S-1

As filed with the Securities and Exchange Commission on February 7, 2007

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

NEUROGESX, INC.

(Exact name of Registrant as specified in its charter)

Delaware	2834	94-3307935
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

981 Industrial Road, Suite F

San Carlos, CA 94070

(650) 508-2116

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Anthony A. DiTonno

President and Chief Executive Officer

NeurogesX, Inc.

981 Industrial Road, Suite F

San Carlos, CA 94070

(650) 508-2116

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael J. O’Donnell, Esq. David J. Saul, Esq. Gavin T. McCraley, Esq. Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304-1050 (650) 493-9300 Bruce K. Dallas, Esq. Davis Polk & Wardwell 1600 El Camino Real Menlo Park, CA 94025 (650) 752-2000

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Class A common stock, par value $0.001 per share	$69,000,000	$7,383

(1) Estimated solely for the purpose of computing the amount of the registration fee, in accordance with Rule 457(o) promulgated under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued February 7, 2007

                 Shares

COMMON STOCK

NeurogesX, Inc. is offering                  shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $             and $             per share.

We have applied to have our common stock listed on the NASDAQ Global Market under the symbol “NGSX.”

Investing in our common stock involves risks. See “ Risk Factors” beginning on page 7.

PRICE $             A SHARE

	Price to Public	Underwriting Discounts and Commissions	Proceeds to NeurogesX
Per Share	$	$	$
Total	$	$	$

We have granted the underwriters the right to purchase up to an additional                  shares of common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on                  , 2007.

MORGAN STANLEY

PACIFIC GROWTH EQUITIES, LLC

LAZARD CAPITAL MARKETS

SUSQUEHANNA FINANCIAL GROUP, LLLP

                 , 2007

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	7
Special Note Regarding Forward-Looking Statements	23
Use of Proceeds	24
Dividend Policy	24
Capitalization	25
Dilution	27
Selected Consolidated Financial Data	29
Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Business	39
Management	62

	Page
Certain Relationships and Related Transactions	85
Principal Stockholders	87
Description of Capital Stock	90
Shares Eligible for Future Sale	94
Material U.S. Tax Considerations For Non-U.S. Holders Of Common Stock	96
Underwriters	99
Legal Matters	102
Experts	102
Where You Can Find Additional Information	102
Index to Consolidated Financial Statements	F-1

You should rely only on the information contained in this prospectus or contained in any free writing prospectus that we may authorize to be delivered to you. We have not, and the underwriters have not, authorized any other person to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus regardless of the time of delivery of this prospectus or of any sale of our common stock.

Until                  , 2007, 25 days after the commencement of this offering, all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and related notes and the information in “Risk Factors.”

NEUROGESX, INC.

Overview

We are a biopharmaceutical company focused on developing and commercializing novel pain management therapies. We are assembling a portfolio of pain management product candidates and are developing innovative new therapies based on known chemical entities. Our initial focus is on chronic peripheral neuropathic pain including postherpetic neuralgia, or PHN, painful HIV-distal sensory polyneuropathy, or HIV-DSP, and painful diabetic neuropathy, or PDN. Our most advanced product candidate, NGX-4010, a synthetic capsaicin-based topical patch designed to manage pain associated with peripheral neuropathic pain conditions, has completed two pivotal Phase 3 clinical trials that have met their primary endpoints, one in PHN and one in HIV-DSP. In each indication, a single 30 or 60 minute application of NGX-4010 has been shown to provide at least 12 weeks of clinically meaningful pain relief. We expect to file a marketing authorization application, or MAA, in Europe for NGX-4010 in mid-2007 based upon existing clinical trial data. If the safety and efficacy of NGX-4010 are confirmed by our two ongoing Phase 3 clinical trials, we intend to submit a new drug application, or NDA, in the United States in 2008. We are developing a non-patch liquid formulation of synthetic capsaicin, NGX-1998, and an opioid analgesic for use in managing chronic pain. We hold all worldwide commercial rights to our product candidates and are actively engaged in partnering discussions in anticipation of European product approval and launch.

Our Lead Product Candidate, NGX-4010

NGX-4010 is a non-narcotic analgesic formulated in a topical patch containing an 8% concentration of synthetic capsaicin. Capsaicin is released from the patch and absorbed into the skin without significant absorption into the bloodstream. Accordingly, users of NGX-4010 can avoid the side effects of anti-convulsants, anti-depressants and opioids and the potential for abuse and addiction associated with some of these drugs. NGX-4010 is administered in a physician’s office in a non-invasive process that involves pre-treating the painful area with a topical anesthetic followed by the application of our patch. NGX-4010 has been shown to provide a clinically meaningful reduction in peripheral neuropathic pain for at least 12 weeks.

We are currently developing NGX-4010 for the treatment of chronic neuropathic pain including PHN and HIV-DSP. PHN is a painful condition affecting sensory nerve fibers and is a complication of shingles, a second outbreak of the varicella-zoster virus which initially causes chickenpox. According to the Centers for Disease Control, or CDC, there are approximately 1.0 million cases of shingles in the United States each year, and approximately one in five develop PHN. According to Jain BioPharma, in 2005 there were approximately 500,000 people in the United States living with PHN.

HIV-DSP is caused primarily by three factors: direct activation of cells known as sensory neurons by the HIV virus, the immune system’s fight against the infection and the drugs administered to treat HIV. According to Frost & Sullivan, neuropathic pain is a common neurological complication of antiretroviral treatments of HIV and affects approximately 15% of the HIV infected community. According to the CDC, in 2005 there were 956,000 people in the United States infected with HIV.

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Existing Treatments and their Limitations

While there are a number of products currently available for the management of neuropathic pain, we believe the market is still underserved due to the limitations of current therapies. Initial treatments may include anti-convulsants, anti-depressants or opioids, alone or in combination. These systemic treatments are often limited by side effects, leading to poor patient compliance and sub-optimal dosing. In addition, one topical patch has been approved in the United States for managing neuropathic pain, specifically to treat PHN. However, some patients may require up to two weeks of treatment before experiencing peak pain relief and the patch must continue to be used daily in order to maintain relief. Therefore, we believe there is an opportunity for localized, non-systemic analgesics to be used broadly, either alone or in combination, to improve efficacy and reduce side effects.

Our Solution

We are developing novel pain management therapies for neuropathic pain, beginning with high-concentration capsaicin formulations. We believe that our high-concentration capsaicin, if approved by regulatory authorities, may become the standard of care for the management of pain associated with peripheral neuropathic disorders, while offering a number of significant advantages over other neuropathic pain management therapies:

• Non-systemic/localized treatment. Our localized peripheral pain management therapy is designed to address the origin of the pain signal in the injured or dysfunctional nerves. Unlike most existing pain therapies, our product candidates do not act as general pain suppressants of the entire central nervous system and do not cause a general desensitization to acute pain or other sensations.

• Duration of effect. Our product candidates are designed to allow capsaicin to readily penetrate the skin and provide rapid onset of clinically-meaningful pain relief that may last for at least 12 weeks from a single 30 or 60 minute application. We believe this will address a significant limitation of existing therapies, many of which require daily use and gradually increased dosages over time before reaching their peak relief effect.

• Compliance. We believe that our product candidates may avoid problems with patient compliance, which can be a significant limitation with currently-available treatments, because our product candidates are designed to be administered in a single application to provide pain relief for at least 12 weeks.

• Safety. Our clinical trials have consistently demonstrated that NGX-4010 is well tolerated. Treatment-related adverse events have primarily consisted of redness, pain, burning, itching, dryness or swelling at the application site. These application site reactions have generally been short term and well managed with the application of cool compresses, ice or the use of short-acting opioids.

Our Strategy

Our goal is to become a leading biopharmaceutical company in the development and commercialization of novel pain management therapies. Key elements of our strategy for achieving these goals include:

• rapidly develop and commercialize NGX-4010 for treatment of neuropathic pain;

• establish a focused U.S. sales and marketing organization targeting pain specialists and partner or co-promote outside the United States;

• maximize market exclusivity for NGX-4010 by aggressively protecting our intellectual property and pursuing regulatory pathways such as Hatch-Waxman marketing exclusivity and orphan drug designations;

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• expand the market opportunity for NGX-4010 by obtaining approval for use of NGX-4010 for PDN; and

• build a balanced portfolio of pain management therapies.

Risks Associated with Our Business

We are a development stage company with no revenues, and our operations to date have generated substantial and increasing needs for cash. Our business and our ability to execute on our business strategy are subject to many risks that you should be aware of before you decide to buy our common stock. These risks are discussed more fully in “Risk Factors” beginning on page 7. For example:

• we have not received, and may not receive, regulatory approval for, or commercial revenues from, NGX-4010 or any other product candidate;

• clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates, preventing or delaying the completion of development and regulatory approval;

• delays in the commencement or completion of clinical testing could result in increased costs to us and delay our ability to generate revenues;

• even if clinical trials for NGX-4010 in treatments of PHN and HIV-DSP are successful, our clinical trials for other indications, including PDN, may not succeed, which would adversely impact our long term success;

• if we are unable to establish a sales, marketing and distribution infrastructure or enter into collaborations with partners to perform these functions, we will not be able to commercialize our product candidates;

• if physicians are not adequately reimbursed for their services in administering NGX-4010, it is likely that they will not prescribe NGX-4010; and

• if adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our existing or planned development, commercialization or expansion activities.

Corporate Information

We were incorporated in California on May 28, 1998, and reincorporated in Delaware on February 5, 2007. Our principal executive offices are located at 981 Industrial Road, Suite F, San Carlos, CA 94070, and our telephone number is (650) 508-2116. Our web site address is www.neurogesx.com. The information on, or accessible through, our web site is not part of this prospectus. “TRANSACIN” is our registered trademark in the United States and in several other countries. “NEUROGESX” is our unregistered trademark. Other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners. References in this prospectus to “we,” “us” and “our” refer to NeurogesX, Inc. and its subsidiaries.

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THE OFFERING

Common stock offered                  shares

Common stock to be outstanding after this offering                  shares

Use of proceeds We expect to use the net proceeds from this offering to fund our ongoing clinical trials and our other development activities, and for working capital, general corporate purposes, the potential repayment of outstanding debt and potential acquisitions of complementary businesses, products or technologies. See “Use of Proceeds.”

Proposed NASDAQ Global Market symbol NGSX

The number of shares of common stock to be outstanding after this offering is based on 127,279,296 shares outstanding as of September 30, 2006 and excludes:

• 10,857,182 shares of common stock issuable upon exercise of options outstanding as of September 30, 2006 at a weighted average exercise price of $0.20 per share;

• 14,338,050 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2006 at a weighted average exercise price of $0.75 per share;

• 2,412,725 shares of common stock reserved for future issuance under our 2000 Stock Incentive Plan as of September 30, 2006;

• 20,000,000 shares of common stock reserved for future issuance under our 2007 Stock Plan adopted January 2007 and effective as of the completion of this offering; and

• 5,000,000 shares of common stock reserved for future issuance under our 2007 Employee Stock Purchase Plan adopted January 2007 and effective as of the completion of this offering.

Unless otherwise noted, all information in this prospectus assumes:

• no exercise by the underwriters of their option to purchase up to an additional              shares of our common stock to cover over-allotments;

• a              for              reverse split of our outstanding capital stock prior to completion of this offering;

• the conversion of all outstanding shares of our preferred stock into              shares of common stock prior to completion of this offering; and

• the filing of our amended and restated certificate of incorporation authorizing a class of undesignated preferred stock and decreasing the number of shares of our authorized common stock to 100,000,000 prior to completion of this offering.

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Summary Consolidated Financial Data

The following table summarizes our consolidated financial data. We have derived the following summary of our consolidated statements of operations data for the years ended December 31, 2003, 2004 and 2005 from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary consolidated statements of operations data for the nine-month periods ended September 30, 2005 and 2006, and for the period from May 28, 1998 (inception) through September 30, 2006 and summary consolidated balance sheet data as of September 30, 2006 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary of our financial data set forth below should be read together with our audited and unaudited consolidated financial statements and the related notes to those statements, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in this prospectus.

	Year Ended December 31,									Nine Months Ended September 30,						Period from May 28, 1998 (inception) to September 30, 2006
	2003			2004			2005			2005			2006
										(unaudited)						(unaudited)
	(in thousands, except share and per share data)
Consolidated Statement of Operations Data:
Operating expenses:
Research and development	$	9,679		$	16,492		$	11,847		$	7,766		$	14,318		$	63,480
General and administrative		3,796			5,113			1,715			1,080			3,458			18,750
Total operating expenses		13,475			21,605			13,562			8,846			17,776			82,230
Loss from operations		(13,475	)		(21,605	)		(13,562	)		(8,846	)		(17,776	)		(82,230	)
Interest income (expense), net		74			262			393			291			280			1,659
Other income (expense), net		1			—			58			3			191			163
Net loss before cumulative effect of change in accounting principle		(13,400	)		(21,343	)		(13,111	)		(8,552	)		(17,305	)		(80,408	)
Cumulative effect of change in accounting principle		—			—			(32	)		(32	)		—			(32	)
Net loss		(13,400	)		(21,343	)		(13,143	)		(8,584	)		(17,305	)		(80,440	)
Accretion of redeemable convertible preferred stock		(3,498	)		(6,782	)		(8,269	)		(6,027	)		(8,039	)		(30,993	)
Loss attributable to common stockholders	$	(16,898	)	$	(28,125	)	$	(21,412	)	$	(14,611	)	$	(25,344	)	$	(111,433	)
Basic and diluted loss per share attributable to common stockholders(1):
Historical	$	(4.42	)	$	(6.52	)	$	(4.70	)	$	(3.22	)	$	(4.86	)
Pro forma(unaudited)							$	(0.14	)				$	(0.15	)
Weighted-average number of shares used to compute basis and diluted loss per share attributable to common stockholders(1):
Historical		3,823,129			4,315,928			4,552,573			4,539,147			5,209,674
Pro forma(unaudited)								95,998,006						113,397,664

(footnotes appear on the next page)

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	As of September 30, 2006 (unaudited)
	Actual			Pro Forma(2)		Pro Forma As Adjusted(3)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and short term investments	$	21,726		$	21,726	$
Working capital		12,530			12,530
Total assets		22,502			22,502
Preferred stock warranty liability		4,076			—
Noncurrent portion of notes payable		7,776			7,776
Redeemable convertible preferred stock		113,050			—
Deficit accumulated during the development stage		111,433			111,433
Total stockholders’ equity (deficit)		(107,942	)		9,184

⁽¹⁾ See Note 2 of the Notes to Financial Statements for an explanation of the method used to calculate the historical and pro forma net loss per common share and the number of shares used in the computation of the per share amounts.

⁽²⁾ The pro forma net loss per common share information gives pro forma effect to the conversion of all shares of our redeemable convertible preferred stock outstanding as of September 30, 2006 into 117,386,300 shares of common stock concurrently with the closing of this offering, as if the conversion had occurred at the date of the original issuance.

⁽³⁾ As adjusted for the sale of              shares of our common stock in this offering at an assumed initial public offering price of $             per share (the mid point of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated expense payable by us.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below as well as the other information contained in this prospectus, including our financial statements and the related notes, before deciding to purchase any shares of our common stock. Our business, prospects, financial condition or operating results could be materially adversely affected by any of these risks. In that case, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to our Business

Our success depends substantially on our ability to obtain U.S. regulatory approval for our lead product candidate, NGX-4010.

Our success depends substantially on our most advanced product candidate, NGX-4010, a dermal patch containing a high-concentration of synthetic capsaicin. NGX-4010 has been evaluated in two completed Phase 3 clinical trials for the management of pain associated with postherpetic neuralgia, or PHN, one of which did not meet its primary endpoint, and one completed Phase 3 clinical trial for the management of pain associated with HIV-associated distal sensory polyneuropathy, or HIV-DSP. We are in the process of undertaking one additional pivotal Phase 3 clinical trial for each indication. The U.S. Food and Drug Administration, or FDA, generally requires successful completion of at least two adequate and well-controlled Phase 3 clinical trials for each indication for which we seek marketing approval before submission of a new drug application, or NDA. We may not have adequate financial or other resources to pursue this product candidate for either or both indications through the clinical trial process or through commercialization. The successful outcome of these ongoing Phase 3 clinical trials and the required capital expenditure will depend in part on our ability to successfully complete enrollment in the trials on a timely basis. Additionally, the ongoing trials may not achieve positive results, and, even if the results are positive, may not adequately support the results of any corresponding earlier trial. If we fail to complete our clinical trials for NGX-4010, or if these clinical trials fail to demonstrate with substantial evidence that NGX-4010 is both safe and effective, we will not be able to commercialize the product in the United States and our business will be significantly harmed, we may be unable to become profitable or continue our operations and our stock price will be adversely affected. We anticipate that we will seek FDA approval for NGX-4010 only after we have successfully met the primary endpoints of the ongoing Phase 3 trials for both PHN and HIV-DSP indications, the last of which is expected to be completed no earlier than 2008. We may change our strategy and initially seek FDA approval for NGX-4010 for only one indication, which could negatively impact our initial marketing efforts and revenue potential.

We may not be successful in obtaining European regulatory approval for NGX-4010.

We expect to submit a Marketing Authorization Application, or MAA, for NGX-4010 to the European Medicines Agency, or EMEA, in mid-2007. We will be relying on published scientific literature for certain basic research data and there can be no assurance that the European authorities will accept that these literature references satisfy the MAA requirements for such data. We expect to request marketing authorization for a broad indication of peripheral neuropathic pain for NGX-4010 based on the results of our two completed Phase 3 clinical trials that met their primary endpoints, one for the treatment of PHN and the other for the treatment of HIV-DSP. We may be unable to obtain such marketing authorization or the marketing authorization, if obtained, may not be as broad as we would like. For example, the EMEA may, like the FDA, only approve NGX-4010 for particular neuropathic pain indications for which we submit sufficient data, rather than accepting such data as supportive of a broad marketing authorization for peripheral neuropathic pain in general. The EMEA may determine that the data we submit are not sufficient for a favorable opinion and may halt or delay the approval process. If NGX-4010 does not receive European marketing authorization, we will not be able to commercialize the product in Europe. Consequently, our ability to generate revenue will be significantly harmed, we may be unable to become profitable or continue our operations and our stock price will be adversely affected.

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Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which could prevent or delay regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of NGX-4010 or any other product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that the product is both safe and effective for use in each target indication. Clinical trial results from the study of neuropathic pain are inherently difficult to predict. The primary measure of pain is subjective patient feedback, which can be influenced by factors outside of our control, and can vary widely from day to day for a particular patient, and from patient to patient and site to site within a clinical study. The results we have obtained in completed clinical trails may not be predictive of results from our ongoing or future trials. Additionally, we may suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies.

Some of our trial results have been negatively affected by factors that had not been fully anticipated prior to our examination of the trial results. For example, we have observed a significant “placebo effect” within our control groups — a phenomenon in which a sham treatment or, in the case of our studies, a low-dose capsaicin treatment that we believed would not be effective, results in a beneficial effect based on the patient’s expectations about the treatment rather than the treatment itself. We have also observed a gender difference in how patients experience pain and respond to pain relief medication or placebo. Although we have modified our protocols in ongoing studies to address these factors, there can be no assurance that these modifications will be adequate or that these or other factors that we may or may not be aware of or anticipate, will not have a negative effect on the results of our ongoing clinical trials, which could significantly disrupt our efforts to obtain regulatory approvals and commercialize our product candidates. Furthermore, we may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable safety risk to patients. Late stage clinical trials in a larger patient population could reveal more frequent, more severe or additional side effects that were not seen in earlier studies, any of which could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory authorities stopping further development of or denying approval of our product candidates. Based on results at any stage of clinical trials, we may decide to repeat or redesign a trial, modify our regulatory strategy or even discontinue development of one or more of our product candidates.

A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials. If our product candidates are not shown to be both safe and effective in clinical trials, the resulting delays in developing other compounds and conducting associated preclinical testing and clinical trials, as well as the potential need for additional financing, would have a material adverse effect on our business, financial condition and results of operations.

We cannot predict whether regulatory agencies will determine that the data from our clinical trials support marketing approval.

The FDA’s and EMEA’s decisions to approve NGX-4010 will depend on our ability to demonstrate with substantial clinical evidence, through well-controlled clinical trials, that NGX-4010 is effective, as measured statistically by comparing the overall improvement in pain in actively-treated patients against improvement in pain in the control group. However, there is a possibility that our data may be statistically significant, but that the actual clinical benefit of the NGX-4010 treatment may not be considered to be significant. Consequently, we believe that the FDA will consider additional data, such as a “responder” analysis and other secondary endpoints when evaluating whether our product can be approved. We believe that the FDA views “responders” as patients who experience at least a 30% reduction in overall pain. The EMEA standard for reduction in overall pain is between 30% to 50%. We cannot predict whether the regulatory agencies will find that our trial results provide compelling “responder” or other secondary endpoint data. Even if we believe that the data from our trials will support marketing approval in the United States or in Europe, we cannot predict whether the agencies will agree with our analysis and approve our applications.

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Even if clinical trials for NGX-4010 in treatment of PHN and HIV-DSP are successful, our clinical trials for other indications, including PDN, may not succeed, which would adversely impact our long term success.

We have not prepared for or conducted any clinical trials for indications other than PHN, HIV-DSP and PDN. We are in Phase 2 for the use of NGX-4010 for the management of PDN. PDN represents a much larger market opportunity than either PHN or HIV-DSP, and unless we successfully complete required clinical trials and obtain regulatory approvals for the use of NGX-4010 for PDN patients, our long term ability to succeed will be significantly and negatively impacted. We believe that, as was the case with PHN and HIV-DSP, we will have to conduct two successful Phase 3 trials for future indications, including PDN, before we can obtain approval to market our product candidates for such indications.

Results of clinical trials of NGX-4010 for patients with PHN and HIV-DSP do not necessarily predict the results of clinical trials involving other indications. NGX-4010 may fail to show desired safety and efficacy for management of pain associated with PDN and other indications, despite results from earlier clinical trials involving PDN, PHN and HIV-DSP. Any failure or significant delay in completing clinical trials for NGX-4010 with PDN and other indications, or in receiving regulatory approval involving such indications, may significantly harm our business.

Delays in the commencement or completion of clinical testing could result in increased costs to us and delay our ability to generate revenues.

We do not know whether ongoing or planned clinical trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be disrupted for a variety of reasons, including difficulties in:

• recruiting and enrolling patients to participate in a clinical trial;

• obtaining regulatory approval to commence a clinical trial;

• reaching agreement on acceptable terms with prospective clinical research organizations and trial sites;

• manufacturing sufficient quantities of a product candidate; and

• obtaining institutional review board approval to conduct a clinical trial at a prospective site.

A clinical trial may also be suspended or terminated by us, the FDA or other regulatory authorities due to a number of factors, including:

• failure to conduct the clinical trial in accordance with regulatory requirements or in accordance with our clinical protocols;

• inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

• unforeseen safety issues; or

• inadequate patient enrollment or lack of adequate funding to continue the clinical trial.

In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes, which could impact the cost, timing or successful completion of a clinical trial. If we experience delays in the commencement or completion of our clinical trials, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also lead to the denial of regulatory approval of a product candidate.

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We rely on third parties to conduct our clinical trials. If these third parties do not perform as contractually required or otherwise expected, we may not be able to obtain regulatory approval for our product candidates.

We do not currently conduct clinical trials on our own, and instead rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories, to assist us with our clinical trials. We are also required to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected. If these third parties do not successfully carry out their duties to us or regulatory obligations or meet expected deadlines, if the third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for our product candidates.

We must enter into an agreement with, and depend upon, one or more partners to assist us in commercializing our lead product candidate, NGX-4010, in Europe.

Because of our limited financial and other resources, we must actively seek and enter into a collaboration with one or more European partners to assist us in our planned European NGX-4010 launch, if marketing approval is granted. Any collaboration agreement we enter into may contain unfavorable terms, for example, with respect to product candidates covered, control over decisions and responsibilities, termination rights, payment, and other significant terms. Our ability to receive any significant revenue from our product candidates covered by the collaboration agreement will be dependent on the efforts of our collaboration partner and may result in lower levels of income to us than if we marketed our product candidates entirely on our own. The collaboration partner may not fulfill its obligations or commercialize our product candidates as quickly as we would like. We could also become involved in disputes with our partner, which could lead to delays in or termination of our commercialization programs and time-consuming and expensive litigation or arbitration. If a collaboration partner terminates or breaches its agreement with us, or otherwise fails to complete its obligations in a timely manner, the chances of successfully developing or commercializing our product candidates would be materially and adversely affected.

Additionally, depending upon the collaboration partner that we choose, other companies that might otherwise be interested in developing products with us could be less inclined to do so because of our relationship with the collaboration partner. If our ability to work with present or future strategic partners or collaborators is adversely affected as a result of our collaboration agreement, our business prospects may be limited and our financial condition may be adversely affected.

If we are unable to establish a sales, marketing and distribution infrastructure or enter into collaborations with partners to perform these functions, we will not be successful in commercializing our product candidates.

In order to commercialize any of our product candidates successfully, we must either acquire or internally develop a capable sales, marketing and distribution infrastructure or enter into collaborations with partners to perform these services for us. The acquisition or development of a capable sales, marketing and distribution infrastructure will require substantial resources, which may divert the attention of our management and key personnel and negatively impact our product development efforts. We intend to enter into partnering, co-promotion and other distribution arrangements for commercialization outside the United States. While we currently intend to develop a direct sales and marketing organization in the United States for NGX-4010, because we believe that we can best serve our target customers with a focused, specialty sales force, our strategy may change and we may have to, instead, seek a collaboration partner. Factors that may inhibit our efforts to develop an internal sales, marketing and distribution infrastructure include:

• our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

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• the inability of sales personnel to obtain access to or convince adequate numbers of physicians to prescribe our products;

• the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

• unforeseen costs and expenses associated with creating a sales and marketing organization.

We also may not be able to enter into collaborations on acceptable terms, if at all, and we may face competition in our search for partners with whom we may collaborate. If we are not able to build a sales, marketing and distribution infrastructure or collaborate with a partner to perform these functions, we may be unable to commercialize our product candidates successfully, which would adversely affect our business and financial condition.

Our product candidates may never achieve market acceptance even if we obtain regulatory approvals.

Even if we receive regulatory approvals for the commercial sale of our product candidates, the commercial success of these product candidates will depend on, among other things, their acceptance by physicians and patients. Market acceptance of, and demand for, any product that we develop and commercialize will depend on many factors, including:

• our ability to provide acceptable evidence of safety and efficacy;

• our ability to obtain sufficient third-party insurance coverage or reimbursement;

• availability, relative cost and relative efficacy of alternative and competing treatments;

• the effectiveness of our or our collaborators’ sales, marketing and distribution strategy; and

• publicity concerning our products or competing products and treatments.

If our product candidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business.

If physicians are not adequately reimbursed for their time and services in administering NGX-4010, it is likely that they will not prescribe NGX-4010.

Because many persons suffering from PHN are elderly, in order for NGX-4010 to be economically viable for this indication in the United States, we will need Medicare coverage for NGX-4010 in the United States if and when NGX-4010 is approved by the FDA for commercialization. The Medicare program may determine that NGX-4010 is not “reasonable and necessary” for Medicare beneficiaries or is reasonable and necessary only under limited circumstances. If the Medicare program were to determine that NGX-4010 is not reasonable and necessary for Medicare beneficiaries and deny or significantly limit reimbursement for NGX-4010, our business would be harmed, not only because the Medicare population is a substantial portion of our target market, but also because the Medicare program’s determination would likely affect the determination of many private payors.

Even if NGX-4010 is covered by the Medicare program, we cannot determine whether that coverage will be primarily under Medicare Part B or Medicare Part D. Although products administered by a physician, as we expect NGX-4010 will be, are ordinarily covered by Medicare Part B, and Medicare Part B also reimburses the physician for services in administering the product, Medicare Part B does not currently provide reimbursement for the use of topical patches in the treatment of peripheral neuropathic pain. Changing the current policy as it applies to NGX-4010 and obtaining Part B coverage is important to our future success, and there is a substantial possibility that our efforts to achieve such a change in a policy will not be successful. Lidoderm, a self-administered topical patch, is covered under Medicare Part D, the outpatient prescription drug benefit that took effect in 2006. Part D may provide reimbursement for NGX-4010, but we do not view Part D coverage as being as favorable as Part B coverage, because each Part D plan establishes its own formulary and may or may not decide to include NGX-4010, or if it does, may seek to negotiate significantly lower prices in order to include

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the product in their formularies. Additionally, Part D does not include reimbursement for the physician’s administration of the product. Patient preparation and NGX-4010 application time is significant and may take two hours or longer, which significantly impacts a physician’s ability to see other patients and, consequently, the physician’s revenue. If physicians are not adequately reimbursed for their time and services in administering NGX-4010, it is likely that they will not prescribe NGX-4010, which would significantly impair our ability to obtain revenues.

We also will need to obtain approvals for payment for NGX-4010 from private insurers, including managed care organizations. We expect that private insurers will consider the efficacy, cost-effectiveness and safety of NGX-4010 in determining whether to reimburse for NGX-4010 therapy and at what level. Obtaining these approvals will be a time consuming and expensive process and we may not receive adequate reimbursement of NGX-4010 from private insurers.

We expect to experience pricing pressures in connection with the sale of NGX-4010, if approved, and our potential future products, due to the trend toward programs and legislation aimed at reducing healthcare costs, as well as the increasing influence of managed care organizations. In some foreign countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to direct governmental control and to drug reimbursement programs with varying price control mechanisms. In these countries, pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of NGX-4010 to other currently available therapies. If reimbursement for NGX-4010 is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, our business would be materially harmed.

We have no manufacturing capabilities and depend on other parties for our manufacturing operations. If these manufacturers fail to meet our requirements and strict regulatory requirements, our product development and commercialization efforts may be materially harmed.

We currently depend on four contract manufacturers as single source suppliers for the components of our NGX-4010 product candidate: synthetic capsaicin, the topical patch, the associated cleansing gel and the fully assembled NGX-4010 treatment kit. To date, we have entered into long term commercial supply agreements for the topical patch and our cleansing gel, but have not yet entered into long term supply agreements with either of our other contract manufacturers and these manufacturers could terminate their relationships with us at any time and for any reason. If our relationship with any of these manufacturers is terminated, or if any manufacturer is unable to produce required quantities on a timely basis or at all, our operations would be delayed and our business harmed.

Our reliance on contract manufacturers exposes us to additional risks, including:

• failure of our current and future manufacturers to comply with strictly-enforced regulatory requirements;

• failure to manufacture to our specifications, or to deliver sufficient quantities in a timely manner;

• the possibility that we may terminate a contract manufacturer and need to engage a replacement;

• the possibility that our current and future manufacturers may not be able to manufacture our product candidates and products without infringing the intellectual property rights of others;

• the possibility that our current and future manufacturers may not have adequate intellectual property rights to provide for exclusivity and prevent competition; and

• insufficiency of intellectual property rights to any improvements in the manufacturing processes or new manufacturing processes for our products.

Any of these factors could result in significant delay or suspension of our clinical trials, regulatory submissions, receipt of required approvals or commercialization of our products and harm our business.

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We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for a product candidate and may have to limit its commercialization.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling our products. If we cannot successfully defend ourselves against these claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

• decreased demand for our product candidates;

• impairment of our business reputation;

• withdrawal of clinical trial participants;

• costs of related litigation;

• substantial monetary awards to patients or other claimants;

• loss of revenues; and

• the inability to commercialize our product candidates.

Although we currently have product liability insurance coverage for our clinical trials with limits that we believe are customary and adequate, our insurance coverage may not reimburse us or may be insufficient to reimburse us for all expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing.

We face substantial competition which may result in others discovering, developing or commercializing products before or more successfully than us.

If NGX-4010 receives marketing approval, it will compete against well-established products marketed by large pharmaceutical companies with far greater name recognition and resources than we have. NGX-4010 will also compete with medications used off-label. The most directly-competitive currently-marketed products in the United States are Lidoderm, an FDA-approved 5% lidocaine topical patch for the treatment of PHN marketed by Endo Pharmaceuticals, and Neurontin and Lyrica, oral anti-convulsants, marketed by Pfizer for use in the treatment of PHN. In addition to these branded drugs, the FDA has approved gabapentin for use in the treatment of PHN. Gabapentin is marketed by multiple generic manufacturers, and is the most widely-prescribed drug in the United States for treatment of neuropathic pain. Pfizer has also received FDA approval of Lyrica for the treatment of PDN and epilepsy indications. The FDA has approved Cymbalta from Eli Lilly for use in the treatment of PDN and depression.

Prior to any market launch, competition may become stronger and more direct and products in development, including products that we are unaware of, may compete with NGX-4010. There are many other companies working to develop new drugs and other therapies to treat pain in general and neuropathic pain in particular, including GlaxoSmithKline, Merck, Novartis AG and Eli Lilly. Many of the compounds in development by such companies are already marketed for other indications, such as anti-depressants or anti-seizure drugs. We are also aware of a small, privately-held specialty pharmaceutical company that has begun early development of a high-concentration capsaicin patch for the treatment of PHN, for which the FDA has granted orphan drug designation, as well as early development of a local anesthetic patch for the treatment of PHN, HIV-DSP and PDN. If this company successfully completes its development efforts without violation of our intellectual property rights, it would compete against us. If it were granted orphan exclusivity and was approved by the FDA in an indication that we are attempting to gain approval for before our product candidate is approved, it would significantly harm

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our ability to commercialize NGX-4010. In addition, physicians employ other interventional procedures, such as nerve stimulation or nerve blocks, to treat patients with difficult to treat neuropathic pain conditions. Furthermore, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, such as vaccines, occur in the biopharmaceutical industry at a rapid pace. Any of these developments may render our product candidates obsolete or noncompetitive.

Many of our potential competitors, either alone or together with their partners, have substantially greater financial resources, research and development programs, clinical trial and regulatory experience, expertise in prosecution of intellectual property rights, and manufacturing, distribution and sales and marketing capabilities. As a result of these factors, our competitors may:

• develop product candidates and market products that are less expensive, safer, more effective or involve more convenient treatment procedures than our future products;

• commercialize competing products before we can launch any of our product candidates;

• initiate or withstand substantial price competition more successfully than we can;

• have greater success in recruiting skilled scientific workers from the limited pool of available talent;

• more effectively negotiate third-party licenses and strategic alliances; and

• take advantage of acquisition or other opportunities more readily than we can.

The life sciences industry is characterized by rapid technological change. If we fail to stay at the forefront of technological change we may be unable to compete effectively.

Even if our product candidates receive regulatory approval, they will be subject to ongoing regulatory requirements and may face regulatory or enforcement action.

Any product candidate for which we receive regulatory approval, together with our third-party manufacturing facilities and processes, post-approval clinical data, and advertising and promotional activities for the product, will be subject to significant review and ongoing and changing regulation by the FDA, the EMEA and other regulatory agencies. Failure to comply with regulatory requirements may subject us to administrative and judicially-imposed sanctions. These may include warning letters, adverse publicity, civil and criminal penalties, injunctions, product seizures or detention, product recalls, total or partial suspension of production, and refusal to approve pending product marketing applications.

Even if we receive regulatory approval to market a particular product candidate, the approval could be conditioned on us conducting additional costly post-approval studies or could limit the indicated uses included in our labeling. Moreover, the product may later cause adverse effects that limit or prevent its widespread use, force us to withdraw it from the market or impede or delay our ability to obtain regulatory approvals in additional countries.

We have limited experience in regulatory affairs.

We have limited experience in preparing, submitting and prosecuting regulatory filings including NDAs, MAAs and other applications necessary to gain regulatory approvals. Moreover, some of our product candidates are based on novel applications of therapies that have not been extensively tested in humans, and the regulatory requirements governing these types of products may be less well defined or more rigorous than for conventional products. As a result of these factors, in comparison to our competitors, we may require more time and incur greater costs to obtain regulatory approvals of products that we develop, license or acquire.

Our “fast track” designation for development of NGX-4010 for treatment of painful HIV-associated neuropathy may not actually lead to a faster development or regulatory review or approval process.

A product intended for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for such a condition may be submitted to the FDA for “fast track”

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designation. Although we received fast track designation from the FDA for NGX-4010 for the treatment of HIV-DSP, there is no assurance that we will experience a faster development process, review or approval, compared to conventional FDA standards, or that the product will be approved at all. The FDA may also withdraw our fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

We may not be able to obtain or maintain orphan drug exclusivity for NGX-4010.

The FDA granted us orphan drug status with regard to NGX-4010 for the treatment of HIV-DSP. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity – that is, for seven years, the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances. We may be unable to obtain orphan drug designations for any additional product candidates or orphan exclusivity for any of our product candidates, or our potential competitors may obtain orphan drug exclusivity for capsaicin-based products competitive with our product candidates before we do, in which case we may be excluded from that market for the exclusivity period. Even if we obtain orphan drug exclusivity for any of our product candidates, we may not be able to maintain it if a competitive product is shown to be clinically superior to our product. Although obtaining FDA approval to market a product with orphan exclusivity can be advantageous, there can be no assurance that it would provide us with a significant commercial advantage.

We may not be able to obtain Hatch-Waxman Act marketing exclusivity or equivalent regulatory data exclusivity protection in other jurisdictions for NGX-4010.

We intend to rely, in part, on Hatch-Waxman exclusivity for the commercialization of NGX-4010 in the United States. The Hatch-Waxman Act provides five-year marketing exclusivity to the first applicant to gain approval of an NDA under specific provisions of the Food, Drug and Cosmetic Act for a product using an active ingredient that the FDA has not previously approved. While we believe that the FDA has not approved another product containing the active ingredient of NGX-4010, synthetic capsaicin, there can be no assurance that NGX-4010 will be able to qualify for Hatch-Waxman exclusivity. This market exclusivity will not prevent the FDA from approving a competitor’s NDA if the competitor’s NDA is based on studies it has performed and not on our studies.

There can be no assurance that European authorities will grant data exclusivity to NGX-4010, because it does not contain a new active molecule. Even if European data exclusivity is granted for NGX-4010, that may not protect us from direct competition. Given the well-established use of capsaicin as a pain reliever, a competitor with a generic version of NGX-4010 may be able to obtain approval of their product during NGX-4010’s period of data exclusivity, by submitting an MAA with a less than full package of preclinical and clinical data.

We depend on our key personnel. If we are not able to retain them, our business will suffer.

We are highly dependent on the principal members of our management and scientific staff. The competition for skilled personnel among biopharmaceutical companies in the San Francisco Bay Area is intense and the employment services of our scientific, management and other executive officers are terminable at-will. If we lose one or more of these key employees, our ability to implement our business strategy successfully could be seriously harmed. Replacing key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. We do not carry key man life insurance on any of our key personnel.

Our management and auditors have identified material weaknesses in our internal controls that, if not properly remediated, could result in material misstatements in our financial statements and the inability of our management to provide its report on the effectiveness of our internal controls as required by the Sarbanes-Oxley Act of 2002, for years ending December 31, 2008 and thereafter, either of which could cause investors

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to lose confidence in our reported financial information and have a negative effect on the trading price of our stock.

We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. Further, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. However, in connection with our fiscal 2005 financial statement audit, our accounting firm informed us that they had identified material weaknesses in our internal controls as defined by the American Institute of Certified Public Accountants.

The material weaknesses reported relate to having insufficient personnel resources with sufficient technical accounting expertise within our accounting function.

We are taking remedial measures to improve the effectiveness of our internal controls. Specifically, we will be:

• strengthening our internal staffing to accommodate public company requirements; and

• engaging an outside compliance consulting firm to advise us on improving our internal controls and systems.

The existence of material weaknesses is an indication that there is a more than remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period, and the process of designing and implementing effective internal controls and procedures is a continuous effort that requires us to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures to be taken in the future will remediate the material weaknesses noted by our independent public accounting firm or that we will implement and maintain adequate controls over our financial processes and reporting in the future. In addition, we cannot assure you that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future. If we fail to develop and maintain effective controls and procedures, we may be unable to provide the required financial information in a timely and reliable manner or otherwise comply with the standards applicable to us as a public company and we may not be able to provide a report on the effectiveness of our internal controls for the year ending December 31, 2008, or later. Any failure by us to timely provide the required financial information or provide a report on the effectiveness of our internal controls could materially and adversely impact our financial condition and the market value of our securities.

