15

As a result of the SEC’s deferral of the deadline for foreign and non-accelerated filers’ compliance with the internal control requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as a non-accelerated filer we will not be subject to the requirements until our Annual Report on Form 10-K for fiscal year 2007.

16

PART II – OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

(a) On June 19, 2006, the Company held its Annual Meeting of Stockholders.

(b) At that Annual Meeting, Simon Pedder, Michael Weiser, Kevan Clemens, Neil Herskowitz, Johnson Y.N. Lau and Jason Stein were re-elected for one-year terms as members of the Board of Directors.

(c) In total, three matters were voted on at the Annual Meeting: (1) the re-election of the six directors as described in item (b) above; (2) the approval of an amendment of the Company’s 2004 Stock Plan; and (3) the ratification of J.H. Cohn, LLP as the Company’s independent registered public accounting firm for 2006. A tabulation for each matter is as follows:

1) The stockholders elected the following directors to serve for the ensuing year and until their successors are elected by the following votes:

	FOR	WITHHELD
Simon Pedder	10,494,447	48,873
Michael Weiser	10,494,447	48,873
Kevan Clemens	10,494,247	49,073
Neil Herskowitz	10,494,447	48,873
Johnson Y. N. Lau	10,494,447	48,873
Jason Stein	10,494,447	48,873

2) The stockholders approved an amendment to the Company’s 2004 Stock Plan increasing the number of shares of common stock reserved for issuance thereunder from 1,496,432 to 2,645,000 shares as follows:

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
8,914,573	52,804	504	1,575,439

3) The stockholders ratified the appointment of J. H. Cohn, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006 as follows:

FOR	AGAINST	ABSTAIN
10,301,972	240,665	683

Item 6. Exhibits

Exhibit Number	Description of Document	Registrant’s Form	Dated	Exhibit Number	Filed Herewith
10.8	Development and Commercialization Agreement dated as of May 5, 2006 between Active Biotech AB and Chelsea Therapeutics International, Ltd.				X
10.9	Exclusive License Agreement dated May 26, 2006 between Dainippon Sumitomo Pharma Co., Ltd. and Chelsea Therapeutics, Inc.				X
10.10	Finder’s Agreement dated May 26, 2006 between Paramount BioCapital, Inc. and Chelsea Therapeutics International, Ltd.				X
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

17

SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Chelsea Therapeutics International, Ltd.
Date: August 10, 2006	By:	/s/ J. Nick Riehle
		J. Nick Riehle
		Vice President, Administration and
		Chief Financial Officer

18

EX-10.8

Exhibit 10.8

Portions of this exhibit marked [*] are omitted and

are requested to be treated confidentially.

DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the “Agreement”), dated as of May 5, 2006 (the “Effective Date”) is entered into between Active Biotech AB, a Swedish corporation, having a place of business at Scheelevägen 22, SE-220 07 Lund, Sweden (“Active Biotech”) and Chelsea Therapeutics International, Ltd., a Delaware corporation having a place of business at 13950 Ballantyne Corporate Place, Suite 325, Charlotte, North Carolina 28277, U.S.A. (“Chelsea”). Each of Active Biotech and Chelsea shall be referred to herein as a “Party” and collectively as “Parties”.

RECITALS

A. Active Biotech and Chelsea are each engaged in the research, development and commercialization of pharmaceutical products.

B. Active Biotech possesses rights to preclinical compounds for the treatment of transplant rejection and certain other autoimmune diseases.

C. Chelsea has desires to further develop and commercialize such compounds.

AGREEMENT

The Parties agree as set forth below.

1. DEFINITIONS.

1.1 “Active Biotech IP” means Active Biotech Know-How and Active Biotech Patent Rights.

1.2 “Active Biotech Know-How” means all Information that is (a) Controlled by Active Biotech as of the Effective Date or at any time during the term of this Agreement, and (b) useful or necessary for the Development, Final Development, Manufacture or Commercialization of the Product.

1.3 “Active Biotech Patent Rights” means all Patent Rights that (a) are Controlled by Active Biotech as of the Effective Date or at any time during the term of this Agreement and (b) claim the Compound, the Product or their method of formulation, manufacture or use, including those patents listed on Schedule 1.3.

1.4 “Active Biotech Territory” means each country in the world other than those countries comprising the Chelsea Territory.

1.5 “Affiliate” means any corporation, company, partnership, joint venture and/or firm which controls, is controlled by, or is under common control with a specified person

or entity. For purposes of this Section 1.5, “control” shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity or voting interest with the power to direct the management and policies of such non-corporate entities.

1.6 “Business Day” means any day between and including Monday through Friday; provided, however, that, with respect to any payment to be made or notice to be provided hereunder by a Party, if the date on which such payment or notice is due falls on a national bank holiday in the country in which the principal place of business of such Party is located, such payment or notice shall be due on the next day on which banks in such country are open for business.

1.7 “cGCP” or “Good Clinical Practice” means Good Clinical Practices, as set forth in (a) Directive 2001/20/EC, and (b) 21 C.F.R. Parts 50, 56 and 312 et seq.

1.8 “cGLP” or “Good Laboratory Practice” means Good Laboratory Practices, as set forth in 21 C.F.R. Part 58 et seq., and the rules in force in the EU relating to GLP, including EC Directives 87/18 EEC, 88/320/EEC, and 1999/11/EC.

1.9 “cGMP” or “Good Manufacturing Practice” means Good Manufacturing Practices, as set forth in 21 C.F.R. Part 210, et seq., and EC Directive 91/356/EEC.

1.10 “Chelsea IP” means Chelsea Know-How and Chelsea Patent Rights.

1.11 “Chelsea Know-How” means all Information that is (a) Controlled by Chelsea as of the Effective Date or at any time during the term of this Agreement, and (b) useful or necessary for the Development, Final Development, Manufacture or Commercialization of the Product.

1.12 “Chelsea Patent Rights” means all Patent Rights that (a) are Controlled by Chelsea or its Affiliates as of the Effective Date or at any time during the term of this Agreement and (b) claim the Compound, the Product or their method of formulation, manufacture or use.

1.13 “Chelsea Territory” means each country in North America and South America, as may be adjusted pursuant to Section 4.1(b), 4.4, and 14.3(a)(i).

1.14 “Commercialization” or “Commercialize” means any and all activities directed to marketing, promoting, distributing, importing, offering to sell and/or selling the Product in a country, including market research, medical education programs, product related public relations, planning, detailing, marketing, distribution, creative development of visual sales aids, support of medical meetings, direct mail, telemarketing, and tele-detailing, media placement and advertising, field marketing events such as peer influence programs featuring medical thought leaders, educational grants, sales meetings, pharmacovigilance (adverse event reporting), and Phase IV clinical trials; provided, however, that Commercialization excludes Development, Final Development and Manufacture.

2

1.15 “Commercialization Plan” means a rolling multi-year plan and budget for Commercializing the Product, which shall include (a) a market development, marketing, sales, supply and distribution strategy, including an overall budget for anticipated marketing, promotion and sales efforts in the calendar year; (b) an identification of target populations and distribution channels to which each Party shall devote its promotion efforts, (c) the personnel and other resources to be devoted by each Party to such efforts, and (d) the number and positioning of details to be performed by each Party, as well as market and sales forecasts and related operating expenses, for the Product.

1.16 “Commercially Reasonable Efforts” means exerting such effort and employing such resources as would normally be exerted or employed by a specialty pharmaceutical company for a product of similar market potential at a similar stage of its product life, taking into account, the phase of development of, and technical risks relating to, the product, the development and proprietary positions of Third Parties, the regulatory structure involved, the likely cost of goods, the competitiveness and size of the relevant marketplace, and the potential profitability of the Product, when utilizing sound and reasonable scientific, business and medical practice and judgment in order to develop the Product and bring it into commercial use as quickly as is reasonably possible.

1.17 “Confidential Information” means all Information, whether or not patentable, regarding a Party’s technology, products, business or objectives, which is designated as confidential in writing by the Disclosing Party, whether by letter or by the use of an appropriate stamp or legend, prior to or at the time any such information or material is disclosed to the Receiving Party. Notwithstanding the foregoing, Information which is orally, electronically or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of a Party (a) if the Disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a written document or documents describing the Information and referencing the place and date of such oral, visual, electronic or written disclosure and the names of the persons to whom such disclosure was made or (b) such Information is of the type that is customarily considered to be confidential by persons engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this Agreement.

1.18 “Control” or “Controlled” means, with respect to any item of Information or any intellectual property right, the possession (other than pursuant to this Agreement) of the right or ability of a Party or any of its Affiliates to grant to the other Party or a Third Party access to and/or a license under such item or right as provided herein without violating the terms of any agreement or arrangement with any Third Party existing before or after the Effective Date.

1.19 “CTD” means the Common Technical Document for the Registration of Pharmaceuticals for Human Use, intended for submission to the FDA or the EMEA.

1.20 “Develop” or “Development” means, with respect to a Product, any and all activities directed to the discovery, construct development, pre-clinical and clinical development of such Product through the preparation of the CTD, including manufacturing process and formulation development; provided, that Development excludes Phase III Development, Final Development, Manufacture and Commercialization.

3

1.21 “Development Expenses” means all expenses incurred by the Parties with respect to the Development of the Product in accordance with the Preliminary Development Plan and the Development Plan, measured as follows: (a) with respect to services provided directly by such Party or its Affiliates, the FTE Rate for each FTE; and (b) all amounts paid to Third Parties with respect such Development, including the acquisition of Product for clinical studies.

1.22 “Development Plan” means a description of the Development and Phase III Development activities to be undertaken by the Parties with respect to the Product, together with a description of (a) all associated tasks and responsibilities, (b) personnel commitments, (c) time schedules and milestones, (d) budgets (including all expenditures, costs, and other resources anticipated to be devoted by the respective Parties to the Development tasks) and (e) other information relevant to the performance of such tasks.

1.23 “EMEA” means the European Medicines Evaluation Agency or any successor agency thereto.

1.24 “Executive Officer” means (a) with respect to Chelsea, the President of Chelsea (or a senior executive officer of Chelsea designated by Chelsea’s President), and (b) with respect to Active Biotech, the President of Active Biotech (or a senior executive officer of Active Biotech designated by Active Biotech’s President).

1.25 “FDA” means the U.S. Food and Drug Administration or any successor agency thereto.

1.26 “Final Development” and “Finalization” means, with respect to the country, any and all activities following the completion of the CTD directed to the filing of the relevant Regulatory Filings and the obtaining of Regulatory Approval of the Product in such country; provided, that Final Development excludes Manufacture and Commercialization.

1.27 “First Commercial Sale” means the first sale of the Product in a country by a Party or one of its Affiliates or Sublicensees to a Third Party on arm’s length commercial terms. Sales for test marketing, clinical trial purposes, named patient use or compassionate or similar use shall not be considered to constitute a First Commercial Sale.

1.28 “FTE” means a full-time equivalent scientist person year consisting of a total of 1,600 hours of work spent on or directly related to the Development of a Product. In the interest of clarity, though, a single individual who works more than 1600 hours in a single year shall be treated as one FTE regardless of the number of hours worked.

1.29 “FTE Rate” means $[*] per FTE. The FTE Rate shall be adjusted appropriately as proposed by the JDC as mutually agreed by the Parties to reflect the average cost of FTEs for the Parties. Such rate includes all salaries, benefits and other indirect costs of personnel, all routine supplies, and all overhead allocations.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

4

1.30 “IND” means an application submitted to a Regulatory Authority to initiate human clinical trials, including (a) an Investigational New Drug application or any successor application or procedure filed with the FDA, (b) any foreign equivalent of the application described in clause (a), and (c) all supplements and amendments that may be filed with respect to the foregoing.

1.31 “Information” means any and all technical, scientific and other know-how and information, inventions, trade secrets, knowledge, technology, means, methods, processes, practices, formulas, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and other intangible materials, including pre-clinical and clinical trial results, manufacturing procedures, test procedures, and purification and isolation techniques (whether or not confidential, proprietary, patented or patentable), and all tangible embodiments of any of the foregoing in written, electronic or any other form or other tangible materials that are used as research or development tools, such as assays and reference substances. Information shall also include all clinical, technical and other relevant reports, records, data, information and materials relating to the Product and all Regulatory Filings and Regulatory Approvals for the Product.

1.32 “Jointly-Owned IP” means all Information made jointly by the Parties during the course of performing activities under this Agreement.

1.33 “Joint Patents” means all Patent Rights claiming any inventions comprising Jointly-Owned IP.

1.34 “Licensed Compound” means a composition of matter that inhibits dihydroorotate dehydrogenase (i.e., IC₅₀ < 1µM in a whole cell assay in Jurkat cells in which the effect is reversed by addition of uridine according to ABR document number [*]), including all such compounds that are claimed in the Active Biotech Patent Rights listed in Schedule 1.3.

1.35 “Manufacture” or “Manufacturing” means process scale-up, validation, clinical and commercial manufacturing (including bulk manufacturing and finished pharmaceutical product manufacturing).

1.36 “Net Sales” means the amount invoiced by the Selling Party, its Affiliates or permitted Sublicensees for a Product in a country (including named patient sales and amounts received for compassionate use product), less the following deductions (to the extent such amounts are included in the amount invoiced):

(a) trade, quantity, promotional and/or other customary discounts actually allowed and taken directly with respect to such sales;

(b) rebates (including price reductions, rebates to social and welfare systems, chargebacks or reserves for chargebacks, cash rebate incentives, government mandated rebates and similar types of rebates, for example, Pharmaceutical Price Regulation Scheme and Medicaid);

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

5

(c) tariffs, duties, excises, sales taxes or other taxes imposed and paid with respect to the production, sale, delivery or use of such Product (excluding national, state or local taxes based on income); and

(d) the amount of chargebacks, and amounts repaid or credited by reason of rejections, damages or returns of goods, or because of retroactive price adjustments.

Notwithstanding the foregoing, no discount, allowance, rebate, chargeback, or any similar amount, however designated, that is given or associated with the purchase by the Third Party of any product other than the Product, or with the purchase or provision of any service, shall be taken into consideration in calculating any deductions from the invoiced amount. Such amounts shall be determined from the books and records of the Selling Party, its Affiliates or permitted sublicensees maintained in accordance with generally accepted accounting principles, consistently applied. In the case of any sale of the Product for consideration other than cash, such as barter or countertrade, Net Sales shall be calculated on the fair market value of the consideration received. If the Product is sold to any Third Party together with other products or services, the price of such Product, solely for purposes of the calculation of Net Sales, shall be deemed to be no less than the price at which such Product would be sold in a similar transaction to a Third Party not also purchasing other products or services. In the case of any sale of the Product between or among the Selling Party and its Affiliates or permitted sublicensees for resale, Net Sales shall be calculated as above only on the value charged or invoiced on the first arm’s length sale thereafter to a Third Party.

1.37 “Non-Owning Party” means, with respect to the Active Biotech IP, Chelsea, and, with respect to Chelsea IP, Active Biotech.

1.38 “Owning Party” means, with respect to the Chelsea IP, Chelsea, and, with respect to Active Biotech IP, Active Biotech.

1.39 “Party’s Territory” means, with respect to Chelsea, the Chelsea Territory, and with respect to Active Biotech, the Active Biotech Territory.

1.40 “Patent Rights” means all patents (including all reissues, extensions, substitutions, confirmations, re-registrations, re-examinations, supplementary protection certificates and patents of addition) and patent applications (including all provisional applications, continuations, continuations-in-part and divisions).

1.41 “Phase III Development” means any and all activities directed to third phase of human clinical trials of a drug which are large-scale trials to gain evidence of the efficacy and safety in a number of human subjects sufficient to support registration for a product or compound with the FDA, as described in 21 C.F.R. § 312.21(c), as may be amended, or, with respect to any country or jurisdiction other than the United States, its equivalent in such other country or jurisdiction.

6

1.42 “Product” means any pharmaceutical formulation containing the Licensed Compound.

1.43 “Regulatory Approval” means any and all approvals (including any applicable governmental price and reimbursement approvals), licenses, registrations or authorizations of the applicable Regulatory Authority necessary for the use, storage, import, promotion, marketing and sale of the Product in a country, including approval of all relevant Regulatory Filings.

1.44 “Regulatory Authority” means, with respect to a country, any governmental authority (whether federal, state, provincial, municipal or other) regulating the exportation, importation, use, manufacture, distribution, marketing and/or sale of pharmaceuticals, which, in the U.S., shall include the FDA and, in Europe, shall include the EMEA.

1.45 “Regulatory Filing” means, with respect to a country or region, an application submitted to the relevant Regulatory Authority for marketing approval of the Product, including a new drug application with respect to the United States and a marketing authorization application with respect to the EMEA.

1.46 “Royalty Term” means, on a Product by Product and country by country basis, the period of time commencing on the First Commercial Sale of a Product in a country and ending the longer of (a) the expiration of the last to expire of the Active Patent Rights, Chelsea Patents Rights and Joint Patents covering such Product in such country or (b) fifteen (15) years from the First Commercial Sale of such Product in such country.

1.47 “Selling Party” means (a) with respect to each country in the Chelsea Territory, Chelsea, and (b) with respect to each country in the Active Biotech Territory, Active Biotech.

1.48 “Sublicensee” means a Third Party to which a Party has granted, directly or indirectly, a right to develop, make, use, sell, market, promote, or otherwise exploit the Product in any country in its Territory.

1.49 “Sublicense Income” means all amounts received by either Party or its Affiliates from Sublicensees or otherwise with respect to rights granted to Third Parties to Commercialize the Product, but excluding:

(a) amounts received by the sublicensing Party or its Affiliates as payments for [*] activities undertaken by the sublicensing Party or its Affiliates for, or in collaboration with, such Third Parties or their Affiliates;

(b) amounts received by the sublicensing Party and/or its Affiliates from such Third Parties or their Affiliates as the [*] for the sublicensing Party’s or

(c) any of its Affiliates’ [*], except that amounts which exceed the [*] shall not be so excluded;

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

7

(d) amounts paid by such Third Party to the sublicensing Party or its Affiliates to purchase of such Product (not to exceed [*]% of the cost of goods sold); and

(e) royalties received by the sublicensing Party or its Affiliates.

1.50 “Third Party” means any person or entity other than Active Biotech, Chelsea or their respective Affiliates.

1.51 Other Defined Terms. Each of the following definitions is set forth in the section of this Agreement indicated below:

Definition:	Section:
Additional Cure Period	14.2(b)
Breaching Party	14.2(b)
Invalidity Claim	7.4(a)
JDC	2.2(a)
Marketing Rights Criteria	4.1(b)
Non-Breaching Party	14.2(b)
Non-Withdrawing Party	14.2(a)
Product Trademarks	5.2
Term	14.1
Withdrawing Party	14.2(a)

2. MANAGEMENT OF COLLABORATION.

2.1 General. The goal of the Parties is to effectively and efficiently develop and commercialize the Product in a manner to maximize its commercial value, and, subject to the terms and conditions of this Agreement, the Parties shall use their Commercially Reasonable Efforts to conduct their Development, Phase III Development, Final Development, Manufacture and Commercialization activities to maximize such commercial value for both Parties in the Territory. To achieve this and other objectives, the (a) Parties shall use Commercially Reasonable Efforts to conduct joint worldwide Development of the Product; (b) Active Biotech shall use Commercially Reasonable Efforts to conduct Phase III Development, Final Development and Commercialization of the Product in the Active Biotech Territory, and (c) Chelsea shall use Commercially Reasonable Efforts to conduct Phase III Development, Final Development and Commercialization of the Product in the Chelsea Territory. Notwithstanding anything to the contrary in this Agreement, Active Biotech does not grant Chelsea any rights to, and Chelsea and its Affiliates shall not, directly or indirectly, develop, make, have made, use, have sold, offer to sell, import, export, register, market, promote or otherwise exploit any Licensed Compounds or Product that is indicated for the treatment of multiple sclerosis for as long as Active Biotech is similarly restricted under any agreement with a Third Party.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

8

2.2 Joint Development Committee.

(a) Committee. The Parties shall establish a Joint Development Committee (the “JDC”), comprised of an equal number of representatives of each of Active Biotech and Chelsea, but not to exceed three representatives of each Party, at least one of whom from each Party shall have experience and seniority sufficient to enable him or her to make decisions on behalf of the Party he or she represents. The initial representatives of each Party to the JDC shall be designated within 30 days after the Effective Date and shall first meeting within 30 days after the Effective Date.

(b) Responsibilities. The JDC shall be responsible for: (i) reviewing and approving the Development Plan for the Product (including the budgets contained therein) and amendments thereto; (ii) reviewing and approving the Commercialization Plan for the Product and amendments thereto; (iii) monitoring the Parties’ and applicable Third Parties’ Development, Final Development, Manufacturing and Commercialization activities hereunder; (iv) providing overall guidance; (v) attempting to resolve disputes; and (v) assuming such other responsibilities as are set forth in this Agreement.

2.3 JDC Administration.

(a) Subcommittees. The JDC may, subject to the oversight of JDC, form subcommittees as it deems appropriate to fulfill its responsibilities.

(b) Changes to Representatives. A Party may change any one or more of its representatives to the JDC at any time upon written notice to the other Party. The number of representatives appointed by each Party to a Committee may be modified by mutual agreement of the Parties; provided, that at all times the number of representatives from each Party shall be equal.

(c) Schedule and Minutes. The JDC shall meet within thirty (30) days after the Effective Date and, thereafter, at least quarterly. The representatives of the JDC will mutually agree on the schedule for meetings. A representative of the Party, but not a member of the JDC, hosting a meeting of a Committee shall serve as secretary of that meeting. The secretary of the meeting shall prepare and distribute to all members of the JDC minutes of the meeting within 15 days following the meeting to allow adequate review and comment. Such minutes shall provide a description in reasonable detail of the discussions held at the meeting and a list of any actions, decisions or determinations approved by the JDC. Minutes of the JDC’s meeting shall be approved or disapproved, and revised as necessary, at its next meeting. The final minutes of any subcommittee shall be provided to the JDC or its overseeing committee.

(d) Location and Attendance. The location of meetings of the JDC shall alternate between Chelsea’s principal place of business and Active Biotech’s principal place of business, or as otherwise agreed by the Parties. The JDC may also meet by means of telephone conference call or videoconference, except that at least one meeting per calendar year will be held in person. Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JDC. If a Party’s representative to the JDC is unable to attend a meeting, such Party may designate an alternate to attend such meeting in place of the absent representative. In addition, each Party may, at its discretion, invite non-voting employees, and, with the consent of the other Party, consultants or scientific advisors, to attend the meetings of the JDC.

9

(e) Decision Making Process. Each Party, acting through its representatives to the JDC, shall have one vote. Any decision of the JDC shall require the affirmative vote of both Parties, through their representatives to such Committee. Any dispute shall be resolved in accordance with the provisions of Article 15.

3. PRODUCT DEVELOPMENT AND MANUFACTURE.

3.1 Development Tasks.

(a) Each Party shall use Commercially Reasonable Efforts to perform its respective Development tasks and Phase III Development tasks set forth in the then-current Development Plan for the Product within the estimated time periods set forth for such tasks therein.

(b) Attached hereto as Schedule 3.1(b) is a “Preliminary Development Plan” that sets forth the Development that will occur prior to the JDC’s implementation of a Development Plan and an overview of the further Development of the Product. Within 90 days following the Effective Date, the JDC shall establish a reasonably detailed Development Plan for the Product that shall be consistent with the Preliminary Development Plan. Prior to November 1 of each year, the JDC shall approve a Development Plan covering Development and Phase III Development activities for the Product in the following year. The JDC shall, from time to time, as appropriate based on Development and Phase III Development activities and results to date, amend or modify the then-current Development Plans. Although each Party may contribute effort toward each Development task, overall responsibility for conducting certain activities for the Product is anticipated to be allocated either to Chelsea, with the assistance of Active Biotech, or to Active Biotech, with the assistance of Chelsea, in the manner set forth in the then-current Development Plan. Each Party shall be responsible for its own Phase III Development tasks in such Party’s Territory; provided, that the protocols for Phase III clinical studies shall conform with the patient eligibility criteria, clinical endpoints and other key parameters established by the JDC with the objective that the results of such studies may be used by both Parties. Each Party shall perform its responsibilities under the Development Plan in accordance with all applicable regulatory requirements, including then-current cGLP, cGCP and cGMP. Each Party will inform the other Party, in writing, of the draft protocols for such clinical studies for review and input before commencement of any clinical studies. The Party sponsoring a clinical study will consider in good faith all comments provided by the other Party within twenty (20) days of its receipt of such protocols; provided, that, subject to the preceding sentences, the sponsoring Party may determine all final protocols so long as they conform with the Development Plan and the other requirements under this Agreement.

(c) Each Party will keep the other Party fully informed about its efforts to Develop the Product, including summaries of all results and data from such development efforts, progress towards meeting all goals and milestones in each Development Plan, significant findings and developments, any reasons for any delays in meeting milestones or timelines in any Development Plan, and any proposed changes thereto. Such disclosures will be made through the JDC, and in a written report provided to other Party at least once semi–annually.

10

Without limiting the generality of the foregoing, such reports will contain the following: (i) summary of development results and data, including progress of initiation of sites and enrollment of patients in clinical trials and any significant events occurring in the clinical development program, including adverse events; (ii) filing of any IND or Regulatory Filing in any jurisdiction; (iii) initiation of any clinical study; and (iv) identification of significant development results and clinical trial progress and Regulatory Approvals. The Parties shall maintain all records, documents, raw data and other Information relating to Development and Phase III Development in sufficient detail and in good scientific manner as will properly reflect all work done and results achieved in the development of the Product. Each Party shall have the right, which shall be exercised in a reasonable manner, to inspect, copy, cross-reference and use in accordance with the licenses granted under Section 7.1 such Information of the other Party for the purpose of carrying out its obligations and exercising its rights under this Agreement.

(d) The Parties shall share equally the Development Expenses for the Product, except Development Expenses relating to Phase III Development in a Party’s Territory incurred in accordance with the relevant Development Plan (including the budgets set forth therein), regardless of which Party is responsible for the performance of one or more of the relevant Development tasks. Each Party shall be responsible for all costs and expenses incurred in conducting its own Phase III Development.

(i) In order to effect a reconciliation of accounts for any calendar quarter with respect to the Development activities with respect to a Product, each Party shall provide to the other Party and to the JDC, within thirty (30) days after the end of such calendar quarter, a quarterly written accounting of and copies of supporting invoices for the expenditures, costs and other resources actually devoted by such Party to the applicable Development tasks for such Product (each, a “Quarterly Report”).

(ii) Within thirty (30) days after each Party’s receipt of the other Party’s Quarterly Report with respect to a calendar quarter, the Party which incurred less Development Expenses for such Product in such calendar quarter than the other Party (the “Over-Paying Party”) shall pay to the Over-Paying Party an amount such that each Party bears one-half (50%) of the Development Expenses with respect to such Product in such calendar quarter, except that Active Biotech shall pay the first $1,000,000 of Development Expenses.

3.2 Manufacturing. The Parties have not yet determined the preferred method of manufacturing the Product. The JDC shall determine such method with the objective of sourcing from reliable, GMP contract manufacturers that can supply the Product at the lowest cost. If the JDC is unable to agree on such an arrangement prior to 30 June 2007, each of the Parties shall then have non-exclusive, royalty-free licenses under the Joint Patents and other Party’s Patent Rights and Know How to the extent reasonably required to manufacture its requirements of the Product.

3.3 Scientific Publications. Each Party shall have the right to make disclosures pertaining to the Development or Phase III Development of the Product in scientific

11

journals or other publications to the extent permitted by the JDC. If so permitted, the publishing Party shall provide the other Party (the “non-publishing Party”) with an advance copy of the proposed publication, and the non-publishing Party shall then have thirty (30) days in which to recommend any changes it reasonably believes are necessary to preserve any Patent Rights or Information belonging in whole or in part to the non-publishing Party. If the non-publishing Party informs the publishing Party that such publication, in the non-publishing Party’s reasonable judgment, could be expected to have a material adverse effect on any Patent Rights or Information belonging in whole or in part to the non-publishing Party, the publishing Party shall delay or prevent such publication. In the case of Patent Rights, the delay shall be sufficiently long to permit the timely preparation and filing of a patent application. In the case of Information, the Information shall be deleted from the publication.