Risks Related to Our Finances and Capital Requirements

We have incurred operating losses in each year since inception and expect to continue to incur substantial and increasing losses for the foreseeable future.

We have not generated any revenue to date and we have incurred operating and net losses each year since our inception in 1998. Our net loss for the nine months ended September 30, 2006 and each of the years ended December 31, 2005, 2004 and 2003 was $17.3 million, $13.1 million, $21.3 million and $13.4 million, respectively. As of September 30, 2006, we had an accumulated deficit of $111.4 million. We expect to incur increasing losses for several years, as we develop, seek regulatory approvals for and commercialize NGX-4010, and continue other research and development activities. If NGX-4010 fails in clinical trials, does not gain regulatory approval or does not achieve market acceptance, we will not generate any revenue. We cannot assure you that we will be profitable even if we commercialize NGX-4010. If we fail to achieve and maintain profitability, or if we are unable to fund our continuing losses, you could lose all or part of your investment.

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We will require substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our development programs or commercialization efforts.

We expect our negative cash flows from operations to continue at least until we obtain regulatory approval for and are able to commercialize NGX-4010, which we believe will not occur until 2008, at the earliest. The report of our independent registered public accounting firm on our financial statements includes an emphasis of matter paragraph regarding our recurring net losses, negative cash flows from operations and a net capital deficiency. We believe, based on our current operating plan and with the proceeds of this offering, that our cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. The development and regulatory approval of NGX-4010 and other product candidates and the acquisition and development of additional products or product candidates by us, as well as the development of our sales and marketing capabilities, will require the commitment of substantial funds. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:

• the rate of progress and cost of our clinical trials and other development activities;

• the costs and timing of regulatory approval;

• the costs of establishing or contracting for sales and marketing capabilities;

• the extent to which we acquire or in-license new products, technologies or businesses;

• the effect of competing technological and market developments; and

• the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

We intend to seek additional funding through strategic alliances or through public or private sales of our equity securities. In addition, we may obtain equipment leases and may pursue opportunities to obtain debt financing in the future. There can be no assurance, however, that strategic alliances, additional equity or debt financing will be available on reasonable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our then existing or planned development, commercialization or expansion activities.

Raising additional funds by issuing securities or through licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership will be diluted. Any debt financing we enter into may involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. In addition, if we raise additional funds through licensing arrangements, it may be necessary to relinquish potentially valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

Risks Related to our Intellectual Property

The commercial success, if any, of NGX-4010 depends, in part, on the rights we have under certain patents.

The commercial success, if any, of NGX-4010 depends, in part, on a device patent granted in the United States and a device patent granted in Hong Kong and certain countries of Europe concerning the use of a dermal patch for high-concentration capsaicin delivery for the treatment of neuropathic pain. We exclusively license these patents, as well as related pending patent applications in Canada and Europe, from the University of California. We do not currently own, and do not have rights under this license to any issued patents that cover NGX-4010 outside Europe, Hong Kong or the United States.

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We also license a method patent granted in the United States from the University of California concerning the delivery of high-concentration capsaicin for the treatment of neuropathic pain. Two of the three inventors named in the method patent did not assign their patent rights to the University of California. As a result, our rights under this patent are non-exclusive. Anesiva, a company focused on the development and commercialization of treatments for pain, including injection or infiltration of capsaicin for post-surgical pain, osteoarthritis or interdigital neuroma, has licensed from one of the non-assigning inventors the right to use the technology under the method patent. There can be no assurances that other entities will not similarly obtain rights to use the technology under the method patent. If other entities license the right to use this patent, we may face more products competitive with NGX-4010 and our business will suffer. There may also be claims of inventorship with respect to patents and patent applications we may have in the past licensed or may in the future license, including those licensed from the University of California, which could also result in a loss of exclusivity and further competition.

If we are unable to maintain and enforce our proprietary rights, we may not be able to compete effectively or operate profitably.

Our commercial success will depend, in part, on obtaining and maintaining patent protection, trade secret protection and regulatory protection (such as Hatch-Waxman protection or orphan drug designation) of our proprietary technology and information as well as successfully defending against third-party challenges to our proprietary technology and information. We will be able to protect our proprietary technology and information from use by third parties only to the extent that valid and enforceable patents, trade secrets or regulatory protection cover them and we have exclusive rights to utilize them.

Our commercial success will continue to depend in part on the patent rights we own, the patent rights we have licensed, the patent rights of our collaborators and suppliers and the patent rights we plan to obtain related to future products we may market. Our success also depends on our and our licensors’, collaborators’ and suppliers’ ability to maintain these patent rights against third-party challenges to their validity, scope or enforceability. Further, we do not fully control the patent prosecution of our licensed patent applications. There is a risk that our licensors will not devote the same resources or attention to the prosecution of the licensed patent applications as we would if we controlled the prosecution of the patent applications, and the resulting patent protection, if any, may not be as strong or comprehensive as if we had prosecuted the applications ourselves.

The patent positions of biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States. The patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. For example:

• we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents;

• we or our licensors might not have been the first to file patent applications for these inventions;

• others may independently develop similar or alternative technologies or duplicate any of our technologies;

• it is possible that none of our pending patent applications or the pending patent applications of our licensors will result in issued patents;

• our issued patents and the issued patents of our licensors may not provide a basis for commercially viable products, or may not provide us with any competitive advantages, or may be challenged and invalidated by third parties;

• we may not develop additional proprietary technologies or product candidates that are patentable; or

• the patents of others may have an adverse effect on our business.

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We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While we seek to protect confidential information, in part, by confidentiality agreements with our employees, consultants, contractors, or scientific and other advisors, they may unintentionally or willfully disclose our information to competitors. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, and the outcome would be unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.

If we are not able to defend the patent or trade secret protection position of our technologies and product candidates, then we will not be able to exclude competitors from developing or marketing competing products, and we may not generate enough revenue from product sales to justify the cost of development of our product candidates and to achieve or maintain profitability.

If we are sued for infringing intellectual property rights of other parties, such litigation will be costly and time consuming, and an unfavorable outcome would have a significant adverse effect on our business.

Although we believe that we would have valid defenses to allegations that our current product candidates, production methods and other activities infringe the valid and enforceable intellectual property rights of any third parties of which we are aware, we cannot be certain that a third party will not challenge our position in the future. It is possible that other parties may own patent rights that might be infringed by our products or other activities. There has been, and we believe that there will continue to be, significant litigation and demands for licenses in our industry regarding patent and other intellectual property rights. Our competitors or other patent holders may assert that our products and the methods we employ are covered by their patents. These parties could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

The cost to us of any litigation or other proceedings relating to intellectual property rights, even if resolved in our favor, could be substantial. Some of our potential competitors may be better able to sustain the costs of complex patent litigation because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to continue our operations. Should third parties file patent applications, or be issued patents claiming technology also claimed by us in pending applications, we may be required to participate in interference proceedings in the United States Patent and Trademark Office to determine priority of invention which could result in substantial costs to us or an adverse decision as to the priority of our inventions. An unfavorable outcome in an interference proceeding could require us to cease using the technology or to license rights from prevailing third parties. There is no guarantee that any prevailing party would offer us a license or that we could acquire any license made available to us on commercially acceptable terms.

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If we fail to comply with our obligations in the agreements under which we license development or commercialization rights to products or technology from third parties, we could lose license rights that are important to our business.

We are a party to a number of technology licenses that are important to our business and expect to enter into additional licenses in the future. For example, we hold licenses from The University of California and LTS Lohmann Therapie-Systeme AG, or LTS, under patents and patent applications relating to NGX-4010, our lead product candidate. These licenses impose various commercialization, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license, including NGX-4010.

We may be subject to damages resulting from claims that our employees or we have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Risks Related to this Offering

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.

Prior to this offering, there has been no public market for shares of our common stock. We and the underwriters will determine the initial public offering price of our common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, the trading price of our common stock following this offering may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:

• results from and any delays related to the clinical trials for our product candidates;

• failure or delays in entering additional product candidates into clinical trials;

• issuance of new or changed securities analysts’ reports or recommendations for our stock;

• delay in entering, or termination of, strategic partnership relationships;

• third-party healthcare reimbursement policies or determinations;

• actual or anticipated quarterly variations in our results of operations or those of our collaborators or competitors;

• our ability to obtain regulatory approvals and develop and market new and enhanced product candidates on a timely basis;

• announcements by us or our collaborators or competitors of new commercial products, clinical progress or the lack thereof, significant contracts, commercial relationships or capital commitments;

• developments or disputes concerning our intellectual property or other proprietary rights;

• commencement of, or our involvement in, litigation;

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• changes in governmental regulations or in the status of our regulatory approvals;

• market conditions in the life sciences sector;

• any major change in our board or management; and

• general economic conditions and slow or negative growth of our markets.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $             in net tangible book value per share from the price you paid, based on an assumed initial public offering price of $             per share, the mid-point of the range set forth on the cover page of this prospectus. In addition, new investors who purchase shares in this offering will contribute approximately         % of the total amount of equity capital raised by us through the date of this offering, but will only own approximately         % of the outstanding share capital and approximately         % of the voting rights. The exercise of outstanding options and warrants will result in further dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could affect our operating results.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new rules implemented by the SEC and The NASDAQ Global Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage than used to be available. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based on shares outstanding as of December 31, 2006, upon completion of this offering, we will have outstanding a total of              shares of common stock, assuming no exercise of the underwriters’ over-allotment option. Of these shares, only the              shares of common stock sold in this offering by us will be freely tradable, without restriction, in the public market. Our underwriters, however, may, in their sole discretion, permit our officers, directors and other current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements.

We expect that the lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus, although those lock-up agreements may be extended for up to an additional 34 days under certain circumstances. After the lock-up agreements expire, based on shares outstanding as of December 31, 2006, up to an additional              shares of common stock will be eligible for sale in the public market, 92,796,356 of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements. In addition, 10,360,236 shares of common stock that are subject to outstanding options as of December 31, 2006 and the              shares reserved for future issuance under our 2007 Stock Plan will become eligible for sale in the public market to the extent permitted by

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the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.

Our executive officers, directors and their affiliates will beneficially own or control approximately             % of the outstanding shares of our common stock (after giving effect to the conversion of all outstanding convertible preferred stock and the exercise of all outstanding vested and unvested options and warrants), following the completion of this offering. Accordingly, these executive officers, directors and their affiliates, acting as a group, will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of us, even if such a change of control would benefit our other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have paid no cash dividends on any of our classes of capital stock to date, have contractual restrictions against paying cash dividends and currently intend to retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

We will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our product candidates and cause the price of our common stock to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are forward-looking statements.

Forward-looking statements include, but are not limited to, statements about:

• the expected timing of completion of, or results from, our clinical trials;

• the timing or likelihood of regulatory filings and approvals, the basis for approval, expected indications and scope of marketing approvals;

• the implementation of our business model and strategic plans for our business, product candidates and technology, including our plans with respect to commercialization efforts and entry into collaborations or strategic partnerships for marketing or other matters;

• our plans with respect to manufacture and assembly of our potential products;

• the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and potential products;

• our ability to obtain, and expected reliance on, Hatch-Waxman marketing exclusivity or orphan drug status;

• our ability to operate our business without infringing the intellectual property rights of others;

• estimates of, or expectations regarding, our expenses for clinical trials, development efforts and other matters, losses, future revenue, capital requirements and our needs and sources for additional financing;

• our ability to continue to fund our operations for the next 12 months after the completion of this offering;

• our use of proceeds from this offering;

• expected markets for our potential products;

• the potential benefits of our product candidates;

• market acceptance of our potential products;

• our financial performance; and

• competitive companies, products and therapies.

The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the section entitled “Risk Factors,” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements.

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $            million from the sale of the shares of common stock offered in this offering, based on the initial public offering price of $            per share (the midpoint of the range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed public offering price of $            per share would increase (decrease) the net proceeds to us from this offering by $            million assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $            .

The principal purposes for this offering are to fund our development activities, including clinical trials for NGX-4010 and our other potential product candidates, to increase our working capital, to create a public market for our common stock, to increase our ability to access the capital markets in the future, for general corporate purposes and to provide liquidity for our existing stockholders.

We intend to use approximately $40.0 million of the net proceeds from this offering to fund research and development activities, including approximately $25.0 million for the completion of our planned clinical and regulatory program for NGX-4010 in PHN and HIV-DSP, $10.0 million for clinical development of NGX-4010 in PDN and $5.0 million for development of our new product candidate NGX-1998, our opioid analgesic and other potential product candidates. We anticipate using the remaining proceeds of this offering to fund general administrative and marketing activities and potentially for the repayment of currently outstanding indebtedness. The indebtedness was incurred for general corporate purposes and bears interest as of September 30, 2006, at a weighted average interest rate of 12.0% with principal payable in installments from November 2006 through January 2010.

We may also use a portion of the net proceeds to acquire or invest in complementary businesses or products or to obtain rights to such complementary technologies. We have no commitments with respect to any such acquisitions or investments.

The amounts and timing of our actual expenditures will depend on numerous factors, including the progress in, and costs of, our clinical programs and the amount and timing of revenues, if any, from our current or future collaborations. We therefore cannot estimate the amount of net proceeds to be used for all of the purposes described above. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in the application of the net proceeds. Pending the uses described above, we intend to invest the net proceeds in short term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any dividends on our capital stock. We currently expect to retain any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends. Any further determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors considers relevant. Pursuant to our loan agreement, we are prohibited from making any cash payments for dividends or purchasing or redeeming any of our equity securities, returning any capital to any holder of our equity securities, or making any distribution of assets or equity securities to holders of our equity securities except for dividends payable in capital stock.

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CAPITALIZATION

The following table sets forth our unaudited cash, cash equivalents and short term investments and capitalization as of September 30, 2006. Our cash and capitalization is presented:

• on an actual basis;

• on a pro forma basis, reflecting the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 117,386,300 shares of common stock immediately prior to the closing of this offering and the reclassification of preferred stock warrant liability to additional paid-in capital upon the conversion of preferred stock underlying warrants to common stock; and

• On a pro forma as-adjusted basis to give effect to the sale of              shares of common stock by us in this offering at an assumed initial public offering price of $             per share (the mid-point of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discount and estimated offering expenses payable by us and assuming no repayment of indebtedness.

You should read this table together with the sections of this prospectus entitled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our consolidated financial statements and related notes beginning on page F-1.

	September 30, 2006
	Actual			Pro Forma			Pro Forma as Adjusted
	(unaudited)
	(in thousands, except share and per share data)
Cash, cash equivalents and short term investments(1)	$	21,726		$	21,726		$
Non-current portion of notes payable	$	7,776		$	7,776		$
Preferred stock warranty liability		4,076			—
Redeemable convertible preferred stock, $0.001 par value, 292,467,200 shares authorized, 117,386,300 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		113,050			—
Stockholders’ equity (deficit):
Preferred stock, no shares authorized, issued and outstanding, actual; $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted		—			—
Common stock, $0.001 par value, 329,500,000 shares authorized, 5,766,911 shares issued and outstanding, actual; $0.001 par value, 100,000,000 shares authorized, 123,128,211 shares issued and outstanding, pro forma; $0.001 par value, 100,000,000 shares authorized,                  shares issued and outstanding, pro forma as adjusted		1			118
Additional paid-in capital(1)		3,536			120,545
Deferred stock-based compensation		(52	)		(52	)
Other comprehensive income (loss)		6			6
Deficit accumulated during the development stage		(111,433	)		(111,433	)
Total stockholders’ equity (deficit)(1)		(107,942	)		9,184
Total capitalization(1)	$	16,960		$	16,960		$

⁽¹⁾ A$1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) each of cash, cash equivalents and short term investments, additional paid-in capital, total stockholders’ equity and total capitalization by $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma information discussed above is illustrative only and following completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

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The number of pro forma as-adjusted shares of common stock shown as issued and outstanding is based on the number of shares of our common stock outstanding as of September 30, 2006 and excludes:

• 10,857,182 shares of common stock issuable upon exercise of options outstanding as of September 30, 2006 at a weighted average exercise price of $0.20 per share;

• 14,338,050 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2006 at a weighted average exercise price of $0.75 per share;

• 2,412,725 shares of common stock available for future issuance under our 2000 Stock Incentive Plan as of September 30, 2006;

• 20,000,000 shares of common stock reserved for future issuance under our 2007 Stock Plan adopted in January 2007 and effective as of the completion of this offering; and

• 5,000,000 shares of common stock reserved for future issuance under our 2007 Employee Stock Purchase Plan adopted in January 2007 and effective as of the completion of this offering.

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DILUTION

Our net tangible book value (deficit) as of September 30, 2006 was $(        ) million, or $(        ) per share of common stock based on                      outstanding shares of common stock as of September 30, 2006. Pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of common stock outstanding including shares of common stock issued upon the early exercise of stock options and the automatic conversion of all outstanding shares of our preferred stock. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to the sale of the              shares of common stock offered by us at an assumed initial public offering price of $             per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of September 30, 2006 would have been $             million, or $             per share of common stock. This represents an immediate increase in pro forma net tangible book value of $             per share to existing stockholders and an immediate dilution of $             per share to new investors in our common stock. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share		$
Net tangible book value (deficit) per share as of September 30, 2006, before giving effect to this offering	$
Increase per share due to automatic conversion of preferred stock
Increase per share attributable to new investors
Pro forma net tangible book value per share after giving effect to this offering
Dilution per share to new investors		$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our pro forma net tangible book value by $            , the pro forma net tangible book value per share after this offering by $             per share and the dilution in pro forma net tangible book value per share to investors in this offering by $             per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share after giving effect to this offering would be $             per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be $             per share.

The following table summarizes, on a pro forma as-adjusted basis as of September 30, 2006 and after giving effect to the offering, based on an assumed initial public offering price of $             per share, the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid.

	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent
Existing stockholders			%			%	$
New investors							$
Total		100.0	%		100.0	%	$

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A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $            , $             and $            , respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, our existing stockholders would own     % and our new investors would own             % of the total number of shares of our common stock outstanding after this offering.

The information provided above is based upon the number of shares issued and outstanding on September 30, 2006, assumes the automatic conversion of all shares of our preferred stock and assumes no exercise of options or warrants outstanding as of September 30, 2006. As of that date, there were                  shares of our common stock issuable upon exercise of options outstanding at a weighted average exercise price of $         per share, and                  shares of our common stock issuable upon exercise of warrants outstanding at a weighted average exercise price of $         per share.

If all our outstanding options and warrants had been exercised, the pro forma net tangible book value as of September 30, 2006 would have been $            million, or $            per share, and the pro forma net tangible book value after this offering would have been $            million, or $            per share, causing dilution to new investors of $            per share.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read together with our consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace our financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

The selected consolidated statements of operations data for the years ended December 31, 2001 and 2002 and the selected consolidated balance sheet data as of December 31, 2001, 2002 and 2003 are derived from our audited consolidated financial statements not included in this prospectus. We derived the consolidated statements of operations data for the years ended December 31, 2003, 2004 and 2005 and the consolidated balance sheet data as of December 31, 2004 and 2005 from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statements of operations data for the nine-month periods ended September 30, 2005 and 2006, and for the period from May 28, 1998 (date of inception) through September 30, 2006 and the consolidated balance sheet data as of September 30, 2006 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position and results of operations.

	Year Ended December 31,															Nine Months Ended September 30,						Period from May 28, 1998 (inception) to September 30, 2006
	2001			2002			2003			2004			2005			2005			2006
																(unaudited)						(unaudited)
	(in thousands except share and per share data)
Consolidated Statement of Operations Data:
Operating expenses:
Research and development	$	4,643		$	5,847		$	9,679		$	16,492		$	11,847		$	7,766		$	14,318		$	63,480
General and administrative		1,734			2,252			3,796			5,113			1,715			1,080			3,458			18,750
Total operating expenses		6,377			8,099			13,475			21,605			13,562			8,846			17,776			82,230
Loss from operations		(6,377	)		(8,099	)		(13,475	)		(21,605	)		(13,562	)		(8,846	)		(17,776	)		(82,230	)
Interest income (expense), net		152			278			74			262			393			291			280			1,659
Other income (expense), net		—			(87	)		1			—			58			3			191			163
Net loss before cumulative effect of change in accounting principle		(6,225	)		(7,908	)		(13,400	)		(21,343	)		(13,111	)		(8,552	)		(17,305	)		(80,408	)
Cumulative effect of change in accounting principle		—			—			—			—			(32	)		(32	)		—			(32	)
Net loss		(6,225	)		(7,908	)		(13,400	)		(21,343	)		(13,143	)		(8,584	)		(17,305	)		(80,440	)
Accretion of redeemable convertible preferred stock		(793	)		(3,234	)		(3,498	)		(6,782	)		(8,269	)		(6,027	)		(8,039	)		(30,993	)
Loss attributable to common stockholders	$	(7,018	)	$	(11,142	)	$	(16,898	)	$	(28,125	)	$	(21,412	)	$	(14,611	)	$	(25,344	)	$	(111,433	)
Basic and diluted loss per share attributable to common stockholders(1):
Historical	$	(2.10	)	$	(3.22	)	$	(4.42	)	$	(6.52	)	$	(4.70	)	$	(3.22	)	$	(4.86	)
Pro forma  (unaudited)													$	(0.14	)				$	(0.15	)
Weighted-average number of shares used to compute basis and diluted loss per share attributable to common stockholders(1):
Historical		3,342,651			3,457,210			3,823,129			4,315,928			4,552,573			4,539,147			5,209,674
Pro forma  (unaudited)														95,998,006						113,397,664

(footnotes appear on the next page)

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	As of December 31,															As of September 30,
	2001			2002			2003			2004			2005			2006
																(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and short term investments	$	672		$	15,139		$	3,177		$	19,205		$	12,050		$	21,726
Working capital		(256	)		14,626			1,456			17,356			8,840			12,530
Restricted cash		140			—			—			500			—			—
Total assets		1,175			16,284			4,031			20,629			12,722			22,502
Notes payable—non-current portion		36			572			285			—			—			7,776
Redeemable convertible preferred stock		8,631			34,619			38,117			80,766			93,690			113,050
Deficit accumulated during the development stage		(8,511	)		(19,653	)		(36,551	)		(64,677	)		(86,089	)		(111,433	)
Total stockholders’ equity (deficit)		(8,474	)		(19,515	)		(36,197	)		(62,897	)		(84,580	)		(107,942	)

⁽¹⁾ See Note 2 of the notes to the consolidated financial statements for an explanation of the method used to calculate the historical and pro forma loss per share attributable to common stockholders and the number of shares used in the computation of the per share amounts.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this prospectus.

Overview

We are a biopharmaceutical company focused on developing and commercializing novel pain management therapies. We are assembling a portfolio of pain management product candidates and are developing innovative new therapies based on known chemical entities. Our initial focus is on chronic peripheral neuropathic pain, including postherpetic neuralgia, or PHN, painful HIV distal sensory polyneuropathy, or HIV-DSP, and painful diabetic neuropathy, or PDN. Our most advanced product candidate, NGX-4010, a synthetic capsaicin-based topical patch designed to manage pain associated with peripheral neuropathic pain conditions, has completed two pivotal Phase 3 clinical trials that have met their primary endpoints, one in PHN and one in HIV DSP. In each indication, a single 30 or 60 minute application of NGX-4010 has been shown to provide at least 12 weeks of clinically meaningful pain relief. We expect to file a marketing authorization application, or MAA, in Europe for NGX-4010 in mid-2007 based upon existing clinical trial data. If the safety and efficacy of NGX-4010 are confirmed by our two ongoing pivotal Phase 3 clinical trials, we intend to file a new drug application, or NDA, in the United States in 2008. We are developing a non-patch liquid formulation of synthetic capsaicin, NGX-1998, and an opioid analgesic for use in managing pain associated with other chronic pain conditions, such as cancer pain. We hold all worldwide commercial rights to our product candidates and are actively engaged in partnering discussions in anticipation of European product approval and launch.

We were incorporated in 1998 as Advanced Analgesics, Inc., and commenced operations in 2000 as NeurogesX, Inc. From inception through 2001 our primary activities were related to formulation development and preclinical studies of our lead product candidate NGX-4010. In 2002, our focus expanded to include clinical development of our lead product candidate, NGX-4010, as well as establishing sources of supply and manufacturing processes.

We are a development stage company. To date, we have not generated any revenues and have funded our operations primarily by selling equity securities and establishing debt facilities. We have incurred significant losses since our inception. As of September 30, 2006, we had a deficit accumulated during the development stage of approximately $111.4 million. We expect our operating losses to increase over the next several years as we continue clinical study of NGX-4010, seek regulatory approvals and, if these efforts are successful, commence commercialization activities. During this time, we also intend to increase our focus on preclinical and clinical development of additional product candidates including NGX-1998 and our opioid analgesic, as well as other product candidates which may be internally developed or acquired.

Research and Development Expenses

Our research and development expenses consist of internal costs, primarily employee salaries and benefits, allocated facility and other overhead costs and external costs, primarily payments to vendors related to our clinical trials, such as clinical research organizations and clinical investigators, as well as payments for formulation development, manufacturing process development and non-clinical studies.

Substantially all of our research and development expenses are directed to the development of NGX-4010. We use our internal research and development resources across several projects and many resources are not attributable to specific projects. Accordingly, we do not account for our internal research and development costs

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on a project basis. With regard to external costs, we commence tracking the separate costs of a project when management determines, in its judgment, that a project has a reasonable chance of entering clinical development.

The process of conducting preclinical testing and clinical trials necessary to obtain FDA approvals is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, patient enrollment, manufacturing capabilities, successful clinical results, our funding, and competitive and commercial viability. As a result of these and other factors, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when or to what extent we will generate revenues from commercialization and sale of any of product candidates. Currently we are primarily focused on completing the development of our lead product candidate, NGX-4010, for patients with PHN and HIV-DSP. We anticipate that our expenditures on these initial indications will remain consistent over the next year or two and that our expenditures for development of NGX-4010 in PDN, as well as NGX-1998 and other earlier development programs, will increase over the next several years both in real dollars and as a percentage of total research and development expenses incurred.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and benefits, professional fees related to our administrative, finance, human resource, legal and information technology functions, marketing expenses and patent costs. In addition, general and administrative expenses include allocated facility, basic operational and support costs and insurance costs. During 2007, and increasingly over the next several years, we anticipate that our general and administrative expenses will continue to increase in real dollars and also as a percentage of total expenses. The increase in real dollar expenses is likely to be attributable to accelerated marketing activities in anticipation of, and upon receipt of, required regulatory approvals and the costs of being a public company, as well as the need to add additional personnel in all of the key functional areas that support growth of our general operations, including accounting and finance, legal and human resources.

Accretion of Redeemable Convertible Preferred Stock.

Our redeemable convertible preferred stock is redeemable at the request of the holders on or after June 30, 2008. We are accreting the carrying value of the preferred stock issuances to the redemption amount using the effective interest method through periodic charges to additional paid-in capital. Upon completion of our initial public offering, our preferred stock will convert to common stock and the carrying value of our preferred stock will be reclassified to common stock and additional paid-in capital.

Critical Accounting Policies and Significant Judgments and Estimates

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 U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Actual results could differ from those estimates.

While our significant accounting policies are described in more detail in Note 2 of Notes to Consolidated Financial Statements included elsewhere in this prospectus, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Research and Development

We expense research and development costs as incurred. Research and development expenses include personnel and personnel related costs, costs associated with clinical trials including amounts paid to clinical research organizations and clinical investigators, manufacturing, process development and clinical product supply costs, research costs and other consulting and professional services, and allocated facility and related expenses.

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Clinical Trials

We accrue and expense costs for clinical trial activities performed by third parties, including clinical research organizations and clinical investigators, based upon estimates made as of the reporting date of the work completed over the life of the individual study in accordance with agreements established with contract research organizations and clinical trial sites completed. We determine these estimates through discussion with internal personnel and outside service providers as to progress or stage of completion of trials or services pursuant to contracts with numerous clinical trial centers and clinical research organizations and the agreed upon fee to be paid for such services. Costs of setting up clinical trial sites for participation in the trials are expensed immediately as research and development expenses. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trial and reduced by any initial payment made to the clinical trial site when the first patient is enrolled.

Stock-Based Compensation

Prior to January 1, 2006, we accounted for stock-based employee compensation arrangements using the intrinsic value method in accordance with the recognition and measurement provisions of Accounting Principles Board Opinion, or APB No. 25, Accounting for Stock Issued to Employees, and related interpretations, including the Financial Accounting Standards Board Interpretation, or FIN No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25 as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. In accordance with APB No. 25, stock-based compensation is calculated using the intrinsic value method and represents the difference between the deemed per share market price of the stock and the per share exercise price of the stock option. The resulting stock-based compensation is deferred and amortized to expense over the grant’s vesting period, which is generally four years. For variable awards, compensation expense is measured each period as the incremental difference between the fair value of the shares and the exercise price of the stock options. Compensation expense relating to variable awards is recorded using a graded vesting model in accordance with FIN No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.

Effective January 1, 2006, we adopted the provisions of SFAS No. 123R, Share-Based Payments. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin, or SAB, No. 107 relating to SFAS No. 123R. We have applied the provisions of SAB No. 107 in our adoption of SFAS No. 123R. Under SFAS No. 123R, stock-based awards, including stock options, are recorded at fair value as of the grant date and recognized to expense over the employee’s requisite service period (generally the vesting period), which we have elected to amortize on a straight-line basis. Because non-cash stock compensation expense is based on awards ultimately expected to vest, it has been reduced by an estimate for future forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition and we will no longer be able to apply the minimum value method and instead must calculate the fair value of our employee stock options using an estimated volatility rate. We adopted the provisions of SFAS No. 123R using the prospective transition method. Under the prospective transition method, beginning January 1, 2006, compensation cost recognized includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of December 31, 2005, based on the intrinsic value in accordance with the provisions of APB No. 25, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. All awards granted, modified, or settled after the date of adoption are accounted for using the measurement, recognition, and attribution provisions of SFAS No. 123R. See Note 10 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further detail.

As a result of adopting SFAS No. 123R on January 1, 2006, the loss applicable to common stockholders for the nine months ended September 30, 2006 was higher by approximately $200,000 than if we had continued to account for stock-based compensation under APB No. 25. Basic and diluted loss per share applicable to common

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stockholders for the nine months ended September 30, 2006 would have been decreased by $0.04 if we had continued to account for stock-based compensation under APB No. 25. At December 31, 2005, unamortized deferred stock-based compensation was approximately $79,000. See Note 10 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further detail. At September 30, 2006, we had one share-based compensation plan, which is described in Note 10.

We account for equity instruments issued to nonemployees in accordance with the provisions of Emerging Issues Task Force, or EITF, No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, using a fair-value approach. The equity instruments, consisting of stock options and warrants granted to lenders and consultants, are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and are recognized as an expense over the term of the related financing or the period over which services are received.

The following table shows the assumptions used to compute stock-based compensation expense for stock options granted to nonemployees during the years ended December 31, 2003, 2004 and 2005 and for the nine months ended September 30, 2005 and 2006 using the Black-Scholes option valuation method:

	Year Ended December 31,			Nine Months Ended September 30,
	2003	2004	2005	2005	2006
Dividend yield	0%	0%	0%	0%	0%
Volatility	80%	80%	77%	77%	77%
Weighted-average expected life	9.0	5.6-8.0	4.6-9.9	4.8-9.9	7.9-9.7
Risk-free interest rate	3.3-4.3%	3.9-4.7%	4.0-4.5%	4.0-4.5%	4.7-5.1%

We recognized stock-based compensation expense, which includes amortization of deferred stock compensation, the costs of variable awards to founders and consultants and the costs of stock options issued in exchange for notes receivable, as follows (in thousands):

	Year Ended December 31,							Nine Months Ended September 30,
	2003		2004		2005			2005			2006
								(Unaudited)
Research and development	$	34	$	252	$	(55	)	$	(76	)	$	342
General and administrative		154		1,149		(265	)		(398	)		1,530
Total stock-based compensation	$	188	$	1,401	$	(320	)	$	(474	)	$	1,872

Estimation of Fair Value of Warrants to Purchase Redeemable Convertible Preferred Stock

The preferred stock warrant liability is adjusted to fair value at the end of each reporting period with the change recorded as interest expense.

Results of Operations

Comparison of Nine Months Ended September 30, 2005 and September 30, 2006

	Nine Months Ended September 30,				Increase (Decrease)			% Increase (Decrease)
	2005		2006
	(unaudited)
	(in thousands, except percentages)
Research and development expenses	$	7,766	$	14,318	$	6,552		84%
General and administrative expenses		1,080		3,458		2,378		220%
Interest income (expense), net		291		280		(11	)	(4%	)
Other income (expense), net		3		191		188		n/m

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Research and development expenses. Research and development expenses increased primarily as a result of a $4.2 million increase in clinical study costs as we moved from three active clinical studies to five, $1.0 million in manufacturing process development and $0.9 million in increased regulatory expenses, as we expanded our clinical study activity and prepared for our MAA submission, and $0.1 million related to our NGX-1998 and our opioid analgesic program. These increases were offset by a decrease of approximately $0.4 million in our non-clinical costs associated with the substantial completion of the NGX-4010 non-clinical program. In addition, research and development expenses were increased by $0.4 million as a result of increased stock-based compensation expenses.

General and administrative expenses. General and administrative expenses increased primarily as a result of $0.3 million in increased professional fees, such as legal and accounting, as well as $0.2 million in salaries, due to an increase in the number of personnel in 2006, and a general increase in operating costs. In addition, general and administrative expenses were increased by $1.9 million as a result of increased stock-based compensation expenses.

Interest income (expense), net. Interest income (expense) decreased primarily as a result of lower levels of investments and cash and cash equivalents.

Other income (expense), net. Other income (expense) increased primarily due to income recognized in conjunction with the valuation of outstanding preferred stock warrants.

Comparison of Years Ended December 31, 2004 and 2005

	Year Ended December 31,				Increase (Decrease)		% Increase (Decrease)
	2004		2005
	(in thousands, except percentages)
Research and development	$	16,492	$	11,847	$	(4,645)	(28)%
General and administrative		5,113		1,715		(3,398)	(66)%
Interest income (expense), net		262		393		131	50 %
Other income (expense), net		—		58		58	—

Research and development expenses. Research and development expenses decreased primarily as a result of a $2.7 million decrease in clinical study costs associated with NGX-4010 as we decreased our activity to three ongoing clinical studies from six, a $1.0 million decrease in manufacturing costs, as a result of conducting fewer clinical trials in 2005 and a $0.2 million decrease in costs related to NGX-1998 and new product research. Further, all of our clinical and research and development costs were reduced in the later part of 2004 and remained lower through most of 2005 as a result of general reduction in spending levels due to a refocusing of research and development efforts on HIV-DSP and the timing and availability of our equity fundraising activities. In addition, research and development expenses were decreased by $0.3 million due to lower stock-based compensation expenses.

General and administrative. General and administrative expenses decreased primarily as a result of a $0.6 million decrease in salary and related expenses, a $0.5 million decrease in legal costs, a $0.3 million reduction in office and consulting expenses. In addition, general and administrative expenses were decreased by $1.4 million due to lower stock-based compensation expenses.

Interest income (expense), net. Interest income (expense) increased in 2005 primarily as a result of higher rates of return on invested assets, offset by generally lower cash balances in 2005.

Other income (expense), net. Other income (expense) increased primarily due to income recognized in conjunction with the valuation of outstanding preferred stock warrants.

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Comparison of Years Ended December 31, 2003 and 2004

	Year Ended December 31,				Increase (Decrease)		% Increase (Decrease)
	2003		2004
	(in thousands, except percentages)
Research and development	$	9,679	$	16,492	$	6,813	70	%
General and administrative		3,796		5,113		1,317	35	%
Interest income (expense), net		74		262		188	254	%

Research and development. Research and development expenses increased primarily as a result of a $4.8 million increase in clinical study expenses as we increased our activity to six ongoing clinical studies from four, a $0.2 million increase in non-clinical toxicology work, a $0.7 million increase in manufacturing costs as we manufactured clinical supply necessary to conduct the larger and more numerous clinical studies in 2004, a $0.3 million increase related to our NGX-1998 project, and a $0.5 million increase as a result of a growth in staffing levels in all areas of research and development as we began to expand our infrastructure to support our more advanced clinical programs. In addition, research and development expenses were increased by $0.2 million as a result of increased stock-based compensation expenses.

General and administrative. General and administrative expenses increased $0.2 million as a result of increased personnel costs and $0.2 million primarily as a result of increased legal fees associated with a financing transaction that was not completed. In addition, general and administrative expenses were increased by $1.0 million as a result of increased stock-based compensation expenses.

Interest income (expense), net. Interest and other income increased in 2004 primarily as a result of higher levels of investment assets as a result of our Series C financing, which occurred in early 2004.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through the private placement of our equity securities and, to a lesser extent, through debt facilities. Through September 30, 2006, we have received approximately $86.0 million from the sale of our equity securities. As of September 30, 2006, we had approximately $21.7 million in cash, cash equivalents and short-term investments. Our cash and investment balances are held in a variety of interest bearing instruments including obligations of U.S. government agencies, corporate bonds, commercial paper and money market funds. Cash in excess of immediate operational requirements is invested in accordance with our investment policy primarily with a view to liquidity and capital preservation.

In July 2006 we entered into a venture loan agreement with two venture finance institutions for an aggregate loan amount of $10,000,000 of which $5,000,000 was drawn in July 2006 and the remaining $5,000,000 was drawn in September 2006. These notes bear interest at fixed rates of 12.21% and 11.75%, respectively. These notes are collateralized by a first priority security interest in our tangible and intangible assets, excluding intellectual property. Each note requires interest only repayment for the period from initial borrowing to October 2006 and July 2007, respectively. Principal and interest repayment commences in November 2006 and August 2007, respectively, for 30 months. As of September 30, 2006, outstanding principal under these notes was $10,000,000. In connection with the notes payable, we are restricted from paying cash dividends or distributions on any equity with the exception of dividends payable solely in capital stock.

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Future minimum payments under all noncancelable obligations are as follows as of September 30, 2006 (in thousands):

Year ended December 31,	Operating Leases
2006 (Remainder of 2006)	$	52
2007		112
2008		16
2009		16
2010 and thereafter		6
Total minimum lease payments	$	202
Current portion

We enter into contracts in the normal course of business with clinical research organizations and clinical investigators, and for third party manufacturing and formulation development, among others. These contracts generally provide for termination with notice, and therefore we believe that our noncancelable obligations under these agreements are not material.

In January 2007, we issued 6,611,386 shares of Series C2 preferred stock at $0.75 per share upon the exercise of warrants, resulting in aggregate net cash proceeds of approximately $4,959,000.

Our future capital uses and requirements depend on numerous forward-looking factors. These factors include but are not limited to the following:

• the progress of our clinical trials;

• our ability to establish and maintain strategic collaborations, including licensing and other arrangements that we have or may establish;

• the costs and timing of regulatory approvals;

• the costs of establishing manufacturing, sales or distribution capabilities;

• the success of the commercialization of our products;

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

• the extent to which we acquire or invest in other products, technologies and businesses.

We believe that our existing cash and investments, including the proceeds from this offering, will be sufficient to meet our projected operating requirements through at least the next twelve months. To date, however, we have incurred recurring net losses, negative cash flows from operations, and, prior to giving effect to the proceeds from this offering, have a net capital deficiency. Until we can generate significant cash from our operations, we expect to continue to fund our operations with existing cash resources generated from the proceeds of offerings of our equity securities. In addition, we may finance future cash needs through the sale of other equity securities, strategic collaboration agreements and debt financing. However, we may not be successful in obtaining collaboration agreements, or in receiving milestone or royalty payments under those agreements. In addition, we cannot be sure that our existing cash and investment resources will be adequate or that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our stockholders. Having insufficient funds may require us to delay, scale back or eliminate some or all of our development programs, relinquish some or even all rights to product candidates at an earlier stage of development or renegotiate less favorable terms than we would otherwise choose. Failure to obtain adequate financing also may adversely affect our ability to continue in business. If we raise additional funds by issuing equity securities, substantial dilution to existing stockholders would likely result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial rations that may restrict our ability to operate our business.