3.4 Material Transfer. Each Party shall, to the extent reasonably appropriate to facilitate the Development or Manufacture of the Product, provide to the other Party materials Controlled by the supplying Party. All such materials will be used only in furtherance of and in accordance with this Agreement, will not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying Party, and will be used in compliance with all applicable laws. Such materials shall be used with prudence and appropriate caution in any experimental work because not all of their characteristics may be known.

4. FINAL DEVELOPMENT AND COMMERCIALIZATION.

4.1 Party Territories.

(a) Each Party shall use Commercially Reasonable Efforts to Finalize and Commercialize the Product in such Party’s Territory in accordance with the then-current Commercialization Plan. Following completion of the CTD, each Party shall use Commercially Reasonable Efforts to prepare and file Regulatory Filings in such Party’s Territory in accordance with the then-current Commercialization Plan. Each Party shall own the Regulatory Filings and Regulatory Approvals for the Product in such Party’s Territory.

(b) Each Party’s right to Commercialize the Product in such Party’s Territory shall be subject to such Party possessing the capabilities and resources reasonably required to so Commercialize in such countries, including the capabilities and resources described in Schedule 4.1, in each case comparable to those capabilities and resources used by Third Parties to market other products for the same indication in the relevant country (the “Marketing Rights Criteria”). At the applicable times specified in Schedule 4.1 or, to the extent not specified therein, prior to filing the first Regulatory Filing in the relevant country in the Selling Party’s Territory, the Selling Party shall submit to the JDC its statement demonstrating compliance with the Marketing Rights Criteria. The JDC shall meet within 45 days after receipt of such statement to review such statement and to provide an opportunity for the other Party to provide input and advice to the Selling Party. If the JDC does not affirmatively determine, at the conclusion of this meeting, that the Selling Party has either satisfied the Marketing Rights Criteria or has put agreed upon plans in place to satisfy such criteria, then another meeting of the JDC shall be scheduled within not less than 60 days nor

12

more than 75 days. The other Party shall, within ten days after the initial meeting, provide to the Selling Party a written statement of what it regards as the critical and non-critical deficiencies of the plans. Within 45 days after the receipt of such statement, the Selling Party shall provide a written response, including a plan to address within 90 days (or such longer period as may be reasonably necessary due to the nature of the proposed remedy (e.g., the hiring of additional personnel)) what were identified by the other Party as critical deficiencies. The JDC shall review this plan and response at the second meeting. If the JDC does not affirmatively determine, at the conclusion of such meeting, that the Selling Party has either satisfied the Marketing Rights Criteria or has put agreed upon plans in place to satisfy such criteria, the provisions of Article 15 shall apply. If the Selling Party agrees, or it is determined, through the dispute resolution procedures of Article 15, that the Selling Party has not satisfied the Marketing Rights Criteria with respect to a country(ies) in the Selling Party’s Territory, then the other Party has the right of first offer to take over sales and marketing rights in such country(ies) in the affected Party’s Territory in accordance with the terms of this Article 4.

(c) Except as otherwise expressly provided in this Agreement, including Sections 7.3 and 8.4(d), each Party shall bear the costs and expenses incurred to conduct Phase III Development, Final Development and Commercialization of the Product in such Party’s Territory.

4.2 Final Development and Commercialization Obligations.

(a) Each Party shall seek all Regulatory Approvals of the Product in such Party’s Territory, and shall be the owner of such Regulatory Approvals. Each Party shall use Commercially Reasonable Efforts to compile, submit, and prosecute in a timely manner, in accordance with the relevant Commercialization Plan, all necessary data, documents and Regulatory Filings (including labeling) in a format acceptable to the applicable Regulatory Authorities in its Territory. Each Party shall assist the other Party in such matters to the extent reasonably requested.

(b) Each Party will maintain sufficient sales representatives and other resources to carry out in a timely manner its obligations hereunder in each country in such Party’s Territory. Such sales representative organization will be appropriately dimensioned for the size of the relevant patient population in each such country for the approved indications of the relevant Product and will be appropriately targeted for the predominant prescribers of pharmaceuticals for that relevant patient population. In performing all such marketing and promotion activities and disseminating Product information, each Party will comply with all applicable laws, regulations and guidelines concerning such promotional activities.

(c) To the extent permitted by law, the overall product positioning and marketing messages used by each Party will be consistent with the global strategic marketing plan developed by JDC. Each Party may modify the positioning and messages only to the extent required to respond to country-specific needs. Such global strategic marketing plan will be designed to attempt to maximize the global revenues and profits from the sale of the Product. The Parties shall jointly create centrally-developed branding elements (e.g., trademark use, trade dress and color schemes) for use with regard to the Product.

13

(d) To the extent that either Party performs Phase IV studies or other clinical studies of the Product following Regulatory Approval (“Post-Registration Studies”), such Party will inform the other Party, in writing, of the draft protocols for such studies before commencement of any such study. Once so informed, the other Party will have 30 days to review and provide comments and requests on the draft protocol and such protocols will be subject to the approval of the JDC. Each Party will perform such Post-Registration Studies at its own costs, unless otherwise agreed to by the Parties. Each Party may use the results of such Post-Registration Studies and reference such Post-Registration Studies in support of Regulatory Filings for the Product in its Territory. Each Party will assist the other Party in a timely fashion to provide such data required for regulatory submissions including periodic safety update reports or answering questions from regulatory authorities related to such studies.

(e) Each Party will keep the JDC informed and coordinate through the JDC regarding the preparation of its core promotional materials and core materials for training sales representatives with respect to the Product and, to the extent determined by the JDC, will provide the JDC with copies of such materials in advance of distribution. Each Party will consider in good faith any reasonable suggestions or comments made in a timely manner by the other Party on such materials.

4.3 Commercialization Plan. The Parties shall establish and maintain a Commercialization Plan with respect to the Product. No later than December 31, 2007, the JDC shall prepare a reasonably detailed Commercialization Plan for the Product. The Commercialization of the Product shall be governed by the Commercialization Plan for such Product. Prior to November 1 of each year, the JDC shall update and approve the Commercialization Plan. The JDC shall, from time to time, as appropriate based on Commercialization activities and results to date, amend or modify the then-current Commercialization Plans.

4.4 JDC Oversight. The JDC shall oversee the Commercialization of the Product in each Party’s Territory.

(a) If either Party chooses not to Finalize or Commercialize a Product in a particular country(ies) in such Party’s Territory, such Party shall notify the other Party, through the JDC, in writing and the Parties, through the JDC, shall determine whether to grant to the other Party or a Third Party the right to Finalize and/or Commercialize such Product in such country. The JDC shall have similar rights if the Selling Party fails to achieve the Marketing Rights Criteria.

(b) If the actual market share of a Product in any 12 months period after the second anniversary of the First Commercial Sale of such Product in a Party’s Territory is substantially below that achieved in the other Party’s Territory for the equivalent twelve (12) month period after the first anniversary of the First Commercial Sale of such Product in such other Party’s Territory, the JDC shall work with the relevant Party or Third Party distributor or sublicensee which is responsible for Commercialization of such Product in such country to attempt to remedy the situation. If such Product performance has not improved (and such market share is still substantially below such market share achieved in the other Party’s Territory) within 12 months despite such efforts, the JDC may appoint one of the Parties or a Third Party to co-promote the Product in such country(ies), pursuant to an agreement approved by both Parties.

14

4.5 Safety Coordination. With respect to the Product, the Parties shall, as soon as practical after the inclusion of such Product in the Collaboration, contract with a Contract Research Organization (“CRO”) to provide a centralized pharmacovigilence database (the “Safety Database”) for such Product, pursuant to which, among other things, the CRO shall promptly provide to each Party all information in the Safety Database necessary for such Party to comply with its obligations to report adverse events (“AEs”). Each Party shall, and shall ensure that its Affiliates and sublicensees, shall promptly provide to the CRO, for inclusion in the Safety Database all AE information with respect to such Product. Each Party shall comply with all applicable law with respect to the reporting of AEs. The Party sponsoring any clinical trial with respect to a Product shall be responsible for reporting any AEs with respect to such Product to the relevant Regulatory Authorities and other government authorities, and the Party Commercializing the Product in a country shall be responsible for reporting any AEs with respect to such Product to the relevant Regulatory Authorities and other government authorities in such country. Notwithstanding the foregoing, the procedures set forth in this Section 4.5 shall not be construed as restricting either Party’s ability to take any action that it deems to be appropriate or required of it under applicable law.

5. NAMES AND TRADEMARKS.

5.1 Non-Proprietary Names. The JDC shall appoint a Party to obtain the USAN (United States Adopted Names) and the INN (International Nonproprietary Names) for the Product.

5.2 Product Trademarks. The JDC shall determine the trademarks of the Product (the “Product Trademarks”); provided, that no Product Trademark shall be the same as or confusingly similar to those trademarks then used by any Party for any of its other products nor contain the words “Active Biotech” or “Chelsea”. Each Party shall own all right, title and interest in and to the Product Trademark, and all goodwill with respect thereto, in each country in such Party’s Territory. Except as otherwise agreed by the Parties, neither Party shall make any use of any of the Product Trademarks except to identify and promote the Product as contemplated hereunder for Commercialization in such Party’s Territory; provided, neither Party shall be obligated to use any of the other Party’s Product Trademarks.

5.3 Protection of Trademarks. Each Party shall cooperate with the other Party to protect the interest of such other Party in the Product Trademarks in such other Party’s Territory. Each Party shall promptly inform the other Party of any actual or apparent infringement of such other Party’s interest in the Product Trademarks in such other Party’s Territory which may come to its attention during the Term.

6. ADDITIONAL OBLIGATIONS.

6.1 In the performance of the obligations hereunder with respect to the Development, Phase III Development, Final Development, Manufacture and Commercialization of the Product, each Party shall (a) comply, and shall ensure that its Affiliates, Sublicensees or Third Party contractors comply, with cGCP, cGLP and cGMP, and (b) use, and shall ensure that its Affiliates and permitted Sublicensees use, Commercially Reasonable Efforts to carry out its Development, Phase III Development, Final Development, Manufacturing and Commercialization activities in compliance with all applicable laws governing the conduct of such activities, including all applicable export and import control laws.

15

7. INTELLECTUAL PROPERTY.

7.1 Licenses.

(a) License from Chelsea. Subject to the terms and conditions of this Agreement, Chelsea hereby grants to Active Biotech during the Term, (i) the exclusive, worldwide license (except as to Chelsea and its Affiliates and permitted Sublicensees) under the Chelsea IP and Chelsea’s interest in the Jointly-Owned IP to Develop the Product, (ii) the exclusive, royalty-bearing license under the Chelsea IP and Chelsea’s interest in the Jointly-Owned IP to conduct Phase III Development, Finalize and Commercialize and Manufacture the Product in the Active Biotech Territory for all uses, other than the treatment, pallation or prevention of multiple sclerosis, subject to the last sentence of Section 2.1. Active Biotech may sublicense the rights granted under the Chelsea IP to its Affiliates and a Third Party(ies) to the extent provided in Section 7.1(d).

(b) License from Active Biotech. Subject to the terms and conditions of this Agreement, Active Biotech hereby grants to Chelsea during the Term, (i) the exclusive, worldwide license (except as to Active Biotech and its Affiliates and permitted Sublicensees) under the Active Biotech IP and Active Biotech’s interest in the Jointly-Owned IP to Develop the Product and (ii) the exclusive, royalty-bearing license under the Active Biotech IP and Active Biotech’s interest in the Jointly-Owned IP to conduct Phase III Development, Finalize and Commercialize the Product in the Chelsea Territory. Chelsea may sublicense the rights granted hereunder to its Affiliates and a Third Party(ies) to the extent provided in Section 7.1(d).

(c) No Implied Rights. Neither Party makes any grant of intellectual property rights by implication. All rights or licenses are or shall be granted only as expressly provided in this Agreement. Without limiting the generality of the foregoing, a license granted under Information Controlled by a Party shall not imply the grant of any license under Patents Rights claiming such Information or its practice.

(d) Sublicenses. Neither Party may sublicense any of rights granted under Section 7.1 without the other Party’s prior written consent, which shall not be unreasonably withheld or delayed, except:

(i) Each Party may engage contract research organizations to monitor and manage clinical trials in accordance with the relevant Development Plan so long as such engagements comply with the guidelines established from time to time by the JDC and such Party remains responsible for all such activities;

(ii) The Selling Party may engage contract sales organizations to provide additional sales representatives to supplement the Selling Party’s sales force in the Selling Party’s Territory so long as such Selling Party’s employees continue to perform the marketing and sales management; and

16

(iii) Each Party may sublicense without the consent of the other Party in any country other than the United States, Japan, the United Kingdom and Germany.

The sublicensing Party shall promptly provide written notice to the other Party of any sublicense granted pursuant to this Section 7.1(d). Upon request, the Selling Party shall provide the other Party copies of any written agreement granting such permitted sublicenses, which written agreements will contain confidentiality, reporting, audit rights and access to records and data, and Confidential Information obligations comparable to those set forth herein. The Selling Party shall remain liable for the performance by all sublicensees of all obligations hereunder. Permitted sublicensees shall not have the right to grant further sublicenses.

7.2 Ownership.

(a) Ownership. As between the Parties, Active Biotech shall own all Active Biotech IP and Chelsea shall own all Chelsea IP. All Jointly-Owned IP and Joint Patents shall be owned jointly by Active Biotech and Chelsea.

(b) Joint IP. Subject to the licenses granted hereunder, neither Party shall have an obligation to account to the other, or obtain the consent of the other, with respect to the exploitation (directly or through licensees or other Third Parties) of any Jointly-Owned IP or Joint Patents, and each Party hereby waives any right it may have under the laws of any jurisdiction to require such an accounting or consent. Neither Party will abandon or assign Jointly-Owned IP or Joint Patents prior to offering the other Party the right to acquire its interest in such Jointly-Owned IP or Joint Patents. Subject to the foregoing, each Party shall have the right to abandon its interest in the Jointly-Owned IP or Joint Patents, or to assign, license or otherwise transfer its interest in the Jointly-Owned IP or Joint Patents to its Affiliates or any Third Party without the consent of the other Party so long as such sale, license or transfer is subject to the licenses granted pursuant to this Agreement and is otherwise consistent with this Agreement.

(c) Policies. In order to protect the Parties’ patent rights with respect to such Party’s Confidential Information, each Party agrees to maintain a policy that requires its employees, contractors and agents to record and maintain all data and information developed in the course of this Agreement in such a manner as to enable the Parties to use such records to establish the earliest date of invention and/or diligence to reduction to practice. Each Party shall require all employees, agents and independent contractors performing activities under or contemplated by this Agreement to enter into written, binding agreements obligating each such employee, agent and independent contractor to assign his, her or its interest in any Information conceived or reduced to practice in the conduct of such activities to the Party for which such employee, agent or independent contractor is providing services; provided that, in the case of an independent contractor, if obtaining the assignment of such an Information to the Party for which such independent contractor is providing services is not practicable, such Party shall use commercially reasonable efforts to have the contractor grant a license to the Party, with right to grant sublicenses to the other Party, with respect to such Information.

17

7.3 Prosecution and Maintenance of Patent Rights.

(a) Sole IP.

(i) Chelsea shall be responsible, at its expense, for the preparation, filing, prosecution (including any interferences, oppositions, reissue proceedings and reexaminations) and maintenance of Chelsea IP in its sole discretion and shall have no liability to Active Biotech for any failure to obtain a patent on the Chelsea IP or the failure to obtain a patent of commercially useful scope on the Chelsea IP. Active Biotech shall be responsible, at its expense, for the preparation, filing, prosecution (including any interferences, oppositions, reissue proceedings and reexaminations) and maintenance of Active Biotech IP in its sole discretion and shall have no liability to Chelsea for any failure to obtain a patent on the Active Biotech IP or the failure to obtain a patent of commercially useful scope on the Active Biotech IP.

(ii) If the Owning Party elects not to pursue the filing, prosecution or maintenance of the Active Biotech IP or the Chelsea IP, as applicable, in a particular country, then the Owning Party shall so notify the Non-Owning Party promptly in writing and in reasonable time to enable the Non-Owning Party to meet any deadlines by which an action must be taken to establish or preserve any such Active Biotech IP or Chelsea IP in such country. Upon receipt of each such notice from the Owning Party, the Non-Owning Party shall have the right, but not the obligation, to pursue the filing or support the continued prosecution or maintenance of such Active Biotech IP or Chelsea IP in such country. Any such action taken by the Non-Owning Party shall be in the name of the Owning Party and shall be at the Non-Owning Party’s expense.

(b) Joint IP.

(i) The JDC shall determine which Party shall prepare, file, prosecute (including any interferences, oppositions, reissue proceedings and reexaminations) and maintain, jointly in Active Biotech’s and Chelsea’s names, with the out-of-pocket expenses (including all costs of outside counsel, which counsel shall be subject to the other Party’s reasonable approval) shared equally by the Parties, any patent applications necessary to protect the proprietary positions of the Parties in any Joint Patents. Active Biotech and Chelsea shall consult in good faith and mutually agree to which countries (hereinafter “Core Countries”) in which such Party shall file, prosecute and maintain any such patent applications and consult with the JDC regarding the same. If such Party elects not to prepare, file, prosecute or maintain any Joint Patent , such Party shall promptly notify the other Party and the other Party shall have the right to prepare, file, prosecute and maintain such patent application or patent, in Active Biotech’s and Chelsea’s names, with the out-of-pocket expenses shared equally by the Parties.

(ii) Notwithstanding the foregoing, either Party may decline to pay its share of out-of-pocket expenses for preparing, filing, prosecuting and maintaining any Joint Patent in a particular country or countries, in which case the declining Party shall assign to the other Party all of its right, title and interest in and to any such

18

patent application or patent in the relevant country or countries and all Patent Rights related thereto shall be considered part of such other Party’s Patent Rights (i.e., Chelsea Patent Rights or Active Biotech Patent Rights, as the case may be).

(iii) Each Party shall provide the other Party with copies of all proposed substantive communications to all patent offices regarding Joint Patents in reasonable time before the due date in order to enable the other Party an opportunity to comment on the content thereof, unless the other Party has declined to pay the expenses thereof. Generally, a reasonable time for review and comment shall be thirty (30) days, unless the time periods set for filing by the relevant patent office is less than two (2) months from the date of receipt of the paper calling for a reply, in which case a shorter reasonable time shall be applicable. In any such situation where a shorter reasonable time is to be used, the prosecuting Party shall promptly notify the other Party of the shorter period by which it intends to act. Each Party will provide the other Party with copies of all substantive communications from all patent offices regarding Joint Patents promptly after the receipt thereof, unless the other Party has declined to pay the expenses thereof. Each Party shall make available to the other Party, or its authorized attorneys, agents or representatives, such of its employees whom the other Party in its reasonable judgment deems necessary in order to assist it in obtaining patent protection for any inventions included within the Jointly-Owned IP. Each Party shall sign or use its best efforts to have signed all legal documents necessary to file and prosecute Joint Patents or to obtain or maintain any Joint Patent at no cost to the other Party. The Parties shall share equally all expenses and fees paid by either Party to any patent office for the activities associated with the filing, prosecution, issuance and maintenance of any Joint Patent in the Core Countries. Any internal and/or out-of-pocket-expenses (including outside counsel fees) for review costs incurred by either Party for the preparation, filing, prosecution, issuance and maintenance of any such patent application and resulting patent shall be borne by such Party.

7.4 Infringement of Party IP. During the Royalty Term, each Party shall give (a) prompt notice to the other Party of any Third Party act which may infringe any Active Biotech Patent Rights, Chelsea Patent Rights or Joint Patent covering the development, manufacture, use or sale of a Product and (ii) any evidence of the foregoing that is reasonably available to it. The Party not enforcing the applicable Patent Rights pursuant to this Section 7.4 shall, at the request and expense (unless otherwise provided in this Section 7.4) of the other Party, provide reasonable assistance to the other Party in connection with enforcing such Patent Rights.

(a) Sole IP.

(i) With respect to any actual or suspected infringement or misappropriation of the Owning Party’s IP relating to the development, manufacture, use or sale of a Product (a “Third Party Infringement”), the Owning Party shall have the initial right, but not the obligation, to initiate an appropriate suit in respect of such Third Party Infringement anywhere in the world and the Owning Party shall have the sole right, but not the obligation, to initiate an appropriate suit in respect of such Third Party Infringement anywhere in the world.

19

(ii) Subject to any contractual obligations to, or restrictions imposed by, the Owning Party’s Third Party licensors, in the event that the Owning Party does not, within six (6) months of written notice from the Non-Owning Party of a such Third Party Infringement in the Non-Owning Party’s, commence and vigorously and continuously pursue thereafter an action to enjoin such infringement, the Non-Owning Party shall be entitled, at its expense, to commence the action in its name or otherwise take appropriate steps to halt such alleged infringement in the Non-Owning Party’s Territory, after giving the Owning Party advance notice of its intent to file any such suit and the reasons therefor.

(iii) If a Party initiates suit pursuant to paragraphs (i) or (ii) above:

(1) the enforcing Party shall provide the non-enforcing Party with an opportunity to make suggestions and comments regarding such suit, and shall consider in good faith the suggestions and comments of the non-enforcing Party; and

(2) the enforcing Party shall keep the non-enforcing Party promptly informed and shall from time to time discuss with the non-enforcing Party the status of any such suit, and shall provide the non-enforcing Party with copies of all material documents filed in, and all material written communications relating to, such suit.

(iv) The Parties shall share equally all out-of-pocket expenses of any suit brought by either Party pursuant to this Section 7.4, including attorneys’ fees and court costs, with respect to a Product-Related Infringement; provided, however, that the non-enforcing Party may reduce, or decline to pay, its share of such expenses by providing written notice to the other Party. Any recovery, lump-sum settlement, royalty payment or other consideration received by the Parties as a result of such litigation or settlement of any Product Related Infringement shall be disbursed as follows:

(1) first, each Party shall be reimbursed pro rata for the out-of-pocket expenses of the suit actually paid by it in connection with the alleged infringement, including attorney’s fees and court costs; and

(2) second, the Parties shall share any remaining amount in [*] to the [*].

(v) If necessary in order to commence or maintain or to obtain a more effective remedy in any suit referred to in this Section 7.4, the other Party shall, at its expense, join as a party to such suit, but shall be under no obligation to participate except to the extent that such participation is required as the result of being a named party to such suit. Further, such other Party shall, at its expense, offer reasonable assistance to the suing Party in connection therewith.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

20

(vi) The Non-Owning Party shall not settle any suit involving the Owning Party’s IP which the Non-Owning Party is permitted to bring under this Section 7.4 without obtaining the prior written consent of the Owning Party, which consent shall not be unreasonably withheld. The Owning Party shall not settle such claims (including any suit or other proceeding) against such Third Party, including the grant of any rights in respect of the Owning Party’s IP, without the other Party’s written consent if such settlement may adversely affect such other Party’s rights hereunder.

(vii) In the event that any counterclaims are brought against a Party in any suit commenced by such Party pursuant to this Section 7.4, such Party shall have the sole right to defend such counterclaims. Notwithstanding anything to the contrary herein, in the event of a declaratory judgment action or other claims alleging invalidity or unenforceability of any of the Owning Party’s IP (an “Invalidity Claim”), the Non-Owning Party shall have no right to settle such action or other claims by admitting the invalidity or unenforceability of the Owning Party’s IP, without the prior written consent of the Owning Party in its discretion.

(b) Joint IP. In the event that any Joint Patent is infringed or misappropriated by a Third Party, Active Biotech and Chelsea shall discuss whether, and if so, how, to enforce such Joint Patent or defend such Joint Patent (whether in an infringement action, declaratory judgment, settlement or otherwise). If the Parties decide to jointly bring suit to enforce or defend such rights or negotiate a settlement and/or license agreement, each Party shall pay share equally all out-of-pocket expenses of any such suit, including attorneys’ fees and court costs; provided, that either Party may reduce, or decline to pay, its share of such expenses by providing written notice to the other Party. The recovery allocation provisions of Section 7.4(a)(iv) shall apply with respect to any damages, monetary awards, or amounts recovered or received in connection with prosecuting the infringer or negotiating a settlement and/or license agreement (license fees, royalties, etc.) in the same way as they apply to a Product-Related Infringement. In the event only one Party wishes to participate in the proceeding or defense or negotiation of a settlement and/or license agreement, it shall have the right to proceed alone, at its expense, and may retain any recovery; provided, that, at the request and expense of the participating Party, the other Party agrees to cooperate and join in any proceedings in the event that a Third Party successfully asserts that the co-owner of such Joint Patent is necessary or indispensable to such proceedings. Notwithstanding anything to the contrary in this Section 7.4(b), following a Party’s receipt of notice from the other Party that any Joint Patent has been infringed or misappropriated by a Third Party, neither Party will enter into any agreement or understanding with such Third Party regarding the Licensing of the infringing Jointly-Owned IP without the prior written consent of other Party.

7.5 Claimed Infringement. In the event that a Third Party at any time provides written notice of a claim to, or brings an action, suit or proceeding against, a Party, or any of its Affiliates or sublicensees, claiming infringement of its Patent Rights or unauthorized use or misappropriation of its know how, based upon an assertion or claim arising out of the

21

Development, Phase III Development, Final Development, Manufacture, use, sale or other Commercialization of the Product, such Party shall promptly notify the other Party of the claim or the commencement of such action, suit or proceeding, enclosing a copy of the claim and all papers served. Subject to the indemnity obligations under Article 10, such Party shall have the sole right to defend such claim, action, suit or proceeding; provided, however, that, to the extent that any action would involve the enforcement of the other Party’s Patent Rights or the defense of an Invalidity Claim with respect to the other Party’s Patent Rights, the general concepts of Section 7.4 shall apply to the enforcement of such other Party’s Patent Rights or the defense of such Invalidity Claim.

7.6 Mutual Cooperation. In the event that any Party takes action pursuant to Section 7.4, the other Party shall cooperate with and reasonably assist the Party so acting to the extent reasonably possible, including providing access to relevant witnesses, documents and other records, the joining of suit as required by this Agreement or as otherwise desirable. If such suit is brought solely by the enforcing Party, the enforcing Party shall pay such other Party’s reasonable out-of-pocket costs incurred in providing such cooperation and assistance.

7.7 Hatch-Waxman Certification. Each Party shall inform the other of any certification regarding any Patent Right such Party receives pursuant to either 21 U.S.C. §§ 355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV) or its successor provisions, or any similar provisions in a country other than the United States, and shall provide the other Party with a copy of such certification within five days after receipt. The initiation and prosecution of any legal action as a result of such certification or any recovery obtained as a result of such legal action shall be as defined in Section 7.4.

7.8 Patent Term Restoration/Supplemental Protection. The Parties shall cooperate with each other in obtaining patent term restoration or supplemental protection certificates or their equivalents in any country. In the event that elections with respect to obtaining such patent term restoration are to be made, the Owning Party shall have the right to make the election.

7.9 Marking of Patented Product. Each Selling Party shall mark, and have marked by its Affiliates and sublicensees, every Product manufactured, used or sold by it, its Affiliates or sublicensees in the Territory, in accordance with the laws of the United States and any other applicable laws relating to the marking of patented articles with notices of patent.

8. PAYMENTS.

8.1 Initial Payments. Chelsea will pay $1,000,000 to Active Biotech within five (5)) Business Days following the Effective Date. Chelsea shall pay such amount by wire transfer to an account designated by Active Biotech. Such amount shall be held in trust by Active Biotech and such amounts shall be used to pay for both Parties Development Expenses as required by Section 3.1(d)(ii). Active Biotech shall pay the first $1,000,000 of Development Expenses incurred after the signing of this Agreement; provided, that any such expenses incurred between signing and the first meeting of the JDC, pursuant to Section 2.3(c), shall be considered Development Expenses hereunder only if such expenses are approved by both Chelsea and

22

8.2 Active Biotech, whether in writing or in an email clearly expressing such Party’s intent to approve such expense.

8.3 Milestone Fees. Chelsea shall pay to Active Biotech the non-creditable milestone fee listed below within [*] days after the achievement of each milestone event in the Chelsea Territory described below:

Milestone Event:	Milestone Fee:
(i) First [*]	$	[	*]
(ii) [*]	$	[	*]
(iii) Receipt of [*]	$	[	*]
(iv) The receipt of [*]	$	[	*]
(v) The receipt of [*]	$	[	*]

Each milestone payment above shall only be made once under this Agreement upon the initial accomplishment of the relevant milestone.