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Recently Issued Accounting Standards

In March 2004, the Emerging Issues Task Force, or EITF, reached a consensus on EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, or EITF No. 03-1. EITF No. 03-1 provides guidance regarding disclosures about unrealized losses on available-for-sale debt and equity securities accounted for under Statement of Financial Accounting Standards, or SFAS, No. 115, Accounting for Certain Investments in Debt and Equity Securities, or SFAS No. 115. The guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. In September 2004, the EITF delayed the effective date for the measurement and recognition guidance. In June 2005, the Financial Accounting Standards Board, or FASB, decided not to provide additional guidance on the meaning of other-than-temporary impairment under EITF No. 03-1. The FASB directed the staff to issue FASB Staff Position Paper No. 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, or FSP No. 115-1, superseding EITF 03-1. FSP No. 115-1 will replace the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF No. 03-1 with references to existing other-than-temporary impairment guidance. FSP No. 115-1 will be effective for other-than-temporary impairment analysis conducted in periods beginning after December 15, 2005. We do not expect that the adoption of FSP No. 115-1 will have a material impact on our results of operations and net loss per share.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 requires retrospective application to prior periods’ financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS No. 154 did not have a material impact on our consolidated results of operations, financial position, or cash flows.

In June 2006, the FASB issued FASB Interpretation, or FIN, No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, or FIN No. 48, which clarifies the accounting for uncertainty in tax positions. FIN No. 48 requires that we recognize the impact of a tax position in the financial statements, if that position is more likely than not to be sustained on audit, based on the technical merits of the position. The provisions of FIN No. 48 are effective as of the beginning of our 2007 fiscal year, with the cumulative effect, if any, of the change in accounting principle recorded as an adjustment to opening retained earnings. We are currently evaluating the impact of adopting this new standard.

Off Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Quantitative and Qualitative Disclosure of Market Risks

Our exposure to market risk is confined to our cash, cash equivalents and short term investments which have maturities of less than one year. The goal of our investment policy are primarily liquidity and capital preservation while attempting to maximize the income we receive without assuming significant risk. To achieve these objectives our investment policy allows us to maintain a portfolio of cash equivalents and short term investments in a variety of securities, including U.S. government agencies, corporate bonds, commercial paper and money market funds. Our cash and investments as of September 30, 2006 consisted primarily of commercial paper. Additionally, as our debt facilities bear interest at fixed rates, we are not subject to market risk with respect to this debt.

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BUSINESS

Overview

We are a biopharmaceutical company focused on developing and commercializing novel pain management therapies. We are assembling a portfolio of pain management product candidates and are developing innovative new therapies based on known chemical entities. Our initial focus is on the management of chronic peripheral neuropathic pain including postherpetic neuralgia, or PHN, painful HIV-distal sensory polyneuropathy, or HIV-DSP, and painful diabetic neuropathy, or PDN. Our most advanced product candidate, NGX-4010, a synthetic capsaicin-based topical patch designed to manage pain associated with peripheral neuropathic pain conditions, has completed two pivotal Phase 3 clinical trials that have met their primary endpoints, one in PHN and one in HIV-DSP. In each indication, a single 30 or 60 minute application of NGX-4010 has been shown to provide at least 12 weeks of clinically meaningful pain relief. We expect to submit a marketing authorization application, or MAA, in Europe for NGX-4010 in mid-2007 based upon existing clinical trial data. If the safety and efficacy of NGX-4010 are confirmed by our two ongoing pivotal Phase 3 clinical trials, we intend to submit a new drug application, or NDA, in the United States in 2008. We are developing a non-patch liquid formulation of synthetic capsaicin, NGX-1998, and an opioid analgesic for use in managing pain associated with other chronic pain conditions, such as cancer pain. We hold all worldwide commercial rights to our product candidates and are actively engaged in partnering discussions in anticipation of European product approval and launch.

Peripheral neuropathic pain is a chronic condition that begins with an aberrant signal sent by injured or dysfunctional nerve endings in the skin to the brain, where it is recognized as pain. Current treatment options for relieving neuropathic pain primarily consist of oral therapeutics, which suppress the ability of the central nervous system to sense pain, and daily use topical anesthetics. While there are a number of products currently available for relief of neuropathic pain, we believe that the market is still underserved due to the limitations of current therapies. The primary limitations of current therapies relate to their unwanted side effects, limited efficacy, cumbersome treatment regimens, and the potential for drug-drug interactions. In contrast, NGX-4010 is a localized treatment designed to act non-systemically. NGX-4010 affects specific nerve fibers in the skin, interfering with aberrant pain signals at their source, without compromising the ability to feel normal protective sensations. Because of the transient and minimal amounts of capsaicin in the bloodstream during and after treatment, we do not expect NGX-4010 to interact with oral medications and therefore believe that NGX-4010 can be used alone or in combination with other pain medications or therapies.

Our Strategy

Our goal is to become a leading biopharmaceutical company focused on the development and commercialization of novel pain management therapies. Key elements of our strategy for achieving these goals include:

Rapidly develop and commercialize NGX-4010 in peripheral neuropathic pain. We are aggressively pursuing approval of NGX-4010 for peripheral neuropathic pain in Europe and for PHN and painful HIV-DSP in the United States. We believe that we have already completed the required clinical and safety studies necessary for approval in Europe. We are currently preparing to submit a single MAA in mid-2007 to obtain marketing authorization in all member states of the European Union. In Europe, we believe that regulations allow us to seek approval of NGX-4010 for a broad indication of peripheral neuropathic pain generally, so long as we adequately demonstrate safety and efficacy in more than one type of peripheral neuropathic pain. We intend to seek broad label authorization in Europe for peripheral neuropathic pain, which includes PHN, HIV-DSP and PDN, among others. We expect to submit an NDA in the United States in 2008 for PHN and HIV-DSP. As both of these indications are characterized by significant unmet medical need, we believe that the U.S. Food and Drug Administration, or FDA, may grant us priority review that could lead to an FDA determination within six months.

Establish a U.S. sales and marketing organization and partner or co-promote outside the United States. We have retained exclusive worldwide commercialization rights for NGX-4010. We intend to develop a direct sales

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and marketing organization in the United States for NGX-4010 to target specialized U.S. pain centers and physicians who treat PHN and HIV-DSP. We intend to enter into partnering, co-promotion and other distribution arrangements for commercialization outside the United States.

Maximize market exclusivity for NGX-4010. Our strategy is to rapidly introduce NGX-4010 with regulatory and intellectual property protection against direct competition, giving us a significant advantage during the critical early years of market adoption. We believe at least one of our licensed patents will cover our product candidate NGX-4010 through November 6, 2016. If the FDA approves NGX-4010, we believe we may be entitled to five years of market exclusivity in the United States under the Hatch-Waxman Act. This exclusivity is provided to the first applicant to gain approval of an NDA under certain sections of the Food, Drug and Cosmetic Act for a new chemical entity. We also plan to file for patent term extension under the Hatch-Waxman Act for one of our patents associated with NGX-4010. We have filed patent applications to help strengthen our NGX-4010 patent portfolio. Additionally, we have received orphan designation for NGX-4010 for the management of painful HIV-DSP, which may give us seven-year marketing exclusivity in the United States for that indication if NGX-4010 is the first synthetic capsaicin patch to be approved by the FDA for that indication.

Obtain approval for use of NGX-4010 for PDN. The most common cause of peripheral neuropathic pain is diabetes. The American Diabetes Association estimates that approximately 60-70% of the 20.8 million people in the United States with diabetes have mild to severe forms of nervous system damage. Jain BioPharma estimates that in 2005 there were 3.0 million diabetic patients in the United States suffering from diabetic neuropathy, making it the largest market opportunity in peripheral neuropathic pain. We intend to seek broad label authorization in Europe for the use of NGX-4010 which would include PDN. With the proceeds of this offering, we intend to continue our U.S. clinical trial program for PDN.

Build a balanced portfolio of pain management therapies. Our model is to develop innovative therapies based on known chemical entities, balancing market opportunity with a favorable clinical and regulatory pathway. We are expanding our portfolio of pain management product candidates with a liquid high concentration topical capsaicin, NGX-1998, and an opioid analgesic for use in treating other chronic pain conditions, such as cancer pain. Additionally, we will actively seek opportunities to in-license products that are currently on the market or in clinical development that may benefit from our expertise in pain.

Our Product Development Programs

Our current product development programs are focused on candidates in the field of peripheral neuropathic pain. We retain worldwide rights to these product candidates. Our portfolio consists of the following product candidates:

Product Candidate	Indication	Phase of Development
NGX-4010	PHN	Two Phase 3 trials completed, one pivotal, with primary endpoint met
		Broad-label European MAA filing expected in mid-2007
		Second pivotal U.S. Phase 3 trial enrolling, with results expected 2nd half 2007
	HIV-DSP	Initial pivotal Phase 3 trial completed
		40 week open-label extension trial completed
		Broad-label European MAA filing expected in mid-2007
		Second pivotal U.S. Phase 3 trial enrolling with results expected in 2008
	PDN	Broad-label European MAA filing expected in mid-2007
		U.S. open label Phase 2 data; expand clinical program in 2007
NGX-1998	Peripheral Neuropathic Pain	Phase 1
Opioid	Chronic Pain	Preclinical
Prodrug

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Neuropathic Pain Conditions

According to Jain BioPharma, in 2005, there were approximately 6.0 million neuropathic pain sufferers in the United States, who generated over $3.0 billion in neuropathic pain product sales, which Jain predicts will grow to $8.5 billion in 2015. Jain also estimates that there are 3.0 million neuropathic pain sufferers in Europe. We believe that this projected growth in the market for neuropathic pain medications reflects increasing awareness by the medical community of neuropathic pain diagnosis and treatment options, as well as growth in the elderly population, an increase in the number of people suffering from diabetes and an increase in the life expectancy of people with HIV.

Pain results from sensory nerve stimulation often associated with actual or potential tissue damage and is transmitted by specific nerve fibers that carry the pain signal across the nervous system to the brain, where it is recognized as pain. Pain can be acute or chronic. Acute pain is short in duration and tends to be reactive or protective against actual or potential tissue injury. Chronic pain lasts over an extended period of time and often serves no useful purpose. There are two broad categories of chronic pain, inflammatory and neuropathic. Inflammatory pain is associated with tissue damage, often occurring from injury or from inflammatory conditions, such as osteoarthritis or lower back pain. This class of pain is often treated with prescription drugs that act systemically, including opioids, and over-the-counter anti-inflammatory drugs.

Neuropathic pain is a type of chronic pain that results from injury to, or dysfunction of, nerves. The injury can be to the central nervous system, consisting of the brain and spinal cord, or to the peripheral nervous system, consisting of all other nerves. Neuropathic pain can occur in any part of the body and can significantly impair the affected individual’s quality of life. It can result from viruses, as is the case with PHN and HIV, or diseases, such as diabetes. Neuropathic pain can also result from the use of drugs that treat diseases or viruses, such as drugs used to treat HIV.

Existing Treatments and their Limitations

While there are a number of products currently available for the management of neuropathic pain, we believe that the market is still underserved due to the limitations of current therapies. The primary limitations of current therapies relate to their unwanted systemic side effects, limited efficacy, cumbersome treatment regimens, potential for abuse and drug-drug interaction.

Because patients react to pain and to pain therapies in many ways and because no one therapy offers complete pain relief to all patients without significant side effects, a single standard of care does not exist for the management of neuropathic pain. Initial treatment typically involves one of a few anti-convulsants or anti-depressants. To the extent that the initial therapy does not provide adequate pain relief, the physician may try other anti-convulsants, anti-depressants or opioids alone or in combination, to treat the pain. These systemic treatments are often limited by side effects including dizziness, sedation, confusion, constipation and the potential for drug dependence. Due to these side effects, patient compliance is often poor and physicians often reduce dosing to less than optimal levels which limits the ability of these drugs to reduce pain. For this reason, we believe there is an opportunity for localized, non-systemic analgesics to be used broadly either alone or in combination to reduce the patient’s pain without the burden of significant side effects.

To date, one topical product has been approved in the United States for managing peripheral neuropathic pain, specifically to treat PHN. This treatment, a lidocaine patch, should not be worn for more than 12 hours in any 24-hour period. Some patients may require up to two weeks of treatment before experiencing peak pain relief and the patch must continue to be used daily in order to maintain relief. Because of safety issues associated with the use of lidocaine, the labeling for the lidocaine patch states that no more than three patches should be worn simultaneously.

Capsaicin-Induced Effects on Peripheral Neuropathic Pain

Peripheral neuropathic pain results from injured or dysfunctional nerve endings that send aberrant pain signals to the brain in the absence of harmful stimuli, inappropriately causing the sensation of pain. We believe

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capsaicin can desensitize these injured or dysfunctional nerve fibers, reducing their ability to initiate pain signals for a sustained period of time. Capsaicin is a naturally occurring substance that is responsible for making chili peppers hot. Products containing low concentrations of capsaicin, including creams, lotions and patches, have long been sold over-the-counter for the treatment of minor arthritis, back and muscle pain, as well as for other conditions.

Low-concentration capsaicin topical products have not been a viable treatment for chronic peripheral neuropathic pain conditions due in part to poor patient compliance resulting from the treatment of already painful skin with a compound that causes burning sensations, as well as the inconvenience of multiple daily applications. We believe that high-concentration capsaicin cream also does not appear to constitute a viable therapy because application causes significant patient discomfort, creams can allow the capsaicin to disperse beyond the treatment area, and existing creams have not been optimally formulated to allow capsaicin to penetrate the skin. To address the intrinsic limitations of existing capsaicin therapies, we have developed NGX-4010, a high concentration capsaicin patch.

Our Solution

We are developing novel pain management therapies for peripheral neuropathic pain, beginning with high-concentration capsaicin formulations. We believe that our high-concentration capsaicin, if approved by regulatory authorities, may become the standard of care for the management of pain associated with peripheral neuropathic disorders while offering a number of significant advantages over other neuropathic pain management therapies:

• Non-systemic/localized treatment. Our localized peripheral pain management therapy is designed to address the origin of the pain signal in the injured or dysfunctional nerves. Unlike most existing pain therapies, our product candidates do not act as general pain suppressants of the entire central nervous system and do not cause a general desensitization to acute pain or other sensations.

• Duration of effect. Our product candidates are designed to allow capsaicin to readily penetrate the skin and provide rapid onset of clinically meaningful pain relief that may last for at least 12 weeks from a single 30 or 60 minute application. We believe this may address a significant limitation of existing pain therapies, many of which require daily use and gradual increased dosages over time before reaching their peak relief effect.

• Compliance. We believe that our product candidates may avoid problems with patient compliance, which can be a significant limitation with currently available treatments, because our product candidates are designed to be administered in a single application to provide pain relief for at least 12 weeks. We believe this may address significant limitations of currently available alternatives, such as the Lidoderm patch, which is self-administered and must be applied daily and worn for no more than 12 hours per day, and systemic drugs, which also require daily use and can produce significant side effects.

• Safety. Our clinical trials have consistently demonstrated that NGX-4010 is well tolerated. Treatment-related adverse events have primarily consisted of redness, pain, burning, itching, dryness or swelling at the application site. The application site reactions have generally been short term and well managed with the application of cool compresses, ice or the use of short-acting opioids. To date we have not seen evidence of increased side effects with repeated treatment.

Our Lead Product Candidate, NGX-4010

NGX-4010 is a non-narcotic analgesic formulated in a topical patch containing an 8% concentration of synthetic capsaicin. Capsaicin is released from the patch and, with the aid of penetration enhancers, absorbed into the skin during application without significant absorption of capsaicin into the bloodstream. Accordingly, users of NGX-4010 can avoid the systemic side effects of anti-convulsants, anti-depressants and opioids and the potential for abuse and addiction associated with some of these drugs. NGX-4010 is administered in a

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non-invasive process that involves pre-treating the painful area with a topical anesthetic for approximately one hour, followed by the application of our patch for 30 or 60 minutes. Patches are cut to conform to the area to be treated. After the specified application period, the patch is removed and residual capsaicin is removed from the skin with a proprietary cleansing gel. NGX-4010 has been shown to provide a clinically meaningful reduction in peripheral neuropathic pain for at least 12 weeks. We expect to submit an MAA in Europe for NGX-4010 in the management of pain associated with peripheral neuropathy in mid-2007, based upon existing clinical trial data. If the safety and efficacy of NGX-4010 are confirmed by our two ongoing Phase 3 clinical trials, we intend to submit an NDA in the United States in 2008 for the use of NGX-4010 in the management of pain associated with PHN and HIV-DSP.

Clinical Trials

NGX-4010 – Initial Target Indications.

As the following table illustrates, we have conducted extensive clinical trials in the management of peripheral neuropathic pain. Combined, our completed studies represent over 1,000 subjects treated with NGX-4010, with another approximately 880 enrolling in current Phase 3 clinical trials.

Indication	Trial Number	Number of Participants	Development Activity	Status
PHN	C116	402	Phase 3 pivotal	Completed; primary endpoint met (p = 0.001)
	C117	400	Phase 3 pivotal	Enrolling; results expected 2nd half 2007
	C110	155	Phase 3	Completed; primary endpoint not met
	C118	106*	Open label safety study	Enrolled; results expected 1st half 2007
	C108	299	Phase 2/3	Completed; primary endpoint not met
	C108	206	Open label extension	Terminated early
	C102	44	Phase 2	Completed
	C106	24	Open label extension of C102	Completed
HIV-DSP	C107	307	Phase 3 pivotal	Completed; primary endpoint met (p = 0.0026)
	C119	480	Phase 3 pivotal	Enrolling; results expected in 2008
	C118	106*	Open label safety study	Enrolled; results expected 1st half 2007
	C109	12	Phase 2	Completed
PDN	C111	117**	Open label tolerability study	Completed

* C118 is evaluating the safety of applications of NGX-4010 over a 12 month period. Of the 106 patients enrolled, 52 patients have HIV-DSP and 54 patients have PHN.

** C111 evaluated the effect of topical anesthetic alternatives on tolerability of NGX-4010 and included 91 PDN patients, 25 PHN patients and 1 HIV-DSP patient.

General Trial Design Criteria. Because all of our trials have focused on the treatment of peripheral neuropathic pain, although in different indications, we have generally been able to employ a similar design in each trial. Patients in each of our trials have to be at least 18 years old and have intact, unbroken skin over the painful area to be treated. Patients could be taking doses of other chronic pain medications, but could not be using any topical pain medications on the affected areas. Our blinded trials involve a randomly selected treated group and a control group. The treated patients receive our NGX-4010 topical patch in its standard formulation, containing 8% concentration of synthetic capsaicin. Our control group patients receive a low-dose version of our

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NGX-4010 topical patch, containing 0.04% capsaicin. The control groups receive a low-dose capsaicin to ensure that these patients can feel the heat sensation produced by the active ingredient, so that they could not tell that they are receiving the control. All patients receive a topical local anesthetic for one hour prior to application of the patch. The patch is then applied to all patients for the same duration, frequently 30 or 60 minutes, although in some of our studies we also test durations of 90 minutes. The amount of active ingredient delivered to the patient is dependent on the duration of patch application, since the capsaicin is absorbed into the skin over time.

General Objectives. The primary objective, or endpoint, of each of our Phase 3 clinical trials has been to assess the percent change in “average pain” from baseline to weeks 2-8, in the case of PHN, or to weeks 2-12, in the case of HIV-DSP. The primary method of assessing baseline pain and pain over the course of the study is a Numeric Pain Rating Scale, or NPRS. Eligible subjects had moderate to severe neuropathic pain with a baseline average NPRS score, as measured over a period of one to two weeks prior to treatment, typically of 3 to 9 (with 0 = no pain and 10 = worst possible pain). Secondary efficacy measures included methods of assessing pain other than with NPRS, such as the Patient and Clinical Global Assessments of Change, Gracely Pain Scale, Short-Form McGill Pain Questionnaire, and Brief Pain Inventory, as well as the proportion of “responders,” which are defined as patients who experience a certain minimal threshold of pain relief. Each of our studies also assessed safety and tolerability.

General Safety Findings. Our clinical trials have consistently demonstrated that NGX-4010 is well tolerated. In our Phase 3 trials, over 98% of subjects completed the prescribed duration of patch application, both during the double-blind phase and during the open-label phase of our trials. Treatment-related adverse events have primarily consisted of application-site issues, such as redness, pain, burning, itching, dryness or swelling. Most of these events have been mild to moderate, however, severe application site events have been observed. The application site reactions have been generally short term and managed with the application of cool compresses, ice or the use of short-acting opioids to relieve the treatment-related discomfort. We have not seen evidence of increased side effects with repeated treatment. There have been very few serious adverse events related to NGX-4010 (three events, totaling less than 1%) in our Phase 3 trials, two related to pain and one case of hypertension. In our PHN studies C108 and C110, more cardiac adverse events occurred in subjects treated with NGX-4010 than subjects receiving the control patch. Evaluation of these adverse events did not indicate that they were due to the study treatment. No difference in the number of cardiac events between the active and control groups was observed in our recently completed Phase 3 PHN study, C116.

Postherpetic Neuralgia

Including our completed C116 initial pivotal Phase 3 clinical trial, we have conducted four controlled studies and an open-label extension study evaluating the effect of NGX-4010 in subjects with PHN. Overall, over 600 subjects have received NGX-4010 in these studies with over 850 NGX-4010 treatments being administered.

Background on PHN. PHN is a painful condition affecting sensory nerve fibers. It is a complication of shingles, a second outbreak of the varicella-zoster virus, which initially causes chickenpox. Following an initial infection, some of the virus can remain dormant in nerve cells. Years later, age, illness, stress, medications or other factors that are not well understood can lead to reactivation of the virus. The rash and blisters associated with shingles usually heal within six weeks, but some people continue to experience pain for years thereafter. This pain is known as postherpetic neuralgia. PHN may occur in almost any area, but is especially common on the torso.

Potential Market. According to the Centers for Disease Control, or CDC, there are approximately 1.0 million cases of shingles in the United States each year, and approximately one in five shingles sufferers go on to develop PHN. The likelihood of developing PHN from shingles increases with age, with approximately 25% of people over 55, 50% of people over 60, and 75% of people over 70 estimated to eventually develop PHN after contracting shingles. According to Jain BioPharma, in 2005, there were approximately 500,000 people in the United States living with PHN and, according to The Mattson Jack Group, approximately 333,000 people in the United Kingdom, France, Germany, Italy and Spain, combined, living with PHN.

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Clinical Trial Results

C116 Phase 3 Clinical Trial. This trial was a randomized, double-blind, controlled, multicenter trial performed at 52 sites in the United States. Inclusion criteria included pain for at least six months following resolution of shingles. We enrolled 402 subjects and randomly assigned them to receive a 60 minute application of NGX-4010 (n = 206) or control (n = 196) patches, according to a 1:1 allocation scheme. Based on the results from the previous PHN studies, randomization was stratified by gender and by cardiovascular risk to ensure balance between the treatment groups.

As the following chart illustrates, the study met its primary endpoint of showing a clinically meaningful reduction in “average pain” from baseline to weeks 2-8 for the NGX-4010 treated group over the control group. The NGX-4010 group demonstrated a 29.6% decrease in pain score, a result that was statistically significant in comparison to the 19.9% decrease in the control group (p = 0.001). The superiority of NGX-4010 treatment was also demonstrated for the secondary assessment period of weeks 2-12, in which the group treated with NGX-4010 demonstrated a 29.9% decrease in pain, while the control group decreased by 20.4% (p = 0.0016). In a week-by-week comparison, NGX-4010 subjects achieved statistically significant mean reductions in NPRS scores as early as week 1 (p = 0.0438) and at every subsequent week through week 12.

PHN: C116 Pain reduction by week

C117 Ongoing Phase 3 Clinical Trial. We are in the process of conducting a second multicenter randomized, double-blind, controlled study of NGX-4010 for the treatment of PHN. The study is similar in design to our completed C116 Phase 3 trial. We intend to enroll approximately 400 subjects with PHN at clinical sites in the United States and Canada, who will be randomized to receive a single 60-minute treatment with NGX-4010 or a low-concentration capsaicin control patch. Study results are expected in the second half of 2007. As of January 31, 2007, there were 64 sites open, and enrollment is on-going.

Prior Clinical Trial Experience: In 2004, we completed C110, a Phase 3 trial of 155 PHN patients. Unlike our C116 trial and our earlier Phase 2 trials in PHN, this study only required subjects to have had pain for at least three months following resolution of their shingles rash, rather than six months. Subjects treated with NGX-4010 experienced a mean percent decrease in pain scores from baseline of approximately 37% compared to an approximately 30% decrease in the control group, a result that was not statistically significant. In a week-by-week comparison, an improvement over time was observed in the control group, suggesting a spontaneous improvement may have occurred. Spontaneous improvement of PHN during the first three to six

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months has been reported in scientific literature. An analysis not specified in the protocol was performed evaluating subjects with PHN for at least six months. This analysis demonstrated significantly greater reductions in pain in NGX-4010 treated patients compared to control. Based on the results of this study, we revised the inclusion criteria for our subsequent clinical trials to include subjects with pain for at least six months post-shingles resolution.

In 2004, we completed C108, a 299 patient randomized, double-blind, 12-week, controlled, dose-finding study of NGX-4010 for PHN. The primary objective of this study was to assess the efficacy, safety, and tolerability of NGX-4010 administered at three different dose levels (30-, 60- and 90-minutes) for the treatment of PHN. Pain scores during weeks 2–8 following 30-, 60- and 90-minute NGX-4010 treatments were similar, with patients’ pain scores declining approximately 25% to 28%. Compared with the control group pain scores, only the 90-minute dose group demonstrated a mean percent pain score decrease from baseline that reached statistical significance (p = 0.044). Given the relatively small size of the individual dose groups and the similar responses observed across the three doses tested, an analysis not specified in the protocol was performed comparing all subjects receiving NGX-4010 to all subjects receiving control. In this analysis, the decrease in pain score from baseline to weeks 2-8 in the pooled NGX-4010 group was 26.5% compared to 17.3% in the pooled control group, a difference that was statistically significant (p = 0.0286). Additionally, the analysis of the study data showed that females tended to report larger reductions in pain than males in both the NGX-4010 and control groups. Further, a gender imbalance was noted between the individual dose groups with more males being assigned to the 60-minute NGX-4010 group than in the other treatment groups. To adjust for this imbalance, a gender-stratified analysis was performed. The results of this analysis demonstrated a significant reduction in pain in the 60-minute NGX-4010 dose group (p = 0.033) suggesting that the primary analysis of this study was confounded by the imbalance in gender in the 60-minute dose group.

The C108 study’s open-label extension phase was terminated prior to completion after the data from the double-blind portion of the study were unblinded. During the open-label extension, subjects could receive up to three NGX-4010 treatments no more frequently than every 12 weeks. Of the 299 subjects, 206 (69%) received one or more open-label NGX-4010 treatments. Treatment was generally well tolerated. There were no observed safety concerns with subjects receiving up to four NGX-4010 treatments.

In C102, a Phase 2 trial, we demonstrated that a single 60-minute treatment with NGX-4010 was feasible in subjects with PHN, appeared to be well tolerated and was associated with a reduction in PHN pain over a 28-day period. C106, an open-label extension of C102, suggested that a single 60-minute NGX-4010 treatment is associated with a reduction in PHN pain over a 12-week period and that treatment appeared to be well-tolerated when administered up to four times over the course of one year.

C118 Ongoing Safety Study. Our ongoing Phase 2 trial is a multicenter, open-label trial of NGX-4010 for the treatment of peripheral neuropathic pain in patients with HIV-DSP or PHN. The primary objective of this study is to assess the safety of repeated applications of NGX-4010 for the treatment of HIV-DSP and PHN. Pain response will also be assessed at week 12 and at the end of the study period. We have enrolled 106 subjects who are eligible to receive up to four 60-minute NGX-4010 treatments over a one year period. Study results are expected during the first half of 2007.

Painful HIV-Distal Sensory Polyneuropathy

We have conducted two controlled studies and an open-label extension study evaluating the effect of NGX-4010 in subjects with painful HIV-Distal Sensory Polyneuropathy, or HIV-DSP. Overall, 290 subjects have received NGX-4010 in these studies with 562 NGX-4010 treatments being administered.

Background on HIV-DSP. HIV-DSP is caused primarily by three factors: direct activation of cells known as sensory neurons by the HIV virus, the immune system’s fight against the infection and the drugs administered to treat HIV. Painful HIV-DSP is characterized by significant pain in the feet and hands.

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Potential Market. According to Frost & Sullivan, neuropathic pain is a common neurological complication of antiretroviral treatments of HIV and affects approximately 15% of the HIV infected community. According to the CDC, in 2005 there were 956,000 people in the United States infected with HIV. There are currently no specific treatments approved in the United States or Europe for HIV-DSP. According to The Mattson Jack Group, there are approximately 245,000 and 136,000 people with HIV-DSP in the United States and in the United Kingdom, France, Germany, Italy and Spain, combined, respectively.

Clinical Trial Results

C107 Phase 3 Clinical Trial. In 2005, we completed a randomized, double-blind, controlled, dose finding study of NGX-4010 for the treatment of HIV-DSP. The primary objective of this study was to assess efficacy, safety, and tolerability of NGX-4010. Efficacy was measured in terms of change in “average pain” from baseline to weeks 2-12. The study consisted of a 12-week randomized, double-blind, controlled phase and a 40-week open-label extension. Three different dose levels (30-, 60- and 90-minute applications) were evaluated together, and then each dose level was evaluated individually. The study also provided information about the efficacy, safety, and tolerability of repeated treatment with NGX-4010 over one year. A total of 307 subjects were enrolled

at 32 clinical sites in the United States, divided approximately equally among the 30-, 60- and 90-minute dose levels, with three patients treated with NGX-4010 for every one subject treated with the control.

As the following chart illustrates, the results of the study demonstrated that in the aggregate, across all active treatment groups, NGX-4010 significantly reduced pain in subjects with HIV-DSP compared to the control group. Subjects treated with NGX-4010 demonstrated a mean reduction in pain score from baseline of 22.8% that was statistically greater than the 10.7% decrease in the control group (p = 0.0026).

HIV-DSP : C107 Pain reduction by week

Among the individual dose groups, the 90-minute NGX-4010 group demonstrated a mean reduction in pain of 24.7% that was significantly greater than the decrease of 10.7% reported by the control group (p = 0.005). The 60-minute NGX-4010 group also demonstrated a greater reduction in pain scores of 15.8%, but the difference from control was not statistically significant. The 30-minute NGX-4010 group had a mean percent decrease from baseline of 27.7%, which was similar to the pain reduction reported for the 90-minute NGX-4010 group (p=0.0007). The effect of treatment was maintained for up to 12 weeks, with the NGX-4010 group demonstrating significantly greater pain reduction compared to the control group during the second week and at each subsequent week through week 12. Among several secondary measures of pain relief, all three doses showed

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meaningful improvement compared to control. This study demonstrated that treatment with NGX-4010 was generally well tolerated. A single NGX-4010 treatment provided a stable reduction in pain over a 12-week period. Although the pre-specified statistical testing of the primary analysis stopped after the 60-minute dose was found not to have reached statistical significance, the data from all the active dosing groups combined from this study, including evaluation of secondary endpoints, support the conclusion that all the NGX-4010 doses tested (30-, 60-, and 90-minute) provided pain relief in subjects with HIV-DSP. Repeated treatments for up to one year in an open label efficacy study were equally efficacious, well tolerated and without cumulative toxicity.

C119 Ongoing Phase 3 Clinical Trial. We are in the process of conducting a multicenter randomized, double-blind, controlled trial of NGX-4010 for the treatment of HIV-DSP. The trial is similar in design to our completed C107 Phase 3 trial. Approximately 480 subjects with HIV-DSP will be enrolled at clinical sites in the United States, Canada, United Kingdom and Australia. Subjects will be randomized to receive a single 30- or 60-minute treatment with NGX-4010 or a low-concentration capsaicin control patch. Unlike the C107 trial, where there were only approximately 75 actively treated patients per dose level, C119 will have approximately 160 actively treated patients per dose level. We believe that this larger size may minimize the risk of results being skewed by individual patient variability. Study results are expected in 2008.

C118 Ongoing Safety Study. Our ongoing long term safety study is a multicenter, open-label trial of NGX-4010 for the treatment of peripheral neuropathic pain in patients with HIV-DSP or PHN. The primary objective of this study is to assess the safety of repeated applications of NGX-4010 for the treatment of HIV-DSP and PHN. Pain response will also be assessed at week 12 and at the end of the study period. We have enrolled 106 subjects who are eligible to receive up to four 60-minute NGX-4010 treatments over a one year period. Study results are expected during the first half of 2007.

Prior Clinical Experience. In 2003, we completed C109, an open-label pilot study of high-concentration capsaicin patches in the treatment of HIV-DSP. The primary objective of this study was to obtain preliminary information on the efficacy, safety, and tolerability of NGX-4010 in subjects with HIV-DSP. This Phase 2, multicenter, open-label trial enrolled 12 subjects at three clinical sites in the United States. Subjects received a single 60-minute treatment with NGX-4010 and were followed for 12 weeks. This study demonstrated that treatment with NGX-4010 was feasible and was generally well-tolerated. The study also provided preliminary evidence of efficacy indicating that NGX-4010 could reduce pain associated with HIV-DSP for 12 weeks after treatment.

Painful Diabetic Neuropathy

Background on PDN. Painful diabetic neuropathy, or PDN, is caused by injury to the sensory nerves, which arises from the toxic effects of some glucose metabolites and damage to blood vessels associated with nerves. The condition causes progressive pain or loss of feeling in the toes, feet, legs, hands and arms. Like HIV-DSP, PDN is typically first felt as pain in the feet and hands.

Potential Market. The CDC estimates that 20.8 million people in the United States suffered from diabetes in 2005, of which it is estimated by Jain BioPharma that 6.0 million suffered from some form of neuropathy. The number of diabetic neuropathic pain sufferers in the United States is currently estimated by Jain to be 3.0 million, growing at an annual incidence rate of approximately 2%. According to The Mattson Jack Group, there are approximately 2.85 million people with PDN in the United Kingdom, France, Germany, Italy and Spain, combined.

Clinical Trial Results

Phase 2a Clinical Trial Description. In 2004, we completed C111, a randomized, open-label multicenter evaluation of the tolerability of treatment with NGX-4010 in conjunction with pre-patch topical application of one of three lidocaine 4%-based local anesthetic products. The study enrolled 25 subjects with PHN, 91 subjects with PDN and 1 subject with HIV-DSP. Tolerability of the procedure was similar among all topical anesthetics

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tested. Preliminary efficacy data were obtained for the PHN group and the PDN group. PHN subjects experienced a 27.7% reduction in pain over weeks 2 through 12; pain was reduced by 32% in PDN subjects. Our experience in C111 suggests that neuropathies of the feet, such as PDN and HIV-DSP, regardless of the underlying disease, may respond similarly to treatment with NGX-4010.

NGX-1998 – Liquid High Concentration Topical Capsaicin

We are developing a proprietary topical high-concentration capsaicin liquid formulation for the treatment of peripheral neuropathic pain, as well as potentially for other chronic pain syndromes. NGX-1998 and other similar proprietary formulations are intended to provide.

• Rapid Delivery: Deliver capsaicin more rapidly into the skin than NGX-4010, without allowing significant amounts to enter the bloodstream, thereby potentially shortening the treatment procedure without impacting the safety or efficacy profile. By reducing treatment time, a larger base of physicians may be willing to administer NGX-1998.

• Improved Comfort: Reduce treatment-related discomfort. We believe that the rapid delivery of capsaicin may significantly reduce the need for pre-treatment with a local anesthetic, as the extremely rapid skin delivery of capsaicin could quickly inhibit the activity of nerve fibers.

• Expanded Indications: The liquid formulation can be applied to many places on the body that pose a challenge for a patch formulation, expanding the potential indications to include such pain syndromes as arthritis, vulvodynia, psoriasis and oral mucositis.

NGX-1998 has been evaluated in two clinical studies. In one study, we tested multiple liquid capsaicin formulations in order to identify those with the highest surrogate efficacy and tolerability characteristics. A second study involving healthy volunteers has completed dosing. This study will measure the relative efficacy of NGX-1998 applied for 5, 15 and 25 minutes using surrogate efficacy markers, compared to a 60-minute NGX-4010 patch application. Both of these clinical studies have been conducted under an exploratory IND, or eIND, in the United States. Once the second study with NGX-1998 is complete, the eIND will be closed, IND-enabling preclinical toxicology studies will be performed and a traditional IND submitted in order to support a clinical study in peripheral neuropathic pain patients.

Opioid Analgesic Prodrug – Preclinical Program

Opioid analgesics are widely prescribed to those suffering from acute or chronic pain. However, this important class of pain medicine suffers from numerous problems, including sedation and dizziness, gastrointestinal side effects, such as nausea, constipation and vomiting, and diversion to non-medical uses. The premise of our opioid prodrug portfolio is that metabolic activation of these prodrugs is required in order to release the pharmacologically active parent molecule. The required metabolic activation step may both reduce the attractiveness of these molecules to opioid abusers and improve safety and tolerability by slowing bioavailability of the parent drug. We also have ongoing exploratory research into innovative prodrugs of a number of analgesic medicines for which both safety and efficacy are established. Some of these compounds have been synthesized and are in the early stages of in vitro and in vivo evaluation.

Manufacturing

We have limited experience in, and do not own facilities for, the manufacture of any products or product candidates. We utilize contract manufacturers to produce clinical supplies of the active ingredient in NGX-4010, synthetic capsaicin, as well as the NGX-4010 topical patch, the associated cleansing gel and the fully assembled NGX-4010 treatment kit. Although we intend to continue to rely on contract manufacturers to produce our products for both clinical and commercial supplies, we oversee the production of the NGX-4010 treatment kit and each of its components.

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There are two primary raw material components of our synthetic capsaicin. Each is generally available from a number of suppliers. We currently obtain our supplies of synthetic capsaicin from Formosa Laboratories in Taiwan, who obtains the raw materials from qualified suppliers. While Formosa is our sole supplier currently, other potential suppliers exist and we may qualify a second source of supply after initial market approval.

For our clinical and commercial supply of NGX-4010, we have engaged LTS Lohmann Therapie-Systeme AG, or LTS, in Germany as the manufacturer to formulate the active ingredient from a powder into a topical patch. Under the terms of our clinical supply and development agreement and commercial supply and license agreement with LTS, we are obligated to purchase all of our NGX-4010 clinical and commercial supply requirements from LTS. The terms of our clinical supply and development agreement with LTS will remain in effect until we obtain regulatory approval for, and begin to commercialize NGX-4010 in a particular territory, at which time, we will obtain our supply of NGX-4010 for such jurisdiction under the commercial supply and license agreement.

For clinical and commercial supply of our cleansing gel, we have engaged Contract Pharmaceuticals Limited as the manufacturer. While we currently have only one supplier for the cleansing gel, we believe there are a number of potential suppliers and intend to evaluate the need for qualifying a second source of supply if we commercialize NGX-4010. In Europe, we have engaged Grenzach Produktions GmbH to supply the component parts of the NGX-4010 treatment kit (such as nitrile gloves, gauze, package insert, and the kit packaging), other than the NGX-4010 patch and cleansing gel, assemble all component parts of the treatment kit and prepare it for distribution. In the United States, we intend to engage at least one company to carry out the treatment kit assembly process, and we believe there are numerous potential candidates to fill this role.

If we obtain FDA approval, or approval outside the United States, for our product candidates, including NGX-4010, we plan to rely on contract manufacturers to produce sufficient quantities for large scale commercialization. These contract manufacturers will be subject to extensive governmental regulation. Regulatory authorities in the markets that we intend to serve require that drugs be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices, or cGMPs. In this regard, we plan to engage only contract manufacturers who have the capability to manufacture drug products in compliance with cGMPs in bulk quantities for commercialization.

Sales, Marketing and Distribution

We currently have no sales or distribution capabilities and limited marketing capabilities. In order to commercialize NGX-4010 or any future product candidates, we must develop sales, marketing and distribution capabilities or make arrangements with other parties to perform these services for us. We have hired a Vice President of Commercial Operations and Business Development with significant experience in specialty sales and marketing roles at large pharmaceutical companies as part of our initial effort to prepare for sales and marketing of NGX-4010, and our Chief Executive Officer also has significant sales and marketing experience.