8.4 Sublicenses. Each Party shall pay a percentage of all Sublicense Income to the non-sublicensing Party as set forth below.

Date of Sublicense:	Percentage of Sublicense Income
After [*]	[	*]%
After [*]	[	*]%
After [*]	[	*]%

8.5 Royalties.

(a) Royalties in Active Biotech Territory. Active Biotech shall pay to Chelsea a royalty of [*]% of the Net Sales of the Product sold by Active Biotech in the Active Biotech Territory, except as provided for in Sections 8.4(f), 8.4(g) and 14.3(a)(iii).

(b) Royalties in Chelsea Territory. Chelsea shall pay to Active Biotech a royalty of [*]% of the Net Sales of the Product sold by Chelsea in the Chelsea Territory, except as provided for in Sections 8.4(f), 8.4(g) and 14.3(a)(iii).

(c) Reports and Payments. The royalty payments owed pursuant to Sections 8.4(a), (b) and (g) shall be paid by the owing Party within forty-five (45) days after the end of each calendar quarter during the Term. Each such payment shall be accompanied by a written report specifying the calculation of the Net Sales and the royalty payable thereon.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

23

(d) Third Party Fees and Royalties. Each Party shall bear any milestones, royalties and other payments payable to Third Parties in consideration of a license(s) under such Third Party intellectual property rights in respect of the Development, Phase III Development, Finalization or Commercialization of the Product in such Party’s Territory, pursuant to any agreement or understanding entered into with a Third Party licensor; provided, if the Parties mutually agree, or if mutually acceptable independent patent counsel not regularly employed by either Party determines, that such license is reasonably necessary for such Development, Phase Three Development, Final Development or Commercialization (to the extent determined other than pursuant to a claim subject to indemnification under Article 10) in all Territories or for the general Development of the Product, then the Parties shall equally bear any such milestones, royalties and other payments payable to Third Parties. Each Party shall be solely responsible for any other milestones, royalties and other payments payable to Third Parties in respect of the Final Development or Commercialization of the Product in such Party’s Territory.

(e) Royalty Term. Each Party’s obligation to pay royalties under Section 8.4 in respect of each Product in each county shall expire upon the expiration of the Royalty Term for such Product in such country. Upon the expiration of the Royalty Term for a Product in any country, all of the licenses and rights granted to the other Party with respect to such Product in such country shall become irrevocable, perpetual, fully-paid, and royalty-free non-exclusive licenses.

(f) Generic Competition. Royalties payable under Sections 8.4 shall be reduced to [*]% of Net Sales in any country upon the earlier of

(i) Expiration of all Valid Claims of Active Biotech Patent Rights, Chelsea Patent Rights, and Joint Patents covering the manufacture, use or sale of the Product in such country; and

(ii) Entry of generic competition, which shall mean that a Third Party is selling in such country a product that (i) contains the Licensed Compound in that is approved for the same use as the Product and (ii) achieves at least [*]% of the total number of prescriptions for equivalent units for products containing the Licensed Compound that are used in a given calendar quarter; provided, that such reduction as a result this paragraph (ii) shall continue for only so long as there exists such generic competition in such country. Such market share shall be measured by IMS data or other mutually acceptable and reliable Third Party sources.

(g) Sublicense Royalties. Each Party shall pay the other Party [*]% of all royalties received from each Sublicensee to which it grants rights in its respective Territory, but not less than [*]% of such Sublicensee’s Net Sales, nor more than [*]% of such Sublicensee’s Net Sales.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

24

8.6 Interest. In addition to any other remedies available to the Party to whom payments are owed pursuant to this Agreement, if the Party owing such payments fails to pay any amounts when due, the Party owing such payments shall pay the Party to whom payments are owed a late payment charge equal to one percent (1%) per month (or the highest rate permitted by law, if lower).

8.7 Records. Each Party and its Affiliates shall, during the Term and for a period of three years thereafter, maintain complete and accurate books and records of account relating to the sale of the Product in such Party’s Territory, the achievement of the milestone events in Section 8.2, and the calculation of Net Sales and the obligations to be shared by the Parties pursuant to Sections 3.3(d), 3.4, 8.3 and 8.4(g), in sufficient detail to permit the accurate calculation of the payments due to the other Party hereunder.

8.8 Audits. Each Party (the “Auditing Party”) shall have the right during the Term and for a period of three (3) years thereafter, to have an independent certified public accountant reasonably acceptable to the other Party (the “Audited Party”) examine the relevant books and records of the Audited Party and its Affiliates during normal business hours, not more than once each calendar year, to verify that appropriate accounting and payments have been made under this Agreement. In the event a determination is made that the Auditing Party has been underpaid or overcharged, the Audited Party shall promptly pay to the Auditing Party the amount by which the Auditing Party was underpaid or overcharged along with interest at a rate of interest equal to one percent (1%) per month (or the highest rate permitted by law, if lower) for the period that such amounts were due. The fees and expenses of the accountant performing any verification pursuant to this Section 8.7 shall be paid by the Auditing Party;, if a determination is made that the amount paid to the Auditing Party with respect to any calendar year was less than ninety five percent (95%) of the amount properly due to the Auditing Party, the Audited Party shall promptly reimburse the Auditing Party for the costs of such verification. Any accountant which examines the books and records of the Audited Party pursuant to this Section 8.7 shall sign a confidentiality agreement reasonably satisfactory to the Audited Party.

8.9 Rate of Exchange for Non-U.S.D. Payments. All payments shall be made in U.S. Dollars. With respect to any payments that may become payable hereunder based on currencies other than U.S. Dollars, the rate of exchange to be used shall be the average commercial rate of exchange for the last Business Day of each month during the applicable quarter in which such payment obligation arose for the conversion of local currency to United States Dollars as published by The Wall Street Journal (or if it ceases to be published, a comparable publication to be agreed upon by the Parties). If at any time legal restrictions in any country in the Territory prevent the prompt remittance of any payments hereunder, the paying Party shall have the right and option to make such payments by depositing the amount thereof in local currency to the account of the payee Party in a bank or depository in such country designated by the payee Party.

8.10 Taxes. In the event that laws or regulations require withholding of taxes on behalf of a Party from any payment owed by the other Party hereunder, such taxes will be deducted from such payment by the paying Party and will be remitted by the paying Party on behalf of the paid Party to the appropriate tax authority. The paying Party will furnish the paid Party with proof of payment of such taxes as soon as practicable after such payment is made. In

25

the event that documentation is necessary in order for the paid Party to secure an exemption from or a reduction in any withholding of taxes, the paid Party shall provide such documentation in a timely manner to the paying Party. The Parties will reasonably cooperate in completing and filing documents required under the provisions of any applicable tax laws or under 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.

9. CONFIDENTIALITY.

9.1 Status of Active Biotech IP and Chelsea IP. All Active Biotech IP shall constitute the Confidential Information of Active Biotech. All Chelsea IP shall constitute the Confidential Information of Chelsea. The Jointly-Owned IP shall constitute the Confidential Information of both Parties.

9.2 Use of Confidential Information. During the Term and thereafter, each Party shall use the other Party’s Confidential Information solely for the purposes contemplated in this Agreement.

9.3 Disclosure of Confidential Information.

(a) During the Term and thereafter, neither Party shall directly or indirectly publish, disseminate or otherwise disclose, deliver or make available to any person outside its organization any of the other Party’s Confidential Information. Each Party shall have the right to provide Confidential Information received from the other Party to its employees, consultants and advisors, and the employees, consultants and advisors of its Affiliates, who have a need to know the Confidential Information and an obligation to maintain in confidence the Confidential Information of the party that releases, exchanges or discloses the Confidential Information (the “Disclosing Party”). For purposes of clarity, notwithstanding anything to the contrary, each Party shall be entitled to make disclosures of Jointly-Owned IP to Third Parties for purposes which are authorized and contemplated by this Agreement.

(b) To the extent that a Party has been granted the right to sublicense under the terms of this Agreement, each Party shall have the right to provide Confidential Information received from the other Party to the employees, consultants and advisors of its sublicensees and potential sublicensees who have a need to know the Confidential Information and an obligation to maintain in confidence the Confidential Information of the Disclosing Party.

(c) Each Party shall have the right to share with its investors the information conveyed to such Party by the other Party under Sections 3.3 and 3.4 and Article 8 and information about the Development, Final Development, Manufacture and Commercialization of the Product. In each case, such disclosure shall be under an obligation to maintain in confidence such Confidential Information of the other Party.

9.4 Release from Restrictions. Notwithstanding the provisions of Sections 9.2 and 9.3, a Party shall not be prevented from using or disclosing the Confidential Information of the other Party which (a) was known or used by the party that receives the Confidential Information (the “Receiving Party”) prior to its date of disclosure to the Receiving Party; (b) either before or after its date of disclosure to the Receiving Party, is lawfully disclosed to the Receiving Party by

26

a Third Party rightfully in possession of the Confidential Information, but only to the extent of the rights obtained from such Third Party; (c) either before or after the date of disclosure to the Receiving Party, becomes published or otherwise publicly known through no fault or omission on the part of the Receiving Party; (d) is independently developed by the Receiving Party without any use of the Confidential Information of the Disclosing Party; or (e) is reasonably necessary to comply with applicable government laws or regulations; provided, that the Receiving Party provides written notice of such disclosure to the Disclosing Party and takes all reasonable actions to avoid and/or minimize the degree of such disclosure.

9.5 Disclosure of Financial and Other Terms. Except as required by applicable laws, treaties, and regulations (including securities laws), the Parties agree that the terms of this Agreement will be considered Confidential Information of both Parties to which Section 9.3 applies. Notwithstanding the foregoing, (a) either Party may disclose such terms as are required to be disclosed in its publicly-filed financial statements or other public statements pursuant to applicable laws, regulations, and stock exchange rules (e.g., the U.S. Securities and Exchange Commission, Stockholmbörsen, or any other stock exchange on which securities issued by either Party may be issued) or otherwise disclosed pursuant to applicable law; provided, that (i) the terms of this Agreement shall be redacted to the greatest extent reasonably possible and (ii) to the extent practicable under the circumstances, such Party shall provide the other Party with a copy of the proposed text of such statements or disclosure (including any exhibits containing this Agreement) sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text (including redacted versions of this Agreement), (b) either Party shall have the further right to disclose the material financial terms of this Agreement under confidentiality undertakings to any actual or potential acquirer, merger partner, or providers of financing (whether in the form of debt, equity or otherwise) and their advisors, (c) either Party shall have the right to disclose information regarding the Development, Finalization, Manufacturing or Commercialization status of a Product to the extent such disclosure is made under a confidentiality undertaking to actual or prospective investors, or required by applicable laws or stock exchange rules, and (d) either Party shall have the right to disclose the material terms of this Agreement in private meetings with actual or potential providers of financing (whether in the form of debt, equity or otherwise). Neither Party shall make any other statement to the public regarding the execution and/or any other aspect of the subject matter of this Agreement, except: (x) where a Party reasonably believes disclosure is required under applicable laws or ethical commercial practice, (y) for customary discussions with current or prospective investors and analysts, and (z) either Party may use the text of a statement previously approved by the other Party or otherwise publicly disclosed in accordance with this Article 9.

9.6 Publicity. Promptly following the execution of this Agreement, the attainment of each of the milestones set forth in Article 8.2 (including the amounts of the milestones) and the First Commercial Sale of the Product, the Parties shall issue a mutually agreed upon press release. Except for subsequent disclosures of substantially similar information or disclosures required by law, regulation or stock exchange requirements, neither Party shall have the right to make any other public announcements with respect to this Agreement without the prior written consent of the other Party, except as provided in Section 9.5. The Parties agree that any announcement made in respect of this Agreement shall not contain the other Party’s Confidential Information or, if disclosure of Confidential Information is required by law or regulation, shall

27

make reasonable efforts to minimize such disclosure and obtain confidential treatment for any such information which is disclosed to a government agency, it being understood that the other Party shall have the right, to the extent in accordance with applicable law, to review such Party’s disclosures to government agencies and require redaction of any information the other Party reasonably deems inappropriate for disclosure, including without limitation, key financial terms not previously disclosed as permitted hereunder. Subject to applicable law and stock exchange requirements, each Party agrees to provide the other Party with a copy of any public announcement as far in advance of its scheduled release as reasonably practicable and such other Party shall have the right to expeditiously review and recommend changes to any announcement regarding this Agreement; provided, that such right of review and recommendation shall only apply for the first time that specific information is disclosed and shall not apply to the subsequent disclosure of substantially similar information that has been previously disclosed.

10. INDEMNIFICATION.

10.1 Active Biotech Indemnification. Active Biotech shall indemnify, defend and hold harmless Chelsea and its Indemnified Parties from and against any and all liability, claims, damage, loss, or expense (including reasonable attorneys’ fees) resulting from any Third Party claims made or legal proceedings instituted against Chelsea or any of its Indemnified Parties which arise out of or result from (a) the [*] by [*], including any claims of [*]; (b) the [*] by or on behalf of [*], including any claims of [*]; or (c) any actual or alleged breach by Active Biotech of this Agreement, except, in each case, to the extent Chelsea is obligated to indemnify and hold harmless Active Biotech and its Indemnified Parties therefrom pursuant to Section 10.2. “Indemnified Parties” means, with respect to a Party, such Party’s Affiliates, and its and their officers, directors, shareholders, successors, assigns, agents, employees and insurers to the extent the same become subject to a claim in such capacity.

10.2 Chelsea Indemnification. Chelsea shall indemnify, defend and hold harmless Active Biotech and its Indemnified Parties from and against any and all liability, claims, damage, loss, or expense (including reasonable attorneys’ fees) resulting from any Third Party claims made or legal proceedings instituted against Active Biotech or any of its Indemnified Parties which arise out of or result from (a) the [*] by or on behalf of Chelsea with respect to the Chelsea Territory, including any claims of [*]; or (b) any actual or alleged breach by Chelsea of this Agreement, except, in each case, to the extent Active Biotech is obligated to indemnify and hold harmless Chelsea and its Indemnified Parties therefrom pursuant to Section 10.1.

10.3 Limitation on Indemnification. Notwithstanding anything to the contrary set forth elsewhere herein, neither Party shall be obligated to indemnify the other Party for claims or liabilities to the extent arising from such other Party’s, or its Affiliates’, Sublicensees’ or assigns’ negligence, intentional misconduct, or breach of its duties, obligations, warranties or representations set forth herein.

10.4 Procedure. The Party seeking indemnification shall provide the indemnifying Party with written notice of any claim or action within ten (10) days of its receipt thereof, and shall afford the indemnifying Party the right to control the defense and settlement of such claim or action. The Party seeking indemnification shall provide reasonable assistance to the indemnifying Party in the defense of such claim or action. If the defendants in any such action

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

28

include both Parties, and the indemnified Party concludes that there may be legal defenses available to it which are different from, additional to, or inconsistent with, those available to the indemnifying Party, the indemnified Party shall have the right to select separate counsel to participate in the defense of such action on its behalf, and the indemnified Party shall bear the cost and expense of such separate defense, unless and to the extent the Parties otherwise agree or it is determined through arbitration hereunder that such costs and expense are or were required to be indemnified by the indemnifying Party and are or were required to be incurred separately due to such different, additional, or inconsistent defenses. Should the indemnifying Party determine not to defend such claim or action, the indemnified Party shall have the right to maintain the defense of such claim or action and the indemnifying Party shall provide reasonable assistance to it in the defense of such claim or action and shall bear the reasonable cost and expense of such defense (including reasonable attorneys’ fees). Neither Party shall settle any such claim or action in a way that prejudices or adversely impacts the other Party without the prior approval of such other Party (which approval shall not be unreasonably withheld).

10.5 Allocation. In the event a claim is based partially on an indemnified claim described in this Article 10 and partially on a non-indemnified claim, or is based partially on a claim described in Section 10.1 and partially on a claim described in Section 10.2, any payments and reasonable attorney fees incurred in connection with such claims are to be apportioned between the Parties in accordance with the degree of cause attributable to each Party.

11. INSURANCE.

11.1 Without limiting either Party’s undertaking to defend, indemnify, and hold the other Party harmless as set forth in Article 10, each Party shall obtain and maintain, promptly following the development of the CTD, a Commercial General Liability policy including coverage for Commercial General Liability claims and coverage for products liability claims, in an amount and coverage reasonably determined by the JDC on a country-by-country basis. The foregoing coverage shall continue during the Term and, with respect to product liability claims, for a period of five years after the Term.

12. REPRESENTATIONS AND WARRANTIES.

12.1 Representations. Each Party (the “Representing Party”) represents and warrants to the other Party that, as of the Effective Date: (a) the Representing Party is a corporation duly organized and in good standing under the laws of the jurisdiction of its incorporation, and it has full power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement; (b) the Representing Party has the full right, power and authority to enter into this Agreement and to grant the rights and licenses granted by it under this Agreement; (c) there are no existing or, to the Representing Party’s knowledge, threatened actions, suits or claims pending with respect to the subject matter of this Agreement or the Representing Party’s right to enter into and perform its obligations under this Agreement; (d) the Representing Party has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement; (e) this Agreement has been duly executed and delivered on behalf of the Representing Party, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with the terms hereof, subject to the general

29

principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally; (f) all necessary consents, approvals and authorizations of all regulatory and governmental authorities and other persons required to be obtained by the Representing Party in connection with the execution and delivery of this Agreement and the performance of its obligations under this Agreement have been obtained; (g) the execution and delivery of this Agreement by the Representing Party and the performance of the Representing Party’s obligations hereunder do not conflict with, or constitute a default under, any of its contractual obligations; and (h) the Representing Party has not been debarred under the Generic Drug Enforcement Act of 1992 (21 U.S.C. §301 et seq.), is not under investigation for debarment action, has not been disqualified as an investigator pursuant to 21 C.F.R. §312.70, does not have a disqualification hearing pending and is not currently employing any person or entity that has been so debarred or disqualified to perform any of the Representing Party’s obligations under this Agreement.

12.2 Debarment Actions. The Representing Party shall promptly notify the other Party if it is debarred or disqualified as described in Section 12.1(h) and shall terminate any so debarred or disqualified individual’s or entity’s participation in the performance of any of the Representing Party’s obligations under this Agreement promptly upon the Representing Party’s awareness of such debarment or disqualification.

12.3 IP Warranties. Each Party warrants that as of the Effective Date: (a) it owns, or is exclusively licensed under, such Party’s IP; and (b) no claim has been made against such Party alleging that such Party’s Patent Rights are invalid or unenforceable or that the exploitation of such Party’s Patent Rights or such Party’s Know-How infringes or misappropriates any intellectual property right of any Third Party; and (c) it has not granted any Third Party any rights in respect of the Product or that are otherwise inconsistent with the term of this Agreement.

12.4 Limitation of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 12.1 THROUGH 12.3, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND UNDER THIS AGREEMENT (INCLUDING WITH RESPECT TO ANY MATERIALS PROVIDED UNDER THIS AGREEMENT), EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR VALIDITY OF PATENT CLAIMS, WHETHER ISSUED OR PENDING.

30

13. LIMITATION OF LIABILITY.

13.1 EXCEPT WITH RESPECT TO A BREACH OF ARTICLE 9 OR A PARTY’S LIABILITY PURSUANT TO ARTICLE 10, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STATUTE, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES. The Parties agree that the actual, direct costs incurred by a Party to perform Development, Phase III Development, Finalization, Manufacturing or Commercialization obligations hereunder that the other Party was obligated to perform but failed to perform (subject to the right of such other Party to cure such breach and subject to the provisions of Article 15 if the occurrence of such breach is disputed) shall be deemed to be direct damages and not subject to this limitation.

14. TERM AND TERMINATION.

14.1 Term. Unless terminated earlier in accordance with Section 14.2, this Agreement shall remain in force for the period commencing on the Effective Date and shall continue until the expiration of the Royalty Term for all Products (the “Term”).

14.2 Termination.

(a) Termination for Convenience. Either Party (the “Withdrawing Party”) may at any time upon providing the other Party (the “Non-Withdrawing Party”) six months’ written notice of the Withdrawing Party’s intent to terminate this Agreement, and, upon the expiration of such six month period (or at such earlier time as the Non-Withdrawing Party may designate), this Agreement shall terminate. Upon giving the initial six months’ written notice, the Withdrawing Party representatives to the JDC shall have no voting or decision making rights with respect to the $1,000,000 initial amount referred to in Section 8.1.

(b) Breach.

(i) Upon any material breach of a material obligation of this Agreement by a Party (the “Breaching Party”), the other Party (the “Non-Breaching Party”) may, by providing 60 days’ prior written notice to the Breaching Party, terminate this Agreement, which notice shall identify the material breach, the intent to so terminate and the actions or conduct that it considers would be an acceptable cure of such breach. The Breaching Party shall have a period of 60 days after such written notice is provided to cure such breach (the “Initial Cure Period”). If the material breach is not cured within such 60 days, the Non-Breaching Party may terminate this Agreement upon 20 days written notice; provided, that if the Breaching Party disputes such material breach as provided in subsection (ii) below, such termination shall be effective only as provided in such subsection (ii). Such termination shall apply solely with respect to the Product if such breach related solely to the Product, and shall otherwise apply to this Agreement in its entirety.

31

(ii) If the Non-Breaching Party gives notice of material breach under this Section 14.2(b) and the Breaching Party disputes whether there is a material breach, then the issue of whether the Non-Breaching Party may properly terminate this Agreement on expiration of such Initial Cure Period shall be resolved in accordance with Article 15, the Parties shall cooperate to allow such determination to be made within 75 days after a Party requests such determination (or as promptly thereafter as possible) and the Agreement shall not terminate except as provided in this Section 14.2(b)(ii). If, as a result of such dispute resolution process, it is determined that the Breaching Party committed a material breach and the Breaching Party does not cure such breach within 60 days after the date of the arbitration award (the “Additional Cure Period”), then such termination shall be effective upon the expiration of the Additional Cure Period. If the Parties dispute whether such breach was so cured, either Party alone may request the same arbitration tribunal to determine whether it was so cured and the Parties shall cooperate to allow such determination to be made within 30 days after a Party requests such determination. Such dispute resolution proceeding does not suspend either Party’s obligations hereunder and each Party shall use reasonable efforts to mitigate all damages. If, as a result of such dispute resolution proceeding, it is determined that the Breaching Party did not commit a material breach (or that such breach was cured within the permitted time period or, subject to the right to recover damages as provided in Article 15, the Additional Cure Period), then no termination shall be effective and this Agreement shall remain in effect as it was prior to such notice by the Non-Breaching Party.

14.3 Effects of Expiration or Termination.

(a) Upon termination of this Agreement in its entirety (in which case the Product is considered to be terminated) or with respect to the Product pursuant to Sections 14.2(a) or (b):

(i) the licenses granted by the Non-Continuing Party to the Continuing Party with respect to the terminated Product shall remain in effect after such termination on a sublicenseable (provided that such sublicensees comply with the relevant provisions of this Agreement) basis and shall be converted to exclusive licenses to (A) Develop, conduct Phase III Development, Finalize and Commercialize the terminated Product anywhere in the world, and (B) Manufacture the terminated Product anywhere in the world;

(ii) the Non-Continuing Party, with respect to the terminated Product, (A) shall pay its share of any costs to conduct clinical trials that have commenced prior to the date of termination; (B) shall, at the Non-Continuing Party’s expense, submit letter(s) or application(s) to the relevant Regulatory Authorities and take such other actions to transfer ownership of the Regulatory Filings and Regulatory Approvals in each country in the Territory to the Continuing Party within 30 days

32

after receipt of the required documentation from the Continuing Party for inclusion in such letter(s) or application(s) (provided, that, if, at the time of termination, any clinical trials are being conducted by the Non-Continuing Party, such transfer may be delayed, in the Continuing Party’s reasonable discretion, to permit the Non-Continuing Party to complete such clinical trials, and the Non-Continuing Party shall complete such trials at the Continuing Party’s expense); (C) shall, at the Non-Continuing Party’s expense, immediately assign to the Continuing Party, all of its right, title and interest in and to all clinical, technical and other relevant reports, records, data and other tangible Information specifically relating to the terminated Product (provided that the Non-Continuing Party may retain one copy of such Information in its archives solely to verify its compliance with its continuing obligations of confidentiality under this Agreement); (D) shall, at the Non-Continuing Party’s expense, take appropriate steps with the relevant Regulatory Authorities to effect such assignments (to the extent permitted under applicable law); (E) shall, at the Non-Continuing Party’s expense, deliver to the Continuing Party one copy of each physical embodiment of the items in clauses (A) and (B) in a mutually agreeable format promptly but in no event more than 30 days after termination; (F) hereby grants to the Continuing Party, subject to such termination, a royalty-bearing license, with the right to grant sublicenses, to use the foregoing to Develop, Manufacture, Finalize and Commercialize the terminated Product anywhere in the world; (G) shall, at the Non-Continuing Party’s expense, (1) assign to the Continuing Party, promptly after such termination but in any event no later than 30 days after such termination, all of its right, title and interest in and to the Product Trademarks for the terminated Product and all goodwill therein; and (2) assist the Continuing Party in taking appropriate steps with the relevant governmental authorities to effect such assignment; (H) the provisions of Sections 7.2, 7.3, 7.5, 7.6, 7.7 and 7.8 shall apply; provided, that the rights granted to a Party in its role as the Non-Owning Party thereunder shall apply only if the Non-Owning Party is the Continuing Party;

(iii) the Non-Continuing Party shall assign to the Continuing Party any then-current Commercialization agreements with Third Parties (except as otherwise mutually agreed by the Parties), the Continuing Party’s Territory shall be expanded to include all countries of the world, and the Continuing Party shall pay to the Non-Continuing Party, based on the date on which the Agreement is so terminated, royalties equal to the applicable percentage set forth in the following table of the worldwide Net Sales of the Product in each calendar quarter:

Date of Termination:	Royalty Rate
After [*]	[*	]%
After [*]	[*	]%
After [*]	[*	]%

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

33

Such payments shall be paid within 45 days after the end of each calendar quarter, and Sections 8.4 through 8.8 shall apply mutatis mutandis to such payments and for as long as each terminated Product is being Developed, Manufactured, Finalized or Commercialized;

(iv) the Parties shall in good faith draft and execute an agreement reflecting the terms of this Section 14.3(a) and, to the extent applicable, Section 14.3(b); and

(v) the Continuing Party shall be solely responsible for any milestones, royalties and other payments payable to Third Parties following termination in consideration of a license(s) under such Third Party intellectual property rights in respect of the Development, Finalization or Commercialization of the terminated Product, regardless of whether such payments are to be made with respect to intellectual property rights licensed (i) to the Continuing Party, other than as described in the following clauses (ii) and (iii); (ii) to the Non-Continuing Party and sublicensed to the Continuing Party hereunder, provided, that the Non-Continuing Party has provided a copy of the relevant Third Party license agreement to the Continuing Party; or (iii) to both Parties. If the Continuing Party wishes to discontinue making such payments pursuant to clauses (ii) or (iii), the Continuing Party shall provide written notice thereof to the Non-Continuing Party and the Continuing Party shall thereafter not be required to make such payments nor shall the Continuing Party be licensed under the relevant Third Party intellectual property rights.

(b) Upon termination or expiration of this Agreement in its entirety for any reason, in addition to the provisions of Section 14.3(a):

(i) each Receiving Party shall (A) promptly return to the Disclosing Party all materials and records in its possession or control containing Confidential Information of the Disclosing Party or, at the election of the Receiving Party, destroy such Confidential Information of the Disclosing Party, and (B) destroy: (1) any notes, reports or other documents prepared by the Receiving Party which contain Confidential Information of the Disclosing Party; and (2) any Confidential Information of the Disclosing Party (and all copies and reproductions thereof) which is in electronic form or cannot otherwise be returned to the Disclosing Party; provided, that (3) each Party may retain the Confidential Information of the other Party to the extent necessary to exercise its rights which survive termination or expiration, and (4) the Receiving Party may retain one (1) copy of the Disclosing Party’s Confidential Information in its archives solely to verify its compliance with its continuing obligations of confidentiality under this Agreement;

(ii) the provisions of Sections 4.5, 7.2(c), 8.6, 8.7, 12.4, 14.3 and 14.4, and Articles 9, 10, 11, 13, 15 and 16 shall survive in accordance with their terms and, to the extent required to give effect to such sections, the provisions of Article 1 shall survive.