If NGX-4010 receives marketing approval from the FDA, we currently plan to build our own U.S. sales force to market NGX-4010 directly to approximately 5,000 pain centers and 10,000 physicians in the United States who specialize in treating chronic pain. We believe that we can best serve this pain center and physician market with a focused, specialty sales force. We also plan to conduct a variety of promotional and educational programs aimed at establishing awareness of NGX-4010 in the physician community as an approved treatment for PHN and HIV-DSP. These programs will focus on differentiating NGX-4010 from other competitive products, such as Pfizer’s Neurontin and Lyrica, gabapentin, the generic form of Neurontin, and Endo Pharmaceuticals’ Lidoderm. These programs are planned to include sales representative promotion, publications in medical journals, continuing medical education, symposia, regional speaker programs and medical conference exhibits.

Outside of the United States, and subject to marketing approval in the relevant countries, we intend to engage sales, marketing and distribution partners in Europe, Asia and Latin America.

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To the extent we expand NGX-4010 for indications beyond PHN and HIV-DSP, such as PDN, we may expand the sales force or establish partner relationships with larger pharmaceutical companies that have well established sales forces in place that may effectively carry our products to a broader physician market both in the United States and abroad.

Competition

If NGX-4010 receives marketing approval, it will compete against, and may be used in combination with, well-established products currently used both on and off-label in the treatment of PHN and HIV-DSP. The most directly competitive currently marketed products in the United States are Lidoderm, an FDA-approved 5% lidocaine topical patch for the treatment of PHN marketed by Endo Pharmaceuticals, and Neurontin and Lyrica, oral anti-convulsants, marketed by Pfizer for use in the treatment of PHN. In addition to these branded drugs, the FDA has approved gabapentin for use in the treatment of PHN. Gabapentin is marketed by multiple generic manufacturers, and is the most widely-prescribed drug in the United States for treatment of neuropathic pain. Pfizer has also received FDA approval of Lyrica for the treatment of PDN and epilepsy indications. The FDA has approved Cymbalta from Eli Lilly for use in the treatment of PDN and depression.

By the time we are able to commercialize a product candidate, the competition and potential competition may be greater and more direct. There are many other companies working to develop new drugs and other therapies to treat pain in general and neuropathic pain in particular, including GlaxoSmithKline, Merck & Co., Novartis AG and Eli Lilly. Many of the compounds in development by such companies are already marketed for other indications, such as anti-depressants or anti-seizure drugs. We are aware of a small, privately-held specialty-pharmaceutical company that claims to be in early stage clinical evaluation of a high-concentration capsaicin patch for the treatment of PHN as well as a local anesthetic patch for the treatment of PHN, HIV-DSP and PDN. Other companies are focusing on new compounds, most of which are in preclinical or early phases of development.

We expect to compete on, among other things, the safety and efficacy of our products. Competing successfully will depend on our continued ability to attract and retain skilled and experienced personnel, to identify, secure the rights to and develop pharmaceutical products and compounds and to exploit these products and compounds commercially before others are able to develop competitive products. In addition, our ability to compete may be affected because insurers and other third-party payors in some cases seek to encourage the use of generic products making branded products less attractive, from a cost perspective, to buyers.

Patents and Proprietary Rights

Our success will depend in part on our ability to protect NGX-4010 and future products and product candidates by obtaining and maintaining a strong proprietary position both in the United States and in other countries. To develop and maintain our proprietary position, we will rely on patent protection, regulatory protection, trade secrets, know-how, continuing technological innovations and licensing opportunities.

The commercial success, if any, of NGX-4010 depends, in part, on a device patent granted in the United States and a device patent granted in Hong Kong and certain countries of Europe concerning the use of a dermal patch for high-concentration-capsaicin delivery for the treatment of neuropathic pain. We exclusively license these patents, as well as related pending patent applications in Canada and Europe, from the University of California. We do not currently own, and do not have rights under this license to any issued patents that cover NGX-4010 outside Europe, Hong Kong or the United States.

We license a method patent granted in the United States from the University of California concerning the use of high-concentration capsaicin delivery for the treatment of neuropathic pain. Two of the three inventors named in the method patent did not assign their patent rights to the University of California. As a result, our rights under this patent are non-exclusive. Anesiva, a company also focused on the development and commercialization of treatments for pain, has licensed the right to use the technology under the method patent

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from one of the non-assigning inventors. There can be no assurances that other entities will not similarly obtain rights to use the technology under the method patent. If other entities license the right to use this patent, we may face more products competitive with NGX-4010 and our business will suffer.

We currently license the rights from LTS to two pending U.S. patent applications, patents granted in certain countries of Europe and pending patent applications in Europe, Canada and other foreign countries, each filed by LTS. These patent applications seek to cover a microreservoir patch, which includes the type of patch used in NGX-4010. We license the rights to these patents and patent applications under a January 2007 exclusive commercial supply and license agreement with LTS, which is subject to certain purchase and other obligations.

We have also filed several non-provisional patent applications of our own in the United States relating to kits, methods and formulations to remove residual capsaicin left on the skin after a topical application of capsaicin. We have also filed one non-provisional patent application relating to methods and formulations using capsaicin to quickly decrease nerve fiber density.

The patent positions of pharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, we do not know whether any of the products or product candidates we acquire or license will result in the issuance of patents or, if any patents are issued, whether they will provide significant proprietary protection or will be circumvented or challenged and found to be unenforceable or invalid. In limited instances, patent applications in the United States and certain other jurisdictions are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention or in opposition proceedings in a foreign patent office, any of which could result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that a court of competent jurisdiction would hold the patents, if issued, valid. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using such technology. To the extent prudent, we intend to bring litigation against third parties that we believe are infringing our patents.

We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology or that we can meaningfully protect our trade secrets. However, we believe that the substantial costs and resources required to develop technological innovations will help us protect our products.

It is our policy to require our employees, consultants, contractors, or scientific and other advisors, to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. These agreements provide that all inventions related to our business that are conceived by the individual during the course of our relationship, shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

Government Regulation

United States

Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of pharmaceuticals. All of our product candidates will require regulatory approval by governmental agencies prior to commercialization. In particular, our products candidates

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are subject to rigorous preclinical testing and clinical trials and other premarketing approval requirements by the FDA and regulatory authorities in other countries. Various federal, state and foreign statutes and regulations govern or affect the manufacturing, safety, labeling, storage, record-keeping and marketing of pharmaceutical products. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources. When and if regulatory approval is obtained for any of our product candidates, the approval may be limited in scope, which may significantly limit the indicated uses for which our product candidates may be marketed, promoted and advertised. Further, approved pharmaceuticals and manufacturers are subject to ongoing review and discovery of previously unknown problems that may result in restrictions on the manufacture, sale or use of approved pharmaceuticals or in their withdrawal from the market.

Preclinical Studies

Before testing any compounds with potential therapeutic value in human subjects in the United States, stringent governmental requirements for preclinical data must be satisfied. Preclinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Preclinical testing results obtained from these studies, including tests in several animal species, are submitted to the FDA as part of an investigational new drug application, or IND, and are reviewed by the FDA prior to the commencement of human clinical trials. These preclinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial trials in human volunteers.

Clinical Trials

If a company wants to conduct clinical trials in the United States to test a new drug in humans, an IND must be prepared and submitted with the FDA. The IND becomes effective if not rejected or put on clinical hold by the FDA within 30 days of filing the application. In addition, an Institutional Review Board must review and approve the trial protocol and monitor the trial on an ongoing basis. The FDA may, at any time during the 30-day review period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. The IND application process can result in substantial delay and expense.

Clinical Trial Phases

Clinical trials typically are conducted in three sequential phases, Phases 1, 2 and 3, with Phase 4 trials potentially conducted after marketing approval. These phases may be compressed, may overlap or may be omitted in some circumstances.

• Phase 1 clinical trials. After an IND becomes effective, Phase 1 human clinical trials can begin. These trials evaluate a drug’s safety profile and the range of safe dosages that can be administered to healthy volunteers or patients, including the maximum tolerated dose that can be given to a trial subject. Phase 1 trials also determine how a drug is absorbed, distributed, metabolized and excreted by the body, and duration of its action.

• Phase 2 clinical trials. Phase 2 clinical trials are generally designed to establish the optimal dose, to evaluate the potential effectiveness of the drug in patients who have the target disease or condition and to further ascertain the safety of the drug at the dosage given in a larger patient population.

• Phase 3 clinical trials. In Phase 3 clinical trials, the drug is usually tested in a controlled, randomized trial comparing the investigational new drug to a control (which may be an approved form of therapy) in an expanded and well-defined patient population and at multiple clinical sites. The goal of these trials is to obtain definitive statistical evidence of safety and effectiveness of the investigational new drug regime as compared to control in defined patient populations with a given disease and stage of illness.

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New Drug Application

After completion of clinical trials, if there is substantial evidence that the drug is both safe and effective, an NDA is prepared and submitted for the FDA to review. The NDA must contain all of the essential information on the drug gathered to that date, including data from preclinical studies and clinical trials, and the content and format of an NDA must conform with all FDA regulations and guidelines. Accordingly, the preparation and submission of an NDA is an expensive and major undertaking for a company.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information from the sponsor rather than accepting an NDA for filing. In such an event, the NDA must be submitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. By law, the FDA has 180 days in which to review the NDA and respond to the applicant. The review process is often significantly extended by the FDA through requests for additional information and clarification. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved and the scope of any approval. The FDA is not bound by the recommendation, but gives great weight to it. If the FDA evaluations of both the NDA and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be satisfied in order to secure final approval. If the FDA’s evaluation of the NDA submission or manufacturing facility is not favorable, the FDA may refuse to approve the NDA or issue a not approvable letter.

Fast Track Designation and Priority Review

The FDA’s fast track program is intended to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for their condition. Under the fast track program, the sponsor of a new drug may request the FDA to designate the drug for a specific indication as a fast track product at any time during the clinical development of the product. The FDA must determine if the product qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

For a product candidate where fast track designation is obtained, the FDA may initiate review of sections of an NDA before the application is complete. This rolling review is available if the applicant provides a schedule for the submission of the remaining information and pays applicable user fees. However, the time period specified in the Prescription Drug User Fees Act, which governs the time period goals the FDA has committed to reviewing an NDA, does not begin until the complete application is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

In some cases, the FDA may designate a product for priority review. A product is eligible for priority review, or review within a targeted six-month time frame from the time an NDA is accepted for filing, if the product provides a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. A fast-track designated product generally meets the FDA’s criteria for priority review. We cannot guarantee any of our products will receive a priority review designation, or if a priority designation is received, that review or approval will be faster than conventional FDA procedures.

We were granted fast track designation of NGX-4010 for treatment of HIV-DSP in July 2004. When appropriate, we intend to seek additional fast track designations for our products. We cannot predict the ultimate impact, if any, of the fast track process on the timing or likelihood of FDA approval on any of our potential products.

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Orphan Drug Designation

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. If the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for up to seven years after receiving FDA approval.

We were granted orphan status for the use of capsaicin to treat erythromelalgia in October 2002, an indication which we are not currently pursuing, and for the use of capsaicin to treat painful HIV-associated neuropathy in May 2003. When appropriate, we intend to seek orphan status for additional indications and products. We cannot predict the ultimate impact, if any, of orphan status on the timing or likelihood of FDA approval on any of our potential products.

The Hatch-Waxman Act

Under the Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, newly approved drugs may benefit from a statutory period of non-patent marketing exclusivity in the United States. The Hatch-Waxman Act provides five years of marketing exclusivity to the first applicant to gain approval of an NDA under Section 505(b) of the Food, Drug and Cosmetic Act for a new chemical entity. A drug qualifies as a new chemical entity if the FDA has not previously approved any other drug containing the same active ingredient. Hatch-Waxman provides data exclusivity by prohibiting abbreviated new drug applications, or ANDAs, and 505(b)(2) applications, which are marketing applications where the applicant does not own or have a legal right of reference to all the data required for approval, to be submitted by another company for another version of such drug during the exclusive period. Protection under Hatch-Waxman will not prevent the filing or approval of a full NDA for the same active ingredient, although the applicant would be required to conduct its own adequate and well-controlled clinical trials to demonstrate safety and effectiveness. We believe NGX-4010, if approved by the FDA, may be entitled to five-year market exclusivity under the Hatch-Waxman Act, because we believe that it would be the first NDA approved by the FDA for synthetic capsaicin, the active ingredient in NGX-4010. The Hatch-Waxman Act also provides three years of marketing exclusivity for the approval of supplemental NDAs for new indications, dosages or strengths of an existing drug if new clinical investigations are essential to the approval. This three-year exclusivity covers only the changes associated with the supplemental NDA and does not prohibit the FDA from approving ANDAs for drugs containing the original active ingredient.

The Hatch-Waxman Act also permits a patent extension term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent extension cannot extend the remaining term of a patent beyond a total of 14 years. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and it must be applied for prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for patent term extension. We are considering applying for a patent term extension for one of our current patents associated with NGX-4010.

Other Regulatory Requirements

Any products we manufacture or distribute under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the

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products. Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with current Good Manufacturing Practices, or cGMP, regulations which impose procedural and documentation requirements upon us and each third party manufacturer we utilize.

The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers from communicating on the subject of off-label use.

The FDA’s policies may change and additional government regulations may be enacted which could prevent or delay regulatory approval of NGX-4010 and our future product candidates or approval of new indications for our future products. We cannot predict the likelihood, nature or extent of adverse governmental regulations that might arise from future legislative or administrative action, either in the United States or abroad.

European Union

Clinical Trials

In common with the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. The regulatory controls on clinical research in the European Union are now largely harmonized following the implementation of the Clinical Trials Directive 2001/20/EC, or CTD. Compliance with the national implementations of the CTD has been mandatory from May 1, 2004. However, variations in the member state regimes continue to exist, particularly in the small number of member states that have yet to implement the CTD fully.

All member states currently require regulatory and independent ethics committee approval of interventional clinical trials. European regulators and ethics committees also require the submission of adverse event reports during a study and a copy of the final study report.

Marketing Authorization

In the European Union, approval of new medicinal products can be obtained through the mutual recognition procedure or the centralized procedure. The mutual recognition procedure entails initial assessment by the national authorities of a single member state and subsequent review by national authorities in other member states based on the initial assessment. The centralized procedure entails submission of a single MAA to the EMEA leading to an approval that is valid in all European Union member states. It is required for certain medicinal products, such as biotechnology products and certain new chemical entities, and optional, or available at the EMEA’s discretion for other new chemical entities or innovative medicinal products with novel characteristics. We have been advised by the EMEA that NGX-4010 can be submitted for review under the centralized procedure, and we intend to submit our application under the centralized procedure in mid-2007.

Under the centralized procedure, an MAA is submitted to the EMEA. Two European Union member states are appointed to conduct an initial evaluation of each MAA. These countries each prepare an assessment report, which are then used as the basis of a scientific opinion of the Committee for Medicinal Products for Human Use, or CHMP. If this opinion is favorable, it is sent to the European Commission which drafts a decision. After consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that member state.

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The European Union expanded its membership by ten in May 2004 and two more countries joined on January 1, 2007. Several other European countries outside of the European Union, particularly those intending to accede to the European Union, accept European Union review and approval as a basis for their own national approval.

If the data from our clinical trials in PHN and HIV-DSP, which represent two models of neuropathic pain, are sufficient to support a grant of a marketing authorization in the European Union, such marketing authorization should not be limited to PHN and HIV-DSP but should instead apply to all models of peripheral neuropathic pain. We expect to file an MAA with the EMEA under the centralized procedure in mid-2007 for the use of NGX-4010 in the treatment of peripheral neuropathic pain.

Advertising

In the European Union, the promotion of prescription medicines is subject to intense regulation and control, including a prohibition on direct-to-consumer advertising. Some jurisdictions require that all promotional materials for prescription medicines be subjected to either prior internal or regulatory review and approval.

Data Exclusivity

For applications filed after October 30, 2005, European Union regulators offer eight years data exclusivity during which generic drug manufacturers cannot file abridged applications. This is followed by two years market exclusivity during which generic applications may be reviewed and approved but during which generic drug manufacturers cannot launch products. The manner in which these new exclusivity provisions will be applied in practice remains far from clear and there can be no assurance that NGX-4010 and our other current or future product candidates will qualify for such exclusivity.

Other Regulatory Requirements

If a marketing authorization is granted for our products in the European Union, the holder of the marketing authorization will be subject to ongoing regulatory obligations. A holder of a marketing authorization for our products is legally obliged to fulfill a number of obligations by virtue of its status as a marketing authorization holder, or MAH. While the associated legal responsibility and liability cannot be delegated, the MAH can delegate the performance of related tasks to third parties, provided that this delegation is appropriately documented. An MAH can therefore either ensure that it has adequate resources, policies and procedures to fulfill its responsibilities, or can delegate the performance of some or all of its obligations to others, such as distributors or marketing partners.

The obligations of an MAH include:

• Manufacturing and Batch Release. MAHs should guarantee that all manufacturing operations comply with relevant laws and regulations, applicable good manufacturing practices, with the product specifications and manufacturing conditions set out in the marketing authorization and that each batch of product is subject to appropriate release formalities.

• Pharmacovigilance. MAHs are obliged to monitor the safety of products post-approval and to submit to the regulators safety reports on an expedited and periodic basis. There is an obligation to notify regulators of any other information that may affect the risk benefit ratio for the product.

• Advertising and Promotion. MAHs remain responsible for all advertising and promotion of its products in the relevant jurisdiction, including promotional activities by other companies or individuals on their behalf. Some jurisdictions require that an MAH subject all promotional materials to either internal or regulatory prior review and approval.

• Medical Affairs/Scientific Service. MAHs are required to have a function responsible for disseminating scientific and medical information on its medicinal products, predominantly to healthcare professionals, but also to regulators and patients.

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• Legal Representation and Distributor Issues. MAHs are responsible for regulatory actions or inactions of their distributors and agents, including the failure of distributors to provide an MAH with safety data within a timeframe that allows the MAH to fulfill its reporting obligations.

• Preparation, Filing and Maintenance of the Application and Subsequent Marketing Authorization. MAHs have general obligations to maintain appropriate records, to comply with the marketing authorization’s terms and conditions, to submit renewal applications and to pay all appropriate fees to the authorities. There are also general reporting obligations, such as an obligation to inform regulators of any information that may lead to the modification of the marketing authorization dossier or product labeling, and of any action to suspend, revoke or withdraw an approval or to prohibit or suspend the marketing of a product.

We may hold marketing authorizations for our products in our own name, or appoint an affiliate or a collaboration partner to hold the marketing authorization on our behalf. Any failure by an MAH to comply with these obligations may result in regulatory action against the MAH and its approvals and ultimately threaten our ability to commercialize our products.

Approvals Outside of the United States and the European Union

We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products. Whether or not FDA approval or European marketing authorization has been obtained, approval of a product by the comparable regulatory authorities of other foreign countries must still be obtained prior to manufacturing or marketing the product in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval or a European marketing authorization. We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country.

Third-Party Reimbursement and Pricing Controls

General. In the United States and elsewhere, patients’ access to pharmaceutical products depends in significant part on the coverage and reimbursement of a product or service by third party payors, such as government programs, private insurance plans and employers. Third party payors increasingly are challenging the prices charged for medical products and services. It will be time consuming and expensive for us to go through the process of seeking reimbursement from Medicare, Medicaid and private payors. We may be unable to achieve reimbursement from some payors because they may not consider our products to be “reasonable and necessary” or cost-effective. Furthermore, it is possible that even if payors are willing to reimburse for our products, the reimbursement levels may not be sufficient to allow us to sell our products on a competitive and profitable basis.

In many foreign markets, including the countries in the European Union, pricing of pharmaceutical products is subject to direct governmental control and to drug reimbursement programs with varying price control mechanisms. In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of such products to consumers. The approach taken varies from member state to member state. Some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products, as exemplified by the National Institute for Clinical Excellence in the United Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations to the government. In addition, in some countries cross-border imports from low-priced markets (parallel imports) exert a commercial pressure on pricing within a country.

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In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement means by which the government can negotiate lower drug prices for Medicare and Medicaid beneficiaries. While we cannot predict whether such legislative bills will become law, their enactment could have a material adverse effect on our business, financial condition and results of operations.

Medicare. Subject to obtaining required marketing approvals, we plan to market NGX-4010 for use in the treatment of PHN and HIV-DSP. We expect that in the United States a majority of the patients who are treated with NGX-4010 for these indications will be Medicare beneficiaries. The Centers for Medicare and Medicaid Services, or CMS, is the agency within the Department of Health and Human Services that administers both Medicare and Medicaid. Two aspects of Medicare reimbursement will be relevant to NGX-4010: the availability of reimbursement for physician services for administration of NGX-4010 and the availability of reimbursement for NGX-4010 itself.

CMS has asserted the authority of Medicare not to cover particular products or services if it determines that they are not “reasonable and necessary” for Medicare beneficiaries. CMS may create a national coverage determination, or NCD, for a product, which establishes on a nationwide basis the indications that will be covered and the frequency limits for administration of the product. However, for most new drugs that are eligible for payment, CMS does not create an NCD. We do not know whether we will seek or obtain an NCD for NGX-4010 or our other potential products or whether any NCD obtained will contain favorable coverage terms. As mentioned above, if Medicare coverage for NGX-4010 is available, CMS may determine to reimburse through one of two avenues: Part B coverage for physician-administered drugs or Part D coverage for outpatient prescription drugs. Under Part B coverage, Medicare reimburses the purchaser of drugs that meet three statutory requirements:

• The product is reasonable and necessary;

• The product is not usually self-administered and as such is incident to a physician’s service in the office setting; and

• The administering physician bills Medicare directly for the product.

Currently, topical products are considered “usually self-administered;” therefore, coverage under Part B would require a specific determination that NGX-4010 differs from most topical products and should therefore be covered under Part B. There can be no guarantee that we will obtain such a determination. For reasons discussed below, failure to obtain such a determination could materially and adversely affect our revenue.

If there is not a national coverage decision, the local Medicare contractors that are responsible for administering the Part B program on a regional basis may have the discretion to decline coverage and reimbursement for the drug or to issue a local coverage decision, or LCD. These policies can include both coverage criteria for the drug and frequency limits for the administration of the drug. The local contractors in different areas of the country may determine that NGX-4010 should be treated like most topical patches and may deny coverage under Part B or, even if they allow coverage, may establish varying coverage criteria and frequency limits for NGX-4010. Furthermore, obtaining LCDs in the various regions can be a time-consuming and expensive process.

Medicare payment for physician services related to the administration of NGX-4010, if any, will most likely be determined according to a prospectively set payment rate, determined by a procedure code established by the American Medical Association. These codes, called Current Procedural Terminology, or CPT, describe the procedure performed and can be specific or more general in nature. We believe that although there are existing CPT codes that could be used, a specific code for NGX-4010 administrations would be preferable. We plan to apply for a specific CPT code. If, at launch, a specific CPT code is not available, local Medicare contractors will advise which existing CPT code should be used for services related to NGX-4010 administration.

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Under Medicare Part B, reimbursement for NGX-4010 is currently limited to 106% of the manufacturer’s average sales price (ASP) (as defined by statute and regulation). CMS has been considering other changes to Medicare reimbursement that could result in lower payments for physician-administered drugs, and Congress may also consider legislation that would mandate lower reimbursement levels. A reduction in reimbursement levels could materially and adversely affect our revenue.

CMS may determine that NGX-4010 does not qualify for Part B coverage and should instead be covered under the Part D outpatient prescription drug benefit. Because, unlike Part B, Part D reimburses only for the drug itself and does not provide reimbursement for the physician’s administration services (though a physician can bill for service under Part B and it is possible that CMS will provide such coverage for administration of NGX-4010, even if the product is covered under Part D), physicians may not consider NGX-4010 as attractive a treatment option if it is reimbursed under Part D instead of Part B. In addition, under Part D, there are multiple types of plans and numerous plan sponsors, each with its own formulary and product access requirements. While CMS evaluates Part D plans’ proposed formularies for potentially discriminatory practices, the plans have considerable discretion in establishing formularies, establishing tiered co-pay structures and placing prior authorization and other restrictions on the utilization of specific products. Moreover, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. Revenue for NGX-4010 will be substantially affected by its formulary status on Part D plans and the rebates that Part D plan sponsors are able to negotiate.

Medicaid. Most State Medicaid programs have established preferred drug lists, or PDLs, and the process, criteria and timeframe for obtaining placement on the PDL varies from State to State. A federal law establishes minimum rebates that a manufacturer must pay for Medicaid utilization of a product, and many States have established supplemental rebate programs as a condition for including a drug product on a PDL. Submitting a PDL application to each State will be a time-consuming and expensive process, and it is not clear how many or which State programs will accept the applications. Review times for these applications can vary from weeks to 14 months or more.

Private Insurance Reimbursement. Commercial insurers usually offer two types of benefits: medical benefits and pharmacy benefits. In most private insurance plans, physician-administered drugs are provided under the medical benefit. If private insurers decide to cover NGX-4010, they will reimburse for the drug and its administration in a variety of ways, depending on the insurance plan’s revenue targets, employer and benefit manager input and the contract negotiated with their physicians. Like Medicare and Medicaid, commercial insurers have the authority to place coverage and utilization limits on physician-administered drugs. Many private insurers tend to adopt reimbursement methodologies for a product similar to those adopted by Medicare. Revenue for NGX-410 may be materially and adversely affected if private payors make unfavorable reimbursement decisions or delay making favorable reimbursement decisions.

Plan of Operation

Our plan of operation for the remainder of 2007 and the first half of 2008 is to:

• complete our Phase 3 clinical program in PHN and HIV-DSP and resume our clinical program in PDN;

• file for regulatory approval of NGX-4010 in Europe while seeking a partnership to assist in potential European commercialization of NGX-4010;

• continue our research and development activities on other product candidates and potential product candidates, including NGX-1998 and our opioid analgesic prodrug; and

• increase our pre-launch market activities for NGX-4010, including physician education programs and preparing for pricing and reimbursement evaluation by CMS.

We believe that the proceeds from this offering will satisfy our cash requirements for at least the next 12 months, including our clinical studies commitments in connection with the development of NGX-4010, product licensing payments and costs related to the establishment and expansion of our sales and marketing organization.

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Employees

As of December 31, 2006, we had 37 employees, of which 28 work in research and development, 8 work in general and administrative and 1 works in sales and marketing. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement.

Facilities

We lease approximately 10,956 square feet of space in our headquarters in San Carlos, California under a lease that expires in July 2007. We have no laboratory, research or manufacturing facilities. We are currently evaluating office space for when our lease expires and seek to identify office space which can accommodate the anticipated expansion of our operations.

Legal Proceedings

We are not engaged in any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

Our executive officers and directors, and their ages and positions as of January 31, 2007 are as follows:

Name	Age	Position
Anthony A. DiTonno	58	President, Chief Executive Officer and Director
Stephen F. Ghiglieri	45	Chief Financial Officer
Keith R. Bley, Ph.D.	47	Senior Vice President, Nonclinical Research and Development
Karen J. Harder	50	Senior Vice President, Regulatory Affairs and Technical Operations
Jeffrey K. Tobias, M.D.	52	Chief Medical Officer
Jean-Jacques Bienaimé(1) (2)	53	Director
Neil M. Kurtz, M.D.(1)(3)	56	Director
Alix Marduel(2) (3)	49	Director
Robert T. Nelsen(2) (3)	43	Director
Daniel K. Turner, III(1)	45	Director

⁽¹⁾ Member of our Audit Committee

⁽²⁾ Member of our Compensation Committee

⁽³⁾ Member of our Nominating and Governance Committee

Anthony A. DiTonno joined us as Chief Operating Officer in April 2003, and has served as our President and Chief Executive Officer since August 2003. From October 2000 to November 2002, Mr. DiTonno served as Executive Vice President of Sales and Marketing for Enteric Medical Technologies, Inc., a medical device company. From 1997 to 2000, Mr. DiTonno served as Chief Executive Officer of LifeSleep Systems, Inc., a medical device company. From 1989 to 1997, Mr. DiTonno held various positions at Oclassen Pharmaceuticals, Inc., a pharmaceutical company, most recently as its Vice President and General Manager. Mr. DiTonno received a B.S. in business administration from St. Joseph’s University and an M.B.A. from Drexel University.

Stephen F. Ghiglieri has served as our Chief Financial Officer since October 2003. From December 2002 to October 2003, Mr. Ghiglieri served as Chief Financial Officer of Hansen Medical, Inc., a medical device company. From March 2000 to April 2002, Mr. Ghiglieri served as Executive Vice President, Chief Financial Officer and Corporate Secretary of Avolent, Inc., a software company. From July 1999 to 2000, Mr. Ghiglieri served as Vice President, Finance, Chief Financial Officer and Corporate Secretary of Andromedia, Inc., a software company. From 1994 to 1999, Mr. Ghiglieri served as Vice President, Finance and Administration, Chief Financial Officer and Corporate Secretary of Oacis Healthcare Systems, Inc., a healthcare technology company. From 1992 to 1994, Mr. Ghiglieri served as Controller of Oclassen Pharmaceuticals, Inc., a pharmaceutical company. From 1984 to 1992, Mr. Ghiglieri served as an audit manager of PricewaterhouseCoopers, LLP. Mr. Ghiglieri received a B.A. in business administration from California State University, Hayward. Mr. Ghiglieri is also a Certified Public Accountant.

Keith R. Bley, Ph.D. has served as our Senior Vice President, Nonclinical Research and Development since August 2001 and prior to that served as our Vice President, Nonclinical Research and Development since June 2000. From 1991 to 2000, Dr. Bley held various positions at Roche Bioscience and Syntex (later acquired by Roche Bioscience), most recently as a Research Manager in the analgesia department. Dr. Bley received an M.A. in philosophy from Columbia University and a Ph.D. in cellular and molecular physiology from Yale University.

Karen J. Harder has served as our Senior Vice President, Regulatory Affairs and Technical Operations since January 2005 and prior to that served as our Vice President, Regulatory Affairs and Technical Operations since November 2000. From February 2000 to August 2000, Ms. Harder served as Vice President, Clinical and Regulatory Affairs of GanTech International, Inc., a biotechnology company. From August 1998 to December 2000, Ms. Harder served as Vice President of Cygnus, Inc., a medical device company. From January 1990 to August 1998, Ms. Harder served as Senior Director, Regulatory Affairs of Scios, Inc., a biopharmaceutical

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company. From December 1983 to January 1990, Ms. Harder served as a Research Associate of Genentech, Inc., a biotechnology company. Ms. Harder received a B.S. in medical technology from Rush Medical University and an M.A. in microbiology from the University of California, Berkeley.

Jeffrey K. Tobias, M.D. has served as our Chief Medical Officer since November 2005. From September 1996 to November 2005, Dr. Tobias served as principal of the Aquila Consulting Group, a professional consulting firm. From June 1995 to September 1996, Dr. Tobias served as Director, New Product Discovery of Alza Corporation, a drug delivery solutions company. Dr. Tobias received a B.S. in biology and an M.D. from the University of Illinois.

Jean-Jacques Bienaimé has served as a member of our board of directors since February 2004. Since May 2005, Mr. Bienaimé has served as Chief Executive Officer and director of BioMarin Pharmaceutical Inc., a publicly-held biopharmaceutical company. From November 2002 to April 2005, Mr. Bienaimé served as the Chairman, Chief Executive Officer and President of Genencor International, a biotechnology company acquired by Danisco A/S. From June 1998 to October 2002, Mr. Bienaimé was Chief Executive Officer and President of SangStat Medical, a biotechnology company. From October 1992 to May 1998, Mr. Bienaimé held various management positions, most recently as Senior Vice President of Corporate Marketing and Business Development, and Vice President and General Manager of the advanced therapeutic and oncology division of Rhône-Poulenc Rorer Pharmaceuticals (now The Sanofi-Aventis Group), a pharmaceutical company. Mr. Bienaimé received a B.S. in economics from the Ecole Supérieure de Commerce de Paris and an M.B.A. from the Wharton School at the University of Pennsylvania.

Neil M. Kurtz, M.D. has served as a member of our board of directors since January 2006. Since April 2002, Dr. Kurtz has served as President and Chief Executive Officer and director of TorreyPines Therapeutics, Inc., a biopharmaceutical company. From September 1999 to April 2002, Dr. Kurtz was President of Worldwide Clinical Trials, a healthcare solutions company. Dr. Kurtz received a B.A. in psychology from New York University and an M.D. from the Medical College of Wisconsin.

Alix Marduel, M.D. has served as a member of our board of directors since June 2000. Since May 1997, Dr. Marduel has been a managing director of Alta Partners, a venture capital firm. From September 1990 to April 1997, Dr. Marduel was a general partner at Sofinnova Ventures, a venture capital firm. Dr. Marduel also serves on the board of directors of Corcept Therapeutics Incorporated, a publicly-held pharmaceutical company. Dr. Marduel received an M.D. from the University of Paris.

Robert T. Nelsen has served as a member of our board of directors since July 2000. Since July 1994, Mr. Nelsen has served as a senior principal of venture capital funds associated with ARCH Venture Partners, a venture capital firm. From April 1987 to July 1994, Mr. Nelsen served as Senior Manager of ARCH Development Partners LLC, a venture capital fund. Mr. Nelsen is also a director of Adolor Corporation, a publicly-held pharmaceutical company. Mr. Nelsen received a B.S. in biology and economics from the University of Puget Sound and an M.B.A. from the University of Chicago.

Daniel K. Turner, III has served as a member of our board of directors since February 2004. Since February 1993, Mr. Turner has served as a managing member of Montreux Equity Partners, a venture capital firm. From 1990 to 1993, Mr. Turner was an investment manager at Berkeley International, a private equity firm. From 1986 to 1990, he served as Chief Financial Officer of Oclassen Pharmaceuticals, Inc., a pharmaceutical company. From 1982 to 1986, he served as a senior consultant of Price Waterhouse, a public accounting firm. Mr. Turner is also a director of Somaxon Pharmaceuticals, Inc., a publicly-held pharmaceutical company. Mr. Turner received a B.S. in business administration and accounting from California State University, Sacramento and attended the M.B.A. program at the Haas School of Business at the University of California, Berkeley. Mr. Turner is also a Certified Public Accountant.

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Medical and Scientific Advisory Board

The following individuals are members of our scientific advisory board:

Allan I. Basbaum, Ph.D. is a Professor and Chair of the Department of Anatomy at the University of California, San Francisco. Dr. Basbaum is a Fellow of the American Academy of Arts and Sciences and Editor-in-Chief of the journal Pain. Dr. Basbaum received a B.S. in psychology from McGill University and a Ph.D. in psychology and anatomy from the University of Pennsylvania.

Gary J. Bennett, Ph.D. is a Canada Senior Research Professor in the Faculty of Dentistry and Department of Anesthesia at McGill University and Director of Pain Research at Montreal General Hospital. From 1996 to 2001, Dr. Bennett was a Professor of Neurology and Director of Pain Research of MCP Hahnemann University. From 1991 to 1996, Dr. Bennett served as Chief of the Neuropathic Pain and Pain Measurement Section of Neurobiology and Anesthesiology Branch, National Institute of Dental Research, National Institutes of Health. Dr. Bennett received a B.A. in psychology from Rutgers University and a Ph.D. in experimental psychology from the Medical College of Virginia at Virginia Commonwealth University.

Robert H. Dworkin, Ph.D. is a Professor of Anesthesiology, Neurology, Oncology and Psychiatry at the University of Rochester Medical Center and Director of the Anesthesiology Clinical Research Center and Director of Psychological Services, Strong Pain Clinic. Dr. Dworkin serves as Chair of the International Conference on the Mechanisms and Treatment of Neuropathic Pain; Chair of the Steering Committee, Neuropathic Pain Institute; Vice-Chair of the Special Interest Group on Neuropathic Pain, International Association for the Study of Pain; and Co-Chair of Initiative on Methods, Measurement and Pain Assessment in Clinical Trials. Dr. Dworkin received a B.A. in psychology from the University of Pennsylvania and a Ph.D. in psychology from Harvard University.

David J. Julius, Ph.D. is a Professor and Vice-Chair in the Department of Cellular and Molecular Pharmacology at the University of California, San Francisco. Dr. Julius served as a postdoctoral fellow at the Columbia College of Physicians and Surgeons. Dr. Julius received a B.S. in life sciences from the Massachusetts Institute of Technology and a Ph.D. in biochemistry from the University of California, Berkeley.

Nathaniel P. Katz, M.D. is an Adjunct Assistant Professor of Anesthesia at Tufts University School of Medicine and a recent Chair of the Advisory Committee, Anesthesia, Critical Care and Addiction Products Division, United States Food and Drug Administration. Dr. Katz served as Chair of the National Initiative on Pain Control. Dr. Katz received an M.S. in biostatistics from Columbia University and an M.D. from the Medical College of Pennsylvania.

Composition of our Board of Directors

Our board of directors is currently composed of six members, five of whom are independent within the meaning of the independent director guidelines of the NASDAQ Stock Market LLC. Immediately prior to this offering, our board of directors will be divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the Annual Meeting of Stockholders to be held during the years 2007 for the Class I directors, 2008 for the Class II directors, and 2009 for the Class III directors.

• Our Class I directors will be Daniel K. Turner, III and Alix Marduel;

• Our Class II directors will be Robert Nelsen and Jean-Jacques Bienaimé; and

• Our Class III directors will be Neil Kurtz and Anthony DiTonno.

Pursuant to a second amended and restated voting agreement entered into in November 2005 by and among us and certain of our stockholders, investors affiliated with ARCH Venture Partners, of which Mr. Nelson is a

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senior principal; Alta Partners, of which Dr. Marduel is a Managing Director; Walden International; and Global Life Science Ventures, have the right to designate a representative to our board of directors. The second amended and restated voting agreement and all rights thereunder will automatically terminate upon completion of this offering, and members previously elected to our board of directors pursuant to the voting agreement will continue to serve as directors until their successors are duly elected by holders of our common stock.

Our amended and restated certificate of incorporation and bylaws provide that the number of our directors, which is currently six members, shall be fixed from time to time by a resolution of the majority of our board of directors. Each officer serves at the discretion of the board of directors and holds office until his successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control.

Committees of the Board of Directors

As of the closing of this offering, our board will have an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Our audit committee will:

• evaluate the independent auditors’ qualifications, independence and performance;

• determine the engagement of the independent auditors;

• approve the retention of the independent auditors to perform any proposed permissible non-audit services;

• monitor the rotation of partners of the independent auditors on the Company engagement team as required by law;

• review our financial statements and review our critical accounting policies and estimates; and

• review and discuss with management and the independent auditors the results of the annual audit and our quarterly financial statements.

The members of our audit committee will be Jean-Jacques Bienaimé, Neil Kurtz and Daniel K. Turner, III. Mr. Turner will be our audit committee chairman and financial expert under the rules of the Securities and Exchange Commission, or SEC, implementing Section 407 of the Sarbanes Oxley Act of 2002. We believe that the composition of our audit committee meets the requirements for independence under the current requirements of the NASDAQ Stock Market LLC and SEC rules and regulations. We believe that the functioning of our audit committee complies with the applicable requirements of the NASDAQ Stock Market LLC and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

Compensation Committee

Our compensation committee oversees our corporate compensation programs. The compensation committee will also:

• review and recommend policy relating to compensation and benefits of our officers and employees;

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• review and approve corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior officers;

• evaluate the performance of our officers in light of established goals and objectives;

• set compensation of our officers based on its evaluations;

• administer the issuance of stock options and other awards under our stock plans; and

• review and evaluate, at least annually, its own performance and that of its members, including compliance with the committee charter.

The members of our compensation committee will be Jean-Jacques Bienaimé, Alix Marduel and Robert Nelsen, each of whom our board of directors has determined is independent within the meaning of the independent director guidelines of the NASDAQ Stock Market LLC. We believe that the composition of our compensation committee meets the requirements for independence under, and the functioning of our compensation committee complies with, any applicable requirements of the NASDAQ Stock Market LLC and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

Nominating and Governance Committee

Upon the closing of this offering, we will establish a Nominating and Governance Committee to oversee and assist our board of directors in reviewing and recommending nominees for election as directors. The Nominating and Corporate Governance Committee will also:

• assess the performance of the board of directors;

• direct guidelines for the composition of our board of directors; and

• review and administer our corporate governance guidelines.

The members of our Nominating and Governance Committee will be Neil Kurtz, Alix Marduel and Robert Nelsen, each of whom is a non-employee member of our board of directors.

Our board of directors may from time to time establish other committees.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board or compensation committee.

Director Compensation

The following table sets forth a summary of the compensation we paid to our non-employee directors in 2006:

Name	Option Awards
Jean Jacques Bienaimé	50,000
Neil M. Kurtz	100,000
Alix Marduel	—
Robert T. Nelsen	—
Daniel K. Turner, III	—

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Upon consummation of our initial public offering, non-employee directors will receive a quarterly retainer of $6,250. Non-employee directors are also paid cash fees of $2,000 for each board meeting and $1,000 for each audit committee meeting attended in person and $1,000 for each board meeting and $500 for each audit committee and compensation committee meeting attended by telephone. The chairman of the audit committee will be paid an additional cash retainer of $2,500 quarterly. The chairman of the compensation committee will be paid an additional cash retainer of $1,250 quarterly.

In addition to the foregoing, and after consummation of our initial public offering, our 2007 Stock Plan also provides for the automatic grant of options to our non-employee directors as more fully discussed under “Employee Benefit Plans—2007 Stock Plan.”

Executive Compensation

Compensation Discussion and Analysis

Our executive compensation program is designed to attract individuals with the skills necessary for us to achieve our business objectives, to reward those individuals fairly over time, to retain those individuals who continue to perform at or above the levels that we expect and to closely align the compensation of those individuals with our performance on both a short term and long term basis. To that end, our executive officers’ compensation has two primary components: base compensation, or salary, and stock option awards. In addition, we have in the past and may in the future provide discretionary performance bonuses to either individual or all employees to recognize individual performance or the achievement of important business objectives. In addition, we provide our executive officers a variety of benefits that are available generally to all salaried employees.

General. We view the components of compensation as related but distinct. Although we review total compensation of our executive officers, we do not believe that significant compensation derived from one component of compensation should negate or reduce compensation from other components. We determine the appropriate level for each compensation component based in part, but not exclusively, on competitive benchmarking consistent with our recruiting and retention goals, our view of internal equity and consistency, our overall performance and other considerations we deem relevant. To this end, we purchase, or otherwise acquire, and review executive compensation surveys of companies in the life science and high technology industries in the San Francisco Bay Area and also rely on the experience and knowledge of the members of our compensation committee, board of directors and senior management when making executive officer hiring decisions. For annual compensation reviews we evaluate each executive’s performance, look to industry trends in compensation levels and generally seek to ensure that compensation is appropriate for an executive’s level of responsibility and for promotion of future performance. Except as described below, we have not adopted any formal or informal policies or guidelines for allocating compensation between long term and currently paid out compensation, between cash and non-cash compensation or among different forms of non-cash compensation. However, our philosophy is to make a greater percentage of an employee’s compensation performance-based and to keep cash compensation to a nominally competitive level while providing the opportunity to be well rewarded through equity if we perform well over time. We also believe that for life science companies, stock-based compensation is a significant motivator in attracting employees, and while base salary and the potential for cash bonuses must be at competitive levels, performance is most significantly impacted by appropriately relating the potential for creating shareholder value to an individual’s compensation potential through the use of stock options.

Our compensation committee’s current intent is to perform at least annually a strategic review of our executive officers’ overall compensation packages to determine whether they provide adequate incentives and motivation and whether they adequately compensate our executive officers relative to comparable officers in other companies with which we compete for executives. To date, our compensation committee has conducted a detailed analysis of the cash and equity compensation of our chief executive officer, and established general budgetary guidelines for aggregate annual employee cash compensation that our chief executive officer has allocated among individual executives and employees on a case by case basis in his discretion. For compensation

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decisions regarding the grant of equity compensation, including vesting schedules and in some cases milestones providing for accelerated vesting if such milestones are achieved, relating to employees other than to our chief executive officer, the compensation committee and the board of directors typically consider recommendations from the chief executive officer and/or other members of management. To date, compensation committee meetings typically have included, for all or a portion of each meeting, not only the committee members but also our chief executive officer and our chief financial officer. Upon completion of this offering, we intend our compensation committee to have a more direct role in setting compensation levels for our executive officers among all compensation components, and to have the authority to grant awards under the 2007 Stock Plan that will be effective upon completion of this offering.

We account for equity compensation paid to our employees under SFAS No. 123R, which requires us to estimate and record an expense over the service period of the award. Our cash compensation, including cash bonuses, is recorded as an expense at the time the obligation is accrued. We currently intend that all cash compensation paid will be tax deductible for us. However, with respect to equity compensation awards, while any gain recognized by employees on exercising of nonqualified options granted at fair market value should be deductible, to the extent that an option constitutes an incentive stock option, gain recognized by the optionee will not be deductible unless the optionee disposes of the shares before the end of the holding period required under the tax code. In addition, if we grant restricted stock or restricted stock awards that are not subject to performance vesting they may not be fully deductible by us at the time the award is otherwise taxable to employees.

Base compensation. We fix executive officer base compensation at a level that we believe enables us to hire and retain individuals in a competitive environment and reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We also take into account the base salaries that are payable by companies with which we believe we generally compete for executives. The salaries of Messrs. DiTonno and Ghiglieri, Dr. Bley and Ms. Harder were increased by approximately 0.0%, 5.0%, 4.0% and 3.2%, respectively, in 2006, and by approximately         %,         %,         % and         % for 2007, respectively. Dr. Tobias was hired by us in 2005 and, therefore, did not receive a salary increase in 2006, but received a         % increase for 2007. These increases were part of our normal annual salary review process and reflect our review of the compensation levels of similar positions at comparable companies.

Cash bonuses. We have periodically utilized cash bonuses to reward performance achievements, but do not have a policy of having established annual target bonuses. For example, in 2005, we provided all employees with a 5% bonus opportunity for the six months ended September 30, 2005 and another 5% bonus opportunity for the six months ended March 31, 2006. Such bonuses were based upon a recommendation by the compensation committee to the board of directors, and were based on achievement of specific operational milestones regarding clinical progress of our product candidate NGX-4010 and regarding research and development efforts to broaden our clinical pipeline. In 2006, we paid performance bonuses for all employees generally in the range of $5,000 for members of executive management, and $2,500 for other employees, with higher bonuses awarded to certain members of executive management in connection with the completion of our C116 clinical trial for NGX-4010. Bonuses have generally been reviewed and approved by both our compensation committee and board of directors, each of which have worked in concert to determine the performance and operational criteria necessary for award of such bonuses. The bonus for 2006 for our chief executive officer was based entirely on our performance, consisting of progress made primarily in the clinical development program for our lead product candidate, NGX-4010. The performance objectives for other executive officers generally included both operational targets, as well as individual performance objectives determined by our chief executive officer. Those performance targets typically include progress in our clinical development programs for our lead product candidate but may also include new product development and general business performance targets. The compensation committee and board of directors approved these targets because they believed that progress in these key activities will have the most significant impact on stockholder value creation. We do not have a formal policy regarding adjustment or recovery of awards or payments if the relevant performance measures upon which they are based are restated or otherwise adjusted in a manner that would reduce the size of the award or payment.

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For 2006, Messrs. DiTonno and Ghiglieri, Drs. Bley and Tobias and Ms. Harder each received an aggregate bonus of $27,500, $11,300, $11,450, $24,763 and $10,850 respectively, which represented approximately 9.2%, 4.5%, 4.4%, 8.7% and 4.9% of their base salaries, respectively.

In 2007, the compensation committee and the board of directors approved the forgiveness of indebtedness due from Messrs. DiTonno and Ghiglieri, Dr. Bley and Ms. Harder to us, evidenced by promissory notes, in the principal amounts of $100,000, $15,000, $55,000 and $19,800, respectively. Forgiveness of accrued interest to date under such notes was also approved in the amounts of $23,347, $2,626, $15,186 and $5,844, respectively. These amounts will be treated as compensation expense in 2007 and will be taxable to the executives as compensation in 2007. The compensation committee and board of directors based their decision to forgive such amounts on the substantial roles that these members of executive management played in our operational success to date.

Stock options and equity awards. We utilize stock options to ensure that our executive officers have a continuing stake in our long-term success. Because our executive officers are awarded stock options with an exercise price equal to the fair market value of our common stock on the date of grant, the determination of which is discussed below, these options will have value to our executive officers only if the market price of our common stock increases after the date of grant. Typically, our stock option grants to new employees vest at the rate of 25% after the first year of service with the remainder vesting ratably over the subsequent 36 months. For non-new hire stock option grants, vesting typically occurs ratably over 48 months from the date of grant. Certain of our stock option grants, particularly those for our most recent executive management hires and annual performance grants for executive management, vest upon achievement of certain milestones. These milestones provide for acceleration of vesting of portions of the grant based on achievement of specific milestones, including clinical progress of our product candidate NGX-4010 and research and development efforts to broaden our clinical pipeline. In the absence of milestone achievement, these grants will vest in full six years from the date of grant if the executive remains a service provider during such time. Certain of the stock options that we have granted under our 2000 Stock Incentive Plan may be exercised by the recipient at any time, however, any shares purchased are subject to a lapsing right of repurchase in our favor. This repurchase right lapses on the same schedule as the vesting of the option. Authority to make stock option grants to executive officers has historically rested with our board of directors, and we expect our board of directors will delegate that authority to our compensation committee in the future. In determining the size of stock option grants to executive officers, our board of directors considers our performance against the strategic plan, individual performance against the individual’s objectives, comparative share ownership data from compensation surveys or the experience of our board members with regard to other life science companies in our geographic area at a similar stage of development, the extent to which shares subject to previously granted options are vested and the recommendations of our chief executive officer and other members of management.

In 2005, we hired an independent valuation firm to determine the fair market value of our common stock as of December 31, 2005 and November 30, 2006. Prior to the engagement of an outside valuation firm, our board of directors determined the value of our common stock based on internal reports and other relevant factors. We do not have any program, plan or obligation that requires us to grant equity compensation on specified dates and, because we have not been a public company, we have not made equity grants in connection with the release or withholding of material non-public information. However, we intend to implement policies to ensure that equity awards are granted at fair market value on the date that the grant action occurs.

During 2006, we granted options to Messrs. DiTonno and Ghiglieri, Dr. Bley and Ms. Harder to purchase 329,125, 122,500, 71,500 and 91,000 shares of our common stock, respectively. Dr. Tobias received a grant in 2006 of 1,300,000 shares of our common stock in connection with the commencement of his employment with us. Each of the grants had an exercise price of $0.25 per share. These grants were made by our board of directors as part of our process of reviewing equity positions of our employees, and the board determined that, in light of the individuals’ performance, equity ownership and level of vesting, it was appropriate to provide additional incentive for each of these personnel. To date, all of our options have been granted under our 2000 Stock Incentive Plan, which is described below under “Management—Employee Benefit Plans.” Prior to the

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completion of this offering, we plan to adopt a new 2007 Stock Plan and 2007 Employee Stock Purchase Plan, both of which are described below under “Management—Employee Benefit Plans.” The 2007 Stock Plan will replace our existing 2000 Stock Incentive Plan immediately following this offering and will afford greater flexibility in making a wide variety of equity awards, including stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares, to executive officers and our other employees. The 2007 Employee Stock Purchase Plan will enable eligible employees to periodically purchase shares of our common stock at a discount. Participation in the 2007 Employee Stock Purchase Plan will be available to all executive officers following this offering on the same basis as our other employees. Other than the equity plans described above, we do not have any equity security ownership guidelines or requirements for our executive officers.

Severance and change of control payments. All of our executive officers are entitled to severance payments equal to from 6 to 12 months of base salary and full acceleration of stock option and restricted stock vesting if the executive officer’s employment is terminated without cause by the acquiring company, or, for certain reasons, by the executive officer, within 18 months following a change of control. In addition, and upon a change of control, all of our executive officers are entitled to receive a bonus determined under our 2006 Acquisition Bonus Plan, and receive partial acceleration of the vesting of their stock options and restricted stock. We believe these severance and change of control arrangements mitigate some of the risk that exists for executives working in a smaller company. These arrangements are intended to attract and retain qualified executives that could have other job alternatives that may appear to them to be less risky absent these arrangements. Because of the significant acquisition activity in the life science industry, there is a possibility that we could be acquired in the future. Accordingly, we believe that the larger severance packages resulting from terminations related to change of control transactions, and bonus and vesting packages relating to the change of control itself, will provide an incentive for these executives to continue to help successfully execute such a transaction from its early stages until closing. For a description and quantification of these severance and change of control benefits, please see the section entitled “Management—Potential Payments Upon Termination or Change of Control.”

Other benefits. Executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability, and accidental death and dismemberment insurance and our 401(k) plan, in each case on the same basis as other employees, subject to applicable law. We also provide vacation and other paid holidays to all employees, including our executive officers, which are comparable to those provided at peer companies.

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Executive Compensation Tables

The following table provides information regarding the compensation of our principal executive officer, principal financial officer and each of the next three most highly compensated executive officers during our fiscal year ended December 31, 2006. We refer to these executive officers as our named executive officers.

Summary Compensation Table

Name and Principal Position	Salary(1)		Bonus		Option Grants(2)		Non-Equity Incentive Plan Compensation(3)		All Other Compensation(4)		Total
Anthony A. DiTonno President, Chief Executive Officer and Director	$	300,000	$	20,000	$	101,403	$	7,500	$	180	$	429,083
Stephen F. Ghiglieri, Chief Financial Officer		252,000		5,000		37,742		6,300		180		301,222
Keith R. Bley, Ph.D., Senior Vice President, Nonclinical Research and Development		258,000		5,000		22,029		6,450		180		291,659
Karen J. Harder, Vice President, Regulatory Affairs and Technical Operations		220,800		5,000		28,037		5,850		180		259,867
Jeffrey Tobias, M.D., Chief Medical Officer		285,000		20,000		295,490		4,763		180		605,433

⁽¹⁾ The amounts in this column include payments in respect of accrued vacation, holidays, and sick days.

⁽²⁾ The amounts in this column represent the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year computed in accordance with SFAS No. 123R.

⁽³⁾ The amounts in this column represent payments pursuant to our incentive bonus plan based upon our board of directors’ determination of milestone attainment in 2006.

⁽⁴⁾ The amounts in this column include a life insurance premium payment of $180.

Grants of Plan-Based Awards in Last Fiscal Year

The following table provides information regarding grants of stock options to each of our named executive officers during the fiscal year ended December 31, 2006. All options were granted at the fair market value of our common stock, as determined by our board of directors on the date of grant. These options were granted under our 2000 Stock Incentive Plan.

Name	Grant Date	Number of Securities Underlying Options		Exercise Price of Option Awards
Anthony A. DiTonno	3/15/2006	329,125	(1)	$	0.25
Stephen F. Ghiglieri	3/15/2006	122,500	(1)		0.25
Keith R. Bley, Ph.D.	3/15/2006	71,500	(1)		0.25
Karen J. Harder	3/15/2006	91,000	(1)		0.25
Jeffrey Tobias, M.D.	1/27/2006	700,000	(2)		0.25
	1/27/2006	600,000	(1)		0.25

⁽¹⁾ Vests in full on the sixth anniversary of the grant date. The vesting will accelerate upon the attainment by the Company of certain milestones. Options expire 10 years from the date of grant.

⁽²⁾ Vests as to 1/4 of the shares underlying the option on the first anniversary of the grant date and as to 1/48 of the underlying shares monthly thereafter. Option expires 10 years from the date of grant.

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Employment Agreements

We have entered into executive employment agreements with each of Anthony DiTonno, Stephen Ghiglieri, Keith Bley, Karen Harder, Jeffrey Tobias and Michael Markels.

The agreements provide for these officers to remain our at-will employees and to receive salary, bonus and benefits as determined at the discretion of our Board of Directors. Our agreements with these officers provide that they will receive certain benefits if within the eighteen month period following a change of control of the company they resign for good reason or are terminated by us or our successor other than for cause.

Upon a qualifying resignation or termination, Mr. DiTonno, will become entitled to receive: continuing severance payments at a rate equal to his base salary for a period of twelve months; a lump sum payment equal to his full target annual bonus; acceleration in full of vesting of options for our common stock held by him; the lapse in full of our right of repurchase with respect to restricted shares of our common stock held by him; and continued employee benefits until the earlier of twelve months following the date of termination or resignation or the date he obtain employment with generally similar employee benefits.

Upon a qualifying resignation or termination, Messrs. Ghiglieri and Markels and Dr. Tobias will become entitled to receive continuing severance payments at a rate equal to their base salaries for a period of nine months; lump sum payments equal to their full target annual bonuses; acceleration in full of vesting of options for our common stock held by them; the lapse in full of our right of repurchase with respect to restricted shares of our common stock held by them; and continued employee benefits until the earlier of nine months following the date of termination or resignation or the date they obtain employment with generally similar employee benefits.

Upon a qualifying resignation or termination, Dr. Bley and Ms. Harder will become entitled to receive continuing severance payments at a rate equal to their base salaries for a period of six months; lump sum payments equal to their full target annual bonus; acceleration in full of vesting of options for our common stock held by them; the lapse in full of the our right of repurchase with respect to restricted shares of the our common stock held by them; and continued employee benefits until the earlier of six months following the date of termination or resignation or the date they obtain employment with generally similar employee benefits.

For a complete description and quantification of benefits payable to our named officers on and following termination of employment under plans and programs currently in effect, see “—Potential Payments Upon Termination Or Change In Control.”

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Outstanding Equity Awards at Fiscal Year-End

The following table presents certain information concerning the outstanding option awards held as of December 31, 2006 by each named executive officer.

	Number of Securities Underlying Unexercised Options				Option Exercise Price		Option Expiration Date
Name	Exercisable		Unexercisable
Anthony A. DiTonno	—		1,300,000	(1)	$	0.18	4/28/2014
	178,899		230,012	(2)		0.13	3/15/2015
	204,456		204,455	(1)		0.13	3/15/2015
	329,125	(1)(4)	—			0.25	3/15/2016
Stephen F. Ghiglieri	300,000	(4)	—			0.12	11/7/2013
	182,666		91,334	(2)		0.18	4/28/2014
	—		274,000	(1)		0.18	4/28/2014
	66,508		85,511	(2)		0.13	3/15/2015
	76,009		76,009	(1)		0.13	3/15/2015
	122,500	(1)(4)	—			0.25	3/15/2016
Keith R. Bley, Ph.D.	50,878		25,439	(2)		0.18	4/28/2014
	—		200,000	(1)		0.18	4/28/2014
	44,265		56,912	(2)		0.13	3/15/2015
	50,588		50,588	(1)		0.13	3/15/2015
	71,500	(1)(4)	—			0.25	3/15/2016
Karen J. Harder	101,688		50,844	(2)		0.18	4/28/2014
	—		200,000	(1)		0.18	4/28/2014
	60,546		77,845	(2)		0.13	3/15/2015
	69,196		69,195	(1)		0.13	3/15/2015
	91,000	(1)(4)	—			0.25	3/15/2016
Jeffrey Tobias, M.D.	189,583		510,417	(3)		0.25	11/30/2015
	120,000		480,000	(1)		0.25	11/30/2015

⁽¹⁾ Vests in full on the sixth anniversary of the grant date. The vesting will accelerate upon the attainment by the Company of certain milestones.

⁽²⁾ Vests as to 1/48 of the shares underlying the option monthly following the grant date.

⁽³⁾ Vests as to 1/4 of the shares underlying the option on the first anniversary of the grant date and as to 1/48 of the underlying shares monthly thereafter.

⁽⁴⁾ Options allow for early exercise.

Option Exercises and Stock Vested in Last Fiscal Year

The following table presents certain information concerning the exercise of options and vesting of stock awards by each of our named executive officers during the fiscal year ended December 31, 2006, including the value of gains on exercise and the value of the stock awards.

	Option Awards			Stock Awards
Name	Number of Shares Acquired on Exercise	Value Realized on Exercise		Number of Shares Acquired on Vesting	Value Realized on Vesting(1)
Anthony A. DiTonno	—	$	—	312,500	$
Stephen F. Ghiglieri	—		—	25,000
Keith R. Bley, Ph.D.	—		—	8,583
Karen J. Harder	—		—	4,000
Jeffrey Tobias, M.D.	—		—	—

⁽¹⁾ The aggregate dollar amount realized upon the vesting of a stock award represents the aggregate market price of the shares of our common stock underlying the stock award on the vesting date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vested on the vesting date.

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Potential Payments Upon Termination or Change of Control

The following summaries set forth potential payments payable to our executive officers upon termination of employment or a change in control of us under their current executive employment agreements and our other compensation programs.

For the purpose of the executive employment agreements, “cause” means an officer:

• fails to perform his or her duties with us (other than due to his or her incapacity as a result of physical or mental illness for a period not to exceed 90 days);

• engages in conduct which is materially injurious to us, our business or reputation, or which constitutes gross misconduct;

• materially breaches the terms of any agreement between him or her and us;

• materially breaches or takes any action in material contravention of our policies adopted by our Board of Directors or any committee thereof;

• is convicted for or admits or pleads no contest with respect to a felony or commits an act of fraud against us; or

• misappropriates material property belonging to us.

For the purpose of the executive employment agreements, “good reason” means:

• a material reduction in his or her salary or benefits other than as a result of a reduction in compensation affecting our or our successor entity’s employees generally;

• a material diminution of his or her duties or responsibilities relative to his or her duties and responsibilities in effect immediately prior to a change in control;

• relocation of his or her place of employment to a location more than 35 miles from our office location at the time of a change in control; or

• failure of a successor entity in any change in control to assume and perform under his or her executive employment agreement.

For the purpose of the executive employment agreements, “disability” means an officer’s inability to perform his or her duties to us as the result of his or her incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by us or our insurers and reasonably acceptable to the officer or the officer’s legal representative.

2006 Acquisition Bonus Plan

Each of Messrs. DiTonno and Ghiglieri, Drs. Bley and Tobias and Ms. Harder is eligible to receive a cash amount in connection with a change in control of us pursuant to our 2006 Acquisition Bonus Plan determined by multiplying the number of shares of common stock and options to purchase common stock (without regard to vesting limitations) held by him or her times a per share amount determined through a formula based upon the net proceeds of the change in control.

Anthony A. DiTonno

Mr. DiTonno’s employment with us is at-will. Either of us may terminate the executive employment agreement between us at any time. Upon a change in control of us, Mr. DiTonno will receive acceleration of vesting of each of DiTonno’s restricted stock grants and outstanding options to purchase our common stock by a number of months equal to the number of months of vesting remaining for such option as of the change in control, minus 18 months; provided, that if such stock options or restricted stock grants have fewer than 18

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months of vesting remaining, then such options or restricted stock grants will not be accelerated upon a change in control. Mr. DiTonno may be eligible to receive certain severance payments and additional acceleration of vesting of stock options and restricted stock grants held by Mr. DiTonno if Mr. DiTonno terminates his employment for good reason or we terminate Mr. DiTonno without cause within the 18-month period following a change in control.

Termination by us or termination by Mr. DiTonno prior to a change in control. If Mr. DiTonno is terminated for any reason, or if Mr. DiTonno terminates his employment for any reason, in each case prior to a change in control of us, Mr. DiTonno will not receive any severance.

Termination by us (other than for cause) or termination by Mr. DiTonno for good reason following a change in control. If Mr. DiTonno is terminated for any reason other than for cause, or if Mr. DiTonno terminates his employment for good reason, in each case within the 18-month period following a change in control of us, in addition to the severance benefits set forth above that Mr. DiTonno is entitled to receive upon a termination prior to a change in control, Mr. DiTonno will be entitled to receive 12 months of severance pay (less applicable withholding taxes) payable over 12 months at a rate equal to his base salary and a lump-sum payment equal to 100% of Mr. DiTonno’s target annual bonus as of the date of such termination. In addition, all restrictions, limitations and conditions applicable to outstanding stock options and restricted stock grants will lapse, performance goals will be deemed to be fully achieved and the awards will become fully vested (and in the case of options, exercisable) upon termination of Mr. DiTonno’s employment by us without cause or by Mr. DiTonno for good reason during the 18-month period following the change in control. Following such terminations, Mr. DiTonno will also receive coverage under our benefit plans for a period equal to the shorter of 12 months or such time as Mr. DiTonno secures employment with benefits generally similar to those provided in our benefit plans.

Termination by us for cause or by Mr. DiTonno other than for good reason following a change in control. Upon termination for any other reason, Mr. DiTonno is not entitled to any payment or benefit other than severance and any other benefits only as are then established under our written severance and benefits plans.

Termination for death or disability. If we terminate Mr. DiTonno’s employment as a result of Mr. DiTonno’s disability or if Mr. DiTonno’s employment terminates upon Mr. DiTonno’s death, Mr. DiTonno is not entitled to any payment or benefit other than severance amounts paid prior to the date of such termination and severance and any other benefits only as are then established under our written severance and benefits plans.

Assuming Mr. DiTonno’s employment was terminated under each of these circumstances on December 31, 2006, such payments and benefits have an estimated value of:

	Cash Severance		Bonus		Value of Accelerated Equity Awards(2)
Prior to a change in control		—		—	—
Upon a change in control(1)		—
Without cause or for good reason following a change in control	$	300,000	$	20,000
Death		—		—	—
Disability		—		—	—
Other		—		—	—

⁽¹⁾

⁽²⁾ The aggregate dollar amount realized upon the acceleration of vesting of an equity award represents the aggregate market price of the shares of our common stock underlying the equity award on the acceleration date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vesting on the acceleration date.

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Stephen F. Ghiglieri

Mr. Ghiglieri’s employment with us is at-will. Either of us may terminate the executive employment agreement between us at any time. Upon a change in control of us, Mr. Ghiglieri will receive acceleration of vesting of each of Mr. Ghiglieri’s restricted stock grants and outstanding options to purchase our common stock by a number of months equal to the number of months of vesting remaining for such option as of the change in control, minus 18 months; provided, that if such stock options or restricted stock grants have fewer than 18 months of vesting remaining, then such options or restricted stock grants will not be accelerated upon a change in control. Mr. Ghiglieri may be eligible to receive certain severance payments and additional acceleration of vesting of stock options and restricted stock grants held by Mr. Ghiglieri if Mr. Ghiglieri terminates his employment for good reason or we terminate Mr. Ghiglieri without cause within the 18-month period following a change in control.

Termination by us or termination by Mr. Ghiglieri prior to a change in control. If Mr. Ghiglieri is terminated for any reason, or if Mr. Ghiglieri terminates his employment for any reason, in each case prior to a change in control of us, Mr. Ghiglieri will not receive any severance.

Termination by us (other than for cause) or termination by Mr. Ghiglieri for good reason following a change in control. If Mr. Ghiglieri is terminated for any reason other than cause, or if Mr. Ghiglieri terminates his employment for good reason, in each case within the 18-month period following a change in control of us, in addition to the severance benefits set forth above that Mr. Ghiglieri is entitled to receive upon a termination prior to a change in control, Mr. Ghiglieri will be entitled to receive nine months of severance pay (less applicable withholding taxes) payable over nine months at a rate equal to his base salary and a lump-sum payment equal to 100% of Mr. Ghiglieri’s target annual bonus as of the date of such termination. In addition, all restrictions, limitations and conditions applicable to outstanding stock options and restricted stock grants will lapse, performance goals will be deemed to be fully achieved and the awards will become fully vested (and in the case of options, exercisable) upon termination of Mr. Ghiglieri’s employment by us without cause or by Mr. Ghiglieri for good reason during the 18-month period following the change in control. Following such terminations, Mr. Ghiglieri will also receive coverage under our benefit plans for a period equal to the shorter of 12 months or such time as Mr. Ghiglieri secures employment with benefits generally similar to those provided in our benefit plans.

Termination by us for cause or by Mr. Ghiglieri other than for good reason following a change in control Upon termination for any other reason, Mr. Ghiglieri is not entitled to any payment or benefit other than severance and any other benefits only as are then established under our written severance and benefits plans.

Termination for death or disability. If we terminate Mr. Ghiglieri’s employment as a result of Mr. Ghiglieri’s disability or if Mr. Ghiglieri’s employment terminates upon Mr. Ghiglieri’s death, Mr. Ghiglieri is not entitled to any payment or benefit other than severance amounts paid prior to the date of such termination and severance and any other benefits only as are then established under our written severance and benefits plans.

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Assuming Mr. Ghiglieri’s employment was terminated under each of these circumstances on December 31, 2006, such payments and benefits have an estimated value of:

	Cash Severance		Bonus		Value of Accelerated Equity Awards(2)
Prior to a change in control		—		—	—
Upon a change in control(1)		—
Without cause or for good reason following a change in control	$	189,000	$	5,000
Death		—		—	—
Disability		—		—	—
Other		—		—	—

⁽¹⁾

⁽²⁾ The aggregate dollar amount realized upon the acceleration of vesting of an equity award represents the aggregate market price of the shares of our common stock underlying the equity award on the acceleration date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vesting on the acceleration date.

Keith R. Bley, Ph.D.

Dr. Bley’s employment with us is at-will. Either of us may terminate the executive employment agreement between us at any time. Upon a change in control of us, Dr. Bley will receive acceleration of vesting of each of Dr. Bley’s restricted stock grants and outstanding options to purchase our common stock by a number of months equal to the number of months of vesting remaining for such option as of the change in control, minus 18 months; provided, that if such stock options or restricted stock grants have fewer than 18 months of vesting remaining, then such options or restricted stock grants will not be accelerated upon a change in control. Dr. Bley may be eligible to receive certain severance payments and additional acceleration of vesting of stock options and restricted stock grants held by Dr. Bley if Dr. Bley terminates his employment for good reason or we terminate Dr. Bley without cause within the 18-month period following a change in control.

Termination by us or termination by Dr. Bley prior to a change in control. If Dr. Bley is terminated for any reason, or if Dr. Bley terminates his employment for any reason, in each case prior to a change in control of us, Dr. Bley will receive no severance.

Termination by us (other than for cause) or termination by Dr. Bley for good reason following a change in control. If Dr. Bley is terminated for any reason other than cause, or if Dr. Bley terminates his employment for good reason, in each case within the 18-month period following a change in control of us, in addition to the severance benefits set forth above that Dr. Bley is entitled to receive upon a termination prior to a change in control, Dr. Bley will be entitled to receive six months of severance pay (less applicable withholding taxes) payable over six months at a rate equal to his base salary and a lump-sum payment equal to 100% of Dr. Bley’s target annual bonus as of the date of such termination. In addition, all restrictions, limitations and conditions applicable to outstanding stock options and restricted stock grants will lapse, performance goals will be deemed to be fully achieved and the awards will become fully vested (and in the case of options, exercisable) upon termination of Dr. Bley’s employment by us without cause or by Dr. Bley for good reason during the 18-month period following the change in control. Following such terminations, Dr. Bley will also receive coverage under our benefit plans for a period equal to the shorter of 12 months or such time as Dr. Bley secures employment with benefits generally similar to those provided in our benefit plans.

Termination by us for cause or by Dr. Bley other than for good reason following a change in control. Upon termination for any other reason, Dr. Bley is not entitled to any payment or benefit other than severance and any other benefits only as are then established under our written severance and benefits plans.

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Termination for death or disability. If we terminate Dr. Bley’s employment as a result of Dr. Bley’s disability or if Dr. Bley’s employment terminates upon Dr. Bley’s death, Dr. Bley is not entitled to any payment or benefit other than severance amounts paid prior to the date of such termination and severance and any other benefits only as are then established under our written severance and benefits plans.

Assuming Dr. Bley’s employment was terminated under each of these circumstances on December 31, 2006, such payments and benefits have an estimated value of:

	Cash Severance		Bonus		Value of Accelerated Equity Awards(2)
Prior to a change in control		—		—	—
Upon a change in control(1)		—
Without cause or for good reason following a change in control	$	129,000	$	5,000
Death		—		—	—
Disability		—		—	—
Other		—		—	—

⁽¹⁾

⁽²⁾ The aggregate dollar amount realized upon the acceleration of vesting of an equity award represents the aggregate market price of the shares of our common stock underlying the equity award on the acceleration date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vesting on the acceleration date.

Karen J. Harder

Ms. Harder’s employment with us is at-will. Either of us may terminate the executive employment agreement between us at any time. Upon a change in control of us, Ms. Harder will receive acceleration of vesting of each of Ms. Harder’s restricted stock grants and outstanding options to purchase our common stock by a number of months equal to the number of months of vesting remaining for such option as of the change in control, minus 18 months; provided, that if such stock options or restricted stock grants have fewer than 18 months of vesting remaining, then such options or restricted stock grants will not be accelerated upon a change in control. Ms. Harder may be eligible to receive certain severance payments and additional acceleration of vesting of stock options and restricted stock grants held by Ms. Harder if Ms. Harder terminates her employment for good reason or we terminate Ms. Harder without cause within the 18-month period following a change in control.

Termination by us or termination by Ms. Harder prior to a change in control. If Ms. Harder is terminated for any reason, or if Ms. Harder terminates her employment for any reason, in each case prior to a change in control of us, Ms. Harder will receive no severance.

Termination by us (other than for cause) or termination by Ms. Harder for good reason following a change in control. If Ms. Harder is terminated for any reason other than cause, or if Ms. Harder terminates her employment for good reason, in each case within the 18-month period following a change in control of us, in addition to the severance benefits set forth above that Ms. Harder is entitled to receive upon a termination prior to a change in control, Ms. Harder will be entitled to receive six months of severance pay (less applicable withholding taxes) payable over six months at a rate equal to her base salary and a lump-sum payment equal to 100% of Ms. Harder’s target annual bonus as of the date of such termination. In addition, all restrictions, limitations and conditions applicable to outstanding stock options and restricted stock grants will lapse, performance goals will be deemed to be fully achieved and the awards will become fully vested (and in the case of options, exercisable) upon termination of Ms. Harder’s employment by us without cause or by Ms. Harder for good reason during the 18-month period following the change in control. Following such terminations, Ms. Harder will also receive coverage under our benefit plans for a period equal to the shorter of 12 months or such time as Ms. Harder secures employment with benefits generally similar to those provided in our benefit plans.

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Termination by us for cause or by Ms. Harder other than for good reason following a change in control Upon termination for any other reason, Ms. Harder is not entitled to any payment or benefit other than severance and any other benefits only as are then established under our written severance and benefits plans.

Termination for death or disability. If we terminate Ms. Harder’s employment as a result of Ms. Harder’s disability or if Ms. Harder’s employment terminates upon Ms. Harder’s death, Ms. Harder is not entitled to any payment or benefit other than severance amounts paid prior to the date of such termination and severance and any other benefits only as are then established under our written severance and benefits plans.

Assuming Ms. Harder’s employment was terminated under each of these circumstances on December 31, 2006, such payments and benefits have an estimated value of:

	Cash Severance		Bonus		Value of Accelerated Equity Awards(2)
Prior to a change in control		—		—	—
Upon a change in control(1)		—
Without cause or for good reason following a change in control	$	110,400	$	5,000
Death		—		—	—
Disability		—		—	—
Other		—		—	—

⁽¹⁾

⁽²⁾ The aggregate dollar amount realized upon the acceleration of vesting of an equity award represents the aggregate market price of the shares of our common stock underlying the equity award on the acceleration date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vesting on the acceleration date.

Jeffrey Tobias, M.D.

Dr. Tobias’ employment with us is at-will. Either of us may terminate the executive employment agreement between us at any time. Upon a change in control of us, Dr. Tobias will receive acceleration of vesting of each of Dr. Tobias’ restricted stock grants and outstanding options to purchase our common stock by a number of months equal to the number of months of vesting remaining for such option as of the change in control, minus 18 months; provided, that if such stock options or restricted stock grants have fewer than 18 months of vesting remaining, then such options or restricted stock grants will not be accelerated upon a change in control. Dr. Tobias may be eligible to receive certain severance payments and additional acceleration of vesting of stock options and restricted stock grants held by Dr. Tobias if Dr. Tobias terminates his employment for good reason or we terminate Dr. Tobias without cause within the 18-month period following a change in control.

Termination by us or termination by Dr. Tobias prior to a change in control. If Dr. Tobias is terminated for any reason, or if Dr. Tobias terminates his employment for any reason, in each case prior to a change in control of us, Dr. Tobias will receive no severance.

Termination by us (other than for cause) or termination by Dr. Tobias for good reason following a change in control. If Dr. Tobias is terminated for any reason other than cause, or if Dr. Tobias terminates his employment for good reason, in each case within the 18-month period following a change in control of us, in addition to the severance benefits set forth above that Dr. Tobias is entitled to receive upon a termination prior to a change in control, Dr. Tobias will be entitled to receive nine months of severance pay (less applicable withholding taxes) payable over nine months at a rate equal to his base salary and a lump-sum payment equal to 100% of Dr. Tobias’ target annual bonus as of the date of such termination. In addition, all restrictions, limitations and conditions applicable to outstanding stock options and restricted stock grants will lapse, performance goals will be deemed to be fully achieved and the awards will become fully vested (and in the case

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of options, exercisable) upon termination of Dr. Tobias’ employment by us without cause or by Dr. Tobias for good reason during the 18-month period following the change in control. Following such terminations, Dr. Tobias will also receive coverage under our benefit plans for a period equal to the shorter of 12 months or such time as Dr. Tobias secures employment with benefits generally similar to those provided in our benefit plans.

Termination by us for cause or by Dr. Tobias other than for good reason following a change in control Upon termination for any other reason, Dr. Tobias is not entitled to any payment or benefit other than severance and any other benefits only as are then established under our written severance and benefits plans.

Termination for death or disability. If we terminate Dr. Tobias’ employment as a result of Dr. Tobias’ disability or if Dr. Tobias’ employment terminates upon Dr. Tobias’ death, Dr. Tobias is not entitled to any payment or benefit other than severance amounts paid prior to the date of such termination and severance and any other benefits only as are then established under our written severance and benefits plans.

Assuming Dr. Tobias’ employment was terminated under each of these circumstances on December 31, 2006, such payments and benefits have an estimated value of:

	Cash Severance		Bonus		Value of Accelerated Equity Awards(2)
Prior to a change in control		—		—	—
Upon a change in control(1)		—
Without cause or for good reason following a change in control	$	213,750	$	20,000
Death		—		—	—
Disability		—		—	—
Other		—		—	—

⁽¹⁾

⁽²⁾ The aggregate dollar amount realized upon the acceleration of vesting of an equity award represents the aggregate market price of the shares of our common stock underlying the equity award on the acceleration date (assumed to be the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the shares vesting on the acceleration date.

Employee Benefit Plans

2000 Stock Incentive Plan

Our 2000 Stock Incentive Plan was adopted by our board of directors and approved by our stockholders effective June 5, 2000 and was last amended March 16, 2006. Our 2000 Stock Incentive Plan provides for the grant of incentive stock options, within the meaning of Section 422(b) of the Internal Revenue Code, to our employees, and for the grant of nonstatutory stock options, stock grants and stock purchase rights to our employees, directors and consultants. As of December 31, 2006, options to purchase 10,360,236 shares of common stock were outstanding and 2,339,123 shares were available for future grant under this plan.

We will not grant any additional awards under our 2000 Stock Incentive Plan following this offering. Instead, we will grant options under our 2007 Stock Plan. However, our 2000 Stock Incentive Plan will continue to govern the terms and conditions of all outstanding options and stock purchase rights previously granted under the 2000 Stock Incentive Plan following this offering.

Our 2000 Stock Incentive Plan provides that in the event of our merger or consolidation, outstanding options or other rights to acquire our common stock will be subject to the agreement of merger or reorganization. Without an optionee’s consent, such agreement may provide for (i) the continuation of outstanding options, if the

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company is the surviving corporation, (ii) the assumption of the plan and outstanding options by the surviving corporation or its parent, (iii) substitution of options by the surviving corporation or its parent with substantially the same terms for each outstanding option, or (iv) the cancellation of outstanding options to the extent not exercised prior to the merger or consolidation. Notwithstanding, upon our change of control, as defined in the plan document, all outstanding options and any shares acquired pursuant to a grant or sale under the plan will vest and any company repurchase or reacquisition right lapse as to 25% of the shares, provided that if any optionee or offeree has an employment or other agreement with us addressing the acceleration of vesting of any awards upon or in connection with a change of control, no vesting will occur as a result of the plan document’s provisions and the provisions of such agreement will govern, even if such agreement provides for more or less acceleration of vesting than provided in the plan document.