34

14.4 Non-Exclusive Remedy. Termination of this Agreement in whole or in part shall be in addition to, and shall not prejudice, the Parties’ remedies at law or in equity, including, without limitation, the Parties’ ability to seek legal damages and/or equitable relief with respect to any breach of this Agreement, regardless of whether or not such breach was the reason for the termination. Upon termination or expiration of this Agreement in whole or in part for any reason, in addition to the provisions of Section 14.3, neither Party will be released from any obligations that accrued prior to the effective date of expiration or termination.

14.5 For the purposes of this Article 14, the “Non-Continuing Party” means the Withdrawing Party or the Breaching Party, as the case may be, and the “Continuing Party” shall mean the Non-Withdrawing Party or the Non-Breaching Party, as the case may be.

15. DISPUTE RESOLUTION.

15.1 JDC Resolution Procedure. The JDC shall attempt in good faith to resolve any dispute between the Parties arising out of or relating to the execution, interpretation and performance of this Agreement (including the validity, scope and enforceability of this provision). The JDC shall meet within 14 days after delivery of the notice of dispute from a Committee or any Party and shall attempt in good faith to resolve the dispute. If the dispute has not been so resolved, either Party may present a notice of dispute to the Executive Officers of the Parties.

15.2 Negotiation Between Officers. Within 15 days after delivery of the notice of dispute pursuant to Section 15.1, the Executive Officers of the Parties shall meet or converse by telephone at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one Party to the other will be honored. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Executive Officers do not resolve the dispute within 30 days after the initial delivery of the notice pursuant to Section 15.1 (or such lesser or longer period as they may agree is a useful period for their discussions), then (a) to the extent such dispute relates to Final Development for the Active Biotech Territory or Commercialization in the Active Biotech Territory or Manufacturing, then Active Biotech shall have the final authority to resolve such dispute in its reasonable discretion, (b) to the extent such dispute relates to Final Development for the Chelsea Territory or Commercialization in the Chelsea Territory, then Chelsea shall have the final authority to resolve such dispute in its reasonable discretion. Disputes in respect to the matters expressly delegated to the JDC shall not be subject to arbitration under Section 15.3 below.

15.3 Arbitration.

(a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, which has not been resolved pursuant to Sections 15.1 or 15.2 shall be finally settled by binding arbitration conducted in the English language in London, England under the commercial arbitration rules of the London Court of International

35

Arbitration. Each Party shall appoint an arbitrator and the two (2) arbitrators so appointed shall jointly appoint a third arbitrator; provided, that if they cannot agree (or if one Party refuses to appoint an arbitrator) within 30 days after the initiation of the arbitration, then such unappointed arbitrator(s) shall be appointed by the President of the London Court of International Arbitration. Disputes about arbitration procedure shall be resolved by the arbitrators or failing agreement, by the London Court of International Arbitration in London, England. The arbitrators may proceed to an award notwithstanding the failure of the other Party to participate in the proceedings. Discovery shall be limited to mutual exchange of documents relevant to the dispute, controversy or claim; depositions shall not be permitted unless agreed to by both Parties.

(b) The arbitrators shall be authorized to grant interim relief, including to prevent the destruction of goods or documents involved in the dispute, protect trade secrets and provide for security for a prospective monetary award. The limitations on liability set out in Article 13 shall apply to an award of the arbitrators. Specifically, but without limitation, under no circumstances shall the arbitrators be authorized to award punitive or multiple damages. Any purported award of punitive or multiple damages or of other damages not permitted under Article 13 shall be beyond the arbitrators’ authority, void, and unenforceable.

(c) If the dispute subject to such arbitration proceeding arises under Section 14.2(b)(ii), the arbitral tribunal shall be directed to first determine whether the applicable Party is entitled to terminate under Section 14.2(b). The arbitral tribunal’s decision on such issue shall be the arbitration award referred to in Section 14.2(b)(ii) for the purpose of commencing the Breaching Party’s final right to cure during the Additional Cure Period. The same tribunal shall then continue such proceeding for the purpose of determining all damages and other remedies, including a monetary amount to compensate the Non-Breaching Party for all damages and other losses incurred or suffered as a result of a material breach and any failure to cure such breach while dispute resolution proceeding is pending and the Additional Cure Period (subject to the limitations of Article 13).

(d) The prevailing Party shall be entitled to an award of reasonable attorney fees incurred in connection with the arbitration in such amount as may be determined by the arbitrators. The award of the arbitrators shall be the sole and exclusive remedy of the Parties and shall be enforceable in any court of competent jurisdiction, subject only to revocation on grounds of fraud or clear bias on the part of the arbitrators. Notwithstanding anything contained in this Article 15 to the contrary, each Party shall have the right to institute judicial proceedings against the other Party or anyone acting by, through or under such other Party, in order to enforce the instituting Party’s rights hereunder through reformation of contract, specific performance, injunction or similar equitable relief.

16. MISCELLANEOUS.

16.1 Notice.

(a) All notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be sent by facsimile (with confirmation

36

received of the recipient’s number, followed by prompt confirmation by telephone of receipt of such communication or prompt delivery of a copy of such communication by hand delivery, mail or overnight delivery as provided herein), hand delivered by messenger or courier service, or mailed by registered or certified mail (postage prepaid), return receipt requested, or delivered by reputable international air courier delivery service, addressed to:

If to Active Biotech:	Active Biotech AB
	Scheelevägen 22
	SE-220 07 Lund
	Sweden
	Attn: President & CEO
	Fax: +46 46 19 20 50
with a copy to:	Wiggin and Dana LLP
	400 Atlantic Street
	Stamford, CT 06911
	USA
	Attn: James F. Farrington, Jr.
	Fax: +1 203 363 7676
If to Chelsea:	Chelsea Therapeutics, Inc.
	13950 Ballantyne Corporate Place
	Suite 325
	Charlotte, NC 28277
	Attn: President and CEO
	Fax: +1 704 752 1479
with a copy to:	Wyrick, Robbins, Yates and Ponton LLP
	The Summit
	4101 Lake Boone Trail
	Suite 300
	Raleigh, NC 27607
	Attn: Daniel S. Porper
	Fax: +1 919 781 4865

(b) Each such notice shall be deemed delivered (i) on the date delivered if by personal or overnight delivery, (ii) on the date confirmation of a facsimile transmission is received, (iii) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed, or (iv) four (4) calendar days after delivery to the applicable air courier.

(c) Either Party may from time to time to change its address upon written notice to the other Party in accordance with this Section 16.1.

16.2 Force Majeure. No failure or omission by a Party in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if

37

the same shall arise from any cause or causes beyond the reasonable control of such Party, which may include, but are not limited to, the following: acts of God; acts or omissions of any government; any rules, regulations or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof; fire; flood; storm; earthquake; accident; war; rebellion; insurrection; riot; and invasion; and provided that such failure or omission resulting from one of the foregoing causes is cured as soon as is practicable after its occurrence.

16.3 Assignment; Binding Effect.

(a) Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either Party without the prior written consent of the other Party, except to a single Third Party that acquires, by merger, sale of assets or otherwise, all or substantially all of the business of the assigning Party to which the subject matter of this Agreement relates. Notwithstanding the foregoing, each Party shall have the right to assign this Agreement, in whole or in part, to an Affiliate of such Party without the prior written consent of the other Party, provided that such Party guarantees the performance of such Affiliate of its obligations hereunder. Any assignment not in accordance with the foregoing shall be void.

(b) Each Party agrees that, notwithstanding any provisions of this Agreement to the contrary, in the event that this Agreement is assigned by either Party in connection with the sale or transfer of all or substantially all of the business and assets of such Party to which the subject matter of this Agreement pertains, such assignment shall not provide the non-assigning Party with rights or access to intellectual property or technology of the acquirer of such Party.

16.4 Modifications; Waivers. No change, modification, extension, termination or waiver of any obligation, term or provision contained herein shall be valid or enforceable unless same is reduced to writing and signed by a duly authorized representative of each of the Parties to be bound thereby. No waiver of any right in any one instance shall constitute a waiver of that right or of any other right in other instances under this Agreement.

16.5 Entire Agreement. This Agreement, the Schedules attached hereto, and any supply agreement between the Parties (if and when executed), contain every obligation and understanding between the Parties relating to the subject matter hereof and supersedes all prior discussions, negotiations and agreements, if any, between them relating to the subject matter hereof, and neither of the Parties shall be bound by any conditions, definitions, understandings, warranties or representations other than as expressly provided or referred to herein.

16.6 Severability. If, under applicable law or regulation, any provision of this Agreement is invalid or unenforceable, or otherwise directly or indirectly affects the validity of any other material provision(s) of this Agreement (“Severed Clause”), it is mutually agreed that this Agreement shall endure except for the Severed Clause. The Parties shall consult and use their best efforts to agree upon a valid and enforceable provision which shall be a reasonable substitute for such Severed Clause in light of the intent of this Agreement.

16.7 Section Headings. The section headings in this Agreement are for convenience of reference only and shall not be deemed to affect the interpretation of any provision of this Agreement.

38

16.8 Relationship of Parties. This Agreement shall not constitute or be construed as creating a partnership, employer-employee or joint venture relationship between the Parties, and neither Party shall be liable for any debts or obligations of the other Party. Neither Party shall have any power to enter into any contracts or commitments in the name of, or on behalf of, the other Party, or to bind the other Party in any respect whatsoever.

16.9 Construction. Each Party acknowledges that it has been advised by counsel during the course of negotiation of this Agreement and, therefore, that this Agreement shall be interpreted without regard to any presumption or rule requiring construction against the Party causing this Agreement to be drafted. Except where the context otherwise requires, wherever used, the use of any gender will be applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used herein means including, without limiting the generality of any description preceding such term. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document refer to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (b) any reference to any laws refer to such laws as from time to time enacted, repealed or amended, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, refer to this Agreement in its entirety and not to any particular provision hereof, and (d) all references herein to Sections and Exhibits, unless otherwise specifically provided, refer to the Sections and Exhibits of this Agreement.

16.10 Governing Law. This Agreement has been entered into and shall be construed and enforced in accordance with the laws of the State of New York, without reference to the choice of law principles thereof.

16.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

39

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the Effective Date.

CHELSEA THERAPEUTICS
By:	/s/  Simon Pedder
Name:	Simon Pedder, Ph.D.
Title:	President and Chief Executive Officer
ACTIVE BIOTECH AB
By:	/s/  Sven Andreasson
Name:	Sven Andreasson
Title:	President and Chief Executive Officer

40

SCHEDULE 1.3

ACTIVE PATENTS

Patent case No: [*]

Country	Application No
EPO	[*]
	[*]
Sweden	[*]
USA	[*]
	[*]

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

41

SCHEDULE 3.1(b)

PRELIMINARY DEVELOPMENT PLAN

To be added at the first JDC meeting.

42

Schedule 4.1

REQUIREMENTS TO MAINTAIN SALES TERRITORY

Prior to receipt of Regulatory Approval of the relevant Product in any country in the Selling Party’s Territory, the Selling Party shall have established a [*] system, including [*].

Prior to receipt of Regulatory Approval of the relevant Product in a country in the Selling Party’s Territory, the Selling Party shall have established or made firm commitments to acquire by contract [*] for the [*] in such country, including [*].

Upon completion of enrollment of any Phase III clinical trial for the relevant Product in any country in the Territory, the Selling Party shall have hired [*] and shall have hired sufficient other personnel to perform all [*].

The Selling Party shall possess such other [*] as shall be appropriately dimensioned for the [*] in each such country for the approved indications of the Product and shall be appropriately targeted for the [*] for that relevant [*] and shall consist of at least such types, qualities and quantities of resources as would be reasonably and customarily deployed by a specialty pharmaceutical company under similar circumstances.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

43

EX-10.9

Exhibit 10.9

Portions of this exhibit marked [*] are omitted and

are requested to be treated confidentially.

EXCLUSIVE LICENSE AGREEMENT

This Agreement is made effective the 26th day of May, 2006 (hereinafter called the “Effective Date”), by and between Dainippon Sumitomo Pharma Co., Ltd., a Japanese corporation having a place of business at 6-8 Doshomachi 2-chome, Chuo-ku, Osaka 541-0045, Japan (hereinafter called “DSP”), and Chelsea Therapeutics, Inc., a Delaware corporation having a place of business at 13950 Ballantyne Corporate Place, Suite 325, Charlotte, NC 28277, U.S.A. (hereinafter called “Chelsea”). DSP and Chelsea may be referred to herein individually as a “Party” or together, as the “Parties”.

WHEREAS, DSP owns certain intellectual property and proprietary information relating to “L-DOPS” (as defined below), and DSP is willing to grant an exclusive license and certain rights as more particularly set forth herein to Chelsea under such intellectual property and information and Chelsea desires such exclusive license and rights under such intellectual property and information, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the Parties covenant and agree as follows:

1. Definitions.

For the purpose of this Agreement, the following definitions shall apply.

1.1 “Affiliate” means any person, partnership, joint venture, limited liability company, corporation or other legal entity recognized in the world, including but not limited to subsidiaries, now or hereafter existing, in which a Party is directly or indirectly owned or controlled by, under common ownership or control with, or that owns or controls the subject Party. For purposes of this paragraph, “own” or “control” means direct or indirect ownership or control of:

(a) at least fifty percent (50%) of the outstanding shares or securities entitled to vote for the election of directors or similar managing authority of the subject entity, if such entity has voting shares or stock or other voting securities;

(b) at least fifty percent (50%) of the ownership interest representing the right to make the decisions for the subject entity, if such entity does not have voting shares or stock or other voting securities; or

(c) any other ability or power to elect at least one-half of the board of directors or similar managing authority of the subject entity, whether by contract or otherwise.

1.2 “Combination Product” means any Licensed Product that is a pharmaceutical preparation incorporating L-DOPS and one or more therapeutically active pharmaceutical ingredients as its main active ingredients.

1.3 “Compound” means the drug substance of L-DOPS.

1

1.4 “Control” means, with respect to any Patent, Know-How or any other intellectual property right, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such Patent, Know-How or any other intellectual property right as provided for herein without violating the terms of any agreement or confidentiality obligations with any Third Party.

1.5 “Drug Master File” mean a reference file submitted by DSP to the FDA that is used in the review of investigational and marketing applications for human drugs and that, at a minimum, contains all information and know-how necessary to manufacture the Compound.

1.6 “Exploitation”, “Exploit” or “Exploiting” means to make, have made, import, have imported, export, have exported, use, have used, sell, have sold, offer for sale, or otherwise dispose of, including any and all discovery, research, development, registration, modification, enhancement, improvement, manufacture, storage, formulation, exportation, transportation, distribution, promotion and marketing activities related thereto.

1.7 “First Commercial Sale” means the first shipment of commercial quantities of any Licensed Product sold to a Third Party by a Party, its Affiliate or Sublicensee in any country after receipt of Marketing Authorization Approval for such Licensed Product in such country. Sales for test marketing, sampling and promotional uses or clinical trial or research purposes or compassionate uses shall not be considered to constitute a First Commercial Sale.

1.8 “Generic Competition” means, on a country-by-country basis and Licensed Product-by-Licensed Product basis, the presence of one or more Generic Products that, in the aggregate, have obtained sales greater than [*] percent ([*]%) of the combined sales of such Licensed Product together with such Generic Products in the relevant country of the Territory, as measured in the local currency, in any calendar quarter, and which Generic Product sales are evidenced by independent market data (where reasonably available and reliable), such as that published by IMS Health Incorporated or similar services.

1.9 “Generic Product” means a drug product that contains the same active pharmaceutical ingredient, dosage form and route of administration and is bioequivalent to and is intended for the same indication as a Licensed Product (inactive ingredients may vary) and is approved for marketing and sale by the relevant Governmental Authority in a country where such Licensed Product is sold. It is understood that the Generic Product shall not include L-DOPS marketed, manufactured or distributed in any manner by Chelsea, its Affiliates and/or Sublicensees.

1.10 “Governmental Authority” means any court, tribunal, arbitrator, agency, legislative body, commission, official or other instrumentality of: (i) any government of any country; (ii) a federal, state, provincial, county, city or other political subdivision thereof; or (iii) any supranational body, including but not limited to, the European Agency for the Evaluation of Medicinal Products.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

2

1.11 “Improvement” means any (i) new means of delivering L-DOPS (ii) new or revised formulations of L-DOPS, (iii) new use/indication of L-DOPS, or (iv) new manufacturing method/process of L-DOPS.

1.12 “Know-How” means all information regarding L-DOPS, including but not limited to, all information, formulations, materials, data, drawings, sketches, designs, testing and test results, records and Regulatory Documentation relating to L-DOPS.

1.13 “L-DOPS” means L-threo-3,4-dihydroxyphenylserine.

1.14 “Laws” means all laws, statutes, rules, regulations, including but not limited to, current Good Manufacturing Practice regulations as specified in 21 C.F.R. §§ 210 and 211; Investigational New Drug Application regulations at 21 C.F.R. § 312; NDA regulations at 21 C.F.R. § 314; relevant provisions of the Federal Food, Drug and Cosmetic Act, and other laws and regulations enforced by the United States Food and Drug Administration (“FDA”), ordinances and other pronouncements having the binding effect of law of any Governmental Authority.

1.15 “Licensed Field” means the treatment, palliation or prevention of all human diseases.

1.16 “Licensed Know-How” means any Know-How Controlled by DSP during the Term that is necessary or useful for the Exploitation of the Licensed Products in the Territory under this Agreement or is related to L-DOPS. Licensed Know-How does not include any Licensed Patents. Licensed Know-How includes, but is not limited to the items set forth in Exhibit B attached hereto.

1.17 “Licensed Patents” means all Patents that are Controlled by DSP or its Affiliates as of the Effective Date and at any time during the Term that claim or cover any invention necessary or reasonably useful for the Exploitation of the Licensed Products in the Territory under this Agreement. The Licensed Patents shall be listed on Exhibit A attached hereto and incorporated herein. The Parties recognize that there are no Licensed Patents as of the Effective Date. During the Term, DSP may file patent applications that fall into the Licensed Patents as set forth in Exhibit A. The Parties agree that upon filing the patent application, it shall be deemed a Licensed Patent under this Agreement, without modification of the milestone and royalty payments and other conditions provided for in this Agreement, and Exhibit A shall be automatically amended to add the patent application.

1.18. “Licensed Product” means a pharmaceutical preparation or formulation containing L-DOPS, whether or not such Licensed Product is used as a single agent or in combination with other therapeutically active components. Licensed Product includes Combination Products.

1.19 “Marketing Authorization Approval” means all approvals, licenses, registrations or authorizations required by or from a Governmental Authority in the Territory for sale and marketing of a Licensed Product in its jurisdiction, including any applicable pricing, final labeling and reimbursement approvals of such Governmental Authority.

3

1.20 “Net Sales” means the total gross receipts for sales of a Licensed Product received by or on behalf of Chelsea or any of its Affiliates or Sublicensees less the sum of the following: (a) usual trade discounts to customers, retroactive price reductions, or other allowances actually allowed or granted from the billed amount and taken; (b) sales, tariff duties and/or use taxes directly imposed and with reference to particular sales; (c) allowances, rebates, credits and refunds for returned or defective Licensed Products; (d) shipping, freight, and insurance costs and (e) chargeback payments and rebates (or the equivalent thereof) actually granted to managed health care organizations, wholesalers, or to federal, state/provincial, local and other governments, including their agencies, purchasers, and/or reimbursers, or to trade customers, provided that total sum of deduction shall not exceed [*] percent ([*]%) of the total gross receipts.

For purposes of calculating Net Sales, “sale” shall include any transfer or other disposition for consideration, and Net Sales shall include the fair market value of all consideration received by Chelsea, its Affiliates or Sublicensees in respect of any sale of a Licensed Product, whether such consideration is in cash payment, in kind or in any other form, subject to the deductions in (a) – (e) above; provided, however, that sales of Licensed Products for clinical trials, test marketing, promotional or sampling purposes, or research purposes or compassionate uses shall not constitute Net Sales for purposes of this Agreement. Amounts received by Chelsea or its Affiliates or Sublicensees for the sale of Licensed Products among Chelsea and its Affiliates and Sublicensees for resale shall not be included in the computation of Net Sales hereunder.

1.21 “Orphan Drug Designation” means designation by FDA of a product as an orphan drug in accordance with the provisions of 21 C.F.R. § 316.20.

1.22 “Patents” means patents and patent applications including United States provisional applications and foreign priority applications and any continuations, continuations-in-part, divisionals, registrations, confirmations, revalidations, reissues, Patent Cooperation Treaty (PCT) applications, utility models, design patents, petty patents as well as all related extensions, restorations of terms and/or reissues and foreign counterparts of the foregoing and all other intellectual property related to the application or patent including supplementary protection certificates or any other such right; in each case, to the extent the same has not been held, by a court or Governmental Authority of competent jurisdiction, to be invalid or unenforceable in a decision from which no appeal can be taken.

1.23 “Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, proprietorship or other de jure entity organized under the Laws of any jurisdiction.

1.24 “Phase II Clinical Trial(s)” means, with respect to the United States, well-controlled clinical trials in human subjects, including clinical trials conducted in patients with a condition, and designed to evaluate clinical activity (including but not limited to, pertinent pharmacodynamic effects or biomarker

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

4

responses) and safety for a Licensed Product for one or more indications, as well as to obtain an indication of the dosage regimen required, as more fully defined in 21 C.F.R. § 312.21(b), as may be amended, and, with respect to any other country or jurisdiction, the equivalent of such a clinical trial in such other country or jurisdiction.

1.25 “Phase III Clinical Trial(s)” means, with respect to the United States, large-scale, pivotal, clinical trials conducted in a sufficient number of human patients whose primary objective is to obtain a definitive evaluation of the therapeutic efficacy and safety of a Licensed Product in patients for the particular indication in question that is needed to evaluate the overall risk-benefit profile of such Licensed Product and to provide an adequate basis for obtaining requisite regulatory approval(s) and product labeling, as more fully defined in 21 C.F.R. § 312.21(c), as may be amended, and, with respect to any other country or jurisdiction, the equivalent of such a clinical trial in such other country or jurisdiction.

1.26 “Reasonable Commercial Efforts” means efforts consistent with those generally utilized by companies of a similar size for their own internally developed pharmaceutical products of similar market potential, at a similar stage of their product life taking into account the existence of other competitive products in the market place or under development, the proprietary position of the product, the regulatory structure involved, the anticipated profitability of the product and other relevant factors. It is understood that such product potential may change from time to time based upon changing scientific, business and marketing and return on investment considerations.

1.27 “Regulatory Authority” means any applicable Government Authorities regulating or otherwise exercising authority with respect to the Exploitation of a Licensed Product in the Territory under this Agreement, including the FDA.

1.28 “Regulatory Documentation” means all appropriate future and then currently available documents, including but not limited to applications, registrations, licenses, authorizations and approvals, all appropriate future and then currently available correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), all appropriate future and then currently available supporting documents and all appropriate future and then currently available clinical studies and tests, relating to L-DOPS, and all appropriate future and then currently available data contained in any of the foregoing, including all appropriate future and then currently available regulatory drug lists, advertising and promotion documents, adverse event files and complaint files possessed by DSP that are useful or necessary for Exploiting the Licensed Product and obtaining the Marketing Authorization Approvals in the Territory. Regulatory Documentation includes, but is not limited to the documents set forth in Exhibit B attached hereto.

1.29 “Sublicensee” means any sublicensee of Chelsea with respect to the license and rights granted under this Agreement.

1.30 “Third Party” means a Person who is not a Party or an Affiliate of a Party.

5

1.31 “Term” means the period from the Effective Date until the expiration of Chelsea’s obligation to pay royalties as described in Section 4.3 hereof.

1.32 “Territory” means all countries of the world excluding Japan, Korea, China and Taiwan.

2. Grant.

2.1 License. Subject to the terms of this Agreement, DSP hereby grants to Chelsea a worldwide, exclusive license and rights in the Licensed Field under the Licensed Know-How and Licensed Patents to Exploit L-DOPS and Licensed Products in the Territory.

2.2 Sublicenses. Chelsea may grant written sublicenses to Third Parties and its Affiliates with respect to the license and rights granted hereunder, provided that Chelsea shall provide DSP with a copy of any executed sublicense agreement within ten (10) days of its execution and shall have the Sublicensee(s) bound by applicable obligations no less strict than those contained in this Agreement. Further, upon DSP’s reasonable request, Chelsea shall provide DSP with information in its possession, subject to confidentiality, concerning identity, business operations and creditworthiness of any proposed or actual Sublicensee. Chelsea shall be solely responsible for any obligations which Chelsea may have under any sublicense agreement, including but not limited to transfer of the Licensed Know-How to the Sublicensee and DSP shall not be obligated to perform such Chelsea’s obligations, unless otherwise provided for in this Agreement or agreed upon between the Parties.

3. Technology Transfer; Diligence.

3.1 Joint Committee. Promptly after the Effective Date, the Parties shall establish a Joint Committee as described in this Section 3.1. The Joint Committee shall exist during the Term and shall meet as mutually agreed upon to discuss the status of Exploitation of Licensed Products by Chelsea, its Affiliates and Sublicensees, including but not limited to the following subjects;

1) Requests for data and grounds for the requests,

2) Development plan of the Improvements, and

3) Confirmation of no negative influences of Exploitation of the Licensed Product in the Territory on Exploitation of the Licensed Product outside the Territory.

provided, however, that the Joint Committee shall have no authority to amend this Agreement and, except as set forth in Sections 3.2, 3.3, 3.6 and 7 of this Agreement and Sections 5.1 and 5.2 of the Supply Agreement (as defined in Section 7.2), shall have no authority to make decisions regarding this Agreement or the Exploitation of Licensed Products. The Joint Committee shall be comprised of at least two (2) representatives from each of Chelsea and DSP, or such other number as the Parties may agree (as set forth in Exhibit C attached hereto). The Joint Committee’s decisions on the matters set

6

forth in Sections 3.2, 3.3, 3.6 and 7 of this Agreement and Sections 5.1 and 5.2 of the Supply Agreement shall be made by unanimous agreement and the Parties shall have good faith discussions and use their best efforts to reach unanimous agreement. In case that the Joint Committee cannot reach unanimous agreement, the matter in dispute shall be discussed in good faith by the presidents or other representatives of the Parties to have amicable solution and the Parties shall make their best efforts to have amicable solution on the matter within ninety (90) days. In case the Parties fail to amicably solve the matter within the ninety (90)-day period, the matter shall be solved pursuant to Section 11.4.

3.2 Know-How Transfer. Promptly after the Effective Date, DSP shall provide Chelsea with copies of Licensed Know-How which is possessed by DSP. Notwithstanding the foregoing, DSP shall have no obligation to provide Chelsea with Know-How related to manufacturing the active pharmaceutical ingredient of L-DOPS, provided that DSP shall file a Drug Master File with the FDA and shall use Reasonable Commercial Efforts to make such filing on or before June 1, 2007, provided that if Chelsea’s development of L-DOPS is delayed for any reason from the schedule in the development plan set forth in Exhibit D attached hereto, such deadline shall be adjusted to a later date according to the actual situation of Chelsea’s development of L-DOPS. DSP hereby grants Chelsea the right to reference the Drug Master File. In the event that DSP fails to file a Drug Master File with the FDA on or before June 1, 2007 or such later date, DSP shall provide Chelsea with the required information within ninety (90) days of the scheduled IND filing provided for in Exhibit D that will allow Chelsea to file an IND with the FDA. Chelsea shall reimburse DSP for all costs reasonably incurred in connection with such transfer, including but not limited to expenses of English translation, that are unanimously agreed upon by the Joint Committee.

3.3 Improvements. If during the Term, any Party (“Inventing Party”) reduces to practice an Improvement that it Controls, then it shall immediately disclose the same to the other Party (“Non-Inventing Party”). The Non-Inventing Party may receive a license for such Improvements during the Term of this Agreement. During the Term, (i) the Non-Inventing Party shall receive a perpetual, irrevocable, royalty-free, non-exclusive license to Exploit such Improvements, outside of the Territory if DSP is the Non-Inventing Party and in the Territory if Chelsea is the Non-Inventing Party, and solely in connection with the Exploitation of L-DOPS and (ii) the Inventing Party shall, subject to the Non-Inventing Party’s payment of all costs and expense reasonably incurred, transfer to the Non-Inventing Party copies of information, formulations, materials, data, drawings, sketches, and designs relating to such Improvement that are Controlled by the Inventing Party and are useful or reasonably necessary for the Non-Inventing Party to Exploit the Improvement, outside the Territory if DSP is the Non-Inventing Party and in the Territory if Chelsea is the Non-Inventing Party. The costs and expenses to be paid by the Non-Inventing Party for such transfer shall be unanimously agreed upon by the Joint Committee. DSP and Chelsea shall negotiate in good faith an agreement under which the Inventing Party shall grant the Non-Inventing Party a royalty-bearing, non-exclusive license to use such Improvements invented after expiration or termination of this Agreement.

7

3.4 Data. Chelsea, at DSP’s cost and expense, shall provide DSP with access to data it generates and Controls during the Term, relating to L-DOPS which Chelsea believes is useful or reasonably necessary for DSP to Exploit L-DOPS outside of the Territory. DSP shall have a perpetual, irrevocable, royalty-free non-exclusive right to use such data solely in connection with Exploiting L-DOPS outside of the Territory during and after the Term of this Agreement. DSP and Chelsea shall negotiate in good faith an agreement, under which either Party shall provide the other Party with a royalty-bearing, exclusive or non-exclusive access to data the Party generates and Controls after expiration or any termination of this Agreement.

3.5 Diligence. Chelsea shall use Reasonable Commercial Efforts to obtain Orphan Drug Designation for one or more Licensed Products from the FDA in a commercially reasonable period of time. Chelsea shall use Reasonable Commercial Efforts to bring the Licensed Product to market through a reasonably diligent program for the Exploitation of the Licensed Product, including formulation and packaging of the Licensed Product. Chelsea shall use Reasonable Commercial Efforts to secure the Marketing Authorization Approval in accordance with the development plan set forth in Exhibit D attached hereto. Particularly, Chelsea shall use Reasonable Commercial Efforts to file (i) one New Drug Application (“NDA”) with the FDA on or before [*], and (ii) one Marketing Authorization Application with the European Agency for the Evaluation of Medicinal Products on or before [*]. In addition, Chelsea shall use Reasonable Commercial Efforts to maximize the sales of the Licensed Products, provided that specific methods for such Reasonable Commercial Efforts shall be determined solely by Chelsea or its Sublicensee. Any of the obligations in this Section 3.5 and the development plan set forth in Exhibit D attached hereto may be modified by Chelsea subject to DSP’s written approval, which approval shall not be unreasonably withheld or delayed. DSP’s sole and exclusive remedy for any failure by Chelsea to perform its obligations under this Section 3.5 shall be to terminate this Agreement by providing Chelsea with sixty (60) days prior written notice, unless Chelsea commences or resumes to perform such obligations during such sixty (60) day period.

3.6 ADR Reporting. Each Party agrees to provide each other with adverse drug events occurring or having occurred in connection with the use of the L-DOPS and/or the Licensed Product which come into its knowledge. The Parties agree to handle data and information on adverse drug events occurring or having occurred in connection with the use of the L-DOPS and/or the Licensed Product according to the respective ICH-Guidelines, FDA requirements, requirements of the relevant European registration authorities, requirements of the Regulatory Authority and/or requirements of any other relevant regulatory authority. Any information furnished by either DSP or Chelsea under this Section 3.6 shall be treated as Confidential Information pursuant to Section 9 of this Agreement, provided that either Party may provide such information to the Regulatory Authority in compliance with any applicable law and/or regulation.

No later than the initiation by Chelsea of the first clinical trial of the Licensed Product in the Territory, the Parties shall negotiate in good faith and execute a Clinical Pharmacovigilance Agreement specifying the procedure for the exchange of information on the adverse drug events which may occur during the development of the Licensed Product.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

8

After completion of the last clinical trial for the application for the Marketing Authorization Approval for the first country in which such application is to be made, but no later than the expected date when Chelsea obtains the first Marketing Authorization Approval in the Territory, the Parties shall negotiate in good faith and execute a Post Marketing Pharmacovigilance Agreement which includes, without limitation, handling of post marketing studies and spontaneous or literature reports, surveillance in relation to the Licensed Product, in the Territory by Chelsea, its Affiliates and its Sublicensees, and outside the Territory by DSP, its Affiliates and its licensees, specifying the procedure for the exchange of information on the adverse drug events which may occur after the first commercial sale of the Licensed Product.

DSP shall be solely responsible for reporting adverse drug events to the regulatory authorities outside the Territory. Chelsea, as a party owning the Marketing Authorization Approval or any application thereof, including an IND and an NDA, shall be solely responsible for reporting adverse drug events to the Regulatory Authority in the Territory. The Parties will maintain a safety database for L-DOPS and the Licensed Product to enable the Parties to manage safety data collected and fulfill their own regulatory requirements.

3.6.1 Further Provisions. Both as an integral part of the procedures referred to in Section 3.6 and as a separate obligation under this Agreement, further provisions concerning the reporting and notification of adverse drug reactions shall be separately negotiated in good faith and agreed upon by the Parties promptly after Effective Date to comply with regulatory requirements.

3.7 Postponement. Upon receiving the Marketing Authorization Approval in any country of the Territory, Chelsea shall notify DSP in writing of that event, together with the expected date of First Commercial Sale, which shall not be unreasonably late after receiving the Marketing Authorization Approval. Chelsea may change such expected date of First Commercial Sale, at no cost to Chelsea, by notifying DSP in writing, together with rationale for such change, prior to the beginning of the calendar month during which the expected date of such First Commercial Sale is scheduled to occur. Chelsea may not postpone the expected date of First Commercial Sale (“Postponement”) more than once in any country of the Territory. In the event of a Postponement, other than due to a delay in supply of the Compound by DSP, Chelsea shall be responsible for and pay to DSP the costs of the Compound ordered under any firm order (whether such orders have been delivered by DSP or not) subject to the conditions set forth in the Supply Agreement, and Chelsea shall have no other responsibility to DSP as a result of such Postponement.

4. Consideration.

4.1 License Fee. Within sixty (60) days of the Effective Date: (i) Chelsea shall pay DSP One Hundred Thousand U.S. Dollars (US$100,000); and (ii)

9

subject to execution of a Subscription Agreement in substantially the form attached hereto as Exhibit E, Chelsea shall cause its Affiliate, Chelsea Therapeutics International, Ltd. (“CTI”), to issue to DSP CTI’s Common Stock with a value of Two Hundred Fifty Thousand U.S. Dollars (US$250,000), which value is based on the average closing price for the ten (10) trading days prior to the Effective Date.

4.2 Milestone Fees. Chelsea shall pay the amounts detailed below within thirty (30) days of the achievement of the corresponding milestones.

Milestone	Milestone Fee
Receipt of [*]	US$[*]. DSP may at its own discretion elect to receive US$[*] of such amount in the form of Common Stock of CTI, valued at the average closing price for the ten trading days prior to the date of the corresponding milestone, subject to execution of a Subscription Agreement in substantially the form attached hereto as Exhibit E.
The [*]	US$[*]
[*]	US$[*]
[*]	US$[*]
The first [*] US$[*]	US$[*]

Each milestone payment above shall only be made once under this Agreement upon the initial accomplishment of the relevant milestone.

4.3 Running Royalty. Chelsea shall pay DSP, within ninety (90) days following the end of each calendar year, [*] Percent ([*]%) of Net Sales of each Licensed Product by Chelsea, its Affiliates and its Sublicensees for the previous calendar year. All obligations of Chelsea to pay DSP royalties for Exploitation of Licensed Products shall expire (i) with respect to the North America which constitutes

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

10

USA, Canada and Mexico, eight (8) years after the First Commercial Sale in USA, and (ii) with respect to the remainder of the Territory, eleven (11) years after the First Commercial Sale in any country of UK, France, Italy, Germany and Spain, and upon expiration of the relevant royalty term, all of the licenses and rights granted to Chelsea hereunder shall become irrevocable, perpetual, fully-paid, and royalty-free.

4.4 Bundling. In the event that a Licensed Product is included as a “bundle” of products or services, Chelsea, as applicable, may discount the list price of the Licensed Product contained in the bundle in calculating the Net Sales of such Licensed Product for purposes of calculating royalties and milestones due under this Agreement by no more than the average percentage discount of all products in a particular “bundle,” calculated as [1-(A/B)] x 100, where “A” equals the total discounted price of a particular “bundle” of products, and “B” equals the sum of the undiscounted bona fide list prices of each unit of every product in such “bundle”. Chelsea shall provide to DSP, to the extent reasonably available or ascertainable, documentation establishing such average discount with respect to each “bundle”. If Chelsea cannot so establish the average discount of a “bundle,” Net Sales for the “bundled” Licensed Product shall be based on (i) the median selling price of the Licensed Product alone during the applicable calendar quarter, if the Licensed Product is sold in a non-”bundled” form during such calendar quarter, or, if such Licensed Product is not sold in a non-”bundled” form during such calendar quarter, (ii) the undiscounted list price of the Licensed Product in the “bundle”. If a Licensed Product in a “bundle” is not sold separately, and/or no bona fide list price exists for such Licensed Product or the other products included in the “bundle,” then the Parties shall negotiate in good faith, based on a commercially reasonable determination of the relative values and/or imputed prices of the “bundled” product’s constituent products and Licensed Product, and imputed discounts provided with respect thereto, an alternative determination of Net Sales with respect to the Licensed Product included in such “bundled” product consistent with the intent of this Section 4.4.

4.5 Combination Products. In the event a Licensed Product is sold which is a Combination Product, for purposes of determining payments due under Section 4.3, Net Sales of Combination Products shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A over A+B, in which A is the Gross Selling Price (as defined below) of the Licensed Product when such Licensed Product is sold in substantial quantities comprising L-DOPS as the sole therapeutically active ingredient during the applicable accounting period in which the Net Sales of the Licensed Product were calculated, and B is the Gross Selling Price of products incorporating solely the other therapeutically active ingredients contained in the Combination Product sold separately in substantial quantities during the applicable accounting period. In the event that no separate sale of either the Licensed Product comprising L-DOPS as the sole therapeutically active ingredient or products incorporating solely the other therapeutically active ingredients of the Combination Product are made during the accounting period in which the Net Sales were calculated, or if the Gross Selling Price for a product solely incorporating a particular therapeutically active ingredient cannot be determined for the applicable accounting period, Net Sales allocable to the Licensed Product and Combination Product shall be determined by mutual agreement reached in good faith by the Parties prior to the end of

11

the accounting period in question based on a reasonably equitable method of determining same that takes into account, in the Territory, variations in potency, the relative contribution of each therapeutically active ingredient in the Combination Product, and relative value to the end user of each therapeutically active ingredient. For purposes of this Section, “Gross Selling Price” shall mean the gross price at which a product incorporating such therapeutically active ingredient as the sole therapeutically active ingredient is sold to a Third Party, before discounts, deductions, credits, taxes or allowances.

4.6 Third Party Royalties. In the event that:

4.6.1 a Licensed Product, not to include Improvements or any future DSP’s Patents not existing as of the Effective Date, is deemed by a final, unappealable decision of a court of competent jurisdiction to infringe a claim of a patent(s) owned or controlled by a Third Party in any given country of the Territory, and Chelsea licenses such patent(s) in settlement of such claims (“Infringement License”), or

4.6.2 Chelsea determines, in its reasonable discretion, that it is commercially, reasonably necessary or advisable to pay royalties to a Third Party to obtain a license to practice any Third Party’s rights in order to Exploit a Licensed Product, not to include Improvements or any future DSP’s Patents not existing as of the Effective Date, in any given country of the Territory (“Necessary License”),

4.6.3 then Chelsea may deduct up to [*] percent ([*]%) of any fees, milestones, and royalties paid for such Infringement Licenses and Necessary Licenses due to such Third Parties (or such amounts paid by Chelsea in settlement of such infringement action) from the royalties otherwise due to DSP pursuant to Section 4.3 hereof, provided that the royalties to be paid by Chelsea pursuant to Section 4.3 shall be in no event less than [*] percent ([*]%) of Net Sales and provided that any additional amounts paid by Chelsea and not deducted shall be carried over to subsequent periods that royalties are due, and provided further that Chelsea shall provide DSP with detailed information on the Infringement Licenses and Necessary Licenses prior to obtaining such Infringement Licenses and Necessary Licenses.

4.7 Compulsory Licenses. Should a compulsory license be granted, or be the subject of a possible grant, to a Third Party under the applicable laws of any country in the Territory under the Licensed Patents licensed hereunder, Chelsea shall notify DSP, including any material information concerning such compulsory license, and the running royalty rate payable hereunder for sales of Licensed Products in such country shall be adjusted to match any lower royalty rate granted to such Third Party for such country with respect to the sales of such Licensed Products to the extent the Licensed Patents cover the Licensed Product, provided that during such periods such Third Parties sell or offer for sale under the compulsory license articles that compete with the Licensed Products then marketed and sold by Chelsea in that country.

4.8 Generic Competition. If the Licensed Product does not receive or maintain the Orphan Drug Designation in the USA, through no fault of Chelsea, its

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

12

Affiliates or Sublicensees, and during the Term, there is Generic Competition in the country, then, on a Licensed Product-by-Licensed Product basis, the royalty to be paid on the Net Sales of the Licensed Product in the USA pursuant to Section 4.3, as it may be adjusted or affected by Sections 4.3, 4.5, and 4.6, will be reduced by [*] percent ([*]%).

4.9 Net Sales Report. Within sixty (60) days following the end of each calendar quarter following the First Commercial Sale in the Territory, Chelsea shall submit to DSP a written report setting forth Net Sales in the Territory on a country-by-country basis and Licensed Product-by-Licensed Product basis during such calendar quarter and calendar year-to-date, total royalty and milestone payments due to DSP, relevant sales and pricing data in support of royalties paid on Licensed Product sold as a “bundle” and Combination Products, and relevant information as necessary to support any reduction in royalties paid resulting from the application of Section 4 hereof. Net Sales reporting shall terminate upon expiration of the obligations of Chelsea to pay royalties pursuant to Section 4.3.

4.10 Payment Terms. Except as otherwise set forth herein, all sums due to DSP shall be payable in United States dollars. Except as otherwise set forth herein with respect to royalties and sales-based milestones, all other payments due hereunder shall be paid within thirty (30) days following receipt of an invoice requesting such payment. In this respect, Chelsea shall diligently and promptly notify DSP in writing of occurrence of any event of the milestone payment. For conversion of foreign currency to U.S. dollars, the conversion rate shall be the New York foreign exchange rate quoted in The Wall Street Journal on the last business day of the relevant reporting period set forth in Section 4.9.

4.11 Financial Records; Audits. Chelsea shall keep at its corporate headquarters, accurate and complete records of milestones achieved and Net Sales, which are necessary to determine the amounts due to DSP under this Agreement. Such records shall be retained by Chelsea for at least the seven (7) calendar years following the end of the calendar year during which such Net Sales or milestones were achieved. During normal business hours and with reasonable advance written notice to Chelsea, such records shall be made available for inspection, review and audit, at the request of DSP, by an independent certified public accountant appointed by DSP and reasonably acceptable to Chelsea for the purpose of verifying the accuracy of accounting reports and payments pursuant to this Agreement. Such auditor shall be required to enter into a confidentiality agreement with Chelsea prior to performing the audit. The final report of the auditor, including methodology and supporting documentation, shall be transmitted to both Parties. Such audits may not be performed by DSP more than once per calendar

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

13

year and the right to audit shall terminate one (1) calendar year after expiration of the obligations of Chelsea to pay royalties pursuant to Section 4.3. All costs and expenses incurred in performing any such audit shall be paid by DSP unless the audit discloses at least a five percent (5%) shortfall in payments made with respect to a calendar quarter, in which case Chelsea shall bear the reasonable, documented cost of the audit. DSP shall be entitled to recover any shortfall in payments as determined by such audit and Chelsea shall pay such shortfall to DSP in such manner as mutually agreed upon by the Parties.

5. Certain Warranties.

5.1 Mutual Representations and Warranties. Chelsea and DSP each represents and warrants to the other, with respect to itself and not the other Party, as of the Effective Date that:

5.1.1 Such Party: (i) is a company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization; (ii) has the requisite corporate power and authority and the legal right to conduct its business as now conducted and hereafter contemplated to be conducted; and (iii) has obtained or will obtain all necessary licenses, permits, consents, or approvals from or by, and has made or will make all necessary notices to, all Governmental Authorities having jurisdiction over such Party that are required for such Party’s performance of this Agreement;

5.1.2 The execution, delivery and performance of this Agreement by such Party: (i) are within the corporate power of such Party; (ii) have been duly authorized by all necessary or proper corporate action; (iii) do not conflict with any provision of the organizational documents of such Party; (iv) do not, to the best of such Party’s knowledge, violate any Law or any order or decree of any court or Governmental Authority; and (v) do not violate or conflict with any terms of any indenture, mortgage, deed of trust, lease, loan, agreement or other instrument to which such Party is a party, or by which such Party is bound; and

5.1.3 This Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.

5.2 DSP Representations and Warranties. DSP represents and warrants to Chelsea as of the Effective Date that:

5.2.1 DSP Controls all of the rights, title and interest in and to its respective Licensed Patents and Licensed Know-How as necessary to grant the licenses provided under this Agreement;

5.2.2 DSP does not have any present knowledge from which it would reasonably conclude that the Licensed Patents are invalid or that their exercise would infringe patent rights of Third Parties;

14

5.2.3 DSP has not omitted to furnish Chelsea with any material information requested by Chelsea, or intentionally concealed from Chelsea any material information in its possession concerning L-DOPS or the subject matter of the transactions contemplated by this Agreement, which DSP reasonably considers would be material to Chelsea’s decision to enter into this Agreement and to undertake the commitments and obligations set forth herein;

5.2.4 Neither DSP nor any of its Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any Person obtaining any interest in, or that would give to any Person any right to assert any claim in or with respect to, any rights granted to Chelsea under this Agreement;

5.2.5 DSP has not, and during the Term of the Agreement will not, grant any right to any Third Party relating to the Licensed Patents or Licensed Know-How, which conflicts with the rights granted to Chelsea hereunder. During the Term, DSP shall not, without the prior written consent of Chelsea, encumber the Licensed Patents with liens, mortgages, security interests or another similar interest that would give the holder the right to convert the interest into patent ownership, unless the encumbrance is expressly subject to the licenses herein;

5.2.6 DSP has, up to and including the Effective Date, furnished Chelsea with all information, which DSP reasonably considers to be material for Chelsea to evaluate the utility or safety of L-DOPS;

5.2.7 DSP has furnished, or will furnish (in accordance with the terms of this Agreement), to Chelsea appropriate tangible manifestations of the Licensed Know-How which DSP Controls as of the Effective Date;

5.2.8 DSP has taken reasonable measures, using its good faith business judgment, to protect the confidentiality of the Licensed Know-How;

5.2.9 The Licensed Patents listed on Exhibit A are, as of the Effective Date, the only Patents Controlled by DSP claiming L-DOPS, the manufacturing thereof or the use thereof; and

5.2.10 With respect to the Licensed Patents and the technology claimed therein:

(i) No Patent within the Licensed Patents is the subject of any pending interference, opposition, cancellation or other protest proceeding;

(ii) Relative to the Licensed Patents and the technology claimed therein, DSP has no knowledge of any claim pending, threatened, or previously made alleging infringement or misappropriation of any patent, trade secret, or other intellectual property right of any Third Party;

(iii) There are no additional inventors of the Licensed Patents other than those currently named as inventors;

15

(iv) The Licensed Patents were not supported in whole or part by any government or private funding, and if they were, Chelsea has received all documentation relating to such support; and

(v) DSP is not aware of any Third Party activities which would constitute misappropriation or infringement of the Licensed Patents.

5.3 Disclaimer of Warranty. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS SECTION 5, NEITHER PARTY MAKES AND EACH PARTY EXPRESSLY DISCLAIMS, WAIVES, RELEASES AND RENOUNCES ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL WARRANTIES ARISING FROM ANY COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE.

6. Patents.

6.1 Prosecution and Maintenance of Licensed Patents. DSP shall file, prosecute (including but not limited to, by conducting interferences, oppositions and reexaminations or other similar proceedings), and maintain (by timely paying all maintenance fees, renewal fees and other applicable fees and costs) all Licensed Patents in such countries of the Territory as agreed upon between the Parties. DSP shall keep Chelsea informed of the updated situation relating to the Licensed Patents. Chelsea shall cooperate with DSP so far as reasonably necessary with respect to furnishing all information and data in its possession reasonably necessary to obtain or maintain such Licensed Patents. DSP shall have no obligation to file, prosecute (including but not limited to, by conducting interferences, oppositions and reexaminations or other similar proceedings), and maintain (by timely paying all maintenance fees, renewal fees and other applicable fees and costs) any Licensed Patents in the other countries of the Territory, provided that, if requested by Chelsea, DSP shall conduct those actions under the name of DSP at the expense of Chelsea and the relevant Licensed Patents shall be owned by DSP. Upon expiration or termination (not including any termination by DSP pursuant to Section 8.2 or 8.3 and by Chelsea pursuant to Section 8.4) of this Agreement, Chelsea shall have a perpetual, irrevocable, royalty-free exclusive right to use such Licensed Patents, Licensed Know-How and Improvements solely in connection with Exploiting L-DOPS in the Territory after the Term of this Agreement

6.2 Patent Infringement.

6.2.1 Infringement Claims. With respect to any and all Claims instituted by Third Parties against Chelsea, DSP, or any of their respective Affiliates for patent infringement involving the manufacture, use, license, marketing or sale of a Licensed Product during the Term (each, a “Patent Infringement Claim”), DSP and Chelsea shall assist one another and cooperate in the defense and settlement of such Patent Infringement Claims at the other Party’s request.

16

6.2.2 Infringement of Patents.

(a) In the event that Chelsea or DSP becomes aware of actual or threatened infringement of a Licensed Patent, within the Licensed Field in the Territory during the Term, that Party shall promptly notify the other Party in writing, which notice shall include any known material details concerning such infringement. Chelsea shall have the first right, but not the obligation, to bring an infringement action against any Third Party in respect of such Licensed Patent. If Chelsea elects to pursue such infringement action, Chelsea shall be solely responsible for the costs and expenses associated with such action and all recoveries (including settlements) shall be applied as follows: (i) first to reimburse Chelsea for any reasonable, documented expenses incurred in respect of such action; (ii) second, to reimburse DSP for any reasonable, documented expenses incurred in respect of such action; and (iii) any remaining amounts shall be allocated as follows: (a) any amounts attributable to lost profits shall be treated as Net Sales, and Chelsea shall pay to DSP royalties due on such amounts in accordance with Section 4 of this Agreement; and (b) any amounts not attributable to lost profits shall be allocated on the basis of [*] percent ([*]%) to DSP and [*] percent ([*]%) to Chelsea.

(b) During the Term, in the event that Chelsea does not undertake an infringement action under Section 6.2.2(a), upon Chelsea’s written consent, which shall not be unreasonably withheld, refused, conditioned or delayed, DSP shall be permitted to undertake an infringement action, at DSP’s sole expense, and, if required, in the relevant Party’s name or the relevant Party’s Affiliate’s name and on the relevant Party’s or the relevant Party’s Affiliate’s behalf. If a particular Party is attempting to undertake an infringement action pursuant to this Section 6.2.2, but such Party is not recognized by the applicable court or other relevant body as having the requisite standing to pursue such action, then such Party may join the other Party as a party-plaintiff. If DSP elects to pursue such infringement action, DSP may be represented in such action by attorneys of its own choice and at its own expense, with DSP taking the lead in such action. In the event that DSP brings any such action after Chelsea has elected not to pursue such action, DSP shall be solely responsible for the costs and expenses associated with such action and all recoveries (including settlements) shall be applied as follows: (i) first to reimburse DSP for any expenses incurred in respect of such action; (ii) second, to reimburse Chelsea for any expenses incurred in respect of such action; and (iii) (a) any amounts attributable to lost profits shall be treated as Net Sales, and Chelsea shall pay to DSP royalties due on such amounts in accordance with Section 4 of this Agreement; and (b) any amounts not attributable to lost profits shall be allocated on the basis of [*] percent ([*]%) to DSP and [*] percent ([*]%) to Chelsea.

6.3 Assistance. For purposes of this Section 6, the Party not bringing suit or defending any suit shall execute such legal papers necessary for the prosecution or defense of such suit as may be reasonably requested by the Party bringing suit or defending any suit. The reasonable, documented out-of-pocket costs and expenses of the Parties shall be reimbursed out of any damages, settlements or other monetary awards recovered as set forth in Section 6.2.2. Any remaining damages, settlements or other monetary awards shall be divided as specified in Section 6.2.2. No settlement, consent judgment or other voluntary final disposition of a suit under this Section 6 may be entered into by a Party without the joint written consent of the other Party (which consent shall not be unreasonably withheld, delayed, or conditioned).

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

17

7. Supply.

7.1 Clinical Supply. DSP shall supply Chelsea with all of Chelsea’s requirements of the Compound for use in clinical trials. The price of the Compound supplied to Chelsea hereunder for clinical use shall be Japanese Yen [*] ([*]) per kilogram on the basis of FCA Kansai International Airport in Japan, as defined by INCOTERMS 2000 as amended. Sections 4 and 7 of the License Agreement shall apply mutatis mutandis to delivery of and payment for the Compound for clinical use hereunder.

7.2 Commercial Supply. DSP shall supply Chelsea with all of Chelsea’s requirements of the Compound for commercial use on such terms and conditions as provided for in the Supply Agreement (the “Supply Agreement”) attached hereto as Exhibit F, which shall become effective upon the dosing of the first patient in Chelsea’s Phase III Clinical Trial using a Licensed Product. The Supply Agreement shall be an integral part of this Agreement, and in case of conflict between this Agreement and the Supply Agreement, this Agreement shall prevail.

The Compound for commercial supply shall be sold to Chelsea at such price in Japanese Yen as agreed upon between the Parties pursuant to the Supply Agreement on the basis of FCA Kansai International Airport in Japan, as defined by INCOTERMS 2000 as amended.

In the event such supply price for commercial supply exceeds an average price (excluding any special or time-limited discount prices) quoted by a Third Party to Chelsea for the Compound with substantially similar specifications (the “Market Price”) to the Compound supplied by DSP as determined by the Joint Committee, Chelsea and DSP shall discuss in good faith the possibility of reduction of the supply price to the level of the Market Price. In the event Chelsea and DSP do not agree to the reduction of the supply price within one hundred twenty (120) days of the commencement of negotiations as a result of a good faith dispute, then Chelsea may use the Compound manufactured by itself or its designee reasonably acceptable to DSP, which acceptance shall not be unreasonably withheld or delayed, and the royalty paid by Chelsea pursuant to Section 4.3 shall increase by one percent (1%) with respect to the Net Sales of Licensed Products containing the Compound not supplied by DSP. The Parties recognize that in the case Chelsea may use the Compound manufactured by itself or its designee, Chelsea will need substantial time and resources to prepare for such case and therefore, Chelsea may initiate its preparation for manufacture of the Compound, including but not limited to selection of candidates of its designated manufacturer, before Chelsea has the right to use the Compound manufactured by it or its designee hereunder, provided that DSP shall have no obligation to provide its Know-How on manufacturing of the Compound to Chelsea or Chelsea’s designee for the purpose of such Chelsea’s preparation.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

18

Notwithstanding the foregoing, in the event (i) any facility involved in the manufacture or storage of the Compound hereunder is prohibited from, or materially adversely affected in its ability to, produce, store, or otherwise be involved in the provision of the Compound to Chelsea under this Agreement by the appropriate Regulatory Authorities or due to such failure to comply; or (ii) the termination of the Supply Agreement by Chelsea pursuant to Section 11.3 or 11.4 of the Supply Agreement (each a “Back-up Trigger”), DSP shall provide to Chelsea the reasonable Know-How necessary to manufacture the Compound so that Chelsea may manufacture the Compound by itself or its designee reasonably acceptable to DSP and there shall be no such increase in royalty. In case of the occurrence of the Back-up Trigger described in (i) above, Chelsea and DSP shall discuss in good faith and determine (i) the estimated period that DSP cannot supply the Compound and (ii) the quantity of the Compound which DSP cannot supply during the estimated period, and during such estimated period, Chelsea may manufacture the Compound by itself or its designee or procure the Compound from any third party. If, after such estimated period, DSP can demonstrate to Chelsea that it has cured the event giving rise to such Back-Up Trigger and is able to supply to Chelsea, on a long-term basis, the Compound in accordance with the Supply Agreement, then Chelsea shall, recommence the purchase of the Compound from DSP.