2007 Stock Plan

Our board of directors adopted and our stockholders approved our 2007 Stock Plan in January 2007, effective upon consummation of this offering. Our 2007 Stock Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to our employees and any parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants.

We have reserved a total of 20,000,000 shares of our common stock for issuance under the 2007 Stock Plan, plus (a) any shares which have been reserved but not issued under our 2000 Stock Incentive Plan as of the effective date of this offering and (b) any shares returned to our 2000 Stock Incentive Plan on or after the effective date of this offering as a result of termination of options or the repurchase of shares issued under the 2000 Stock Incentive Plan. As of January 31, 2007 the maximum number of shares that may be added to the 2007 Stock Plan from the 2000 Stock Incentive Plan is 13,000,000 shares. In addition, our 2007 Stock Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year, beginning with our 2008 fiscal year, equal to the least of:

• 5% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year;

• 20,000,000 shares; or

• such other amount as our board of directors may determine.

Our board of directors or a committee of our board administers our 2007 Stock Plan. Our compensation committee will be responsible for administering all of our equity compensation plans. In the case of options intended to qualify as “performance based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, the committee will consist of two or more “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The administrator has the power to determine the terms of the awards, including the exercise price, the number of shares subject to each such award, the exercisability of the awards and the form of consideration payable upon exercise. The administrator also has the authority to institute an exchange program whereby the exercise prices of outstanding awards may be reduced, outstanding awards may be surrendered in exchange for awards with a lower exercise price or outstanding awards may be transferred to a third-party.

The exercise price of options granted under our 2007 Stock Plan must at least be equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten years, except that with respect to any participant who owns 10% of the voting power of all classes of our outstanding stock as of the grant date, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator determines the term of all other options.

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After termination of an employee, director or consultant, he or she may exercise his or her option for the period of time stated in the option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, the option will generally remain exercisable for three months. However, an option generally may not be exercised later than the expiration of its term.

Stock appreciation rights may be granted under our 2007 Stock Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. The administrator determines the terms of stock appreciation rights, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof. Stock appreciation rights expire under the same rules that apply to stock options.

Restricted stock may be granted under our 2007 Stock Plan. Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee. The administrator may impose whatever conditions to vesting it determines to be appropriate. For example, the administrator may set restrictions based on the achievement of specific performance goals. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

Restricted stock units may be granted under our 2007 Stock Plan. Restricted stock units are awards of restricted stock, performance shares or performance units that are paid out in installments or on a deferred basis. The administrator determines the terms and conditions of restricted stock units including the vesting criteria and the form and timing of payment.

Performance units and performance shares may be granted under our 2007 Stock Plan. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our common stock on the grant date. Payment for performance units and performance shares may be made in cash or in shares of our common stock with equivalent value, or in some combination, as determined by the administrator.

Our 2007 Stock Plan also provides for the automatic grant of non-statutory options to our non-employee directors. Each non-employee director appointed to the board of directors after the completion of this offering will receive an initial option to purchase 200,000 shares upon such appointment except for those directors who become non-employee directors by ceasing to be employee directors. This option will vest ratably each year, so that the option will be fully vested and exercisable on the fourth anniversary of its grant date, subject to the director’s continued service on each relevant vesting date. In addition, beginning in 2007, non-employee directors who have been directors for at least twelve months will receive a subsequent option to purchase 50,000 shares immediately following each annual meeting of our stockholders. This option will vest in full on the first anniversary of its grant date, subject to the director’s continued service on such date. All options granted under the automatic grant provisions have a term of ten years and an exercise price equal to the fair market value on the date of grant.

Unless the administrator provides otherwise, our 2007 Stock Plan does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.

Our 2007 Stock Plan provides that in the event of our change in control, as defined in the 2007 Stock Plan, each outstanding award will be treated as the administrator determines, including that the successor corporation or its parent or subsidiary will assume or substitute an equivalent award for each outstanding award. The administrator is not required to treat all awards similarly. If there is no assumption or substitution of outstanding

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awards, the awards will fully vest, all restrictions will lapse and the awards will become fully exercisable. The administrator will provide notice to the recipient that he or she has the right to exercise the option and stock appreciation right as to all of the shares subject to the award, all restrictions on restricted stock will lapse and all performance goals or other vesting requirements for performance shares and units will be deemed achieved at 100% of target levels, and all other terms and conditions met. The option or stock appreciation right will terminate upon the expiration of the period of time the administrator provides in the notice. In the event the service of an outside director is terminated on or following a change in control, other than pursuant to a voluntary resignation, his or her options and stock appreciation rights will fully vest and become immediately exercisable, all restrictions on restricted stock will lapse and all performance goals or other vesting requirements for performance shares and units will be deemed achieved at 100% of target levels, and all other terms and conditions met.

Our 2007 Stock Plan will automatically terminate in 2017, unless we terminate it sooner. In addition, our board of directors has the authority to amend, suspend or terminate the 2007 Stock Plan provided such action does not impair the rights of any participant.

2007 Employee Stock Purchase Plan

Concurrently with this offering, we intend to establish our 2007 Employee Stock Purchase Plan. Our board of directors adopted the 2007 Employee Stock Purchase Plan in January 2007, effective upon the consummation of this offering.

A total of 5,000,000 shares of our common stock will be made available for sale under our 2007 Employee Stock Purchase Plan. In addition, our 2007 Employee Stock Purchase Plan provides for annual increases in the number of shares available for issuance under the plan on the first day of each fiscal year, beginning with our 2008 fiscal year, equal to the least of:

• 2% of the outstanding shares of our common stock on the first day of the fiscal year;

• 8,000,000 shares; or

• such other amount as may be determined by our board of directors.

Our board of directors or a committee of our board administers the 2007 Employee Stock Purchase Plan. Our compensation committee will be responsible for administering all of our equity compensation plans. Our board of directors or its committee has full and exclusive authority to interpret the terms of the 2007 Employee Stock Purchase Plan and determine eligibility.

All of our employees are eligible to participate if they are customarily employed by us or any participating subsidiary for at least 20 hours per week and more than 5 months in any calendar year. However, an employee may not be granted rights to purchase stock if:

• such employee immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock; or

• such employee’s rights to purchase stock under all of our employee stock purchase plans would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year in which such rights are outstanding.

Our 2007 Employee Stock Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended, and provides for consecutive, overlapping twelve-month offering periods. Each offering period includes two 6-month purchase periods. The offering periods generally start on the first trading day on or after May 15 and November 15 of each year, except for the first such offering period which will commence on the first trading day on or after the effective date of this offering and will end on the first trading day on or after the earlier of May 15, 2008 or 27 months from the beginning of the offering period.

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Our 2007 Employee Stock Purchase Plan permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation which includes a participant’s straight time gross earnings, commissions, overtime and shift premium, exclusive of payments for incentive compensation, bonuses and other compensation. A participant may purchase a maximum of 20,000 shares of common stock during a six-month purchase period.

Amounts deducted and accumulated by the participant are used to purchase shares of our common stock at the end of each six-month purchase period (the first purchase period will end on the first trading day on or after November 1, 2007). The purchase price is 85% of the lower of the fair market value of our common stock at the beginning of the offering period or the date the purchase period ends. Participants may end their participation at any time during an offering period, and will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with us. If the fair market value at the end of a purchase period is less than the fair market value at the beginning of the offering period, participants will be withdrawn from the current offering period following the purchase of shares on the purchase date and automatically will be re-enrolled in a new offering period. Participants may end their participation at any time during an offering period, and will be paid their payroll deductions to date, without interest. Participation ends automatically upon termination of employment with us.

A participant may not transfer rights granted under the 2007 Employee Stock Purchase Plan other than by will, the laws of descent and distribution or as otherwise provided under the 2007 Employee Stock Purchase Plan.

In the event of our merger or change in control, as defined under the 2007 Employee Stock Purchase Plan, a successor corporation may assume or substitute each outstanding purchase right. If the successor corporation refuses to assume or substitute for the outstanding purchase rights, the offering period then in progress will be shortened, and a new exercise date will be set.

Our 2007 Employee Stock Purchase Plan will automatically terminate in 2027, unless we terminate it sooner. In addition, our board of directors has the authority to amend, suspend or terminate our 2007 Employee Stock Purchase Plan, except that, subject to certain exceptions described in the 2007 Employee Stock Purchase Plan, no such action may adversely affect any outstanding rights to purchase stock under our 2007 Employee Stock Purchase Plan.

401(k) Plan

We have established a tax-qualified employee savings and retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Under our 401(k) plan, employees may elect to reduce their current compensation by up to 60% or the statutory limit, $15,000 in 2006, whichever is less, and have us contribute the amount of this reduction to the 401(k) plan. As of December 31, 2006 36 employees were eligible for participation in our 401(k) plan. We intend for the 401(k) plan to qualify under Section 401 of the Code so that contributions by employees or by us to the 401(k) plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) plan. Our contributions, if any, will be deducted by us when made.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In addition to the director and executive compensation arrangement discussed above under “Management,” the following is a description of transactions since January 1, 2004, to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.

Severance Agreement

We entered into a severance agreement and release on February 12, 2004, with Wendye Robbins, M.D., one of our founders and a former director. The severance agreement required us to make a lump sum payment of $133,900, equivalent to six months of Dr. Robbins’ salary. For a period of one year following the severance agreement and release, Dr. Robbins provided two days of consulting services to us per month for which we paid Dr. Robbins an aggregate of $133,900. In addition, we paid Dr. Robbins a bonus payment of $40,000. Further, pursuant to the terms of the severance agreement and release, Dr. Robbins also repaid a loan made to her by us in the principal amount of $39,600.

Indebtedness of Management

In connection with his employment with us, on April 25, 2003, we loaned Anthony DiTonno $100,000 with an interest rate of 6.1% per annum, compounded semiannually. The loan was evidenced by a promissory note and secured by a pledge on shares of our common stock. As of October 31, 2006, total principal and accrued interest outstanding on the note was approximately $122,300. In January 2007, our board of directors agreed to forgive all outstanding indebtedness represented by the principal and accrued interested on such loan effective as of January 1, 2007.

Shares and Warrants Issued to Insiders

In February and March 2004, we sold shares of our Series C preferred stock convertible into an aggregate of 48,017,402 shares of common stock at a price per common equivalent share of $0.75. We sold the shares pursuant to a preferred stock purchase agreement and an amended and restated investors’ rights agreement under which we made standard representations, warranties and covenants, and provided the purchasers with registration rights and information rights. The registration rights are the only rights that survive beyond this offering. See “Description of Capital Stock.”

In November 2005, December 2005, February 2006, May 2006 and August 2006, we sold shares of our Series C2 preferred stock convertible into an aggregate of 26,888,900 shares of common stock at a price per common equivalent share of $0.75. We sold the shares pursuant to a preferred stock purchase agreement and an amended and restated investors’ rights agreement under which we made standard representations, warranties and covenants, and provided the purchasers with registration rights and information rights. The registration rights are the only rights that survive beyond this offering. In addition, we issued warrants exercisable for an aggregate of 13,444,450 shares of our Series C2 preferred stock in connection with the preferred stock purchase agreement. As of January 31, 2007, 6,611,386 of the warrants have been exercised and 6,833,064 remain unexercised. See “Description of Capital Stock.”

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The purchasers of the Series C and Series C2 preferred stock included, among others, the following principal stockholders, directors and affiliates (not including beneficial ownership described in more detail under “Principal Stockholders”):

Name of Purchaser	Series C Preferred	Series C2 Preferred	Series C2 Preferred Issued Upon Exercise of Warrants
5% Stockholders
Entities affiliated with ARCH Venture Partners	12,339,915	6,283,376
Entities affiliated with Alta Partners	8,642,667	4,732,792
Entities affiliated with Global Lifescience Ventures	6,666,666	1,666,240
Entities affiliated with Montreux Equity	6,466,666	2,598,668
Entities affiliated with Walden International	5,950,000	1,600,000
Directors
Jean-Jacques Bienaimé	37,334	13,336

Policies and Procedures for Related Party Transactions

We adopted corporate governance guidelines in January 2007, which will be effective upon the closing of this offering. Pursuant to these guidelines, all of our directors must inform our audit committee of all types of transactions between the directors (directly or indirectly) and us, prior to their conclusion, even if such transactions are in the ordinary course of business. Furthermore, our corporate governance guidelines direct the audit committee to review and approve all related party transactions for which such approval is required by applicable law or the rules of the NASDAQ Stock Market LLC.

Since our corporate governance guidelines become effective upon the closing of this offering, none of the transactions described above required review, approval or ratification pursuant to such guidelines.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of December 31, 2006 and as adjusted to reflect the sale of the shares of our common stock in this offering, for:

• each person known by us to beneficially own more than 5% of our outstanding shares of common stock;

• each of our directors;

• each of our named executive officers; and

• all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock that could be issued upon the exercise of outstanding options and warrants held by that person that are currently exercisable or exercisable within 60 days of December 31, 2006 are considered outstanding. These shares, however, are not considered outstanding when computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

Except as indicated in the footnotes to this table and pursuant to state community property laws, each stockholder named in the table has sole voting and investment power for the shares shown as beneficially owned by them. Percentage of ownership is based on 127,319,441 shares of our common stock outstanding on December 31, 2006, assuming conversion of all shares of convertible preferred stock, and             shares of common stock to be outstanding after completion of this offering. This table assumes no exercise of the underwriters’ over-allotment option. Unless otherwise indicated, the address for each of the stockholders in the table below is c/o NeurogesX, Inc., 981 Industrial Road, Suite F, San Carlos, California 94070.

	Number of Shares Beneficially Owned	Percentage of Shares Outstanding
		Before Offering	After Offering
Name and Address of Beneficial Owner
5% Stockholders
Entities affiliated with ARCH Venture Partners(1) 8725 West Higgins Road, Suite 290 Chicago, IL 60631	31,423,291	24.7%	%
Entities affiliated with Alta Partners(2) One Embarcadero Center, #3700 San Francisco, CA 94111	23,668,791	18.6%	%
Entities affiliated with Global Lifescience Ventures(3) Von-der-Tann Str. 3 D-Munich, Germany	8,332,906	6.5%	%
Entities affiliated with Montreux Equity Partners(4) 2500 Sand Hill Road, #215 Menlo Park, CA 94025	12,998,667	10.2%	%
Entities affiliated with Walden International(5) 750 Battery Street, 7th Floor San Francisco, CA 94111	18,216,667	14.3%	%

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	Number of Shares Beneficially Owned	Percentage of Shares Outstanding
		Before Offering	After Offering
Name and Address of Beneficial Owner
Executive Officers and Directors
Anthony DiTonno(6)	1,732,674	1.4%	%
Keith Bley(7)	1,036,135	*	%
Jean-Jacques Bienaimé(8)	205,878	*	%
Stephen Ghiglieri(9)	723,559	*	%
Karen Harder(10)	583,968	*	%
Neil Kurtz(11)	50,000	*	%
Alix Marduel(2)	23,668,791	18.6%	%
Michael Markels(12)	167,129	*	%
Robert T. Nelsen(1)	31,423,291	24.7%	%
Jeffrey Tobias(13)	338,750	*	%
Daniel K. Turner III(4)	12,998,667	10.2%	%
All directors and executive officers as a group (11 persons)(14)	70,796,752	56.3%	%

⁽¹⁾ Represents: (a) 25,017,142 shares of common stock held by ARCH Venture Fund V, L.P., (b) 6,257,910 shares of common stock held by Healthcare Focus Fund, L.P., and (c) 148,239 shares of common stock held by ARCH V Entrepreneurs Fund, L.P. The people who have investment control of the ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and the Healthcare Focus Fund, L.P. shares are Robert T. Nelsen, Steven Lazarus, Clinton Bybee and Keith Crandell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

⁽²⁾ Represents: (a) 188,088 shares common stock held by Alta Embarcadero BioPharma Partners III, LLC, (b) 512,572 shares of common stock held by Alta BioPharma Partners III GmbH & Co. Beteiligungs KG, (c) 7,632,247 shares of common stock held by Alta BioPharma Partners III, L.P., (d) 12,765,180 shares of common stock held by Alta California Partners II, L.P., (e) 2,409,432 shares of common stock held by Alta California Partners II, L.P. – New Pool, and (f) 161,273 shares of common stock held by Alta Embarcadero Partners II, LLC. Alta Partners III, Inc. provides investment advisory services to Alta BioPharma Partners III Gmbh & Co. Beteiligungs KG, Alta BioPharma Partners III, L.P. and Alta Embarcadero BioPharma Partners III, LLC, which we refer to collectively as the Alta BioPharma Funds. The directors of Alta BioPharma Management III, LLC (which is the general partner of Alta BioPharma Partners III, L.P. and the managing limited partner of Alta BioPharma Partners III GmbH & Co. Beteiligungs KG) and the managers of Alta Embarcadero BioPharma Partners III, LLC exercise sole dispositive and voting power over the shares owned by the Alta Funds. Certain principals of Alta Partners III, Inc., Jean Deleage, Alix Marduel, Farah Campisi, Edward Penhoet and Ed Hurwitz, are directors of Alta BioPharma Management III, LLC and managers of Alta Embarcadero BioPharma Partners III, LLC. These individuals may be deemed to share dispositive and voting power over the shares held by the Alta BioPharma Funds. Alta Partners Management Corp. provides investment advisory services to Alta California Partners II, L.P., Alta California Partners II, L.P. – New Pool, and Alta Embarcadero Partners, II, LLC which we refer to collectively as the Alta California Funds. The managing directors of Alta California Management II, LLC (which is the general partner of Alta California Partners II, L.P.) and Alta California Management II, LLC – New Pool (which is the general partner of Alta California Partners II, L.P. – New Pool) exercise sole dispositive and voting power over the Alta California Funds. Jean Deleage, Garrett Fruener, Guy Nohra, Daniel Janney and Alix Marduel are managing directors of Alta California Management II, LLC and Alta California Management II, LLC – New Pool and share voting and investment control with regard to shares held by Alta California Partners II, L.P. and Alta California Partners II, L.P. – New Pool. Jean Deleage, Garrett Gruener and Guy Nohra are members of Alta Embarcadero Partners II, LLC and share voting and investment control with regard to shares held by Alta Embarcadero Partners II, LLC. Each of the above listed individuals disclaims beneficial ownership of such shares, except to the extent of his or her pecuniary interest therein.

⁽³⁾ Represents: (a) 4,687,260 shares of common stock held by The Global Life Sciences Ventures Funds II GmbH & Co., and (b) 3,645,646 shares of common stock held by The Global Life Science Ventures Funds II Limited Partnership. The people who have investment control of The Global Life Sciences Ventures Funds II GmbH & Co. and The Global Life Science Ventures Funds II Limited Partnership are Hans-Peter Wiese and Hans A. Küpper, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

⁽⁴⁾ Represents: (a) 6,594,995 shares of common stock held by Montreux Equity Partners II, SBIC, L.P., and (b) 6,403,672 shares of common stock held by Montreux Equity Partners III SBIC, L.P. The people who have investment control of Montreux Equity Partners II SBIC, L.P. and Montreux Equity Partners III SBIC, L.P. are Daniel K. Turner III,

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Howard D. Palefsky, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

⁽⁵⁾ Represents: (a) 351,000 shares of common stock held by Asian Venture Capital Investment Corporation, (b) 468,001 shares of common stock held by International Venture Capital Investment III Corporation, (c) 351,000 shares of common stock held by International Venture Capital Investment Corporation, (d) 360,359 shares of common stock held by Pacven Walden Ventures Parallel V-B, C.V., (e) 32,761 shares of common stock held by Pacven Walden Ventures V Associates Fund, L.P., (f) 15,397,199 shares of common stock held by Pacven Walden Ventures V, L.P., (g) 360,359 shares of common stock held by Pacven Walden Ventures Parallel V-A, C.V., (h) 229,321 shares of common stock held by Pacven Walden Ventures V-QP Associates Fund, L.P., and (i) 666,667 shares of common stock held by Seed Ventures III Pte Ltd. The people who have investment control of Asian Venture Capital Investment Corporation, International Venture Capital Investment III Corporation, International Venture Capital Investment Corporation, Pacven Walden Ventures Parallel V-A, C.V., Pacven Walden Ventures Parallel V-B, C.V., Pacven Walden Ventures V Associates Fund, L.P., Pacven Walden Ventures V, L.P., Pacven Walden Ventures V-QP Associates Fund, L.P., and Seed Ventures III Pte Ltd. are Lip-Bu Tan, Nancy Lee, Andrew Kau and Tzu-Hwa Hsu, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

⁽⁶⁾ Represents (a) 1,250,000 shares held by Mr. DiTonno, of which 26,042 shares are subject to our right of repurchase upon termination of Mr. DiTonno as a service provider and (b) the right to acquire 482,674 shares exercisable within 60 days of December 31, 2006.

⁽⁷⁾ Represents (a) 865,133 shares held by Dr. Bley, and (b) the right to acquire 171,002 shares exercisable within 60 days of December 31, 2006.

⁽⁸⁾ Represents (a) 200,670 shares held by Mr. Bienaimé, of which 59,375 shares are subject to our right of repurchase upon termination of Mr. Bienaimé as a service provider, and (b) the right to acquire 5,208 shares exercisable within 60 days of December 31, 2006.

⁽⁹⁾ Represents (a) 100,000 shares held by Mr. Ghiglieri, of which 25,000 shares are subject to our right of repurchase upon termination of Mr. Ghiglieri as a service provider and (b) the right to acquire 623,559 shares exercisable within 60 days of December 31, 2006.

⁽¹⁰⁾ Represents (a) 317,666 shares held by Ms. Harder, and (b) the right to acquire 266,302 shares exercisable within 60 days of December 31, 2006.

⁽¹¹⁾ Represents the right to acquire 50,000 shares exercisable within 60 days of December 31, 2006.

⁽¹²⁾ Represents the right to acquire 167,129 shares exercisable within 60 days of December 31, 2006.

⁽¹³⁾ Represents the right to acquire 338,750 shares exercisable within 60 days of December 31, 2006.

⁽¹⁴⁾ See notes 1, 2 and 4 and notes 6 through 13.

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DESCRIPTION OF CAPITAL STOCK

General

Upon completion of this offering, we will be authorized to issue 100,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of undesignated preferred stock, $0.001 par value.

Common Stock

Assuming the conversion of all of our preferred stock into 117,386,300 shares of common stock, as of September 30, 2006, we had 127,279,296 shares of common stock outstanding that were held of record by approximately 88 stockholders.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably any dividends that may be declared from time to time by the board of directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.

Preferred Stock

Upon the closing of this offering, our board of directors will have the authority, without action by our stockholders, to designate and issue up to 10,000,000 shares of preferred stock in one or more series. The board of directors may also designate the rights, preferences and privileges of each series of preferred stock, any or all of which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might include:

• restricting dividends on the common stock;

• diluting the voting power of the common stock;

• impairing the liquidation rights of the common stock; and

• delaying or preventing a change in control of our company without further action by the stockholders.

We have no present plans to issue any shares of preferred stock.

Warrants

As of September 30, 2006, we had the following warrants outstanding to purchase a total of 14,338,050 shares of our capital stock:

• A warrant to purchase in the aggregate 33,600 shares of our Series A preferred stock, which will be converted to a warrant to purchase in the aggregate 33,600 shares of our common stock, at an exercise price of $0.625 per share, terminating 2014.

• A warrant to purchase in the aggregate 20,000 shares of our Series B preferred stock, which will be converted to a warrant to purchase in the aggregate 20,000 shares of our common stock, at an exercise price of $0.75 per share, terminating 2014.

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• A warrant to purchase in the aggregate 345,000 shares of our Series C2 preferred stock, which will be converted to a warrant to purchase in the aggregate 345,000 shares of our common stock, at an exercise price of $0.75 per share, terminating July 7, 2013.

• A warrant to purchase in the aggregate 345,000 shares of our Series C2 preferred stock, which will be converted to a warrant to purchase in the aggregate 345,000 shares of our common stock, at an exercise price of $0.75 per share, terminating July 7, 2013.

• A warrant to purchase in the aggregate 150,000 shares of our Series C2 preferred stock, which will be converted to a warrant to purchase in the aggregate 150,000 shares of our common stock, at an exercise price of $0.75 per share, terminating July 7, 2013.

• Warrants to purchase in the aggregate 13,444,450 shares of our Series C2 preferred stock, which will be converted to a warrant to purchase in the aggregate 13,444,450 shares of our common stock, at an exercise price of $0.75 per share, terminating September 30, 2008.

All warrants contain provisions allowing for cashless exercise.

Registration Rights

As of September 30, 2006, the holders of 117,386,300 shares of common stock issuable upon conversion of preferred stock, and 14,338,050 shares of common stock issuable upon the exercise of warrants and conversion of preferred stock underlying such warrants or their permitted transferees are entitled to rights with respect to registration of these shares under the Securities Act of 1933, as amended, following this offering . These rights are provided under the terms of our amended and restated investor rights agreement. Under these registration rights, holders of the then outstanding registrable securities may require on two occasions that we register their shares for public resale. Such registration requires the election of the holders of registrable securities holding at least 25% of such registrable securities. We are obligated to register these shares only if the requesting holders request the registration of at least the number of shares having an aggregate offering price (prior to deduction for underwriter’s discounts and commissions related to the issuance) of at least $10,000,000. In addition, holders of registrable securities holding at least 20% of such registrable securities may require that we register their shares for public resale on Form S-3 or similar short-form registration, if we are eligible to use Form S-3 or similar short-form registration, and the value of the securities to be registered is at least $1,000,000. If we elect to register any of our shares of common stock for any public offering, the holders of registrable securities are entitled to include shares of common stock in the registration. However, we may reduce the number of shares proposed to be registered in view of market conditions, provided that we may not reduce the number of registrable securities included in any such registration below thirty percent (30%) of the shares included in the registration (except for a registration relating to the Company’s initial public offering, from which all Registrable Securities may be excluded). We will pay all expenses in connection with any registration described herein, other than underwriting discounts and commissions. These rights will terminate five years after the closing of this offering and prior to then, a holder of less than 1% of our then-outstanding capital stock shall cease to have registration rights once that holder may sell all of its registrable securities under Rule 144 during any three-month period.

Anti-Takeover Effects of Some Provisions of Delaware Law

Provisions of Delaware law and our amended and restated certificate of incorporation and amended bylaws to be in effect upon the closing of this offering could make the acquisition of our company through a tender offer, a proxy contest or other means more difficult and could make the removal of incumbent officers and directors more difficult. We expect these provisions to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with our board of directors. We believe that the benefits provided by our ability to negotiate with the proponent of an unfriendly or unsolicited proposal outweigh the disadvantages of discouraging these proposals. We believe the negotiation of an unfriendly or unsolicited proposal could result in an improvement of its terms.

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We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an interested stockholder, unless:

• Prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

• The stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers, and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

• On or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Anti-Takeover Effects of Provisions of Our Charter Documents

Our amended and restated certificate of incorporation to be in effect upon the closing of this offering provides for our board of directors to be divided into three classes serving staggered terms. Approximately one-third of the board of directors will be elected each year. The provision for a classified board could prevent a party who acquires control of a majority of the outstanding voting stock from obtaining control of the board of directors until the second annual stockholders meeting following the date the acquirer obtains the controlling stock interest. The classified board provision could discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company and could increase the likelihood that incumbent directors will retain their positions. Our amended and restated certificate of incorporation to be in effect upon the closing of this offering provides that directors may be removed with cause by the affirmative vote of the holders of the outstanding shares of common stock.

Our amended bylaws to be in effect upon the closing of this offering establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors. At an annual meeting, stockholders may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors. Stockholders may also consider a proposal or nomination by a person who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our Secretary timely written notice, in proper form, of his or her intention to bring that business before the meeting. The amended bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting of the stockholders. However, our bylaws may have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

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Our amended bylaws provide that only our board of directors, the chairman of the board or the chief executive officer may call a special meeting of stockholders. Because our stockholders do not have the right to call a special meeting, a stockholder could not force stockholder consideration of a proposal over the opposition of the board of directors by calling a special meeting of stockholders prior to such time as a majority of the board of directors believed or the chief executive officer believed the matter should be considered or until the next annual meeting provided that the requestor met the notice requirements. The restriction on the ability of stockholders to call a special meeting means that a proposal to replace the board also could be delayed until the next annual meeting.

Our amended and restated certificate of incorporation to be in effect upon the closing of this offering does not allow stockholders to act by written consent without a meeting. Without the availability of stockholder’s actions by written consent, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a stockholders’ meeting. The holder would have to obtain the consent of a majority of the board of directors, the chairman of the board or the chief executive officer to call a stockholders’ meeting and satisfy the notice periods determined by the board of directors.

Transfer Agent and Registrar

Our transfer agent and registrar for our common stock is                         .

Listing

We have applied to list our common stock on the NASDAQ Global Market under the trading symbol NGSX.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our stock. We cannot predict the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. Sales of our common stock in the public market after the restrictions lapse as described below, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.

Sale of Restricted Shares

Upon completion of this offering, we will have outstanding              shares of common stock. The shares of common stock being sold in this offering will be freely tradable, other than by any of our “affiliates” as defined in Rule 144(a) under the Securities Act, without restriction or registration under the Securities Act. All remaining shares were issued and sold by us in private transactions and are eligible for public sale if registered under the Securities Act or sold in accordance with Rule 144 or Rule 701 under the Securities Act. These remaining shares are “restricted securities” within the meaning of Rule 144 under the Securities Act.

Lock-up Agreements

In connection with this offering, we and each of our directors and officers and certain of our stockholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we and they will not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise. These restrictions are in effect until 180 days after the date of this prospectus, subject to extension for up to an additional 34 days. These restrictions, and certain exceptions, are described in more detail under “Underwriters.”

Rule 144

In general, under Rule 144, as currently in effect, a person who owns shares that were acquired from us or an affiliate of us at least one year prior to the proposed sale is entitled to sell upon expiration of the lock-up described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

• 1% of the number of shares of common stock then outstanding, which will equal approximately              shares immediately after this offering; or

• the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Rule 144 also provides that our affiliates who sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares with the exception of the holding period requirement.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than our

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affiliates, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, “144(k) shares” may be sold immediately upon the completion of this offering.

Rule 701

In general, under Rule 701 as currently in effect, any of our employees, directors, consultants or advisors who purchases or purchased shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction that was completed in reliance on Rule 701 and which complied with the requirements of Rule 701 is eligible to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

Stock Options

We intend to file a registration statement on Form S-8 under the Securities Act covering              shares of our common stock subject to options outstanding or reserved for issuance under our stock plans and shares of our common stock issued upon the exercise of options by employees. We expect to file this registration statement as soon as practicable after this offering. In addition, we intend to file a registration statement on Form S-8 or such other form as may be required under the Securities Act for the resale of shares of our common stock issued upon the exercise of options that were not granted under Rule 701. We expect to file this registration statement as soon as permitted under the Securities Act. However, none of the shares registered on Form S-8 will be eligible for resale until expiration of the lock-up agreements to which they are subject.

Registration Rights

We have granted demand registration rights, rights to participate in offerings that we initiate and Form S-3 registration rights to our preferred stockholders, warrant holders and some of our common stockholders. For a further description of these rights, see “Description of Capital Stock—Registration Rights.”

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MATERIAL U.S. TAX CONSIDERATIONS FOR

NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a non-U.S. holder. For purposes of this discussion, you are a “non-U.S. holder” if you are a beneficial owner of our common stock and you are not, for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation created or organized in or under the laws of the United States, or of any political subdivision of the United States;

• an estate whose income is subject to U.S. federal income taxation regardless of its source; or

• a trust, in general, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or if the trust has made a valid election to be treated as a U.S. person under applicable U.S. Treasury regulations.

If you are an individual, you may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes, instead of a nonresident, by, among other ways, being present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of this calculation, you would count all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income tax purposes as if they were U.S. citizens. If a partnership or other flow-through entity is a beneficial owner of our common stock, the tax treatment of a partner in the partnership or owner of the entity will generally depend on the status of the partner or owner and the activities of the partnership or entity. Such holders and their partners or owners should consult their own tax advisors regarding U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

This discussion does not purport to address all aspects of U.S. federal income and estate taxes or specific facts and circumstances that may be relevant to a particular non-U.S. holder’s tax position, including:

• U.S. state or local or any non-U.S. tax consequences;

• the tax consequences for the stockholders, partners or beneficiaries of a non-U.S. holder;

• special tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, broker-dealers, and traders in securities; and

• special tax rules that may apply to a non-U.S. holder that holds our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment.

The following discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, existing and proposed U.S. Treasury regulations and administrative and judicial interpretations, all as of the date of this prospectus, and all of which are subject to change, possibly with retroactive effect. The following summary assumes that you hold our common stock as a capital asset. Each non-U.S. holder should consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. See “Dividend Policy.” In the event, however, that we pay dividends on our common stock, we will have to withhold a U.S. federal withholding tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross

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amount of the dividends paid to you. You should consult your tax advisors regarding your entitlement to benefits under a relevant income tax treaty. Generally, in order for us to withhold tax at a lower treaty rate, you must provide us with a properly executed Form W-8BEN certifying your eligibility for the lower treaty rate. However:

• in the case of common stock held by a foreign partnership, the certification requirement will generally be applied to partners and the partnership will be required to provide certain information;

• in the case of common stock held by a foreign trust, the certification requirement will generally be applied to the trust or the beneficial owners of the trust, depending on whether the trust is a “foreign complex trust,” “foreign simple trust” or “foreign grantor trust” as defined in the U.S. Treasury regulations; and

• look-through rules apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.

A non-U.S. holder that is a foreign partnership or a foreign trust is urged to consult its tax advisor regarding its status under these U.S. Treasury regulations and the certification requirements applicable to it.

If you are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the U.S. Internal Revenue Service.

If the dividend is effectively connected with your conduct of a trade or business in the United States, the dividend will be exempt from the U.S. federal withholding tax. In this case, the dividend will be taxed on a net income basis at the regular graduated rates and in the manner applicable to U.S. persons, subject to an applicable income tax treaty providing otherwise, and, if you are a foreign corporation, you may be subject to an additional branch profits tax at a rate of 30% or a lower rate as may be specified by an applicable income tax treaty.

Gain on Dispositions of Common Stock

You generally will not be subject to U.S. federal income tax on gain recognized on a disposition of our common stock unless:

• the gain is effectively connected with your conduct of a trade or business in the United States and, if an income tax treaty applies, the gain is attributable to a permanent establishment maintained by you in the United States; in these cases, the gain will be taxed on a net income basis at the regular graduated rates and in the manner applicable to U.S. persons and, if you are a foreign corporation, you may be subject to an additional branch profits tax at a rate of 30% or a lower rate as may be specified by an applicable income tax treaty;

• you are an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meet other requirements; or

• we are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that you held our common stock.

Generally, a corporation is a “U.S. real property holding corporation” if the fair market value of its “U.S. real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The tax relating to stock in a “U.S. real property holding corporation” generally will not apply to a non-U.S. holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market. We believe that we are not currently, and we do not anticipate becoming in the future, a “U.S. real property holding corporation” for U.S. federal income tax purposes.

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Federal Estate Tax

Common stock owned or treated as owned by an individual who is a non-U.S. holder (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax.

Information Reporting and Backup Withholding Tax

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends and the proceeds from the sale or other disposition of our common stock.

Dividends paid to you may also be subject to information reporting and U.S. backup withholding. You generally will be exempt from such backup withholding tax if you provide a properly executed Form W-8BEN or otherwise meet documentary evidence requirements for establishing that you are a non-U.S. holder or otherwise establish an exemption.

The gross proceeds from the disposition of our common stock may be subject to information reporting and backup withholding. If you sell your shares of our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then the U.S. backup withholding and information reporting requirements generally (except as provided in the following sentence) will not apply to that payment. However, U.S. information reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if you sell our common stock through a non-U.S. office of a broker that:

• is a U.S. person;

• derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States;

• is a “controlled foreign corporation” for U.S. tax purposes; or

• if a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons who in the aggregate hold more than 50% of the income or capital interests in the partnership, or the foreign partnership is engaged in a U.S. trade or business,

unless the broker has documentary evidence in its files that you are a non-U.S. person and various other conditions are met or you otherwise establish an exemption.

If you receive payments of the proceeds of a sale of our common stock to or through a U.S. office of a broker, the payment is subject to both U.S. backup withholding and information reporting unless you provide a properly executed Form W-8BEN certifying that you are a non-U.S. person or you otherwise establish an exemption.

You generally may obtain a refund of any amount withheld under the backup withholding rules that exceeds your income tax liability by filing a refund claim with the U.S. Internal Revenue Service.

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UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Pacific Growth Equities, LLC, Lazard Capital Markets LLC and Susquehanna Financial Group, LLLP are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, the number of shares of common stock indicated in the table below:

Name	Number of Shares
Morgan Stanley & Co. Incorporated
Pacific Growth Equities, LLC
Lazard Capital Markets LLC
Susquehanna Financial Group, LLLP
Total

The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions, and part to certain dealers at a price that represents a concession not in excess of $            a share under the public offering price. No underwriter may allow, and no dealer may re-allow, any concession to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of             additional shares of common stock at the public offering price, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. If the underwriters’ over-allotment option is exercised in full, the total price to the public would be $            , the total underwriters’ discounts and commissions would be $            and the total proceeds to us would be $            .

The following table shows the per share and total underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option.

	No Exercise	Full Exercise
Per share	$	$
Total	$	$

In addition, we estimate that the expenses of this offering other than underwriting discounts and commissions payable by us will be approximately $            million.

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The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.

We have applied to have our common stock listed on the NASDAQ Global Market under the symbol “NGSX.”

We, all of our directors and officers and holders of substantially all of our outstanding stock and securities exercisable for or convertible into shares of common stock have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we and they will not, during the period beginning on the date of this prospectus and ending 180 days thereafter:

• offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock;

• file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable for shares of our common stock; or

• enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock;

whether any such transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise.

Moreover, the 180-day restricted period described in the preceding paragraph will be extended if:

• during the last 17 days of the 180-day restricted period, we issue an earnings release or disclose material news or a material event relating to our company occurs; or

• prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day restricted period;

in which case the restrictions described in the immediately preceding sentence will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release, the disclosure of the material news or the occurrence of the material event.

The restrictions described in the immediately preceding two paragraphs do not apply to:

• the sale of shares to the underwriters;

• the issuance by us of shares of common stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing;

• transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of this offering of shares;

• the transfer of shares of common stock or securities convertible into or exchangeable or exercisable for common stock by gift, will or intestacy to a member of his or her immediate family or to a trust formed for the benefit of any such person, or by a trust to any beneficiary of such trust or to the estate of any such beneficiary, or by any beneficiary who is an individual by gift, will or intestacy to a member of his or her immediate family; or

• the transfer or distribution of shares of common stock or securities convertible into or exchangeable or exercisable for common stock by a partnership, limited liability company, trust, corporation or similar entity to its partners, members or stockholders, or to a retired partner, member or stockholder of such entity who retires after the date of this prospectus, or to the estate of any such retired partner, member or stockholder, or to the transfer by any partner, member or stockholder who is an individual of any common stock by gift, will or intestate succession to a member of his or her immediate family.

100

With respect to the last two bullets, it shall be a condition to the transfer or distribution that the transferee execute a copy of the lock-up agreement and no such transfer or distribution may include a disposition for value.

In order to facilitate this offering of common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or by purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. In addition, to stabilize the price of the common stock, the underwriters may bid for and purchase shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering if the syndicate repurchases previously distributed common stock to cover syndicate short positions or to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. Among the factors to be considered in determining the initial public offering price will be our future prospects and those of our industry in general; sales, earnings and other financial operating information in recent periods; and the price-earnings ratios, price-sales ratios and market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

Lazard Frères & Co. LLC referred this transaction to Lazard Capital Markets LLC and will receive a referral fee from Lazard Capital Markets LLC in connection therewith.

From time to time, Lazard Frères & Co. LLC has provided, and continues to provide, investment banking services to us.

101

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. Davis Polk & Wardwell, Menlo Park, California, is representing the underwriters. Certain members of, and investment partnerships comprised of members of, and persons associated with, Wilson Sonsini Goodrich & Rosati own an interest representing less than 1% of the shares our common stock.