8. Term and Termination.

8.1 Term. Unless otherwise mutually agreed to by the Parties or earlier terminated as provided herein, this Agreement shall continue in effect for the Term.

8.2 Termination for Material Breach. Either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in the event that the other Party materially breaches its obligations under this Agreement; provided that, if such breach can be cured, the breaching Party shall have sixty (60) days after receipt of written notice thereof from the non-breaching Party to cure such breach. Any such termination shall become effective at the end of such 60-day period unless the breaching Party has cured any such breach prior to the expiration of such 60-day period (or, if such breach is capable of being cured but cannot be cured within such 60-day period, the breaching Party has commenced and used diligent efforts to cure such breach, provided that, in such instance, such cure must have occurred within one hundred twenty (120) days after receipt of written notice thereof from the non-breaching Party).

8.3 Termination for Bankruptcy. This Agreement may be terminated by either Party within thirty (30) days upon written notice in case the other Party makes an assignment for the benefit of creditors or become involved in receivership, bankruptcy (but excluding Chapter 11 bankruptcy under the U.S. Bankruptcy Act, and the Japanese Civil Rehabilitation Law and the Japanese Corporate Reorganization Law) or other insolvency or debtor relief proceedings, or any similar proceedings, or in proceedings, voluntary or forced, whereby the other Party is limited in the free and unrestrained exercise of its own judgment as to the carrying out of the terms of this Agreement.

19

8.4 Termination by Chelsea. Chelsea may terminate this Agreement at any time for its convenience by providing DSP with sixty (60) days prior written notice containing the rationale of the termination.

8.5 Effects of Termination.

8.5.1 Effect of Termination for Material Breach.

(a) Material Breach by Chelsea. In the event this Agreement is terminated by DSP pursuant to Section 8.2 for material breach by Chelsea, all licenses and rights granted by DSP to Chelsea or its Affiliates under this Agreement shall terminate.

(b) Material Breach by DSP. In the event this Agreement is terminated by Chelsea pursuant to Section 8.2 for material breach by DSP, all licenses and rights granted by DSP to Chelsea or its Affiliates under this Agreement prior to termination shall survive, and all of the licenses and rights granted to Chelsea under this Agreement shall become irrevocable, perpetual and royalty-free, subject to Chelsea’s continued obligation to pay milestones hereunder.

8.5.2 Effect of Termination by Chelsea. In the event this Agreement is terminated by Chelsea pursuant to Section 8.4 all licenses and rights granted by DSP to Chelsea or its Affiliates under this Agreement shall terminate. Upon termination by Chelsea pursuant to Section 8.4, Chelsea shall not continue Exploitation of L-DOPS. Upon termination by Chelsea, except due to material breach by DSP pursuant to Section 8.2, Chelsea shall promptly assign the Regulatory Documentation including the Marketing Authorization Approval free of charge to DSP and shall promptly settle the outstanding amount of the payments for L-DOPS supplied by DSP and of the costs of the transfer of the Licensed Know-How.

8.5.3 Sublicenses. If this Agreement is terminated by DSP for Chelsea’s breach, pursuant to Section 8.2, all sublicenses and rights with Third Parties regarding the licenses and rights hereunder granted to Chelsea by DSP hereunder prior to such termination shall be automatically assigned to DSP upon such termination, subject to the payment of any amounts due thereunder to DSP, in order to permit such Sublicensees’ continued quiet enjoyment of their rights thereunder in accordance with the terms thereof; provided, however, that such assignment shall not subject DSP to any obligations or liabilities in excess of those imposed by this Agreement.

8.6 Accrued Rights; Surviving Obligations. Except as provided elsewhere, termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of any Party prior to such termination or expiration. Such termination or expiration shall not relieve any Party from obligations that are expressly or by implication intended to survive termination or expiration of this Agreement, including but not limited to, definitions, rights to payment, and Sections 3.3, 3.4, 4.10, 4.11, 8.5, 8.6, 9, 10 and 11.4 and shall not affect or prejudice any provision of this Agreement which is expressly or by implication provided to come into effect on, or continue in effect after, such termination or expiration. Notwithstanding anything herein to the contrary, all rights granted to the data under Section 3.4 shall survive.

20

9. Confidential Information.

9.1 Definition. “Confidential Information” means confidential or proprietary information, data or know-how, whether provided in written, oral, visual or other form, provided by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) in connection with this Agreement, including but not limited to, the terms of this Agreement and information relating to the Disclosing Party’s existing or proposed research, development efforts, patent applications, business or products. Confidential Information shall not include any such information to the extent that the information: (i) is already known to the Receiving Party (other than under an obligation of confidentiality) at the time of disclosure (as evidenced by written records of the Receiving Party); (ii) is or becomes generally available to the public other than through any act or omission of the Receiving Party; (iii) is disclosed to the Receiving Party without obligation of confidentiality by a Third Party who had the legal right to disclose such information; or (iv) is independently discovered or developed by or on behalf of the Receiving Party without the use or benefit of the Confidential Information of the Disclosing Party (as evidenced by written records of the Receiving Party).

9.2 Confidentiality. The Receiving Party shall keep in confidence all Confidential Information of the Disclosing Party with the same degree of care it employs to maintain the confidentiality of its own Confidential Information, but no less than a reasonable degree of care. The Receiving Party shall not use such Confidential Information for any purpose other than in performance of or exercise of its rights or obligations under this Agreement or disclose the same to any other Person other than to the Receiving Party’s and its Affiliates’ (and, if applicable, the Sublicensees’) employees, agents, or subcontractors who have a need to know such Confidential Information to implement the terms of or exercise of the Receiving Party’s rights or obligations under this Agreement. The Receiving Party shall advise any employee, agent or subcontractor who receives Confidential Information of the Receiving Party’s obligations, and the Receiving Party shall ensure that all such agents, employees and subcontractors comply with such obligations as if they had been a Party hereto. The Receiving Party shall be liable for breach of this Section 9 by any of its employees, agents or subcontractors.

9.3 Permitted Disclosure and Use. The Receiving Party shall have the right to disclose Confidential Information if, in the reasonable opinion of the Receiving Party’s legal counsel, such disclosure is required by Law or the rules of any stock exchange, provided that, to the extent reasonably practicable, the Receiving Party gives adequate prior notice of such disclosure to the Disclosing Party to permit the Disclosing Party to intervene and to request protective orders or other confidential treatment. The Receiving Party shall cooperate reasonably with any such efforts by the Disclosing Party.

9.4 Confidentiality of this Agreement. The terms of this Agreement shall be deemed Confidential Information of each Party. Either Party may disclose the

21

terms of this Agreement: (i) if, in the opinion of its counsel, such disclosure is required by Law, provided that such Party shall seek appropriate confidentiality of those portions of the Agreement for which confidential treatment or a protective order is typically permitted by the relevant Governmental Authority; or (ii) as necessary in connection with any financing, merger, strategic partnership, or other similar transaction, subject to the execution of a confidentiality agreement with the applicable Third Party that receives the information and terms.

9.5 Return. Unless otherwise provided for in this Agreement, upon termination of this Agreement, the Receiving Party shall return all documents or other media containing Confidential Information of the Disclosing Party, except that each Party may retain one copy of all Confidential Information solely for establishing its obligations under the Agreement.

9.6 Remedies. Money damages shall not be an adequate remedy if this Section 9 is breached and, therefore, either Party may, in addition to any other legal or equitable remedies, be entitled to seek an injunction or other equitable relief against such breach or threatened breach without the necessity of posting any bond or surety.

9.7 Survival. This Section 9 shall survive the expiration or termination of this Agreement for a period of ten (10) years.

10. Indemnification.

10.1 Indemnification by Chelsea. Subject to Sections 10.3 and 10.4, Chelsea shall defend, indemnify and hold harmless DSP and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated losses damages, claims, payments (collectively, “Losses”), to the extent arising out of: (i) Chelsea’s negligence or willful misconduct in performing any of its obligations or exercising its rights under this Agreement; (ii) breach by Chelsea of any of its representations, warranties, covenants, or agreements under this Agreement; or (iii) the Exploitation of Licensed Products by Chelsea, its Affiliates, agents, subcontractors or Sublicensees, except to the extent resulting from the negligence or willful misconduct, breach of this Agreement, or failure to comply with applicable Laws by DSP or its Affiliates, sublicensees, officers, directors, employees, contractors, agents, other representatives, successors, or assigns.

10.2 Indemnification by DSP. Subject to Sections 10.3 and 10.4, DSP shall defend, indemnify and hold harmless Chelsea and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated Losses, to the extent arising out of: (i) DSP’s negligence or willful misconduct in performing any of its obligations or exercising its rights under this Agreement; (ii) breach by DSP of any of its representations, warranties, covenants or agreements under this Agreement; or (iii) the Exploitation of Improvements by DSP, its Affiliates, agents, subcontractors or Sublicensees, except to the extent resulting from the negligence or willful misconduct, breach of this Agreement, or failure to comply with applicable Laws by Chelsea or its Affiliates, sublicensees, officers, directors, employees, contractors, agents, other representatives, successors, or assigns.

22

10.3 Procedure for Indemnification. A Party which intends to seek indemnification under this Section 10 (such Party hereinafter referred to as the “Indemnitee”) for a Loss in respect to a Claim by a Third Party (“Third Party Claim”), shall promptly give written notice thereof to the Party from whom indemnification is sought (such other Party hereinafter referred to as the “Indemnitor”) within a reasonable period of time after the assertion of such Third Party Claim; provided, however, that the failure to provide written notice of such Third Party Claim within a reasonable period of time shall not relieve Indemnitor of any of its obligations hereunder, except to the extent that Indemnitor is materially prejudiced by such failure. Indemnitor may assume the complete control of the defense, compromise or settlement of any Third Party Claim (provided that any settlement of any Third Party Claim that: (i) subjects Indemnitee to any non-indemnified liability; or (ii) admits fault or wrongdoing on the part of Indemnitee shall require the prior written consent of such Indemnitee, provided such consent shall not be unreasonably withheld), including, at its own expense, employment of legal counsel, and at any time thereafter Indemnitor shall be entitled to exercise, on behalf of Indemnitee, any rights which may mitigate the extent or amount of such Third Party Claim; provided, however, that if Indemnitor shall have exercised its right to assume control of such Third Party Claim, Indemnitee (x) may, in its sole discretion and at its own expense, employ legal counsel to represent it (in addition to the legal counsel employed by Indemnitor) in any such matter, and in such event legal counsel selected by Indemnitee shall be required to confer and cooperate with the counsel of Indemnitor in such defense, compromise or settlement for the purpose of informing and sharing information with Indemnitor; (y) shall, at Indemnitor’s own expense, make available to Indemnitor those employees, officers, contractors, and directors of Indemnitee whose assistance, testimony or presence is necessary or appropriate to assist Indemnitor in evaluating and in defending any such Third Party Claim; provided, however, that any such access shall be conducted in such a manner as not to interfere unreasonably with the operations of the businesses of Indemnitee; and (z) shall otherwise fully cooperate with Indemnitor and its legal counsel in the investigation and defense of such Third Party Claim.

10.4 Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, TREBLE OR CONSEQUENTIAL DAMAGES INCLUDING LOST PROFITS, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY.

11. Miscellaneous.

11.1 Public Announcements. Except as may be expressly permitted under this Section 11.1 or required by applicable Laws or the rules of any stock exchange, neither Party shall make any public announcement of any information regarding this Agreement without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned, or delayed, subject to prior written notice to the other Party. To the extent reasonably practicable, each Party shall

23

submit to the other Party any proposed announcements at least ten (10) business days prior to the intended date of publication of such announcement to permit review and the other Party shall provide its comments in writing within five (5) business days after receipt of the proposed announcement. The Party shall complete the announcement, taking the other Party’s comments into due consideration. Once any statement is approved for disclosure by the Parties or information is otherwise made public in accordance with the preceding sentence, either Party may make a subsequent public disclosure of the specific contents of such statement without further approval of the other Party.

11.2 Relationship of the Parties. Each Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other except as expressly provided in this Agreement. Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee benefits of such employees. No employee or representative of a Party shall have any authority to bind or obligate the other Party to this Agreement in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without such Party’s approval. For all purposes, Chelsea’s legal relationship under this Agreement to DSP shall be that of independent contractor. This Agreement is not a partnership agreement and nothing in this Agreement shall be construed to establish a relationship of partners or joint venturers between the Parties.

11.3 Force Majeure. The occurrence of an event which materially interferes with the ability of a Party to perform its obligations or duties hereunder, which is not within the reasonable control of the Party affected (including any of its Affiliates and Sublicensees), and which could not with the exercise of due diligence have been avoided (“Force Majeure Event”), including but not limited to, fire, accident, strike, riot, civil commotion, act of God, inability to obtain raw materials, delay or errors by shipping companies or change in law, shall not excuse such Party from the performance of its obligations or duties under this Agreement, but shall merely suspend such performance during the Force Majeure Event. The Party subject to a Force Majeure Event shall promptly notify the other Party of the occurrence and particulars of such Force Majeure Event and shall provide the other Party, from time to time, with its best estimate of the duration of such Force Majeure Event and with notice of the termination thereof. The Party so affected shall use commercially reasonable efforts to avoid or remove such causes of nonperformance as soon as is reasonably practicable. Upon termination of the Force Majeure Event, the performance of any suspended obligation or duty shall promptly recommence. The Party subject to the Force Majeure Event shall not be liable to the other Party for any direct, indirect, consequential, incidental, special, punitive, exemplary or other damages arising out of or relating to the suspension or termination of any of its obligations or duties under this Agreement by reason of the occurrence of a Force Majeure Event, provided such Party complies in all material respects with its obligations under this Section 11.3.

11.4 Governing Law and Arbitration. This Agreement shall be governed by and construed and enforced in accordance with the laws of England, excluding that body of law known as choice of law, and shall be binding upon the

24

Parties in the United States and worldwide. All disputes with respect to this Agreement which cannot be solved amicably between the Parties shall be finally settled by arbitration held in the English language in accordance with the Rules of Arbitration of International Chamber of Commerce. The arbitration shall be held in Osaka, Japan if the arbitration is initiated by Chelsea and in Charlotte, North Carolina, USA if the arbitration is initiated by DSP. The award rendered by the arbitration shall in any case be final and binding upon the Parties hereto. Judgment upon the award may be entered in any court having jurisdiction thereof.

11.5 Assignment. This Agreement may not be assigned by either Party without the prior written consent of the other Party; provided that either Party may assign this Agreement, in whole or in part, to any of its Affiliates if such Party guarantees the performance of this Agreement by such Affiliate; and provided further that either Party may assign this Agreement to a successor to all or substantially all of the assets or business of such Party to which this Agreement relates, whether by merger, sale of stock, sale of assets or other similar transaction. In any event, the assigning Party shall provide the other Party with ten (10) business days’ prior written notice of assignment. Any assignment in violation of this provision is void and without effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto, their permitted successors, legal representatives and assigns.

11.6 Notices. All demands, notices, consents, approvals, reports, requests and other communications hereunder must be in writing, in English, and shall be deemed to have been duly given only if delivered personally, by facsimile with confirmation of receipt, by airmail (first class, postage prepaid), or by overnight delivery using a globally-recognized carrier, to the Parties at the following addresses:

DSP:

Dainippon Sumitomo Pharma Co., Ltd.

33-94 Enoki, Suita, Osaka 564-0053, Japan

Attn: Director, Licensing

Facsimile: +81-6-6368-1573

Chelsea:

Chelsea Therapeutics, Inc.

13950 Ballantyne Corporate Place, Suite 325, Charlotte, NC 28277, USA

Attn: Simon Pedder, Ph.D.

Facsimile: +1-704-752-1479

or to such other address as the addressee shall have last furnished in writing in accord with this provision. Any such communication shall be deemed given: (i) when delivered, if personally delivered or sent by facsimile on a business day; (ii) on the seventh (7^th) business day after posting, if sent by airmail; (iii) on the fourth (4^th) business day after dispatch, if sent by an internationally recognized overnight courier; and (iii) upon receipt, if sent in any other manner.

11.7 Severability. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.

25

11.8 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

11.9 Waiver. No waiver of any term or condition of this Agreement shall be effective unless set forth in a written instrument that explicitly refers to this Agreement that is duly executed by or on behalf of the waiving Party. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any prior, concurrent or future occasion. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by Law or otherwise, shall be cumulative and not in the alternative to any other rights or remedies that may be available to such Party.

11.10 Entire Agreement. This Agreement (including the appendices and schedules hereto) constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all previous agreements and understandings between the Parties, whether written or oral, including but not limited, to all proposals, negotiations, conversations, letters of intent, memoranda of understanding or discussions, between Parties relating to the subject matter of this Agreement and all past dealing or industry custom.

11.11 Modification. This Agreement may be altered, amended or changed only by a writing making specific reference to this Agreement and the clause to be modified, which amendment is signed by duly authorized representatives of Chelsea and DSP.

11.12 Counterparts. This Agreement may be executed in any two counterparts, each of which, when executed, shall be deemed to be an original and both of which together shall constitute one and the same document.

[Signature page follows]

26

IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on the dates indicated below.

DAINIPPON SUMITOMO PHARMA CO, LTD.		CHELSEA THERAPEUTICS, INC.
By:	/s/  Kenjiro Miyatake	By:	/s/  Simon Pedder
Name:	Kenjiro Miyatake	Name:	Simon Pedder, Ph.D.
Title:	President	Title:	President and Chief Executive Officer

27

EXHIBIT A

LICENSED PATENTS

REFERENCE NUMBER COUNTRY PATENT NUMBER ISSUE DATE APPLICATION SERIAL NUMBER

(No Licensed Patents exist as of the Effective Date. DSP has filed a patent application regarding [*] tablet in Japan (application number: [*]) and plans to file the corresponding patent applications in some countries of the Territory.)

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

28

EXHIBIT B

REGULATORY DOCUMENTATION AND LICENSED KNOW-HOW (1)

The Regulatory Documentation and Licensed Know-How delivered to Chelsea

hereunder shall include, but not be limited to the items set forth below.

[*]

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

29

EXHIBIT C

JOINT COMMITTEE

Members from DSP:

Mitsutaka Nakamura, Ph.D.	Masumi Ueda, Ph.D.
Director,	Director,
Development Management Management	Technology Research and Development
Development Division	Technology Research and Development Center
Phone: +81-6-6337-5935	Phone: +81-6-6454-8176
Facsimile: +81-6-6368-1573	Facsimile: +81-6-6454-8153
Email: mitsutaka-nakamura@ds-pharma.co.jp	Email: masumi-ueda@ds-pharma.co.jp
Members from Chelsea:
L. Arthur Hewitt, Ph.D.	Michael J. Roberts, Ph.D.
VP, Drug Development	Director, Business Development
13950 Ballantyne Corporate Place	13950 Ballantyne Corporate Place
Suite 325	Suite 325
Charlotte, NC 28277, USA	Charlotte, NC 28277, USA
Phone: +1-704-341-1516 x102	Phone: +1-704-341-1516 x104
Facsimile: +1-704-752-1479	Facsimile: +1-704-752-1479
Email: hewitt@chelsearx.com	Email: roberts@chelsearx.com

30

EXHIBIT D

DEVELOPMENT PLAN

[*]

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

31

EXHIBIT E

FORM OF

SUBSCRIPTION AGREEMENT

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the signature page hereof between Chelsea Therapeutics International, Ltd., a Delaware corporation having a place of business at 13950 Ballantyne Corporate, Place Suite 325, Charlotte, NC 28277 (the “Company”), and Dainippon Sumitomo Pharma Co., Ltd., a Japanese corporation having a place of business at 6-8 Doshomachi 2-chome, Chuo-ku, Osaka 541-0045, Japan (the “Subscriber”).

W I T N E S S E T H:

WHEREAS, the Company’s wholly owned subsidiary Chelsea Therapeutics, Inc. and the Subscriber are entering into an Exclusive License Agreement (the “License”) for L-DOPS, as defined therein, under which the Company is to issue to the Subscriber shares (the “Shares”) of its common stock, par value $0.0001 per share (“Common Stock”); and

WHEREAS, on the terms and conditions hereinafter set forth, the Subscriber desires to purchase from the Company, and the Company desires to sell to the Subscriber, a number of Shares.

NOW, THEREFORE, in consideration of the promises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

1. PURCHASE AND SALE OF SHARES.

1.1 The number of Shares to be issued hereunder shall be                     , which is equal to U.S. $250,000 provided for in Section 4.1 of the License or U.S. $[*] provided for in Section 4.2 of the License divided by the average closing price of the Company’s Common Stock as reported on NASDAQ for the ten (10) trading days prior to the Effective Date (as defined in the License) or the date of the corresponding milestone in the License. The consideration for the Shares shall be the Subscriber’s execution and delivery of the License.

1.2 The closing hereunder (the “Closing”) shall be held at a date and time designated by the Company and the Subscriber pursuant to the License which date shall be no later than five (5) business days after satisfaction or waiver of the closing conditions set forth in Article 4 hereof. The Closing shall occur at the offices of the Company or such other place as may be agreed upon between the parties.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

32

1.3 The Company shall deliver, or cause to be delivered, the certificates representing the Shares purchased by the Subscriber hereunder as soon as practical after the Closing to the Subscriber’s address indicated on the signature page hereto, provided that the Company shall provide the Subscriber with such evidence as the Subscriber may reasonably request evidencing that the Subscriber’s rights as the holder of the Shares commence as of and from the Closing Date.

2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER.

The Subscriber hereby represents and warrants to the Company as of the date hereof and the Closing Date as follows:

2.1 The Subscriber understands, acknowledges and agrees that the purchase of the Shares involves a high degree of risk including, but not limited to, the following: (i) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Shares; (ii) the Subscriber may not be able to liquidate its investment; (iii) transferability of the Shares is extremely limited; (iv) in the event of a disposition of the Shares, the Subscriber could sustain the loss of its entire investment; and (v) since the Company has been a publicly traded company, the Company has not paid any dividends on its Common Stock and does not anticipate the payment of dividends in the foreseeable future.

2.2 The Subscriber is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

2.3 The Subscriber understands, acknowledges and agrees that: (i) the Subscriber is knowledgeable, sophisticated and has experience in making, and is qualified to make, decisions with respect to investments representing an investment decision like that involved in the purchase of the Shares and has prior investment experience, including investments in securities which are non-listed, unregistered and/or not traded on the New York Stock Exchange, AMEX, the Nasdaq National Market or Capital Market or any other national stock exchange; (ii) the market price of the Common Stock has been and continues to be volatile and the Subscriber has carefully evaluated the risks of an investment in the Shares; and (iii) the Subscriber is able to bear the economic risk of an investment in the Shares and the potential loss of such investment, which risk the Subscriber hereby assumes.

2.4 The Subscriber has received and reviewed this Agreement and documents filed by the Company with the Securities and Exchange Commission (the “SEC”, and such documents, the “SEC Filings”). For purposes of this representation, the parties agree that any information that that Company subsequently files with the SEC shall automatically update and supersede any previous information, provided that the Subscriber has been provided a copy of such SEC Filings or provides access to an automated service to provide such notification by e-mail. The Subscriber further represents that it has been furnished by the Company during the course of this

33

transaction with all information regarding the Company which the Subscriber, its investment advisor, attorney and/or accountant has requested or desired to know or which is otherwise relevant to an investment decision, has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions hereof and has received any additional information which the Subscriber or its advisors or agents has requested.

2.5 (a) The Subscriber has relied solely upon the information provided by the Company in making the decision to invest in the Shares. In evaluating the suitability of an investment in the Company, the Subscriber has not relied upon any representation or other information (whether oral or written) from the Company, or any agent, employee or Affiliate of the Company other than as set forth in this Agreement or resulting from the Subscriber’s own independent investigation. The Subscriber understands and acknowledges that nothing in this Agreement or any other materials provided to the Subscriber in connection with the subscription for the Shares or sale of the Shares constitutes investment, tax or legal advice. To the extent deemed necessary or advisable by the Subscriber in its sole discretion, the Subscriber has retained, at its sole expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and its purchase of the Shares hereunder.

(b) No Shares were offered or sold to the Subscriber by means of any form of general solicitation or general advertising.

2.6 The Subscriber, either by reason of the Subscriber’s business or financial experience or the business or financial experience of the Subscriber’s professional advisors, has the capacity to protect the Subscriber’s own interests in connection with the transaction contemplated hereby.

2.7 The Subscriber understands, acknowledges and agrees that the issuance of the Shares hereunder has not been reviewed, recommended or endorsed by the SEC or any other securities regulatory authority or other governmental body or agency, since it is intended to be exempt from the registration requirements of Section 5 of the Securities Act pursuant to Regulation D promulgated under the Securities Act. The Subscriber shall not sell or otherwise transfer the Shares unless such transfer is registered under the Securities Act or unless an exemption from such registration is available. The Subscriber understands that if required by the laws or regulations or any applicable jurisdictions, the offering contemplated hereby shall be submitted to the appropriate authorities of such state(s) for registration or exemption therefrom.

2.8 The Subscriber understands, acknowledges and agrees that the Shares have not been registered under the Securities Act in reliance upon a claimed exemption under the provisions of the Securities Act which depends, in part, upon the Subscriber’s investment intention and the truth and accuracy of, and Subscriber’s compliance with, the representations, warranties, acknowledgments and covenants of Subscriber set forth herein. In this connection, the Subscriber hereby represents that the representations, warranties, acknowledgments and covenants of Subscriber set forth

34

herein are true and correct, the Subscriber shall comply with the covenants set forth herein, and the Subscriber is purchasing the Shares for the Subscriber’s own account for investment purposes only and not with a view toward the resale or distribution to others and has no contract, undertaking, agreement or other arrangement, in existence or contemplated, to sell, pledge, assign or otherwise transfer the Shares to any other person. The Subscriber also represents that it was not formed for the purpose of purchasing the Shares. The Subscriber has no current plans to effect a “change of control” of the Company, as such term is understood in Rule 13d-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2.9 The Subscriber understands that the Shares shall not be registered or available for sale in the public markets except as specifically provided herein, and Rule 144 promulgated under the Securities Act requires, among other conditions, a one-year holding period prior to the resale (in limited amounts) of Shares acquired in a non-public offering (and a two-year holding period for unlimited sales by non-Affiliates of the Company) without having to satisfy the registration requirements under the Securities Act. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Shares under the Securities Act or any other applicable securities or “blue sky” laws.

2.10 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Shares substantially as set forth below, that such Shares have not been registered under the Securities Act or any other applicable securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware that the Company shall make a notation in its appropriate records with respect to the restrictions on the transferability of the Shares.

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION. THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED.

2.11 The address of the Subscriber furnished by the Subscriber on the signature page hereof is the Subscriber’s principal business address.

2.12 The Subscriber has full power and authority (corporate or otherwise) to execute, deliver, and perform this Agreement and to purchase the Shares and has taken all action necessary to authorize the execution, delivery and performance

35

of this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.

2.13 The Subscriber (a) is authorized and qualified to become an investor in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so and (b) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

2.14 No authorization, approval, consent or license of any person is required to be obtained for the purchase of the Shares by the Subscriber, other than as have been obtained and are in full force and effect. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby shall not, result in any violation of or constitute a default under any material agreement or other instrument to which the Subscriber is a party or by which the Subscriber or any of its properties are bound, or to the best of the Subscriber’s knowledge, any permit, franchise, judgment, order, decree, statute, rule or regulation to which the Subscriber or any of its businesses or properties is subject.

3 REPRESENTATIONS BY AND COVENANTS OF THE COMPANY.

The Company hereby represents and warrants to the Subscriber as of the date hereof and the Closing Date that:

3.1 The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which such qualification is necessary, except to the extent that the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, conditions (financial or otherwise), assets or results of operations of the Company and its subsidiaries as a whole (a “Material Adverse Effect”). The Company is not the subject of any pending or, to its knowledge, threatened investigation or administrative or legal proceeding in any state, federal or local jurisdiction.

3.2 (a) The authorized capital stock of the Company consists of 50,000,000 shares of capital stock, of which 45,000,000 are designated Common Stock and 5,000,000 of which are designated preferred stock. As of the date hereof, there were 19,565,304 shares of Common Stock issued and outstanding, all of which are duly authorized, validly issued, fully paid and non-assessable and no shares of preferred stock outstanding. In addition, there are 4,927,880 shares of Common Stock reserved for issuance pursuant to outstanding options and warrants. All of the Shares issued by the Company have been issued in accordance with all applicable federal and other securities laws. Other than as set forth above, there are no other options, warrants, calls,

36

rights, commitments or agreements of any character to which the Company is a party or by which the Company is bound or obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no preemptive rights or rights of first refusal or similar rights which are binding on the Company permitting any person to subscribe for or purchase from the Company shares of its capital stock pursuant to any provision of law, the Company’s Certificate of Incorporation or the Company’s By-laws, or pursuant to any agreement, contract or understanding to which the Company is a party. There are no shares or instruments containing anti-dilution or similar provisions that shall be triggered by the issuance of the Shares as described in this Agreement. Except as set forth in the SEC Filings, the Company does not own, directly or indirectly, any stock, partnership interest, joint venture interest or any other equity interest in, or security issued by, any person.

(b) The Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, shall be duly authorized, validly issued, fully paid and non-assessable. No further approval or authority of the stockholders or the Board of Directors of the Company shall be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein.

3.3 The Company has all power and authority (corporate or otherwise) to enter into this Agreement and to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of the Shares contemplated herein and the performance of the Company’s obligations hereunder has been taken. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.

3.4 (a) The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby shall not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or Governmental Authority to or by which the Company or any subsidiary thereof is bound, or of any provision of the Certificate of Incorporation or By-Laws of the Company, and shall not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company or any subsidiary thereof is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company or any subsidiary thereof where such violation, breach, default or imposition would reasonably be likely to result in a Material Adverse Effect.

37

(b) No material consent, approval, authorization or other order of any Governmental Authority or other third-party is required to be obtained by the Company or any subsidiary thereof in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Shares, except such filings as may be required to be made with the SEC, any stock exchange or quotation service and with any state or foreign blue sky or securities regulatory authority.

3.5 All reports required to be filed by the Company since January 1, 2005 under the Exchange Act have been duly filed with the SEC, complied at the time of filing in all material respects with the requirements of their respective forms and the rules and regulations thereunder, except to the extent updated or superseded by any subsequently filed report, were complete and correct in all material respects as of the dates at which the information was furnished, and such reports did not contain (as of their respective dates) any untrue statements of a material fact nor omitted to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, or if amended, as so amended.

3.6 Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising.

3.7 To the best of the Company’s knowledge, the Company owns, or has the right to use, all patents, trademarks, service marks, trade names, copyrights, licenses, trade secrets or other proprietary rights necessary to its business as now conducted without conflicting with or infringing upon the right or claimed right of any person under or with respect to any of the foregoing. The Company has not received any communications alleging that the Company has violated the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company is not aware of any violation by a third party of any of the Company’s patents, trademarks, service marks, trade names, copyrights, trade secrets or other proprietary rights.

3.8 Except as disclosed in the SEC Reports filed on or prior to the execution date of this Agreement: (i) the Company has not incurred any material liabilities or obligations, indirect, or contingent, or entered into any material oral or written agreement or other transaction which is not in the ordinary course of business or which could reasonably be expected to result in a material reduction in the future earnings or prospects of the Company; (ii) except as described in the SEC filings made prior to the execution date of this Agreement, the Company has not paid or declared any dividends or other distributions with respect to its capital stock and the Company is not in default in the payment of principal or interest on any outstanding debt obligations; (iii) there has not been any change in the capital stock of the Company other than the sale of the Shares, shares or options issued pursuant to stock option plans or purchase

38

plans approved by the Company’s Board of Directors; and (iv) there has not been any other event or change that would have, individually or in the aggregate, a Material Adverse Effect.

3.9 The financial statements of the Company and the related notes contained in the SEC filings made by the Company prior to the execution date of this Agreement present fairly, in accordance with generally accepted accounting principles, the financial position of the Company as of the dates indicated, and the results of its operations, cash flows and the changes in shareholders’ equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments. Such consolidated financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles. The Company has to the extent required complied in all material respects with the Sarbanes-Oxley Act of 2002.

4 CONDITIONS TO OBLIGATIONS OF EACH PARTY.

4.1 The Company’s obligation to complete the sale and issuance of the Shares to the Subscriber at the Closing is subject to the fulfillment on or prior to the Closing of the following conditions, which conditions may be waived at the option of the Company to the extent permitted by law:

(a) The representations and warranties made by the Subscriber in Article 2 hereof shall be true and correct when made, and shall be true and correct on and as of the Closing Date.

(b) All covenants, agreements and conditions contained in this Agreement to be performed by the Subscriber on or prior to such sale and issuance shall have been performed or complied with in all material respects.

(c) There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d) There shall not be in effect any law, rule or regulation prohibiting or restricting the issuance and sale of the Shares or requiring any consent or approval of any person which shall not have been obtained to issue or sell the Shares, or in either case to otherwise consummate the transactions contemplated hereby (except as otherwise provided in this Agreement).

(e) The Company shall have received the License executed by the Subscriber.

4.2 The Subscriber’s obligation to purchase the Shares at the Closing is subject to the fulfillment on or prior to the Closing of the following conditions, which conditions may be waived at the option of the Subscriber to the extent permitted by law:

(a) The representations and warranties made by the Company in Article 3 hereof shall be true and correct when made, and shall be true and correct on and as of the Closing Date (except for any representation or warranty that speaks as of a specific date, which shall be true and correct as of such date).

39

(b) All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to such purchase shall have been performed or complied with in all material respects.

(c) There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d) There shall not be in effect any law, rule or regulation prohibiting or restricting the issuance and sale of the Shares or requiring any consent or approval of any person which shall not have been obtained to issue or sell the Shares, or in either case to otherwise consummate the transactions contemplated hereby (except as otherwise provided in this Agreement).

5 COVENANTS OF COMPANY

5.1 The Company agrees to use commercially reasonable efforts:

(a) to make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

(b) to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(c) to furnish to the Subscriber upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as the Subscriber may reasonably request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such securities without registration.

5.2 At any time commencing on June 1, 2006, if the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale of any of its securities by it or any of its security holders (other than a registration statement on Form S-4, S-8 or other limited purpose form), then the Company will give written notice of its determination to Subscriber. Upon the written request from Subscriber, within twenty (20) days after receipt of any such notice from the Company, the Company will, except as herein provided, cause all of the Shares (the “Registrable Securities”) to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the Subscriber; provided, further, that nothing herein shall prevent the

40

Company from, at any time, abandoning or delaying any registration. If any registration pursuant to this Section 5.2 shall be underwritten in whole or in part, the Company may require that the Registrable Securities requested for inclusion to be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. The right of the Subscriber to have shares registered pursuant to this Section 5.2 shall cease at such time as the Shares are freely saleable without the volume limitations of Rule 144.

6 MISCELLANEOUS.

6.1 This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.

6.2 This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of North Carolina, excluding that body of law known as choice of law, and shall be binding upon the parties hereto in the United States and worldwide. All disputes with respect to this Agreement shall be brought and heard either in the North Carolina state courts located in Mecklenburg County, North Carolina, or the federal district court for the Eastern District of North Carolina located in Raleigh, North Carolina. The parties to this Agreement each consent to the in personam jurisdiction and venue of such courts. The parties agree that service of process upon them in any such action may be made if delivered in person, by courier service, by telegram, by facsimile or by first class mail, and shall be deemed effectively given upon receipt.

6.3 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

6.4 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.5 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

41

6.6 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

6.7 The Subscriber represents and warrants that it has neither engaged, consented to nor authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. The Subscriber hereby agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to any such person acting on behalf of the Subscriber hereunder.

6.8 Any covenant, agreement, representation or warranty made by the Company and the Subscriber herein that by its terms provides that it shall be performed, in whole or in part, after the Closing Date, including, without limitation, Articles 5.1 and 5.2, shall survive the execution of this Agreement and the delivery to the Subscriber of the Shares.

42

In witness whereof, each of the parties has caused this Subscription Agreement to be signed by its duly authorized representative.

DAINIPPON SUMITOMO PHARMA CO., LTD.

Signature

Kenjiro Miyatake

Name Typed or Printed

President

Title

6-8 Doshomachi 2-chome, Chuo-ku

Address

Osaka, Osaka 541-0045

City, State and Zip Code

+81-6-6503-4900

Facsimile Number

CHELSEA THERAPEUTICS INTERNATIONAL, LTD.
By:
Name:	Simon Pedder, Ph.D.
Title:	President and Chief Executive Officer

43

EXHIBIT F

SUPPLY AGREEMENT

This Supply Agreement (the “Agreement”) is entered into as of the [    ] day of [            ], 200[  ] (the “Effective Date”) by and between Dainippon Sumitomo Pharma Co., Ltd., a Japanese corporation having a place of business at 6-8 Doshomachi 2-chome, Chuo-ku, Osaka 541-0045, Japan (hereinafter called “DSP”), and Chelsea Therapeutics, Inc., a Delaware corporation having a place of business at 13950 Ballantyne Corporate Place, Suite 325, Charlotte, NC 28277, U.S.A. (hereinafter called “Chelsea”). DSP and Chelsea may be referred to herein individually as a “Party” or together, as the “Parties”.

INTRODUCTION

WHEREAS, DSP and Chelsea have executed the Exclusive License Agreement dated [            ], 200[  ] for “L-DOPS” (the “License Agreement”) under which DSP grants Chelsea the licenses and rights under certain intellectual property rights to develop and commercialize L-DOPS in the Territory; and

WHEREAS, in the License Agreement, DSP and Chelsea agree to execute a supply agreement which sets forth the terms and conditions of the supply of the Compound.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, DSP and Chelsea agree as follows:

1. DEFINITIONS

1.0 As used herein, the following terms shall have the respective meanings set forth below. Capitalized terms not defined herein shall have the meaning set forth in the License Agreement.

1.1 “Affiliate” shall mean any person, partnership, joint venture, limited liability company, corporation or other legal entity recognized in the world, including but not limited to subsidiaries, now or hereafter existing, in which a Party is directly or indirectly owned or controlled by, under common ownership or control with, or that owns or controls the subject Party. For purposes of this paragraph, “own” or “control” means direct or indirect ownership or control of:

(a) at least fifty percent (50%) of the outstanding shares or securities entitled to vote for the election of directors or similar managing authority of the subject entity, if such entity has voting shares or stock or other voting securities;

(b) at least fifty percent (50%) of the ownership interest representing the right to make the decisions for the subject entity, if such entity does not have voting shares or stock or other voting securities; or

44

(c) any other ability or power to elect at least one-half of the board of directors or similar managing authority of the subject entity, whether by contract or otherwise.

1.2 “cGMPs” shall mean the standards established by the FDA for current Good Manufacturing Practices, as specified in the Quality System Regulations set forth at 21 CFR Parts 210 and 211.

1.3 “Commercially Reasonable Efforts” shall mean efforts consistent with those generally utilized by companies of a similar size for their own internally developed pharmaceutical products of similar market potential, at a similar stage of their product life taking into account the existence of other competitive products in the market place or under development, the proprietary position of the product, the regulatory structure involved, the anticipated profitability of the product and other relevant factors. It is understood that such product potential may change from time to time based upon changing scientific, business and marketing and return on investment considerations.

1.4 “Compound” shall mean the active pharmaceutical ingredient dihydroxyphenylserine contained in the Licensed Product.

1.5 “DMF” shall have the meaning set forth in Section 2.3.

1.6 “Effective Date” shall mean the date first set forth above.

1.7 “FDA” shall mean the United States Food and Drug Administration.

1.8 “Finished Product” shall mean a packaged and labeled Licensed Product for commercial sale.

1.9 “First Commercial Sale” shall mean the first shipment of commercial quantities of any Finished Product sold to a Third Party by Chelsea, its Affiliate or Sublicensee in any country of the Territory after receipt of Marketing Authorization Approval in such country. Sales for test marketing, sampling and promotional uses or clinical trial or research purposes or compassionate uses shall not be considered to constitute a First Commercial Sale.

1.10 “L-DOPS” shall mean L-threo-3,4-dihydroxyphenylserine.

1.11 “Manufacturing Costs” shall mean, with respect to DSP’s manufacturing and supply of Compound to Chelsea hereunder, direct costs of all raw materials and direct labor used or consumed in such manufacture, packaging costs and expenses, quality assurance and quality control related expenses all of the foregoing shall be reasonable, documented, and as calculated in accordance with generally accepted accounting principles in Japan.

1.12 “Manufacturing Technology” shall mean all methods, processes, technology, information, data, results of tests, studies, and analyses, whether patentable or not, which are specifically related to the manufacturing process of the Compound and/or the Licensed Product, owned or controlled by DSP or its Affiliates as of the Effective Date or during the term of this Agreement.

45

1.13 “Marketing Authorization Approval” shall mean all approvals, licenses, registrations or authorizations required by or from the Regulatory Authority in the Territory for sale and marketing of the Finished Product in its jurisdiction, including any applicable pricing, final labeling and reimbursement approvals of such Regulatory Authority.

1.14 “Regulatory Authority” shall mean any applicable government authorities regulating or otherwise exercising authority with respect to making, importing, exporting, using, selling, offering for sale, or otherwise disposing of the Compound, the Licensed Product or the Finished Product, including any and all discovery, research, development, registration, modification, enhancement, improvement, manufacture, storage, formulation, transportation, distribution, promotion and marketing activities related thereto, in the Territory under this Agreement, including but not limited to the FDA in the USA.

1.15 “Specifications” shall mean those specifications pertaining to the Compound set forth in the DMF, and as described in Exhibit A hereto and made a part hereof, as modified to comply with the specifications pertaining to the Compound set forth in the Marketing Authorization Approval for the Licensed Product or as otherwise modified from time to time in accordance with Section 5.2.

1.16 “Sublicensee” shall mean any sublicensee of Chelsea with respect to the licenses and rights granted under the License Agreement.

1.17 “Supply Term” shall mean the period from the Effective Date (as defined in Section 1.6 above) until expiration or termination of the License Agreement.

1.18 “Territory” shall mean all countries of the world, excluding Japan, Korea, China and Taiwan.

1.19 “Third Party” shall mean a person or entity other than (a) DSP, any of its Affiliates or licensees for L-DOPS other than Chelsea, or (b) Chelsea, any of its Affiliates or Sublicensees.

2. SUPPLY OF COMPOUND

2.1 Subject to the terms and conditions of this Agreement and the License Agreement, DSP shall supply Chelsea with, and Chelsea shall purchase from DSP, all of its requirements of the Compound to be used for manufacture and sale of the Finish Product by Chelsea, its Affiliates and Sublicensees in the Territory.

2.2 The Joint Committee (as described in Section 3.1 of the License Agreement) shall meet as mutually agreed upon to discuss the performance of this Agreement; provided, however, that the Joint Committee shall have no authority to amend this Agreement, except that they shall have the power to make the decisions described in Sections 5.1 and 5.2 hereof. In case that the Joint

46

Committee cannot reach unanimous agreement regarding any such matter, the matter in dispute shall be discussed in good faith by the presidents or other representatives of the Parties to have amicable solution and the Parties shall make their best efforts to have amicable solution on the matter within ninety (90) days. In case the Parties fail to amicably solve the matter within the ninety (90)-day period, the matter shall be solved pursuant to Section 12.3.

2.3 DSP agrees (i) that, with respect to the manufacture of the Compound, it will, on or before June 1, 2007, establish and maintain a Type II FDA Drug Master File (No.                     ) (“DMF”) in accordance with the requirements of the FDA, as well as any comparable files required by Regulatory Authorities in other countries within the Licensed Territory, (ii) immediately following the filing of the DMF, to provide Chelsea with letters of access to the DMF and any other comparable files and (iii) to further provide Chelsea with all necessary and useful information and data regarding the manufacture of the Compound to the extent necessary for Chelsea to prepare and defend any inquiries from the FDA and to satisfy regulatory requirements in the Licensed Territory. DSP further agrees to use Commercially Reasonable Efforts to assist Chelsea with respect to the DMF in obtaining Marketing Authorization Approval from FDA, as well as from any other government or agency which may be required for the marketing of the Licensed Product in any other country within the Licensed Territory.

3. FORECASTING AND ORDERING

3.1 Supply Forecast

3.1.1 Initial Projection

Eighteen (18) months prior to the beginning of the calendar quarter which contains the expected date of the First Commercial Sale in the Territory, the Parties shall discuss in good faith the projected quantity requirements of the Compound for the first three (3) years following the First Commercial Sale in the Territory.

3.1.2 Rolling Forecast

Twelve (12) months prior to the beginning of the calendar quarter which contains the expected date of the First Commercial Sale in the Territory, Chelsea shall provide DSP with a good faith forecast of quantity requirements of the Compound for three (3) years following the First Commercial Sale in the Territory, including the quarterly quantities of the Compound for the first year and the yearly quantities of the Compound for the subsequent two (2) years. Chelsea shall update such forecast for the three (3)-year period on a rolling basis by the end of every calendar quarter thereafter during the term of this Agreement.

47

3.2 Firm Order

The first quarter of the rolling forecast placed by Chelsea pursuant to Section 3.1.2 above shall be deemed as a firm order. Chelsea shall designate a delivery date within the applicable calendar quarter at the time the forecast becomes a firm order. The quantity of the Compound in the firm order shall not be less than [*] percent ([*]%) nor more than [*] percent ([*]%) of the quantity specified in the latest forecast for the same quarter. In case the quantity in the firm order exceeds [*] percent ([*]%) of that in the latest forecast, DSP’s failure to supply the quantities exceeding [*] percent ([*]%) of that in the latest forecast shall not constitute a breach of this Agreement.

3.3 Postponement

Prior to receiving Marketing Authorization Approval in any country of the Territory, Chelsea may change the expected date of First Commercial Sale, at no cost to Chelsea, by notifying DSP in writing. Thereafter but prior to receiving Marketing Authorization Approval, Chelsea may postpone the expected date of First Commercial Sale one or more additional times (each, a “Postponement”) upon written notice to DSP. In the event of a Postponement, other than due to a delay by DSP, Chelsea shall be responsible for the costs of the Compound ordered under any Firm Order (whether such orders have been delivered by DSP or not) subject to the conditions set forth in Sections 4 and 5, and Chelsea and its sublicensees shall have no other responsibility to DSP as a result of such Postponement. DSP agrees that, provided that Chelsea is using Commercially Reasonable Efforts to achieve the First Commercial Sale, there shall be no limit on the number of Postponements or the duration of any Postponement, to the extent reasonable, that may be made by Chelsea prior to receiving Marketing Authorization Approval in any country of the Territory.

3.4 Minimum Order Quantity

The minimum order quantity (lot) per shipment shall be [*] kilograms ([*]kg) of the Compound.

3.5 Allocation in Case of Shortage

In the event that the Compound is, or is anticipated by DSP to be, in short supply, DSP shall notify Chelsea in writing of such circumstances as soon as possible, including the underlying reasons for such shortage.

Under the foregoing circumstances, DSP shall allocate to Chelsea an amount of the Compound proportionate to the quantity of Chelsea’s rolling forecast for the twelve (12)-month period immediately preceding such shortage divided by the total forecasted demand for the Compound of DSP and all of DSP’s customers (including Chelsea) for the same period, provided that DSP shall reserve the right to adjust the foregoing allocation scheme, taking into account any prevailing ethical considerations and the relative strategic and financial significance of the markets involved.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

48

3.6 Minimum Purchase Requirement

Chelsea recognizes that DSP will need some initial investment to satisfy estimated Chelsea’s requirements for the Compound and therefore, Chelsea agrees to purchase at least [*] kilograms ([*]kg) of the Compound from DSP hereunder during the Supply Term after any Marketing Authorization Approval is obtained, taking such DSP’s investment into due consideration.

4. DELIVERY

4.1 Delivery Terms

All of the Compound shall be delivered to Chelsea or such other co-signee as may be designated by Chelsea FCA (as defined by INCOTERMS 2000 as amended) at Kansai International Airport, Osaka, Japan.

4.2 Risk and Title

Except as provided for in Section 5, the risk of loss and damage for, and the title in, the Compound supplied hereunder shall pass to Chelsea upon delivery of the Compound by DSP to the carrier designated by Chelsea at Kansai International Airport, Osaka, Japan.

5. QUALITY CONTROL

5.1 Conformity

All of the Compound supplied by DSP for the commercial use under this Agreement shall conform to the Specifications and cGMPs of the USA. In the event any laws, rules and regulations in the Territory, other than cGMPs of the USA, required DSP to modify the Specifications, DSP shall use its Commercially Reasonable Efforts to comply with such laws, rules and regulations. Any reasonable and documented costs and expenses unanimously agreed to by the Joint Committee, solely to meet and to satisfy the requirements of any laws, rules and regulations in the Territory, including cGMPs of the USA, shall be reimbursed to DSP by Chelsea according to the method of payment as determined by the Joint Committee, provided that in case that the Joint Committee does not approve the investment for the purpose of this Section 5.1 proposed by DSP and/or Chelsea, DSP shall have no obligation to invest in and implement such requirements and shall have no liability for non-implementation of such requirements.

5.2 Change Control

In the event that DSP intends any change in the Specifications, the location of the manufacture, the manufacturing process, or the raw materials, which requires approval of the Regulatory Authority, DSP shall first give a prior written notice to Chelsea and then obtain an approval from the Regulatory Authority, provided that prior to implementation of such change that requires Chelsea to pay the cost for, all such proposed changes, including amount and method of payment by

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

49

Chelsea, shall be unanimously approved by the Joint Committee and then, all such proposed changes shall be approved by the applicable Regulatory Authority. In case that the Joint Committee does not approve such proposed changes, DSP shall have no obligation to invest in and implement such proposed changes and shall have no liability for non-implementation of such proposed changes.

5.3 Release

DSP shall perform quality assurance test of all the batches of the Compound manufactured by DSP in accordance with the methods of analysis and the Specifications approved by the FDA and shall release only the Compound from the batches which passed such quality assurance test. DSP shall furnish Chelsea with signed original certificates of quality assurance test for each batch of the Compound (the “Certificate of Analysis”). Such Certificate of Analysis shall certify with respect to each shipment and batch (identified by batch number) (i) the quantity of the shipment, and (ii) that the Compound delivered meets the Specifications, as well as any further information required by the relevant Regulatory Authority that Chelsea may have previously notified DSP is necessary. Chelsea or the Sublicensee shall be under no obligation to accept any shipment of Compound which does not accompany Certificate of Analysis.

5.4 Acceptance

Promptly after receipt of the Compound, Chelsea shall perform confirmatory quality assurance test of all the batches of the Compound in accordance with the Specifications by itself or its designee and notify DSP in writing within forty (40) days after receipt at Chelsea’s facilities or such other destination as may be designated by Chelsea of each shipment of the Compound if the confirmatory quality assurance test indicates that the delivered Compound does not meet the Specifications. On Chelsea’s failure to notify DSP of the non-conformance to the Specifications within such forty (40)-day period, Chelsea shall be deemed to have accepted the delivered Compound.

Upon receipt by DSP of the notice of non-conformance from Chelsea, each Party shall re-test the Compound which Chelsea alleges does not conform to the Specifications. In the event that the Parties reach an agreement on the non-conformance to the Specifications as a result of the above re-test, DSP shall replace such Compound and the cost of the replacement reasonably incurred by the Parties shall be borne by DSP.

If the results of the re-test performed by each Party are inconsistent, the Parties shall have the Compound tested by a reputable Third Party testing organization selected by mutual agreement of the Parties and cooperate in the furnishing of necessary analytical methodology, subject to appropriate safeguards of confidentiality, to such testing organization. The decision of such Third Party testing organization shall be binding upon both Parties and the Party whose test results are inconsistent with those of the Third Party testing organization shall bear the costs of having such Third Party test the Compound. In addition, if the

50

decision of the Third Party testing organization shows that the Compound does not meet the Specifications, DSP shall replace such Compound with no charge to Chelsea. The non-conforming Compound shall be returned to DSP or destroyed by Chelsea or its designee at the expense of DSP in accordance with DSP’s instructions.

5.5 Inspection by Chelsea

Chelsea may inspect facilities of DSP or DSP’s Affiliate during normal business hours of the facilities upon a reasonable prior written notice and DSP shall accept or shall have its Affiliate accept such inspection to the extent such facilities relate to the manufacture of the Compound.

DSP shall use Commercially Reasonable Efforts to have the Third Parties, who are entrusted or contracted all or a part of manufacturing process of the Compound, if any, accept the foregoing inspections by Chelsea.

5.6 Inspection by Regulatory Authority

DSP shall accept, have its Affiliate accept, and seek to have the Third Parties, who are entrusted or contracted all or a part of manufacturing process of the Compound, if any, accept, the inspection by the Regulatory Authority if it is required for Chelsea to maintain the Marketing Authorization Approval. Chelsea shall use Commercially Reasonable Efforts to obtain the information on such inspection in advance and forward it to DSP. DSP shall permit Chelsea or Chelsea’s Affiliates to be present at any inspection by the Regulatory Authority. If any issue on the manufacturing of the Compound is raised in the inspection by the Japanese, US and EU Regulatory Authorities, DSP shall inform Chelsea of the issue.

5.7 Retention of Samples and Records

DSP shall retain samples from each lot of the Compound manufactured for Chelsea in quantities sufficient for complete analysis and shall retain manufacturing batch records of each lot of the Compound. DSP shall retain such samples and records until the first (1st) anniversary of the expiration of the shelf life of each lot or such longer period of time that Chelsea notifies DSP in writing is required by applicable laws, rules or regulations. Chelsea shall also notify DSP of any additional records that are required to be retained for such period of time.

5.8 Quality Assurance Agreement

The Parties shall enter into a mutually agreed-upon quality assurance agreement (“Quality Assurance Agreement”) which shall set forth in detail the quality assurance arrangements and procedures of the Compound and the cGMP responsibilities between the Parties.

51

5.9 Customer Complaints

The Parties shall handle with customer complaints under the Quality Assurance Agreement.

5.10 Formulation and Packaging

Chelsea shall at its sole cost, expense, risk and responsibility carry out the formulation and packaging of the Finished Product. The formulation and packaging shall be carried out in compliance with any and all applicable laws and regulations of the Territory. Chelsea shall not sell, by itself through its Affiliates and Sublicensees, the Finished Product which does not meet the then-prevailing quality, specifications and test methods, formula and manufacturing process.

Chelsea shall at DSP’s request and Chelsea’s expense, provide DSP with an appropriate unit of samples of the Finished Product, together with manufacturing report including certificate of analysis.