EXPERTS

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2004 and 2005, and for each of the three years in the period ended December 31, 2005, and for the period from May 28, 1998 (inception) to December 31, 2005, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 450 Fifth Street, N.W., Room 1200, Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and web site of the SEC referred to above.

102

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders’ Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

NeurogesX, Inc.

We have audited the accompanying consolidated balance sheets of NeurogesX, Inc. (a development stage company) as of December 31, 2004 and 2005, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2005 and for the period from May 28, 1998 (inception) to December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As more fully described in Note 1 to the consolidated financial statements, NeurogesX, Inc. has incurred recurring net losses, negative cash flows from operations, and has a net capital deficiency.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NeurogesX, Inc. (a development stage company) at December 31, 2004 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 and for the period from May 28, 1998 (inception) to December 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, NeurogesX, Inc. adopted Financial Accounting Standards Board Staff Position No. 150-5, “Issuer’s Accounting Under Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares that are Redeemable” during the year ended December 31, 2005.

/s/    ERNST & YOUNG LLP

Palo Alto, California

February 5, 2007

F-2

NeurogesX, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

	December 31,						September 30, 2006			Pro Forma September 30, 2006
	2004			2005
							(unaudited)			(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,059		$	10,031		$	17,508		$	17,508
Short term investments		13,146			2,019			4,218			4,218
Restricted cash		500			—			—			—
Other current assets		411			402			422			422
Total current assets		20,116			12,452			22,148			22,148
Property and equipment, net		470			260			202			202
Other assets		43			10			152			152
	$	20,629		$	12,722		$	22,502		$	22,502
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,387		$	1,680		$	1,986		$	1,986
Accrued compensation		399			197			171			171
Accrued research and development		558			709			1,014			1,014
Other accrued expenses		134			290			577			577
Preferred stock warrant liability		—			736			4,076			—
Notes payable—current portion		282			—			1,794			1,794
Total current liabilities		2,760			3,612			9,618			5,542
Notes payable—non-current portion		—			—			7,776			7,776
Commitments and contingencies
Redeemable convertible preferred stock, $0.001 par value; 196,467,200, 292,467,200 and 292,467,200 shares authorized at December 31, 2004, 2005 and September 30, 2006, respectively; 90,497,400, 97,920,298, and 117,386,300 shares issued and outstanding at December 31, 2004 and 2005 and September 30, 2006, respectively; aggregate liquidation value of $66,373, $71,940 and $86,540 at December 31, 2004 and 2005 and September 30, 2006, respectively		80,766			93,690			113,050			—
Stockholders’ equity (deficit):
Common stock, $0.001 par value; 221,467,200, 329,500,000 and 329,500,000 shares authorized at December 31, 2004 and 2005 and September 30, 2006, respectively; 4,507,417, 4,786,453 and 5,766,911 shares issued and outstanding at December 31, 2004 and 2005, and September 30, 2006, respectively		—			—			1			118
Additional paid-in capital		1,932			1,589			3,536			120,545
Deferred stock compensation		(133	)		(79	)		(52	)		(52	)
Other comprehensive income (loss)		(19	)		(1	)		6			6
Deficit accumulated during the development stage		(64,677	)		(86,089	)		(111,433	)		(111,433	)
Total stockholders’ equity (deficit)		(62,897	)		(84,580	)		(107,942	)		9,184
	$	20,629		$	12,722		$	22,502		$	22,502

See accompanying notes.

F-3

NeurogesX, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(in thousands, except share and per share data)

	Year Ended December 31,									Nine Months Ended September 30,						Period from May 28, 1998 (inception) to September 30, 2006
	2003			2004			2005			2005			2006
										(unaudited)						(unaudited)
Operating expenses:
Research and development	$	9,679		$	16,492		$	11,847		$	7,766		$	14,318		$	63,480
General and administrative		3,796			5,113			1,715			1,080			3,458			18,750
Total operating expenses		13,475			21,605			13,562			8,846			17,776			82,230
Loss from operations		(13,475	)		(21,605	)		(13,562	)		(8,846	)		(17,776	)		(82,230	)
Interest income (expense), net		74			262			393			291			280			1,659
Other income (expense), net		1			—			58			3			191			163
Net loss before cumulative effect of change in accounting principle		(13,400	)		(21,343	)		(13,111	)		(8,552	)		(17,305	)		(80,408	)
Cumulative effect of change in accounting principle		—			—			(32	)		(32	)		—			(32	)
Net loss		(13,400	)		(21,343	)		(13,143	)		(8,584	)		(17,305	)		(80,440	)
Accretion of redeemable convertible preferred stock		(3,498	)		(6,782	)		(8,269	)		(6,027	)		(8,039	)		(30,993	)
Loss attributable to common stockholders	$	(16,898	)	$	(28,125	)	$	(21,412	)	$	(14,611	)	$	(25,344	)	$	(111,433	)
Net loss per common share—basic and diluted
Net loss before cumulative effect of change in accounting principle	$	(3.50	)	$	(4.95	)	$	(2.88	)	$	(1.88	)	$	(3.32	)
Cumulative effect of change in accounting principle		—			—			(0.01	)		(0.01	)		—
Net loss		(3.50	)	$	(4.95	)		(2.89	)		(1.89	)		(3.32	)
Accretion of redeemable convertible preferred stock		(0.92	)		(1.57	)		(1.81	)		(1.33	)		(1.54	)
Loss per share attributable to common stockholders	$	(4.42	)	$	(6.52	)	$	(4.70	)	$	(3.22	)	$	(4.86	)
Shares used to compute basic and diluted loss per common share attributable to common stockholders		3,823,129			4,315,928			4,552,573			4,539,147			5,209,674
Pro forma basic and diluted loss per common share attributable to common stockholders (unaudited)							$	(0.14	)				$	(0.15	)
Shares used to compute pro forma basic and diluted loss per common share attributable to common stockholders (unaudited)								95,998,006						113,397,664

See accompanying notes.

F-4

NeurogesX, Inc.

(A Development Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)

(in thousands, except share and per share data)

	Common Stock				Additional Paid-in Capital		Deferred Stock-Based Compensation			Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated during the Development Stage			Total Stockholders’ Equity (Deficit)
	Shares		Amount
Issuance of common stock to founders for cash at $0.001 per share in July 1998	3,000,000		$	—	$	3	$	—		$	—	$	—		$	3
Issuance of common stock for cash and services at $0.06 per share in June 2000	300,000			—		19		—			—		—			19
Accretion of redeemable convertible preferred stock	—			—		—		—			—		(378	)		(378	)
Net loss from May 28, 1998 (inception) to December 31, 2000	—			—		—		—			—		(1,115	)		(1,115	)
Balances at December 31, 2000	3,300,000			—		22		—			—		(1,493	)		(1,471	)
Issuance of common stock for cash at $0.06 per share in April 2001	57,500			—		4		—			—		—			4
Issuance of warrants in connection with loan in June 2001	—			—		14		—			—		—			14
Compensation expense relating to common stock issued to consultants	—			—		1		—			—		—			1
Accretion of redeemable convertible preferred stock	—			—		—		—			—		(793	)		(793	)
Net loss	—			—		—		—			—		(6,225	)		(6,225	)
Balances at December 31, 2001	3,357,500			—		41					—		(8,511	)		(8,470	)
Issuance of common stock to employees upon exercise of stock options at $0.06-$0.08 per share for cash	63,230			—		4		—			—		—			4
Issuance of common stock upon payment of note receivable	100,000			—		6		—			—		—			6
Issuance of warrants in connection with loan in May 2002	—			—		12		—			—		—			12
Stock-based compensation	—			—		4		(4	)		—		—			—
Compensation expense relating to common stock issued to employees and consultants	—			—		75		—			—		—			75
Accretion of redeemable convertible preferred stock	—			—		—		—			—		(3,234	)		(3,234	)
Net loss	—			—		—		—			—		(7,908	)		(7,908	)
Balances at December 31, 2002	3,520,730			—		142		(4	)		—		(19,653	)		(19,515	)
Issuance of common stock upon exercise of stock options for cash at $0.08 per share	55,395			—		4		—			—		—			4
Reclassification of unvested common stock at $0.08 per share	(5,688	)		—		—		—			—		—			—
Issuance of common stock upon payment of note receivable	300,000			—		25		—			—		—			25
Stock-based compensation	—			—		29		(29	)		—		—			—
Compensation expense relating to common stock issued to employees and consultants	—			—		188		—			—		—			188
Accretion of redeemable convertible preferred stock	—			—		—		—			—		(3,498	)		(3,498	)
Net loss	—			—		—		—			—		(13,400	)		(13,400	)
Balances at December 31, 2003 (carried forward)	3,870,437		$	—	$	388	$	(33	)	$	—	$	(36,551	)	$	(36,197	)

See accompanying notes.

F-5

NeurogesX, Inc.

(A Development Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)—(Continued)

(in thousands, except share and per share data)

	Common Stock				Additional Paid-in Capital			Deferred Stock-Based Compensation			Accumulated Other Comprehensive Income (Loss)			Deficit Accumulated during the Development Stage			Total Stockholders’ Equity (Deficit)
	Shares		Amount
Balances at December 31, 2003 (brought forward)	3,870,437		$	—	$	388		$	(33	)	$	—		$	(36,551	)	$	(36,196	)
Issuance of common stock upon exercise of stock options for cash at $0.8 - $0.40 per share	123,292			—		14			—			—			—			14
Issuance of common stock at $0.08 per share upon vesting of early exercised options	3,688			—		—			—			—			(1	)		(1	)
Issuance of common stock upon payment of note receivable	560,000			—		37			—			—			—			37
Shares cancelled upon recission of option exercise	(50,000	)		—		(8	)		—			—			—			(8	)
Stock-based compensation	—			—		100			(100	)		—			—			—
Compensation expense relating to common stock issued to employees and consultants	—			—		1,401			—			—			—			1,401
Accretion of redeemable convertible preferred stock	—			—		—			—			—			(6,782	)		(6,782	)
Comprehensive loss:
Unrealized gain/(loss) on investments	—			—		—			—			(19	)		—			(19	)
Net loss	—			—		—			—			—			(21,343	)		(21,343	)
Total comprehensive loss																		(21,362	)
Balances at December 31, 2004	4,507,417			—		1,932			(133	)		(19	)		(64,677	)		(62,897	)
Issuance of common stock upon exercise of stock options for cash at $0.13 - $0.17 per share	128,036			—		19			—			—			—			19
Issuance of common stock at $0.06 per share upon vesting of early exercised options	1,000			—		—			—			—			—			—
Reclassification of unvested common stock at $0.15 per share	(50,000	)		—		(7	)		—			—			—			(7	)
Registration cost of additional option pool shares	—			—		(1	)		—			—			—			(1	)
Issuance of commons stock upon payment of note receivable	200,000			—		20			—			—			—			20
Stock-based compensation	—			—		(48	)		48			—			—			—
Amortization of deferred stock-based compensation	—			—		—			6			—			—			6
Accretion of redeemable convertible preferred stock	—			—		—			—			—			(8,269	)		(8,269	)
Compensation expense relating to common stock issued to employees and consultants	—			—		(327	)		—			—			—			(327	)
Issuance of warrants in connection with Series C-2 in November 2005	—			—		1			—			—			—			1
Comprehensive loss:
Unrealized gain/(loss) on investments	—			—		—			—			18			—			18
Net loss	—			—		—			—			—			(13,143	)		(13,143	)
Total comprehensive loss																		(13,125	)
Balances at December 31, 2005	4,786,453			—		1,589			(79	)		(1	)		(86,089	)		(84,580	)
Issuance of common stock upon exercise of stock options for cash at $0.25 - $0.27 per share (unaudited)	342,210					49			—			—			—			49
Registration cost of additional option pool shares (unaudited)	—			—		(1	)		—			—			—			(1	)
Issuance of common stock at $0.08 - $0.15 per share upon vesting of early exercised options	25,748			—		4			—			—			—			4
Reclassification of unvested common stock at $0.20 per share	(37,500	)		—		(8	)		—			—			—			(8	)
Issuance of common stock upon payment of note receivable (unaudited)	650,000			1		59			(1	)		—			—			59
Stock-based compensation (unaudited)	—			—		(19	)		19			—			—			—
Amortization of deferred stock-based compensation (unaudited)	—			—		—			9			—			—			9
Accretion of redeemable convertible preferred stock (unaudited)	—			—		—			—			—			(8,039	)		(8,039	)
Compensation expense relating to common stock issued to employees and consultants (unaudited)	—			—		1,863			—			—			—			1,863
Comprehensive loss:
Unrealized gain/(loss) on investments (unaudited)	—			—		—			—			7			—			7
Net loss (unaudited)	—			—		—			—			—			(17,305	)		(17,305	)
Total comprehensive loss																		(17,298	)
Balances at September 30, 2006 (unaudited)	5,766,911		$	1	$	3,536		$	(52	)	$	6		$	(111,433	)	$	(107,942	)

See accompanying notes.

F-6

NeurogesX, Inc.

(A Development Stage Company)

Consolidated Statement of Cash Flows

	Year Ended December 31,									Nine Months Ended September 30,						Period from May 28, 1998 (inception) to September 30, 2006
	2003			2004			2005			2005			2006
										(unaudited)						(unaudited)
Operating activities
Net loss	$	(13,400	)	$	(21,343	)	$	(13,143	)	$	(8,584	)	$	(17,305	)	$	(80,440	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of deferred stock compensation		—			—			6			2			9			15
Depreciation and amortization		257			269			229			170			186			1,220
Amortization of debt issuance costs														39			39
Amortization of investment premiums		—			203			186			179			(10	)		379
Stock-based compensation		189			1,401			(326	)		(476	)		1,863			3,206
Loss on disposal of fixed assets		—			—			—			—			—			88
Revaluation of preferred stock warrant liability		—			—			(26	)		32			(199	)		(225	)
Changes in operating assets and liabilities:
Other current assets		(7	)		(308	)		9			99			(20	)		(421	)
Other assets		87			20			46			14			(149	)		(159	)
Accounts payable		632			705			293			(816	)		306			1,986
Accrued compensation		48			320			(202	)		(128	)		(26	)		171
Accrued research and development		195			335			151			193			305			1,014
Other accrued expenses		360			(418	)		147			703			63			561
Cash used in operating activities		(11,639	)		(18,816	)		(12,630	)		(8,612	)		(14,939	)		(72,566	)
Investing activities
Purchases of short-term investments		(16,546	)		(26,442	)		(4,877	)		(3,680	)		(5,457	)		(70,338	)
Proceeds from maturities of short-term investments		21,568			13,075			15,834			13,453			3,273			65,744
Change in restricted cash		—			(500	)		500			500			—			—
Purchases of property and equipment		(45	)		(53	)		(31	)		(26	)		(121	)		(1,503	)
Unrealized gain (loss) on investments		—			(1	)		1			1			3			3
Net cash provided by (used in) investing activities		4,977			(13,921	)		11,427			10,248			(2,302	)		(6,094	)
Financing activities
Proceeds from notes payable		—			—			—			—			10,000			11,083
Repayment of notes payable		(305	)		(293	)		(282	)		(282	)		—			(1,083	)
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs		—			35,868			5,419			—			14,611			85,889
Proceeds from issuance of common stock		28			43			38			18			106			279
Net cash provided by financing activities		(277	)		35,618			5,175			(264	)		24,717			96,168
Net increase (decrease) in cash and cash equivalents		(6,939	)		2,881			3,972			1,372			7,477			17,508
Cash and cash equivalents, beginning of period		10,117			3,178			6,059			6,059			10,031			—
Cash and cash equivalents, end of period	$	3,178		$	6,059		$	10,031		$	7,431		$	17,508		$	17,508
Supplemental cash flow information
Cash paid for interest	$	47		$	28		$	5		$	4		$	172		$	277
Noncash investing and financing activities
Accretion of redeemable convertible preferred stock	$	3,498		$	6,783		$	8,269		$	6,027		$	8,038		$	30,993
Reclassification of the unvested portion of common stock from early exercises of stock options to a liability	$	—		$	—		$	8		$	8		$	8		$	15
Vesting of common stock from early exercises of stock options	$	—		$	—		$	—		$	—		$	4		$	4
Warrants issued in connection with preferred stock or debt financing	$	—		$	—		$	762		$	—		$	3,539		$	4,301

See accompanying notes.

F-7

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

1. The Company

Nature of Operation and Basis of Preparation

NeurogesX, Inc. (the “Company”), is a biopharmaceutical company focused on developing and commercializing novel pain management therapies. The Company’s initial focus is on chronic peripheral neuropathic pain. The Company’s lead product candidate, NGX-4010, a synthetic capsaicin-based topical patch designed to manage pain associated with peripheral neuropathic pain conditions, has completed two pivotal phase 3 clinical trials that have met their primary endpoints, one in postherpetic neuralgia (“PHN”) and one in HIV distal sensory polyneuropathy (“HIV-DSP”).

The Company was founded as Advanced Analgesics, Inc. on May 28, 1998 and changed its name to NeurogesX, Inc. in September 2000. In January 2007, the Company’s board of directors approved the reincorporation of the Company into Delaware. The Company was previously a California corporation. The reincorporation was completed in February 2007. The Company is located in San Carlos, California. Since its inception, the Company has devoted substantially all of its efforts to the development of NGX-4010, establishing its offices, recruiting personnel, performing business and financial planning, and raising capital. Accordingly, the Company is considered to be in the development stage.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiary, NeurogesX UK Limited, which was incorporated as of June 1, 2004. NeurogesX UK Limited was established for the purposes of conducting work with drug regulatory authorities, e.g., clinical trials in the UK and marketing approval submission. The subsidiary has no assets other than the initial formation capital totaling one Pound Sterling.

Need to Raise Additional Capital

The Company has incurred significant net losses and has had negative cash flows from operations during each period from inception through September 30, 2006 and has a deficit accumulated during the development stage of $111.4 million at September 30, 2006. Management expects operating losses and negative cash flows to continue at least into 2009.

In January 2007, the Company received approximately $4,959,000 of cash upon the exercise of 6,611,386 shares of Series C2 preferred stock at $0.75 per share.

At September 30, 2006, management believed that currently available cash and cash equivalents and short term investments together with existing financing agreements would provide sufficient funds to enable the Company to meet its obligations through the first half of 2007. Management plans to continue to finance the Company’s operations with a combination of equity issuances, debt arrangements and revenues from collaborations with pharmaceutical companies, technology licenses and, in the longer term, product sales and royalties. If adequate funds are not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its development programs or obtain funds through collaborative arrangements with others that may require the Company to relinquish rights to certain of its technologies, product candidates or products that the Company would otherwise seek to develop or commercialize itself.

Unaudited Interim Results

The accompanying balance sheet as of September 30, 2006, the statements of operations and cash flows for the nine months ended September 30, 2005 and 2006 and for the period from May 28, 1998 (inception) to

F-8

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

September 30, 2006 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of September 30, 2006 and the results of its operations and cash flows for the nine months ended September 30, 2005 and 2006. The financial data and other information disclosed in these notes to the financial statements related to the nine-month periods and the period from May 28, 1998 (inception) to September 30, 2006 are unaudited. The results for the nine months ended September 30, 2006 are not necessarily indicative of results to be expected for the year ending December 31, 2006 or for any other interim period or for any future year.

Unaudited Pro Forma Stockholders’ Equity

In January 2007, the board of directors authorized management of the Company to file a registration statement with the Securities and Exchange Commission permitting the Company to sell shares of its common stock to the public. The unaudited pro forma stockholders’ equity as of September 30, 2006 and pro forma basic and diluted net loss per share attributable to common stockholders reflect the automatic conversion of all of the Series A, Series B, Series C and Series C2 redeemable convertible preferred stock outstanding at the time of the offering into 117,368,300 shares of common stock upon the closing of the Company’s initial public offering.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents and Short Term Investments

The Company invests its available cash balances in bank deposits, money market funds, U.S. government securities and other investment grade debt securities that have strong credit ratings. The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.

The Company accounts for its investments in marketable securities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Management determines the appropriate classification of securities at the time of purchase. To date, all marketable securities have been classified as available-for-sale, and are carried at fair value as determined based on quoted market prices with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company has classified all investments as short term.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary for available-for-sale securities, if any, are included in interest income and

F-9

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

expense and have not been significant to date. Realized gains and losses are computed on a specific identification basis. Interest and dividends are included in interest income.

Restricted Cash

In connection with the Company’s loan outstanding as of December 31, 2004, restricted cash in the amount of $500,000 was required to be maintained in the Company’s bank account throughout the duration of the loan. This restriction on cash was released with the Company’s repayment of the loan during 2005.

Concentrations of Credit Risk and Financial Instruments

The Company invests cash that is not currently being used for operational purposes in accordance with its investment policy. The policy allows for the purchase of low risk debt securities issued by U.S. government agencies and highly rated banks and corporations subject to certain concentration limits. The maturities of these securities may be no longer than 12 months. The Company believes that it has established guidelines for investment of its excess cash that maintains safety and liquidity through its policies on diversification and investment maturity.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and short term investments, available for sale investment securities in high-credit quality corporate debt, and debt securities issued by the U.S. government and government-sponsored enterprises. The carrying amounts of cash equivalents and available-for-sale investment securities approximate fair value due to their short term nature. The carrying amounts of borrowings under the Company’s debt facilities approximate fair value based on the current interest rates for similar borrowing arrangements.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized over the life of the lease or the useful economic life, whichever is shorter.

Long Lived Assets

The Company periodically assesses the impairment of long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If indicators of impairment exist, an impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment charge, if any, is determined based on the excess of the carrying value of the asset over fair value, with fair value determined based on an estimate of discounted cash flows or other appropriate measure of fair value. Since inception, the Company has not recorded any such impairment charges.

F-10

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

Research and Development

The Company expenses research and development costs as incurred. Research and development expenses include personnel and personnel related costs, costs associated with clinical trials including amounts paid to clinical research organizations and clinical investigators, manufacturing, process development and clinical product supply costs, research costs and other consulting and professional services, and allocated facility and related expenses.

Clinical Trials

The Company accrues and expenses costs for clinical trial activities performed by third parties, including clinical research organizations and clinical investigators, based upon estimates of the work completed over the life of the individual study in accordance with agreements established with contract research organizations and clinical trial sites. The Company determines these estimates through discussion with internal personnel and outside service providers as to progress or stage of completion of trials or services pursuant to contracts with numerous clinical trial centers and clinical research organizations and the agreed upon fee to be paid for such services. Costs of setting up clinical trial sites for participation in the trials are expensed immediately as research and development expenses. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trial and reduced by any initial payment made to the clinical trial site when the first patient is enrolled.

Stock-Based Compensation

Prior to January 1, 2006, the Company accounted for stock-based employee compensation arrangements using the intrinsic value method in accordance with the recognition and measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations, including the Financial Accounting Standards Board Interpretation (“FIN”) No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25 as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. In accordance with APB No. 25, stock-based compensation is calculated using the intrinsic value method and represents the difference between the deemed per share market price of the stock and the per share exercise price of the stock option. The resulting stock-based compensation is deferred and amortized to expense over the grant’s vesting period, which is generally four years. For variable awards, compensation expense is measured each period as the incremental difference between the fair value of the shares and the exercise price of the stock options. Compensation expense relating to variable awards is recorded using a graded vesting model in accordance with FIN No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, Share-Based Payments. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 107 relating to SFAS No. 123R. The Company has applied the provisions of SAB No. 107 in its adoption of SFAS No. 123R. Under SFAS No. 123R, stock-based awards, including stock options, are recorded at fair value as of the grant date and recognized to expense over the employee’s requisite service period (generally the vesting period) which the Company has elected to amortize on a straight-line basis. Because non-cash stock compensation expense is based on awards ultimately expected to vest, it has been reduced by an estimate for future forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The pro forma disclosures

F-11

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition and the Company will no longer be able to apply the minimum value method and instead must calculate the fair value of its employee stock options using an estimated volatility rate. The Company adopted the provisions of SFAS No. 123R using the prospective transition method. Under the prospective transition method, beginning January 1, 2006, compensation cost recognized includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of December 31, 2005, based on the intrinsic value in accordance with the provisions of APB No. 25, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. All awards granted, modified, or settled after the date of adoption are accounted for using the measurement, recognition, and attribution provisions of SFAS No. 123R. See Note 10 for further detail.

As a result of adopting SFAS No. 123R on January 1, 2006, the net loss for the nine months ended September 30, 2006 was higher by approximately $200,000 than if the Company had continued to account for stock-based compensation under APB No. 25. Basic and diluted loss per share applicable to common stockholders for the nine months ended September 30, 2006 would have been decreased by $0.04 if the Company had continued to account for stock-based compensation under APB No. 25. At December 31, 2005, unamortized deferred stock-based compensation was approximately $79,000.

At September 30, 2006, the Company had one share-based compensation plan, which is described in Note 10.

The Company accounts for equity instruments issued to nonemployees in accordance with the provisions of Emerging Issues Task Force (“EITF”) No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, using a fair-value approach. The equity instruments, consisting of stock options and warrants granted to lenders and consultants, are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest and are recognized as an expense over the term of the related financing or the period over which services are received.

The following table shows the assumptions used to compute stock-based compensation expense for stock options granted to nonemployees during the years ended December 31, 2003, 2004 and 2005 and for the nine months ended September 30, 2005 and 2006 using the Black-Scholes valuation model:

	Year Ended December 31,			Nine Months Ended September 30,
	2003	2004	2005	2005	2006
				(Unaudited)
Dividend yield	0%	0%	0%	0%	0%
Volatility	80%	80%	77%	77%	77%
Weighted-average expected life (in years)	8.0-9.7	5.6-10.0	4.6-9.9	4.8-9.9	3.8-9.8
Risk-free interest rate	3.3-4.3%	3.9-4.7%	4.0-4.5%	4.0-4.5%	4.76-5.16%

F-12

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

The Company recognized stock-based compensation expense as follows (in thousands):

	Year Ended December 31,							Nine Months Ended September 30,
	2003		2004		2005			2005			2006
								(Unaudited)
Research and development	$	34	$	252	$	(55	)	$	(76	)	$	342
General and administrative		154		1,149		(265	)		(398	)		1,530
Total stock-based compensation	$	188	$	1,401	$	(320	)	$	(474	)	$	1,872

Income taxes

The Company utilizes the liability method of accounting for income taxes as required by SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Currently, there is no provision for income taxes as the Company has incurred operating losses to date.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, requires components of other comprehensive income, including gains and losses on available-for-sale investments, to be included as part of total comprehensive income. The Company displays comprehensive loss and its components as part of the statement of stockholders’ equity (deficit). Comprehensive loss consists of net loss and unrealized gains and losses on available-for-sale investments.

Loss Per Share

Basic loss per share is calculated by dividing the loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period less the weighted average unvested common shares subject to repurchase and without consideration for common stock equivalents. Diluted loss per share is computed by dividing the loss applicable to common stockholders by the weighted-average number of common share equivalents outstanding for the period less the weighted average unvested common shares subject to repurchase and dilutive common stock equivalents for the period determined using the treasury-stock method. For purposes of this calculation, preferred stock, options to purchase common stock, warrants to purchase preferred stock and warrants to purchase common stock are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

F-13

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

The unaudited pro forma basic and diluted loss per share calculations assumes the conversion of all outstanding shares of redeemable convertible preferred stock into common stock using the as-if converted method, as if such conversion had occurred as of January 1, 2005 or the original issuance date, if later.

	Year Ended December 31,									Nine Months Ended September 30,
	2003			2004			2005			2005			2006
	(unaudited)
	(in thousands except share and per share data)
Historical
Numerator:
Net loss before cumulative effect of change in accounting principle	$	(13,400	)	$	(21,343	)	$	(13,111	)	$	(8,552	)	$	(17,305	)
Cumulative effect of change in accounting principle		—			—			(32	)		(32	)		—
Accretion of redeemable convertible preferred stock		(3,498	)		(6,782	)		(8,269	)		(6,027	)		(8,038	)
Loss applicable to common stockholders	$	(16,898	)	$	(28,125	)	$	(21,412	)	$	(14,611	)	$	(25,343	)
Denominator:
Weighted-average common shares outstanding		3,829,117			4,315,218			4,852,573			4,537,147			5,209,674
Less: Weighted-average unvested common shares subject to repurchase		(5,989	)		(3,290	)		(48,376	)		(39,126	)		(74,470	)
Denominator for basic and diluted loss per share applicable to common stockholders		3,823,129			4,315,928			4,552,573			4,539,147			5,209,674
Net loss per common share–basic and diluted
Net loss before cumulative effect of change in accounting principle	$	(3.50	)	$	(4.95	)	$	(2.88	)	$	(1.88	)	$	(3.32	)
Cumulative effect of change in accounting principle		—			—			(0.01	)		(0.01	)		—
Net loss		(3.50	)		(4.95	)		(2.89	)		(1.89	)		(3.32	)
Accretion of redeemable convertible preferred stock		(0.92	)		(1.57	)		(1.81	)		(1.33	)		(1.54	)
Basic and diluted loss per share applicable to common stockholders	$	(4.42	)	$	(6.52	)	$	(4.70	)	$	(3.22	)	$	(4.86	)
Pro Forma
Weighted average shares used in computation of net loss per common share - above								4,552,573						5,209,674
Pro forma adjustments to reflect assumed weighted-average effect of conversion of preferred stock (unaudited)								91,445,433						108,187,990
Shares used to compute pro forma basic and diluted net loss per share (unaudited)								95,998,006						113,397,664
Pro forma basic and diluted net loss per share (unaudited)							$	(0.14	)				$	(0.15	)
Historical outstanding dilutive securities not included in diluted loss per share applicable to common stockholders calculation
Redeemable convertible preferred stock		42,479,998			90,497,400			97,920,298			90,497,400			117,386,300
Options to purchase common stock		4,119,293			8,148,957			9,821,455			10,046,455			12,352,864
Warrants to purchase redeemable convertible preferred stock		53,600			53,600			3,765,049			53,600			14,338,050
Common stock subject to repurchase		5,688			2,000			51,000			51,252			62,752
		46,658,579			98,701,957			111,557,802			100,648,707			144,139,966

F-14

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

Cumulative Effect of Change in Accounting Principle

Effective July 1, 2005, the Company adopted the provisions of Financial Accounting Standards Board Staff Position (“FSP”) No. 150-5, Issuer’s Accounting under Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares that are Redeemable, an interpretation of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. Pursuant to FSP No. 150-5, freestanding warrants for shares that are either puttable or warrants for shares that are redeemable are classified as liabilities on the balance sheet at fair value. At the end of each reporting period, changes in fair value during the period are recorded as a component of other expense or interest expense if the warrant was issued pursuant to debt financing. Prior to July 1, 2005, the Company accounted for warrants for the purchase of preferred stock under EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

Upon adoption of FSP No. 150-5, the Company reclassified the fair value of its warrants to purchase shares of its redeemable convertible preferred stock from equity to a liability and recorded a cumulative effect charge of approximately $32,000 for the change in accounting principle. The Company recorded approximately $58,000 reflected as interest income for the decrease in fair value between July 1, 2005 and December 31, 2005. In the nine months ended September 30, 2006, the Company recorded approximately $248,000 of other income and $9,000 of interest income for the decrease in fair value between December 31, 2005 and September 30, 2006. The Company will continue to adjust the liabilities for changes in fair value until the earlier of the exercise of the warrants to purchase shares of mandatorily redeemable convertible preferred stock or the completion of a liquidation event, including the completion of an initial public offering, at which time the liabilities will be reclassified to stockholders’ equity (deficit).

The pro forma effect of the adoption of FSP 150-5 on the results of operations for fiscal 2003, 2004 and 2005, if applied retroactively, assuming FSP 150-5 had been adopted in these years, has not been disclosed as these amounts would not be materially different from the reported amounts.

Recently Issued Accounting Standards

In March 2004, the EITF reached a consensus on EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF No. 03-1 provides guidance regarding disclosures about unrealized losses on available-for-sale debt and equity securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. In September 2004, the EITF delayed the effective date for the measurement and recognition guidance. In June 2005, the FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment under EITF 03-1. The FASB directed the staff to issue FSP No. 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, superseding EITF 03-1. FSP No. 115-1 will replace the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF No. 03-1 with references to existing other-than-temporary impairment guidance. FSP No. 115-1 will be effective for other-than-temporary impairment analysis conducted in periods beginning after December 15, 2005. The Company does not expect that the adoption of FSP No. 115-1 will have a material impact on its results of operations and loss per share attributable to common stockholders.

F-15

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 requires retrospective application to prior periods’ financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS No. 154 did not have a material impact on the Company’s consolidated results of operations, financial position, or cash flows.

In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. FIN No. 48 requires that the Company recognize the impact of a tax position in the financial statements, if that position is more likely than not to be sustained on audit, based on the technical merits of the position. The provisions of FIN No. 48 are effective as of the beginning of the Company’s 2007 fiscal year, with the cumulative effect, if any, of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting this new standard.

3. Cash and Cash Equivalents, Short Term Investments and Restricted Cash

The following are summaries of cash, cash equivalents, short term investments and restricted cash (in thousands):

	Cost		Unrealized Gain/ (Loss)			Estimated Fair Value
As of December 31, 2004:
Cash	$	220	$	—		$	220
Money market funds		5,334		—			5,334
Commercial paper		745					745
Foreign corporate bonds		1,006		(1	)		1,005
Corporate debt securities		11,544		(17	)		11,527
Auction rate debt securities		875		(1	)		874
	$	19,724	$	(19	)	$	19,705
Reported as:
Cash and cash equivalents						$	6,059
Short term investments							13,146
Restricted cash							500
						$	19,705

F-16

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

	Cost		Unrealized Gain/ (Loss)			Estimated Fair Value
As of December 31, 2005:
Cash	$	31	$	—		$	31
Money market funds		9,105		—			9,105
Commercial paper		894		1			895
Corporate debt securities		1,457		(1	)		1,456
Auction rate debt securities		564		(1	)		563
	$	12,051	$	(1	)	$	12,050
Reported as:
Cash and cash equivalents						$	10,031
Short term investments							2,019
						$	12,050

	Cost		Unrealized Gain/(Loss)		Estimated Fair Value
As of September 30, 2006 (unaudited):
Cash	$	—	$	—	$	—
Money market funds		13,288		—		13,288
Commercial paper		4,216		3		4,219
Corporate debt securities		1,728		2		1,730
Auction rate debt securities		2,488		1		2,489
	$	21,720	$	6	$	21,726
Reported as:
Cash and cash equivalents					$	17,508
Short term investments						4,218
					$	21,726

At December 31, 2004 and 2005 and September 30, 2006, the contractual maturities of investments held were less than one year.

F-17

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

4. Property and Equipment

Property and equipment consists of the following (in thousands):

	December 31,						September 30, 2006
	2004			2005
							(unaudited)
Software	$	10		$	10		$	65
Leasehold improvements		718			718			720
Office furniture and equipment		243			249			270
Research equipment		39			39			39
Computer equipment		206			231			274
		1,216			1,247			1,368
Less: accumulated depreciation and amortization		(746	)		(987	)		(1,166	)
Property and equipment, net	$	470		$	260		$	202

Depreciation expense was $265,000, $241,000, $182,000 and $179,000 for the years ended December 31, 2004 and 2005 and for the nine months ended September 30, 2005 and 2006, respectively, and $1,213,000 for the period from May 28, 1998 (inception) to September 30, 2006.

5. Notes Payable

In July 2006, the Company entered into a venture loan agreement with two venture finance institutions for an aggregate note payable amount of $10,000,000 of which $5,000,000 was drawn in July 2006 and the remaining $5,000,000 was drawn in September 2006. These notes bear interest at 12.21% and 11.75%, respectively. The loan is collateralized by a first priority security interest in the tangible and intangible assets of the Company, excluding intellectual property. These notes require interest only repayment for the period from initial borrowing to October 2006 and July 2007, respectively. Principal and interest repayment commences in November 2006 and August 2007, respectively, for 30 months. As of September 30, 2006, outstanding principal under these notes was $10,000,000. A debt premium related to the initial fair value of warrants for 840,000 shares of Series C2 preferred stock issued in connection with the loan agreement of $469,000 was recorded. This amount will be amortized to interest expense over the term of the notes. As of September 30, 2006, $39,000 has been recognized as interest expense. In connection with the notes payable, the Company is restricted from paying cash dividends or distributions on any equity with the exception of dividends payable solely in capital stock. In connection with these notes, the Company issued warrants to the financial institutions (see Note 9).

In May 2002, the Company entered into a term loan facility with a financial institution to finance certain equipment and leasehold improvements. The original borrowing under this note totaled $1,000,000, was repayable over 42 months and bore interest at 6.25%. At December 31, 2004 approximately $282,000 was outstanding under this loan. The loan was repaid in March 2005. In connection with this loan, the Company issued warrants to the financial institution (see Note 9).

Interest expense recognized in connection with all loans was $47,000, $25,000, $3,000 for the years ended December 31, 2003, 2004 and 2005, respectively, $3,000 and $211,000 for the nine months ended September 30, 2005 and 2006, respectively, and $355,000 for the period from May 28, 1998 to September 30, 2006.

F-18

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

6. Commitments and Contingencies

Operating Leases

The Company leases its office facilities and certain office equipment under operating leases. The Company’s lease for its office facilities, as amended, expires on June 30, 2007. The Company is recognizing rent expense evenly over the lease term.

Rent expense under these noncancellable operating leases were $374,000, $391,000, and $236,000 for the years ended December 31, 2003, 2004 and 2005, respectively, $182,000 and $159,000 for the nine months ended September 30, 2005 and 2006, respectively, and $1,868,000 for the period from May 28, 1998 (inception) to September 30, 2006.

Future minimum payments under all noncancelable operating lease obligations are as follows as of December 31, 2005 (in thousands):

Year ended December 31,
2006	$	208
2007		112
2008		16
2009		16
2010 and thereafter		6
Total minimum lease payments	$	358

2006 Acquisition Bonus Plan

In November 2006, the board of directors approved the 2006 Acquisition Bonus Plan which provides for bonus payments to certain members of management in the event of a change of control. Payments under the plan are based on the percentage ownership of the company of such members. This plan is designed to allow for payment of a management bonus prior to the payment of the preferred stock liquidation preference in order to counteract the effect of such liquidation preference on the acquisition proceeds that members of management would receive from their holdings of common stock alone.

Guarantees and Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and generally provide for various indemnifications including indemnification from claims resulting from clinical trial activities and intellectual property matters. The Company’s liability under these agreements is unknown because it involves the potential for future claims that may be made against the Company, but have not yet been made. To date, the Company has not received any claims under its various indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

The Company, as permitted under Delaware law and in accordance with its bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was

F-19

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The Company may terminate the indemnification agreements with its officers and directors upon 90 days’ written notice, but termination will not affect claims for indemnification relating to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2006.

7. License Agreement

In October 2000 and as amended, the Company licensed certain patents from the University of California for high dose capsaicin for neuropathic pain. Under the terms of the agreement, the Company will be required to pay royalties on net sales of the licensed product up to a maximum of $1,000,000 per annum as well as a percentage of upfront and milestone payments resulting from sublicense of the Company’s rights under the agreement. The Company will also be required to make three annual installment payments in the event the Company completes an initial public offering or a merger or acquisition of the Company at the amount of 16,400 common shares multiplied by the initial public offering or merger price per common share. No amounts have been paid by the Company under the agreement through September 30, 2006.