6. COMMERCIAL SUPPLY PRICE

6.1 The price of the Compound supplied to Chelsea hereunder for commercial use (the “Commercial Supply Price”) shall be the Manufacturing Costs plus [*] percent ([*]%) of such Manufacturing Costs. The Commercial Supply Price shall be the amount in Japanese Yen on the basis of FCA Kansai International Airport in Osaka, Japan, as defined by INCOTERMS 2000 as amended. In the event such Commercial Supply Price exceeds an average price (excluding any special or time-limited discount prices) quoted by a Third Party to Chelsea for the Compound with substantially similar specifications (the “Market Price”) to the Compound supplied by DSP as determined pursuant to Section 7.2 of the License Agreement or as agreed upon between the Parties, Chelsea and DSP shall discuss in good faith the possibility of reduction of the Commercial Supply Price to the level of the Market Price. In the event Chelsea and DSP do not agree to the reduction of the Commercial Supply Price within one hundred twenty (120) days of the commencement of negotiations as a result of a good faith dispute, then Chelsea may manufacture the Compound by itself or its designee reasonably acceptable to DSP, and the royalty paid by Chelsea under Section 4.3 of the License Agreement shall increase as provided for in Section 7.2 of the License Agreement. Notwithstanding the foregoing, in the event DSP is unable to supply Chelsea with the Compound in accordance with this Agreement, DSP shall provide Chelsea with the Manufacturing Technology so that Chelsea may manufacture the Compound by itself or its designee reasonably acceptable to DSP until DSP becomes able to, and has intention to, supply the Compound pursuant to this Agreement, and there shall be no such increase in royalty to be paid under the License Agreement.

6.2 In the event of change in economic circumstances including increase in expenses of raw materials of the Compound, Chelsea and DSP shall discuss in good faith the reasonable revision of the Commercial Supply Price.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

52

6.3 Upon the written request of Chelsea, and not more than once in each calendar year, DSP shall permit an independent certified public accounting firm selected by Chelsea, to have access during normal business hours, and upon reasonable prior written notice, to such records of DSP as may be reasonably necessary to verify the Manufacturing Costs for the Compound supplied hereunder. In the event the accounting firm reasonably concludes that an underpayment or overpayment was made, such underpayment or overpayment shall be specified in a written report issued by the accounting firm, along with the information on which such conclusion is based. This report will be delivered promptly to DSP. If such report concludes that an overpayment by more than five percent (5%) was made by Chelsea, DSP shall reimburse Chelsea for the cost reasonably incurred for the audit. The reimbursement of any such overpayment and the cost of the audit shall be due and payable to Chelsea by DSP within sixty (60) days of the date of such report. If such report concludes that an underpayment by more than five percent (5%) was made by Chelsea, Chelsea shall pay to DSP the amount of any such underpayment, which shall be due and payable to DSP by Chelsea within sixty (60) days of the date of such report.

7. PAYMENTS

7.1 Payment Procedure

For each order for shipment of the Compound, DSP shall issue the invoice for the shipment in Japanese Yen, based on the Commercial Supply Price set forth in Section 6. Chelsea shall with each order deliver to DSP an irrevocable and confirmed letter of credit payable at sight and issued by a recognized bank accepted by DSP.

8. CONFIDENTIALITY

8.1 Definitions

“Confidential Information” means confidential or proprietary information, data or know-how, whether provided in written, oral, visual or other form, provided by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) in connection with this Agreement, including but not limited to, the terms of this Agreement and information relating to the Disclosing Party’s existing or proposed research, development efforts, patent applications, business or products. Confidential Information shall not include any such information to the extent that the information: (i) is already known to the Receiving Party (other than under an obligation of confidentiality) at the time of disclosure (as evidenced by written records of the Receiving Party); (ii) is or becomes generally available to the public other than through any act or omission of the Receiving Party; (iii) is disclosed to the Receiving Party without obligation of confidentiality by a Third Party who had the legal right to disclose such information; or (iv) is independently discovered or developed by or on behalf of the Receiving Party without the use or benefit of the Confidential Information of the Disclosing Party (as evidenced by written records of the Receiving Party).

53

8.2 Confidentiality

The Receiving Party shall keep in confidence all Confidential Information of the Disclosing Party with the same degree of care it employs to maintain the confidentiality of its own Confidential Information, but no less than a reasonable degree of care. The Receiving Party shall not use such Confidential Information for any purpose other than in performance of or exercise of its rights or obligations under this Agreement or disclose the same to any person or entity other than to the Receiving Party’s and its Affiliates’ (and, if applicable, the Sublicensees’) employees, agents, or subcontractors who have a need to know such Confidential Information to implement the terms of or exercise of the Receiving Party’s rights or obligations under this Agreement. The Receiving Party shall advise any employee, agent or subcontractor who receives Confidential Information of the Receiving Party’s obligations, and the Receiving Party shall ensure that all such agents, employees and subcontractors comply with such obligations as if they had been a Party. The Receiving Party shall be liable for breach of this Section 8 by any of its employees, agents or subcontractors.

8.3 Permitted Disclosure and Use

The Receiving Party shall have the right to disclose Confidential Information if, in the reasonable opinion of the Receiving Party’s legal counsel, such disclosure is required by the applicable laws or regulations or the rules of any stock exchange, provided that, to the extent reasonably practicable, the Receiving Party gives adequate prior notice of such disclosure to the Disclosing Party to permit the Disclosing Party to intervene and to request protective orders or other confidential treatment. The Receiving Party shall cooperate reasonably with any such efforts by the Disclosing Party.

8.4 Confidentiality of this Agreement

The terms of this Agreement shall be deemed Confidential Information of each Party. Either Party may disclose the terms of this Agreement: (i) if, in the opinion of its counsel, such disclosure is required by applicable laws or regulations, provided that such Party shall seek appropriate confidentiality of those portions of the Agreement for which confidential treatment or a protective order is typically permitted by the relevant governmental authority; or (ii) as necessary in connection with any financing, merger, strategic partnership, or other similar transaction, subject to the execution of a confidentiality agreement with the applicable Third Party that receives the information and terms.

8.5 Return

Unless otherwise provided for in this Agreement, upon termination of this Agreement, the Receiving Party shall return all documents or other media containing Confidential Information of the Disclosing Party, except that each Party may retain one copy of all Confidential Information solely for establishing its obligations under this Agreement.

54

8.6 Remedies

Money damages shall not be an adequate remedy if this Section 8 is breached and, therefore, either Party may, in addition to any other legal or equitable remedies, be entitled to seek an injunction or other equitable relief against such breach or threatened breach without the necessity of posting any bond or surety.

8.7 Survival

This Section 8 shall survive the expiration or termination of this Agreement for a period of ten (10) years.

9. INDEMNIFICATION

9.1 Indemnification by Chelsea

Subject to Sections 9.3 and 9.4, Chelsea shall defend, indemnify and hold harmless DSP and its Affiliates, other licensees for L-DOPS, and each of their officers, directors, shareholders, employees, successors and assigns from and against all claims of Third Parties, and all associated losses damages, claims, payments (collectively, “Losses”), to the extent arising out of: (i) Chelsea’s negligence or willful misconduct in performing any of its obligations or exercising its rights under this Agreement; (ii) breach by Chelsea of any of its representations, warranties, covenants, or agreements under this Agreement; or (iii) any performance hereunder of Chelsea, its Affiliates, agents, subcontractors or Sublicensees, except to the extent resulting from the negligence or willful misconduct, breach of this Agreement, or failure to comply with applicable laws or regulations, by DSP or its Affiliates, other licensees for L-DOPS, any of their officers, directors, employees, contractors, agents, other representatives, successors, or assigns.

9.2 Indemnification by DSP

Subject to Sections 9.3 and 9.4, DSP shall defend, indemnify and hold harmless Chelsea and its Affiliates, Sublicensees and each of their officers, directors, shareholders, employees, successors and assigns from and against all claims of Third Parties, and all associated Losses, to the extent arising out of: (i) DSP’s negligence or willful misconduct in performing any of its obligations or exercising its rights under this Agreement; or (ii) breach by DSP of any of its representations, warranties, covenants or agreements under this Agreement, except to the extent resulting from the negligence or willful misconduct, breach of this Agreement, or failure to comply with applicable laws or regulations, by Chelsea or its Affiliates, Sublicensees, any of their officers, directors, employees, contractors, agents, other representatives, successors, or assigns.

9.3 Procedure of Indemnification

A Party which intends to seek indemnification under this Section 9 (such Party hereinafter referred to as the “Indemnitee”) for a Loss in respect to a claim by a Third Party (“Third Party Claim”), shall promptly give written notice thereof to

55

the Party from whom indemnification is sought (such other Party hereinafter referred to as the “Indemnitor”) within a reasonable period of time after the assertion of such Third Party Claim; provided, however, that the failure to provide written notice of such Third Party Claim within a reasonable period of time shall not relieve Indemnitor of any of its obligations hereunder, except to the extent that Indemnitor is materially prejudiced by such failure. Indemnitor may assume the complete control of the defense, compromise or settlement of any Third Party Claim (provided that any settlement of any Third Party Claim that: (i) subjects Indemnitee to any non-indemnified liability; or (ii) admits fault or wrongdoing on the part of Indemnitee shall require the prior written consent of such Indemnitee, provided such consent shall not be unreasonably withheld), including, at its own expense, employment of legal counsel, and at any time thereafter Indemnitor shall be entitled to exercise, on behalf of Indemnitee, any rights which may mitigate the extent or amount of such Third Party Claim; provided, however, that if Indemnitor shall have exercised its right to assume control of such Third Party Claim, Indemnitee (x) may, in its sole discretion and at its own expense, employ legal counsel to represent it (in addition to the legal counsel employed by Indemnitor) in any such matter, and in such event legal counsel selected by Indemnitee shall be required to confer and cooperate with the counsel of Indemnitor in such defense, compromise or settlement for the purpose of informing and sharing information with Indemnitor; (y) shall, at Indemnitor’s own expense, make available to Indemnitor those employees, officers, contractors, and directors of Indemnitee whose assistance, testimony or presence is necessary or appropriate to assist Indemnitor in evaluating and in defending any such Third Party Claim; provided, however, that any such access shall be conducted in such a manner as not to interfere unreasonably with the operations of the businesses of Indemnitee; and (z) shall otherwise fully cooperate with Indemnitor and its legal counsel in the investigation and defense of such Third Party Claim.

9.4 Consequential Damages

IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES OR CHELSEA’S SUBLICENSEES OR DSP’S OTHER LICENSEES FOR L-DOPS BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, TREBLE OR CONSEQUENTIAL DAMAGES INCLUDING LOST PROFITS, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY.

10. EXPRESS WARRANTIES

10.1 The Parties intend and agree that this Agreement is not subject to the Uniform Commercial Code in force in any state of the USA, and that no warranties exist beyond these stated in this Agreement. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR

56

IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

11. TERM AND TERMINATION

11.1 Term

Unless otherwise mutually agreed to by the Parties or earlier terminated as provided herein, this Agreement shall continue in effect for the Supply Term.

11.2 Early Termination of License Agreement

In the event that the License Agreement is early terminated prior to its expiration, this Agreement shall be automatically terminated simultaneously, in which case, each Party shall be entitled to the remedies set forth in the License Agreement.

11.3 Termination for Material Breach

Either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in the event that the other Party materially breaches its obligations under this Agreement; provided that, if such breach can be cured, the breaching Party shall have sixty (60) days after receipt of written notice thereof from the non-breaching Party to cure such breach. Any such termination shall become effective at the end of such 60-day period unless the breaching Party has cured any such breach prior to the expiration of such 60-day period (or, if such breach is capable of being cured but cannot be cured within such 60-day period, the breaching Party has commenced and used diligent efforts to cure such breach, provided that, in such instance, such cure must have occurred within one hundred twenty (120) days after receipt of written notice thereof from the non-breaching Party).

11.4 Termination for Bankruptcy

This Agreement may be terminated by either Party within thirty (30) days upon written notice in case the other Party makes an assignment for the benefit of creditors or become involved in receivership, bankruptcy (but excluding Chapter 11 bankruptcy under the U.S. Bankruptcy Act, and the Japanese Civil Rehabilitation Law and the Japanese Corporate Reorganization Law) or other insolvency or debtor relief proceedings, or any similar proceedings, or in proceedings, voluntary or forced, whereby the other Party is limited in the free and unrestrained exercise of its own judgment as to the carrying out of the terms of this Agreement.

57

11.5 Regulatory Responsibilities of Both Parties

Even after the termination for any ground, each Party shall comply with the regulatory requirements which the Regulatory Authority of the relevant countries imposes on the Parties, if any.

11.6 Outstanding Payments

Expiration or any termination of this Agreement for any reason shall not release Chelsea from any obligation to make any payments to DSP under this Agreement which were due and payable prior to the effective date of expiration or termination. Upon the termination of this Agreement by DSP under Section 11.3 or 11.4, outstanding debts of Chelsea due to DSP shall become immediately due irrespective of any payment terms previously agreed upon the Parties.

11.7 Accrued Rights and Surviving Clauses

Except as provided elsewhere, expiration or termination of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of any Party prior to such termination or expiration. Such termination or expiration shall not relieve any Party from obligations that are expressly or by implication intended to survive termination or expiration of this Agreement, including but not limited to, definitions, rights to payment, and Sections 7, 8, 9, 10, 11.5, 11.6, 11.7, and 12 and shall not affect or prejudice any provision of this Agreement which is expressly or by implication provided to come into effect on, or continue in effect after, such termination or expiration.

12. MISCELLANEOUS PROVISIONS

12.1 Relationship of the Parties

For all purposes, Chelsea’s legal relationship under this Agreement to DSP shall be that of independent contractor. This Agreement is not a partnership agreement and nothing in this Agreement shall be construed to establish a relationship of partners or joint venturers between the Parties.

12.2 Force Majeure

The occurrence of an event which materially interferes with the ability of a Party to perform its obligations or duties hereunder, which is not within the reasonable control of the Party affected (including any of its Affiliates and Sublicensees), and which could not with the exercise of due diligence have been avoided (“Force Majeure Event”), including but not limited to, fire, accident, strike, riot, civil commotion, act of God, inability to obtain raw materials, delay or errors by shipping companies or change in law, shall not excuse such Party from the performance of its obligations or duties under this Agreement, but shall merely suspend such performance during the Force Majeure Event. The Party subject to a Force Majeure Event shall promptly notify the other Party in writing of the occurrence and particulars of such Force Majeure Event and shall provide the other Party, from time to time, with its best estimate of the duration of such Force Majeure Event and with notice of the termination thereof. The Party so

58

affected shall use Commercially Reasonable Efforts to avoid or remove such causes of non-performance as soon as is reasonably practicable. Upon termination of the Force Majeure Event, the performance of any suspended obligation or duty shall promptly recommence. The Party subject to the Force Majeure Event shall not be liable to the other Party for any direct, indirect, consequential, incidental, special, punitive, exemplary or other damages arising out of or relating to the suspension or termination of any of its obligations or duties under this Agreement by reason of the occurrence of a Force Majeure Event, provided such Party complies in all material respects with its obligations under this Section 12.2.

12.3 Governing Law and Arbitration

This Agreement shall be governed by and construed and enforced in accordance with the laws of England, excluding that body of law known as choice of law, and shall be binding upon the Parties in the United States and worldwide. All disputes with respect to this Agreement which cannot be solved amicably between the Parties shall be finally settled by arbitration held in the English language in accordance with the Rules of Arbitration of International Chamber of Commerce. The arbitration shall be held in Osaka, Japan if the arbitration is initiated by Chelsea and in Charlotte, North Carolina, USA if the arbitration is initiated by DSP. The award rendered by the arbitration shall in any case be final and binding upon the Parties hereto. Judgment upon the award may be entered in any court having jurisdiction thereof.

12.4 Assignment

This Agreement may not be assigned by either Party without the prior written consent of the other Party; provided that either Party may, without such consent, assign this Agreement, in whole or in part, to any of its Affiliates if such Party guarantees the performance of this Agreement by such Affiliate; and provided further that either Party may, without such consent, assign this Agreement to a successor to all or substantially all of the assets or business of such Party to which this Agreement relates, whether by merger, sale of stock, sale of assets or other similar transaction. In any event, the assigning Party shall provide the other Party with ten (10) business days’ prior written notice of assignment. Any assignment in violation of this provision is void and without effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto, their permitted successors, legal representatives and assigns.

12.5 Notices

All demands, notices, consents, approvals, reports, requests and other communications hereunder must be in writing, in English, and shall be deemed to have been duly given only if delivered personally, by facsimile with confirmation of receipt, by airmail (first class, postage prepaid), or by overnight delivery using a globally-recognized carrier, to the Parties at the following addresses:

DSP:

Dainippon Sumitomo Pharma Co., Ltd.

5-51, Ebie 1-chome, Fukushima-ku, Osaka 553-0001, Japan

Attn: Director, International Business Affairs

Facsimile: +81-6-6454-8162

59

Chelsea:

Chelsea Therapeutics, Inc.

13950 Ballantyne Corporate Place, Suite 325, Charlotte, NC 28277, USA

Attn: Simon Pedder, Ph.D.

Facsimile: +1-704-752-1479

or to such other address as the addressee shall have last furnished in writing in accord with this provision. Any such communication shall be deemed given: (i) when delivered, if personally delivered or sent by facsimile on a business day; (ii) on the seventh (7^th) business day after posting, if sent by airmail; (iii) on the fourth (4^th) business day after dispatch, if sent by an internationally recognized overnight courier; and (iv) upon receipt, if sent in any other manner.

12.6 Severability

If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.

12.7 Headings

The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

12.8 Waiver

No waiver of any term or condition of this Agreement shall be effective unless set forth in a written instrument that explicitly refers to this Agreement that is duly executed by or on behalf of the waiving Party. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any prior, concurrent or future occasion. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by applicable law or otherwise, shall be cumulative and not in the alternative to any other rights or remedies that may be available to such Party.

12.9 Entire Agreement

This Agreement constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all previous agreements and understandings between the Parties, whether written or oral, including but not limited, to all proposals, negotiations, conversations, letters of intent, memoranda of understanding or discussions, between Parties relating to the

60

	subject matter of this Agreement and all past dealing or industry custom, provided that in case of conflict between this Agreement and the License Agreement, the License Agreement shall prevail.
12.10	Modification
	This Agreement may be altered, amended or changed only by a writing making specific reference to this Agreement and the clause to be modified, which amendment is signed by duly authorized representatives of Chelsea and DSP.
12.11	Counterparts
	This Agreement may be executed in two (2) counterparts, each of which, when executed, shall be deemed to be an original and both of which together shall constitute one and the same document.

61

IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on the dates indicated below.

DAINIPPON SUMITOMO PHARMA CO., LTD.		CHELSEA THERAPEUTICS, INC.
By		By
Name:	Kenjiro Miyatake	Name:	Simon Pedder, Ph.D.
Title:	President	Title:	President and Chief Executive Officer
Date:		Date:

62

EX-10.10

Exhibit 10.10

Portions of this exhibit marked [*] are omitted and

are requested to be treated confidentially.

May 26, 2006

Simon Pedder, Ph.D.

Chelsea Therapeutics International, Ltd.

The Richardson Building

13950 Ballantyne Corporate Place, Suite 325

Charlotte, NC 28277

Re: Finder’s Agreement (this “Agreement”)

Dear Dr. Pedder:

1. This is to confirm our understanding that Paramount BioCapital, Inc., 787 Seventh Avenue, 48th Floor, New York, NY 10019 (“Paramount”) has been engaged as introducing agent of Chelsea Therapeutics International, Ltd. (the “Company”) from the date of this Agreement until January 27, 2007 (as further described and as may be extended pursuant to Section 9 hereto, or by mutual agreement of the parties hereto, the “Term”).

2. Should the Company enter into a definitive license agreement with Dainippon Sumitomo Pharma Co., Ltd., which was first introduced to the Company by or through Paramount during or prior to the Term (the “Introduced Party”), for the acquisition of an exclusive, irrevocable, worldwide license, excluding Japan, North Korea, South Korea, China and Taiwan, including the right to grant sublicenses, to use L-threo-3,4-dihydroxyphenylserine, or L-DOPs, its analogs or its derivatives (the “Technology”), and all know-how related to the Technology (the “License Agreement”), then the Company shall:

(a) pay Paramount a cash fee equal to Thirty-Five Thousand Dollars ($35,000) upon execution of the License Agreement;

(b) pay Paramount a cash fee equal to [*] Dollars ($[*]) upon the earlier to occur of (i) issuance of [*] for the benefit of the Company or (ii) the first [*] (as defined below), in a [*].

(c) pay Paramount a cash fee equal to [*] Dollars ($[*]) upon achieving [*] Dollars ($[*]) in Net Sales (as defined below) of Licensed Products by or on behalf of the Company or any of its affiliates or sublicensees within a single calendar year. For purposes of this Agreement, the term “Licensed Products” shall mean all products incorporating the Technology and/or related know-how.

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

1

3. In addition to the cash fees provided for in Section 2, the Company shall also pay to Paramount cash royalties equal to [*] of one percent (0.[*]%) of Net Sales of Licensed Products, by the Company, or its sublicensees. For purposes of this Agreement, the term “Net Sales” shall have the same meaning as that term is defined in the License Agreement for calculation of royalties to the Introduced Party.

4. Upon the execution of the License Agreement, the Company shall issue Paramount warrants (the “Warrants”) to purchase 250,000 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The Warrants shall be exercisable upon the earlier to occur of (a) issuance of orphan drug designation to the Technology by the FDA for the benefit of the Company or (b) the first dosing of a human being, with a Licensed Product, in a clinical trial under a Company sponsored, or sublicensee sponsored, IND. In addition, the Warrants shall (i) expire seven (7) years from the date of issuance; (ii) contain anti-dilution protection for stock splits and the like; (iii) contain a cashless exercise provision; (iv) have piggyback registration rights; and (v) have an exercise price equal to 110% of the Market Price of the Common Stock. For purposes of this Agreement, the “Market Price” shall be valued at the average closing bid price for the ten (10) days preceding the date of the execution of the License Agreement.

5. The Company acknowledges that the services (the “Services”) of [*], M.D. will be necessary to execute the License Agreement. The Company agrees that it shall be responsible for paying Dr. [*] consulting fee and any expenses incurred in connection with the Services within a reasonable amount of time from the date upon which the License Agreement is executed and that, in connection with the Services, the Company further agrees to negotiate in good faith a consulting agreement with Dr. [*] whereby Dr. [*] shall, in addition to any Services previously rendered, advise the Company with respect to the development of the Technology.

6. Any financial advice rendered by Paramount pursuant to this Agreement shall only be incidental to its introduction service pursuant hereto and shall not be disclosed publicly in any manner without Paramount’s prior written approval and shall be treated by the Company as confidential information, except as required by law.

7. All non-public information given to Paramount by the Company or to the Company by Paramount shall not be divulged by the receiving party to any third parties and shall be treated by each receiving party as confidential information, in each case except as required by law, and shall not be used by each receiving party except in rendering its services pursuant to this Agreement. Paramount may rely, without independent verification, on the accuracy and completeness of any information furnished to Paramount by the Company, subject to its obligations under the securities laws, which Paramount acknowledges and with which it warrants to Chelsea it will comply.

8. The Company agrees to indemnify each of Paramount, and its directors, officers, employees, shareholders, controlling persons under the Securities Act of 1933, affiliates and agents thereof (each an “Indemnitee,” together, the “Indemnitees”); and pay on demand and protect, defend, save and hold each Indemnitee harmless from and against any and all liabilities,

* Confidential treatment requested; certain information omitted and filed separately with the SEC.

2

damages, losses (other than loss of profit), settlements, claims, actions, suits, penalties, fines, costs or expenses (and all actions in respect thereof) (including, without limitation, reasonable attorneys’ fees and related expenses) incurred by or asserted against any Indemnitee of whatever kind or nature, caused by or arising directly or indirectly by Paramount’s performance under this Agreement except relating to the gross negligence or willful misconduct of Paramount or any other Indemnitee.

9. The Term of this Agreement shall commence upon execution of this Agreement and shall terminate at the close of business on January 27, 2007, unless extended by mutual written agreement of both the Company and Paramount. Notwithstanding the foregoing, this Agreement may be terminated solely by Paramount, at any time and for any reason, immediately upon notice; provided, however, regardless of such termination by Paramount, the rights to compensation contained in Sections 2, 3 and 4, to indemnity pursuant to Section 8, and noncircumvention in Section 10, shall survive. Furthermore, in the event of any termination or expiration of this Agreement, the provisions of Sections 6 and 7 shall survive.

10. Paramount intends to introduce the Company to the Introduced Party with the hope and intention that the Company and the Introduced Party may consummate a mutually beneficial business arrangement. The Company acknowledges that such services are unique and valuable. The Company hereby agrees that neither it nor any of its officers or directors shall consummate any business arrangement with the Introduced Party without the prior written consent of Paramount or approval of Chelsea’s Board of Directors, including more than 50% of the directors then employed by Paramount.

11. This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflicts of law thereof.

12. This Agreement shall be binding upon Paramount and the Company and their successors and permitted assigns.

13. Subject only to Paramount’s obligations of confidentiality under Section 7 of this Agreement, Paramount shall not be in any way precluded from (i) entering into similar agreements with companies which engage in similar business activities or lines of business as the Company or developing or marketing any products, services or technologies that do or may in the future compete, directly or indirectly, with those of the Company (but not introducing the Introduced Party to others that negotiate for rights to the Technology); (ii) investing or owning any interest publicly or privately in, or developing a business relationship with, any corporation, partnership or other person or entity engaged in the same or similar activities or lines or business as, or otherwise in competition with, the Company; or (iii) doing business with any client, collaborator, licensor, consultant, vendor or customer of the Company. Paramount and any of its officers, directors, employees or former employees and affiliates shall not be deemed to have any fiduciary duty to the Company, its stockholders, creditors, employees or its affiliates, and shall not have any obligation, or be liable, to the Company on account of the conduct described in the preceding sentence, unless such conduct also constitutes a breach of Paramount’s obligations of confidentiality under Section 7 of this Agreement. The Company recognizes that Paramount is not obligated to introduce the Introduced Party to the Company and nothing in this Agreement

3

shall be construed to limit Paramount’s ability to introduce the Introduced Party to any other company (but not to negotiate for rights to the Technology). In the event that Paramount or any officer, director, employee or former employee or affiliate thereof acquires knowledge of a potential transaction, agreement, arrangement or other matter which may be a corporate opportunity for both Paramount and the Company, neither Paramount nor any of its officers, directors, employees or former employees or affiliates shall have any duty by reason of this Agreement to communicate or offer such corporate opportunity to the Company and neither Paramount nor any of its officers, directors, employees or former employees or affiliates shall be liable to the Company by reason of this Agreement for breach of any fiduciary or other duty, as a stockholder or otherwise, solely by reason of the fact that Paramount or any of its officers, directors, employees or former employees or affiliates pursue or acquire such corporate opportunity for Paramount, direct such corporate opportunity to another person or entity or communicate or fail to communicate such corporate opportunity or entity to the Company. Similarly, the Company is not obligated under this Agreement to negotiate, pursue, accept or execute the License Agreement or any other opportunities presented to it by Paramount and, accordingly, subject to Section 8, neither the Company nor any of its officers, directors, employees or former employees or affiliates shall be liable to Paramount by reason of failing to do so.

Sincerely yours,
PARAMOUNT BIOCAPITAL, INC.
/s/  Lindsay A. Rosenwald
Name:	Lindsay A. Rosenwald, M.D.
Title:	Chairman of the Board

Confirmed as of the date hereof:
CHELSEA THERAPEUTICS INTERNATIONAL, LTD.
By:	/s/  Simon Pedder
Name:	Simon Pedder, Ph.D.
Title:	Chief Executive Officer

4

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Simon Pedder, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chelsea Therapeutics International, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation ; and

c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2006	By:	/s/ Simon Pedder
		Simon Pedder, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, J. Nick Riehle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chelsea Therapeutics International, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2006	By:	/s/ J. Nick Riehle
		J. Nick Riehle, Vice President, Administration and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Chelsea Therapeutics International, Ltd. (the “Company”) for the period ended June 30, 2006 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Simon Pedder, President and Chief Executive Officer, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

/s/ Simon Pedder

Simon Pedder

President and Chief Executive Officer

August 10, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Chelsea Therapeutics International, Ltd. (the “Company”) for the period ended June 30, 2006 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, J. Nick Riehle, Vice President, Administration and Chief Financial Officer, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

/s/ J. Nick Riehle

J. Nick Riehle

Vice President, Administration and

Chief Financial Officer

August 10, 2006