8. Redeemable Convertible Preferred Stock

As of December 31, 2004 and 2005 and September 30, 2006, the authorized, issued and outstanding shares of redeemable convertible preferred stock (“preferred stock”) were as follows (in thousands):

	Redeemable Convertible Preferred Stock
	Series A		Series A-1		Series B		Series B-1		Series C		Series C-1		Series C2		Series C3		Total
As of December 31, 2004:	$	11,516	$	—	$	30,447	$	—	$	38,803	$	—	$	—	$	—	$	80,766
Shares authorized		12,034		12,034		31,200		31,200		55,000		55,000		—		—		196,468
Shares issued and outstanding		12,000		—		30,480		—		48,017		—		—		—		90,497
Aggregate liquidation preference	$	7,500		—	$	22,860		—	$	36,013		—		—		—	$	66,373
As of December 31, 2005:	$	12,674	$	—	$	33,516	$	—	$	42,740	$	—	$	4,760	$	—	$	93,690
Shares authorized		12,034		12,034		31,200		31,200		55,000		55,000		48,000		48,000		292,468
Shares issued and outstanding		12,000		—		30,480		—		48,017		—		7,423		—		97,920
Aggregate liquidation preference	$	7,500		—	$	22,860		—	$	36,013		—	$	5,567		—	$	71,940
As of September 30, 2006 (unaudited):	$	13,613	$	—	$	36,001	$	—	$	45,920	$	—	$	17,516	$	—	$	113,050
Shares authorized		12,034		12,034		31,200		31,200		55,000		55,000		48,000		48,000		292,468
Shares issued and outstanding		12,000		—		30,480		—		48,017		—		26,889		—		117,386
Aggregate liquidation preference	$	7,500		—	$	22,860		—	$	36,013		—	$	20,167		—	$	86,540

F-20

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

The carrying value of the Company’s Series A, Series B, Series C, and Series C2 preferred stock is increased by periodic accretion, using the effective interest method, so that the carrying amount will equal the redemption value at the redemption date. Upon completion of the Company’s initial public offering, the Series A, Series B, Series C and Series C2 preferred stock will convert into 117,386,300 shares of common stock and the related carrying value will be reclassified to additional paid-in capital on the Company’s balance sheet.

In November 2005, February 2006, May 2006 and August 2006, the Company issued a total of 26,888,900 shares of Series C2 preferred stock at $0.75 per share resulting in net cash proceeds of approximately $20,028,000. In February and March 2004, the Company issued 48,017,402 shares of Series C preferred stock at $0.75 per share, raising net cash proceeds of approximately $35,866,000

In January 2007, the Company issued a total of 6,611,386 shares of Series C2 preferred stock at $0.75 per share upon the exercise of warrants resulting in aggregate net cash proceeds of approximately $4,959,000.

The rights and features of the Company’s preferred stock are as follows:

Redemption

The Series A, Series B, Series C and Series C2 preferred stock is redeemable in three annual installments beginning June 30, 2008 unless a majority of the holders of the Series A, Series B, Series C and Series C2 preferred stock agree otherwise. The shares are redeemable at the original issuance price plus dividends of 10% compounded annually. The aggregate amount redeemable, including dividends compounded annually at 10% through June 30, 2010, will be $17,738,000 for Series A, $46,917,000 for Series B, $59,872,000 for Series C and $27,501,000 for Series C2 preferred stock.

Conversion and Voting Rights

The holder of each share of preferred stock has the right to one vote for each share of common stock into which it can be converted. Series A, Series B, Series C and Series C2 preferred stock are convertible at the stockholders’ option at any time into common stock on a one-for-one basis, subject to adjustment for anti-dilution. Conversions are automatic upon the closing of an underwritten public offering with aggregate offering proceeds exceeding $30,000,000 and an offering price of at least $150,000,000 (adjusted for any stock splits, stock dividends, recapitalization, or similar events) or upon agreement of the holders of at least two-thirds of the outstanding preferred stock.

Dividends

When and if declared by the Board of Directors, holders of Series A, Series B Series C and Series C2 preferred stock are entitled to receive non-cumulative dividends at the rate of $0.0625, $0.075, $0.075 and $0.075 per share, respectively. These dividends are to be paid in advance of any distributions to common stockholders. No dividends have been declared through September 30, 2006.

Liquidation

In the event of a liquidation or winding up of the Company, holders of Series A, Series B, Series C and Series C2 preferred stock shall have a liquidation preference of $0.625, $0.75, $0.75 and $0.75 per share, respectively, together with any declared but unpaid dividends, over holders of common shares. After payment of these preferential amounts, the remaining assets of the Company shall be distributed among the holders of the preferred and common stock pro rata based on the number of shares of common stock held (assuming conversion of preferred stock). The sale of substantially all of the assets of the Company is defined as a liquidation event.

F-21

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

9. Preferred Stock Warrant Liability

Significant terms and fair value of warrants to purchase preferred stock are as follows (in thousands except share and per share data):

Stock	Expiration Date	Exercise Price Per Share		Shares as of		Fair Value as of
				December 31, 2005	September 30, 2006	December 31, 2005		September 30, 2006
					(Unaudited)			(Unaudited)
Series A preferred	Later of (i) December 14, 2010, or (ii) 7 years after the closing of an initial public offering of the Company’s common stock	$	0.625	33,600	33,600	$	20	$	20
Series B preferred	Later of (i) May 1, 2012, or (ii) 7 years after the closing of an initial public offering of the Company’s common stock	$	0.75	20,000	20,000		12		12
Series C2 preferred	September 30, 2008	$	0.75	3,711,449	13,444,450		704		3,584
Series C2 preferred	July 4, 2013	$	0.75	—	840,000		—		460
Total				3,765,049	14,338,050	$	736	$	4,076

Warrants that do not expire on the closing of an initial public offering will convert into warrants to purchase shares of common stock at the applicable conversion rate for the related preferred stock (currently 1-for-1 for all series of preferred stock). Additionally, warrants to purchase 840,000 shares of Series C2 preferred stock will automatically exercise in the event of an acquisition of the Company.

In January 2007, the holders of 6,611,386 warrants to purchase C2 preferred stock exercised their warrants for an aggregate $4,959,000 in proceeds.

The fair value of the above warrants was determined using the Black-Scholes valuation model using the following assumptions:

	Year ended December 31, 2005	Nine months ended September 30, 2006
		(Unaudited)
Dividend yield	—	—
Volatility	54 - 77%	59 - 77%
Remaining contractual term (in years)	1.2 - 8.6	2.0- 7.0
Risk-free interest rate	4.2 - 4.4%	4.6 - 5.2%

F-22

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

10. Stockholders’ Equity (Deficit)

Common Stock

In connection with the Series C2 preferred stock financing, the Company committed to issue to a consultant a total of 333,334 shares of common stock from November 2005 through August 2006. As of September 30, 2006, these shares have not yet been issued. The value of such shares, $220,000, as of September 30, 2006, has been recognized as an issuance cost of the Series C2 preferred stock.

Deferred Stock-Based Compensation

During 2005 and 2006, the Company issued stock options to employees under the 2000 Stock Incentive Plan (“2000 Plan”) at amounts that, at the time of grant, the Board of Directors determined to be the fair value of the common stock, taking into consideration a number of factors including redemption requirements and liquidation preferences of the preferred stock. In conjunction with the initial public offering, the Board of Directors has reassessed the fair value of these grants given the anticipation of completing this offering and the timing of key events that occurred during the two years ended December 31, 2005 and the nine months ended September 30, 2006. In accordance with the requirements of APB No. 25, the Company has recorded deferred stock-based compensation for the differences between the exercise price of the stock options at the date of grant and the re-assessed fair value of the Company’s common stock on the date of grant. This deferred compensation is amortized to stock compensation expense on a straight-line basis over the period during which the options vest, generally four to five years. During the year ended December 31, 2005, the Company recorded deferred stock-based compensation related to these options of $67,000. Cancellations of $2,000 and $14,000 was recorded in the year ended December 31, 2005 and in the nine months ended September 30, 2006, respectively. Amortization of deferred stock-based compensation was $6,000 and $9,000 for the year ended December 31, 2005 and for the nine months ended September 30, 2006, respectively.

The expected future amortization expense for deferred stock compensation as of September 30, 2006 is as follows (in thousands):

2006 remaining period	$	3
2007		13
2008		13
2009		7
	$	36

Additionally, the Company has recorded deferred stock-based compensation of $16,000 related to the unvested portion of stock options exercised with full recourse promissory notes subject to variable accounting.

Restricted Stock Purchases

In 2000, prior to its adoption of the 2000 Plan, the Company issued 6,000,000 shares of its common stock to founders and employees of the Company under restricted stock purchase agreements of which 2,940,000 shares were for cash and 3,060,000 shares were in exchange for promissory notes. Under the terms of the restricted stock purchase agreements, shares purchased generally vested over a three-year period. Upon termination of

F-23

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

employment or services, unvested shares were subject to repurchase by the Company at the original issuance price. As of December 31, 2004 and 2005 and September 30, 2006, all shares had vested and are no longer subject to repurchase. The promissory notes bear interest at a rate of 6.1% and are repayable in four equal installments at the end of each year after the date of notes or within 30 days following termination of employment. The amount payable to the Company relating to these notes was $126,000 at December 31, 2004 and 2005 and September 30, 2006. Due to the extension of the repayment of these notes as authorized by the Company’s Board of Directors, in accordance with EITF No. 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44, these notes are treated as non-recourse in nature and are subject to variable accounting. The shares of common stock relating to the note receivables amounts outstanding are not deemed to be issued until the promissory note is repaid and therefore are excluded from the shares of common stock outstanding at each balance sheet date and the loss per share computation for each respective period. These total 2,100,000 shares as of December 31, 2004 and 2005 and September 30, 2006. Stock compensation expense relating to variable accounting for these promissory notes was $108,000, $622,000 and $(189,000) for the years ended December 31, 2003, 2004 and 2005, respectively, and $(252,000) and $735,000 for the nine-months ended September 30, 2005 and 2006, respectively, and $1,335,000 for the period from May 28, 1998 (inception) to September 30, 2006.

Notes Receivable from Stockholders

In April 2002, February 2003, April 2003 and March 2004 1,450,000, 30,000, 1,250,000 and 100,000 shares of common stock, respectively, were issued to employees of the Company upon exercise of stock options in exchange for full recourse promissory notes. These notes bear interest at a rate of 6.0%–6.1% compounded semi-annually, are repayable in five equal installments at the end of each year after the date of notes or within 30 days following termination of employment. The underlying shares generally vest over a four-year period. Unvested shares, which amount to 1,057,947 shares, 483,113 shares and 191,667 shares at December 31, 2004 and 2005 and September 30, 2006, are subject to repurchase by the Company at the original issue price. As the interest rate on each note is not deemed to represent a market rate at the time the option shares vest, in accordance with EITF No. 00-23, each award is subject to variable accounting until the award is vested or forfeited. The shares of common stock relating to the note receivables amounts outstanding are not deemed to be issued until the promissory note is repaid and therefore are excluded from the shares of common stock outstanding at each balance sheet date and the earnings per share computation for each respective period. Shares excluded total 2,813,333 shares, 2,613,333 shares and 1,963,333 shares as of December 31, 2004 and 2005 and September 30, 2006, respectively. Stock compensation expense relating to variable accounting for these promissory notes was $79,000, $695,000 and $(147,000) for the years ended December 31, 2003, 2004 and 2005, respectively, and $(198,000) and $772,000 for the nine-months ended September 30, 2005 and 2006, respectively, and $1,410,000 for the period from May 28, 1998 (inception) to September 30, 2006.

Rescission of Stock Option Exercises

During 2004, the Company allowed the rescission of two stock option exercises by an executive and a director for a total of 350,000 shares of common stock. In accordance with EITF No. 00-23 and EITF Topic D-93, the rescissions of the exercises were treated as though each award was regranted on the respective dates of the rescissions and thus the awards were subject to variable accounting. Additional stock compensation associated with the rescission based on EITF Topic D-93 was not material. Stock compensation expense relating to variable accounting for these options was $66,000 and $(6,000) for the years ended December 31, 2004 and

F-24

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

2005, respectively, and $(17,000) and $113,000 for the nine-months ended September 30, 2005 and 2006, respectively, and $173,000 for the period from May 28, 1998 (inception) to September 30, 2006.

2000 Stock Incentive Plan

The Company’s 2000 Plan provides for the granting of incentive and nonstatutory stock options by the board of directors to employees, officers, directors, and consultants of the Company. Incentive stock options may be granted with exercise prices not less than estimated fair value, and nonstatutory stock options may be granted with an exercise price of not less than 85% of the estimated fair value of the common stock on the date of grant, as determined by the board of directors. Options granted under the 2000 Plan expire no later than 10 years from the date of grant. Options granted and shares underlying stock purchase rights issued under the 2000 Plan vest over periods determined by the board of directors, generally over four to six years. Stock purchased under stock purchase rights is subject to a repurchase option by the Company upon termination of the purchaser’s employment or services. The repurchase right lapses over a period of time as determined by the board of directors. The vesting of certain options accelerate upon the achievement of specified milestones. The 2000 Plan terminates automatically 10 years after its adoption by the board of directors.

The 2000 Plan allows for the early exercise of options prior to vesting. In accordance with EITF No. 00-23, stock options granted or modified after March 21, 2002 that are subsequently exercised for cash prior to vesting are not deemed to be issued until those shares vest. Since March 21, 2002, the Company has issued an aggregate of 604,000 shares of common stock pursuant to the early exercise of stock options. As of December 31, 2004 and 2005 and the nine months ended September 30, 2006, there were 2,000, 76,000 and 87,752, respectively, of these shares issued subject to the Company’s right to repurchase at the original issuance price. The amounts received in exchange for these shares have been recorded as a liability for early exercise of stock options in the accompanying balance sheets and will be reclassified into equity as the shares vest.

F-25

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

The following table summarizes stock option activity:

	Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted-Average Exercise Price
Balance at inception (May 28, 1998)	—		—			—
Shares authorized	1,640,000		—			—
Options granted	(580,000	)	580,000		$	0.06
Options canceled	5,000		(5,000	)	$	0.06
Balance at December 31, 2000	1,065,000		575,000		$	0.06
Options granted	(491,667	)	491,667		$	0.06
Options canceled	75,000		(75,000	)	$	0.06
Balance at December 31, 2001	648,333		991,667		$	0.06
Shares authorized	1,200,000		—			—
Options granted	(1,731,333	)	1,731,333		$	0.08
Options exercised	—		(63,230	)	$	0.07
Options canceled	181,770		(181,770	)	$	0.07
Balance at December 31, 2002	298,770		2,478,000		$	0.07
Shares authorized	2,000,000		—			—
Options granted	(1,724,000	)	1,724,000		$	0.09
Options exercised	—		(49,707	)	$	0.08
Options canceled	33,000		(33,000	)	$	0.08
Balance at December 31, 2003	607,770		4,119,293		$	0.08
Shares authorized	6,500,000		—			—
Options granted	(5,682,541	)	5,682,541		$	0.19
Options exercised	—		(76,980	)	$	0.11
Options canceled	1,575,897		(1,575,897	)	$	0.18
Balance at December 31, 2004	3,001,126		8,148,957		$	0.16
Shares authorized	2,375,000		—			—
Options granted	(3,222,557	)	3,222,557		$	0.15
Options exercised	—		(279,036	)	$	0.09
Options canceled	1,271,023		(1,271,023	)	$	0.14
Balance at December 31, 2005	3,424,592		9,821,455		$	0.14
Shares authorized	2,500,000		—			—
Options granted	(4,278,100	)	4,278,100		$	0.25
Options exercised	—		(980,458	)	$	0.09
Options canceled	766,233		(766,233	)	$	0.17
Balance at September 30, 2006	2,412,725		12,352,864		$	0.18

F-26

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

Details of the Company’s stock options by exercise price at December 31, 2005 is as follows:

Range of Exercise Prices	Outstanding at December 31, 2005	Weighted Average Remaining Contractual  Term (years)	Weighted Average Exercise Price		Exercisable at December 31, 2005	Weighted Average Exercise Price
$0.06 - $0.08	2,952,707	6.78	$	0.08	2,273,059	$	0.08
$0.12 -   0.15	2,837,557	8.58		0.13	1,268,228		0.13
$0.17 -   0.25	3,946,191	8.71		0.18	531,535		0.19
$0.40	85,000	8.44		0.40	32,708		0.40
	9,821,455	8.21		0.14	4,105,530		0.11

Details of the Company’s stock options by exercise price at September 30, 2006 is as follows:

Range of Exercise Prices	Outstanding at September 30, 2006	Weighted Average Remaining Contractual Term (years)	Weighted Average Exercise Price		Exercisable at September 30, 2006	Weighted Average Exercise Price
$0.06 - $0.08	2,099,959	6.09	$	0.08	2,097,122	$	0.08
$0.12 -   0.15	2,546,989	8.16		0.13	1,393,423		0.13
$0.17 -   0.25	6,937,166	8.60		0.21	2,336,290		0.23
$0.27 -   0.40	768,750	9.69		0.29	732,395		0.29
	12,352,864	8.23		0.18	6,559,230		0.22

The weighted-average fair value of the options granted during the years ended December 31, 2003, 2004 and 2005 was $0.06, $0.13 and $0.12 per share, respectively. The weighted-average fair value of the options granted during the nine months ended September 30, 2005 and 2006 was $0.12 and $0.34 per share, respectively. The weighted-average fair value of the options granted below deemed market value during the nine months ended September 30, 2006 is $0.34.

Adoption of SFAS No. 123R

On January 1, 2006, the Company adopted the provisions of SFAS No. 123R, Share-Based Payment. SFAS No. 123R establishes accounting for stock-based awards made to employees and directors. Accordingly, stock-based compensation expense is measured at grant date, based on the fair value of the award, and is recognized as expense over the remaining requisite service period. Total stock-based compensation of $200,000 was recorded during the nine months ended September 30, 2006.

F-27

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

The fair value for the Company’s employee stock options was estimated at the date of grant using the Black-Scholes valuation model with the following assumptions:

	Nine months ended September 30, 2006
Expected volatility	77	%
Expected term (years)	6.0
Risk-free interest rate	4.7	%
Dividend yield	0	%

The Company’s computation of expected volatility for the nine months ended September 30, 2006 is based on an average of the historical volatility of a peer-group of similar companies. The Company’s computation of expected term in the nine months ended September 30, 2006 utilizes the simplified method in accordance with SAB No. 107. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company recognizes stock-based compensation expense for the fair values of these awards on a straight-line basis over the requisite service period of each of these awards. Stock compensation expense relating to stock options with acceleration of vesting dependent upon the achievement of milestones is recognized based upon the Company’s evaluation of the probability of achievement of each respective milestone and the related estimated date of achievement.

As of September 30, 2006, the weighted-average remaining contractual term for outstanding stock options and for exerciseable stock options was 8.7 years and 8.0 years, respectively, and the intrinsic value of these options was $6,189,000 and $3,293,000, respectively. The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the Company’s re-assessed stock price of $0.66 per share as of September 30, 2006, which would have been received by the option holders had all option holders exercised their options on September 30, 2006. This amount changes based on the fair market value of the Company’s stock. Total intrinsic value of options exercised for the nine months ended September 30, 2006 was $39,000. During the nine months ended September 30, 2006, the Company granted 4,278,100 stock options with an estimated total grant-date fair value of $0.34 per share.

Cash received from option exercises and repayment of notes receivable by stockholders under all share-based payment arrangements including repayments on notes receivable from stockholders for the nine months ended September 30, 2005 and 2006 was $19,000 and $108,000, respectively. Because of the Company’s net operating losses, the Company did not realize any tax benefits for the tax deductions from share-based payment arrangements during each of the quarters ended September 30, 2006 and 2005.

Stock Options Granted to Nonemployees

For the years ended December 31, 2004 and 2005 and the nine months ended September 30, 2006, the Company issued options in conjunction with various consulting agreements to purchase 86,834 and 73,418 and 202,216 shares of common stock, respectively, at exercise prices of $0.06 to $0.40 per share. During the period from May 28, 1998 (inception) to September 30, 2006, the Company granted options to purchase 467,468 shares of common stock to consultants. The options generally vest over a period of up to four years. Compensation expense related to the fair value of these options totaled $2,000, $19,000 and $18,000 for the years ended

F-28

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

December 31, 2003, 2004 and 2005, respectively, and $11,000 and $43,000 for the nine months ended September 30, 2005 and 2006, respectively, and $84,000 for the period from May 28, 1998 (inception) to September 30, 2006.

Shares Reserved for Future Issuances

The Company had reserved shares of common stock for future issuances as follows:

	December 31, 2005	September 30, 2006
		(unaudited)
Redeemable convertible preferred stock (assuming conversion)	97,920,298	117,386,300
Warrants to purchase redeemable convertible preferred stock (assuming conversion)	3,765,049	14,338,050
2000 Stock Incentive Plan:
Shares available for grant	3,424,592	2,412,725
Options outstanding	10,351,858	12,883,267
Common stock to be issued upon repayment of notes receivable from stockholders	4,713,333	4,063,333
	120,175,130	151,083,675

11. Income Taxes

There is no provision for income taxes because the Company has incurred operating losses. Deferred income taxes reflect the net tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets are as follows (in thousands):

	December 31,
	2004			2005
Net operating losses	$	7,743		$	10,449
Research credits		2,235			3,342
Capitalized research and development		10,720			14,210
Other		665			757
Total deferred tax assets		21,363			28,758
Valuation allowance		(21,363	)		(28,758	)
Net deferred tax assets	$	—		$	—

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $7,395,000 during 2005.

F-29

NEUROGESX, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of September 30, 2006, for the nine months ended September 30, 2006 and 2005, and for the period from May 28, 1998 (inception) to September 30, 2006 is unaudited)

As of December 31, 2005, the Company had net operating loss carryforwards for federal income tax purposes of $25,011,000 which expire beginning in the year 2010 and federal research and development tax credits of $1,973,000 which expire beginning in the year 2010.

As of December 31, 2005, the Company had net operating loss carryforwards for state income tax purposes of $29,501,000 which expire beginning in the year 2010 and state research and development tax credits of $2,106,000 which do not expire.

Utilization of the Company’s net operating loss and credit carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitation could result in the expiration of the net operating loss and credits before utilization.

12. Subsequent Events

In January 2007, the Company’s board of directors approved the adoption of the Company’s 2007 Stock Plan and 2007 Employee Stock Purchase Plan to become effective on the effectiveness of the Company’s initial public offering.

In January 2007, the Company’s board of directors forgave notes receivable of $355,000, including accrued interest, from current and certain former officers of the Company.

F-30

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth all expenses to be paid by the registrant, other than estimated underwriting discounts and commissions, in connection with this offering. All amounts shown are estimates except for the registration fee, the NASD filing fee and NASDAQ listing fee.

	Amount to be Paid
SEC registration fee	$	7,383
NASD filing fee		7,400
NASDAQ listing fee		100,000
Printing and engraving		250,000
Legal fees and expenses		900,000
Accounting fees and expenses		950,000
Blue sky fees and expenses (including legal fees)		10,000
Transfer agent and registrar fees		5,000
Miscellaneous		70,217
Total	$	2,300,000

Item 14. Indemnification of Officers and Directors.

On completion of this offering, our amended and restated certificate of incorporation will contain provisions that eliminate, to the maximum extent permitted by the General Corporation Law of the State of Delaware, the personal liability of directors and executive officers for monetary damages for breach of their fiduciary duties as a director or officer. Our amended and restated certificate of incorporation and bylaws will provide that we shall indemnify our directors and executive officers and may indemnify our employees and other agents to the fullest extent permitted by the General Corporation Law of the State of Delaware.

Sections 145 and 102(b)(7) of the General Corporation Law of the State of Delaware provide that a corporation may indemnify any person made a party to an action by reason of the fact that he or she was a director, executive officer, employee or agent of the corporation or is or was serving at the request of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of an action by or in right of the corporation, no indemnification may generally be made in respect of any claim as to which such person is adjudged to be liable to the corporation.

We have entered into indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated certificate of incorporation and bylaws, and intend to enter into indemnification agreements with any new directors and executive officers in the future.

We have purchased and intend to maintain insurance on behalf of any person who is or was a director or officer of our company against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to certain exclusions.

II-1

The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification by the underwriters of us and our executive officers and directors, and by us of the underwriters, for certain liabilities, including liabilities arising under the Securities Act.

See also the undertakings set out in response to Item 17 herein.

Item 15. Recent Sales of Unregistered Securities.

The following sets forth information regarding all securities sold by us since October 1, 2003.

Preferred Stock

In February and March 2004, we sold an aggregate of 48,017,402 shares of series C preferred stock to investors at a price of $0.75 per share for an aggregate purchase price of $36,013,051.

In November 2005, we sold an aggregate of 26,888,900 shares of series C2 preferred stock to investors at a price of $0.75 per share for an aggregate purchase price of $20,166,675.

The sales of the above securities were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering. All recipients were either accredited or sophisticated investors, as those terms are defined in the Securities Act and the regulations promulgated thereunder. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.

Stock Options and Stock Purchase Rights

Since January 1, 2004, we granted options to purchase an aggregate of 14,795,698 shares of common stock to employees, consultants and directors under our 2000 Stock Incentive Plan at exercise prices ranging from $0.13 to $1.00 per share for an aggregate exercise price of $3,838,392.

Since January 1, 2004, we issued an aggregate of 668,579 shares of common stock to employees, consultants and directors pursuant to the exercise of stock options and stock purchase rights or the subsequent transfer of such shares issued pursuant to the exercise of stock options and stock purchase rights under our 2000 Stock Incentive Plan at exercise prices ranging from $0.08 to $0.25 per share for an aggregate consideration of $95,694.

The sales of the above securities were deemed to be exempt from registration in reliance in Rule 701 promulgated under Section 3(b) under the Securities Act as transactions pursuant to a compensatory benefit plan or a written contract relating to compensation.

Warrants

In December 2005, July 2006 and August 2006, we issued warrants to purchase an aggregate of 14,284,450 shares of Series C2 preferred stock at an exercise price of $0.75 per share for an aggregate exercise price of $10,713,338.

The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving any

II-2

public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sale of these securities was made without general solicitation or advertising.

The sales of the above securities were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering. All recipients were either accredited or sophisticated investors, as those terms are defined in the Securities Act and the regulations promulgated thereunder. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits.

Exhibit Number	Exhibit Title
1.1*	Form of Underwriting Agreement.
3.1	Amended and Restated Certificate of Incorporation.
3.1.1	Form of Amended and Restated Certificate of Incorporation, to be effective upon closing of the offering.
3.2	Bylaws.
3.2.1	Form of Amended and Restated Bylaws, to be effective upon closing of the offering.
4.1*	Form of Specimen Stock Certificate.
4.2	Third Amended and Restated Investors’ Rights Agreement by and between Registrant and certain stockholders, dated as of November 14, 2005.
4.3	Warrant to Purchase Series A Preferred Stock by and between Registrant and Silicon Valley Bank, dated as of December 14, 2000.
4.4	Warrant to Purchase Series B Preferred Stock by and between Registrant and Silicon Valley Bank, dated as of May 1, 2002.
4.5	Warrant to Purchase Shares of Series C2 Preferred Stock by and between Registrant and Horizon Technology Funding Company II LLC, dated as of July 7, 2006.
4.6	Warrant to Purchase Shares of Series C2 Preferred Stock by and between Registrant and Horizon Technology Funding Company II LLC, dated as of July 7, 2006.
4.7	Warrant to Purchase Shares of Series C2 Preferred Stock by and between Registrant and Oxford Finance Corporation, dated as of July 7, 2006.
4.8	Form of First Warrant to Purchase Series C2 Preferred Stock.
4.9	Form of Second Warrant to Purchase Series C2 Preferred Stock.
5.1*	Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1	2000 Stock Incentive Plan.
10.2	2007 Stock Plan.
10.3	2007 Employee Stock Purchase Plan.
10.4	Form of Indemnification Agreement entered into between the Registrant and each of its directors and officers.

II-3

Exhibit Number	Exhibit Title
10.5	Lease Agreement between Registrant and Three Sisters Ranch Enterprises LLC, dated as of August 11, 2000.
10.5.1	First Amendment to Lease Agreement between Registrant and Three Sisters Ranch Enterprises LLC, dated as of December 10, 2001.
10.5.2	Second Amendment to Lease Agreement between Registrant and Three Sisters Ranch Enterprises LLC, dated as of March 3, 2005.
10.5.3	Third Amendment to Lease Agreement between Registrant and Black Mountain Holdings, LLC (f/k/a) Three Sisters Ranch Enterprises LLC, dated as of November 15, 2006.
10.6	Exclusive License Agreement between Registrant and The Regents of the University of California, dated as of November 1, 2000.
10.6.1	Amendment Number One to Exclusive License Agreement between Registrant and The Regents of the University of California, dated as of November 1, 2001.
10.6.2	Amendment Number Two to Exclusive License Agreement between Registrant and The Regents of the University of California, dated as of December 2, 2003.
10.6.3	Amendment Number Three to Exclusive License Agreement between Registrant and The Regents of the University of California, dated as of July 29, 2004.
10.7†	Clinical Supply, Development and License Agreement between Registrant and LTS Lohmann Therapie-Systeme AG, dated as of January 15, 2004.
10.8	Manufacturing and Supply Agreement by and between Registrant and Contract Pharmaceuticals Limited Canada, dated as of December 22, 2005.
10.9	Executive Employment Agreement by and between Registrant and Anthony DiTonno, dated as of July 15, 2004.
10.10	Executive Employment Agreement by and between Registrant and Stephen Ghiglieri, dated as of July 15, 2004.
10.11	Executive Employment Agreement by and between Registrant and Karen Harder, dated as of July 15, 2004.
10.12	Executive Employment Agreement by and between Registrant and Keith Bley, dated as of July 15, 2004.
10.13	Executive Employment Agreement by and between Registrant and Michael Markels, dated as of June 2, 2006.
10.14	Executive Employment Agreement by and between Registrant and Jeffrey Tobias, dated as of November 30, 2005.
10.15	Severance Agreement and Release by and between Registrant and Wendye Robbins, dated as of February 12, 2004.
21.1	List of Subsidiaries.
23.1	Consent of Independent Registered Public Accounting Firm.
23.2*	Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1).
24.1	Power of Attorney (see page II-7).

* To be filed by amendment.

† Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from this Registration Statement and have been filed separately with the Securities and Exchange Commission.

II-4

(b) Financial Statement Schedules.

All schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or notes thereto.

Item 17. Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification by the registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act of 1933, shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Carlos, County of San Mateo, State of California, on the 7th day of February, 2007.

NeurogesX, Inc.
By:	/s/    Anthony A. DiTonno
	Anthony A. DiTonno President and Chief Executive Officer; Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Anthony DiTonno and Stephen Ghiglieri, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/    Anthony A. DiTonno         Anthony A. DiTonno	President and Chief Executive Officer; Director (principal executive officer)	February 7, 2007
/s/    Stephen F. Ghiglieri         Stephen F. Ghiglieri	Chief Financial Officer (principal financial officer and principal accounting officer)	February 7, 2007
/s/    Jean-Jacques Bienaimé         Jean-Jacques Bienaimé	Director	February 7, 2007
/s/    Neil M. Kurtz         Neil M. Kurtz	Director	February 7, 2007
/s/    Alix Marduel         Alix Marduel	Director	February 7, 2007
/s/    Robert T. Nelsen         Robert T. Nelsen	Director	February 7, 2007
/s/    Daniel K. Turner, III         Daniel K. Turner, III	Director	February 7, 2007

II-6

EX-3.1

EXHIBIT 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

NEUROGESX, INC.

NeurogesX, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), certifies that:

A. The name of the Corporation is NeurogesX, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 9, 2007.

B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware and has been duly approved by the written consent of the stockholders of the Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware.

C. The text of the Certificate of Incorporation is amended and restated to read as set forth in EXHIBIT A attached hereto.

IN WITNESS WHEREOF, NeurogesX, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by Anthony DiTonno, a duly authorized officer of the Corporation, on January 11, 2007.

/s/ Anthony DiTonno

Anthony DiTonno,

President and Chief Executive Officer

EXHIBIT A

ARTICLE I

The name of the corporation (hereinafter called the “Corporation”) is NeurogesX, Inc.

ARTICLE II

The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE III

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name of the registered agent at such address is The Corporation Trust Company.

ARTICLE IV

A. The Corporation is authorized to issue two classes of shares to be designated, respectively, Preferred Stock (“Preferred Stock”) and Common Stock (“Common Stock”). The total number of shares of capital stock that the Corporation is authorized to issue is 621,967,200. The total number of shares of Preferred Stock this Corporation shall have authority to issue is 292,467,200. The total number of shares of Common Stock this Corporation shall have authority to issue is 329,500,000. The Preferred Stock shall have a par value of $0.0001 per share and the Common Stock shall have a par value of $0.0001 per share.

B. The first series of Preferred Stock shall be designated “Series A Preferred Stock” and shall consist of 12,033,600 shares, the second series of Preferred Stock shall be designated “Series A1 Preferred Stock” and shall consist of 12,033,600 shares, the third series of Preferred Stock shall be designated “Series B Preferred Stock” and shall consist of 31,200,000 shares, the fourth series of Preferred Stock shall be designated “Series B1 Preferred Stock” and shall consist of 31,200,000 shares, the fifth series of Preferred Stock shall be designated “Series C Preferred Stock” and shall consist of 55,000,000 shares, the sixth series of Preferred Stock shall be designated “Series C1 Preferred Stock” and shall consist of 55,000,000 shares, the seventh series of Preferred Stock shall be designated “Series C2 Preferred Stock” and shall consist of 48,000,000 shares and the eighth series of Preferred Stock shall be designated “Series C3 Preferred Stock” and shall consist of 48,000,000 shares.

C. The powers, preferences, rights, restrictions, and other matters relating to the Preferred Stock are as follows:

1. Dividends.

(a) The holders of the Series A, Series A1, Series B, Series B1, Series C and Series C1, Series C2 and Series C3 Preferred Stock shall be entitled to receive dividends at the rate of $0.0625, $0.0625, $0.075, $0.075, $0.075, $0.075, $0.075 and $0.075, respectively, per share of Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum (the “Preferred Dividend”) payable out of funds legally available therefor. Such dividends shall be payable only when, as, and if declared by the Board of Directors and shall be noncumulative.

(b) No dividends or other distributions (other than those payable solely in the Common Stock of the Corporation or for which an adjustment provision is otherwise made pursuant to Section C.4) shall be paid on any Common Stock of the Corporation during any fiscal year of the Corporation until dividends in the total amount of $0.0625, $0.0625, $0.075, $0.075, $0.075, $0.075, $0.075 and $0.075, respectively, per share (as adjusted for stock dividends, combinations or splits with respect to such shares) on the Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 and Series C3 Preferred Stock shall have been paid or declared and set apart during such fiscal year. Dividends shall not be cumulative and no right to such dividends shall accrue to holders of Preferred Stock or Common Stock unless declared by the Board of Directors.

(c) After the foregoing dividends on the Preferred Stock shall have been paid, then the Corporation may (when, as and if declared by the Board of Directors) declare and distribute in such year dividends among the holders of Preferred Stock and the holders of Common Stock pro rata based on the number of shares of Common Stock held by each, determined on an as-if-converted basis (assuming full conversion of all such Preferred Stock) as of the record date with respect to the declaration of such dividends.

2. Liquidation Preference.

(a) Preference Amount.

(i) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series C, Series C1, Series C2 and Series C3 Preferred Stock shall be entitled to receive, on a pari passu basis and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Series A, Series A1, Series B or Series B1 Preferred Stock or Common Stock by reason of their ownership thereof, the amounts of $0.75 (the “Original Series C Issue Price”), $0.75 (the “Original Series C1 Issue Price”), $0.75 (the “Original Series C2 Issue Price”) and $0.75 (the “Original Series C3 Issue Price”) per share of Series C, Series C1, Series C2 and Series C3 Preferred Stock, respectively, in each case as adjusted for splits, dividends or combinations with respect to such shares, plus all declared but unpaid dividends on each such share then held by them. If the assets and funds thus distributed among the holders of the Series C, Series C1, Series C2 and Series C3 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series C, Series C1, Series C2

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and Series C3 Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.

(ii) After the payment to the holders of the Series C, Series C1, Series C2 or Series C3 Preferred Stock of the full preferential amounts so payable to them pursuant to Section C.2(a)(i) above, the holders of the Series A, Series A1, Series B and Series B1 Preferred Stock shall be entitled to receive, on a pari passu basis and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock by reason of their ownership thereof, the amounts of $0.625 (the “Original Series A Issue Price”), $0.625 (the “Original Series A1 Issue Price”), $0.75 (the “Original Series B Issue Price”) and $0.75 (the “Original Series B1 Issue Price”) per share of Series A, Series A1, Series B and Series B1 Preferred Stock, respectively, in each case as adjusted for splits, dividends or combinations with respect to such shares, plus all declared but unpaid dividends on each such share then held by them. If the assets and funds thus distributed among the holders of the Series A, Series A1, Series B and Series B1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of the Corporation legally available for distribution after the payment in full of the amounts payable pursuant to Section C.2(a)(i) above shall be distributed ratably among the holders of the Series A, Series A1, Series B and Series B1 Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.

(b) Remaining Assets. After the payment to the holders of the Preferred Stock of the preferential amounts so payable to them pursuant to Section C.2(a) above, the remaining assets of the Corporation shall be distributed among the holders of the Preferred Stock and the Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all such Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 and Series C3 Preferred Stock), provided, however, that the total amounts that may be distributed to the holders of Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 and Series C3 Preferred Stock pursuant to this Section C.2 (including distributions pursuant to Section C.2(a)) shall not exceed $1.875 per share of Series A Preferred Stock, $1.875 per share of Series A1 Preferred Stock, $2.25 per share of Series B Preferred Stock, $2.25 per share of Series B1 Preferred Stock, $2.25 per share of Series C Preferred Stock, $2.25 per share of Series C1 Preferred Stock, $2.25 per share of Series C2 Preferred Stock and $2.25 per share of Series C3 Preferred Stock, in each case as adjusted for splits, dividends or combinations with respect to such shares, with any remaining assets being distributed pro rata to the holders of Common Stock.

(c) For purposes of this Section C.2, a consolidation or merger of the Corporation with or into any other corporation or entity in which transaction the Corporation’s shareholders immediately prior to such transaction own immediately after such transaction less than 50% of the equity securities of the surviving corporation or its parent or a sale, exclusive license or transfer of all or substantially all of the assets of the Corporation, shall be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of the Preferred Stock and the Common Stock to receive, at the closing of such acquisition or sale, cash, securities or other

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property (valued as provided in Section C.2(d) below) in the amounts as specified in Sections C.2(a) and C.2(b) above.

(d) In any of the events specified in (c) above, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors, except that any securities to be distributed in a liquidation shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability:

(A) If traded on a securities exchange or the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the distribution;

(B) If actively traded over-the-counter but not on the Nasdaq National Market, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the distribution; and

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (A), (B) or (C) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.

(e) The Corporation shall give each holder of record of Preferred Stock written notice of such impending transaction not later than twenty (20) days prior to the shareholders’ meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes to such terms and conditions. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock voting together as a single class on an as-converted basis.

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3. Voting Rights; Directors.

(a) Except as set forth below or otherwise required by law, each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock held, and each holder of shares of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Preferred Stock could be converted and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

(b) For so long as the Series A and Series A1 Preferred Stock, voting pursuant to Section C.3(c), the Series B and Series B1 Preferred Stock, voting pursuant to Section C.3(d), or the Series C and Series C1 Preferred Stock, voting pursuant to Section C.3(e), have a right to elect a member of the Board of Directors pursuant to this Section C.3, the holders of the outstanding shares of Common Stock shall have the right to elect two (2) members of the Board of Directors and to fill any vacancies with respect thereto.

(c) For so long as any combination of at least 1,000,000 shares of Series A and/or Series A1 Preferred Stock (as adjusted for Preferred Stock splits, dividends or combinations), remain outstanding, the holders of the outstanding shares of Series A and Series A1 Preferred Stock shall, voting together as a single class on an as-converted basis, have the right to elect two (2) members of the Board of Directors and to fill any vacancies with respect thereto.

(d) For so long as any combination of at least 1,000,000 shares of Series B and/or B1 Preferred Stock (as adjusted for Preferred Stock splits, dividends or combinations) remain outstanding, the holders of the outstanding shares of Series B and Series B1 Preferred Stock shall, voting together as a single class on an as-converted basis, have the right to elect one (1) member of the Board of Directors and to fill any vacancies with respect thereto.

(e) For so long as any combination of at least 1,000,000 shares of Series C and/or C1 Preferred Stock (as adjusted for Preferred Stock splits, dividends or combinations) remain outstanding, the holders of the outstanding shares of Series C and Series C1 Preferred Stock shall, voting together as a single class on an as-converted basis, have the right to elect one (1) member of the Board of Directors and to fill any vacancies with respect thereto.

(f) The holders of Common Stock and Preferred Stock, voting together as a single class on an as-converted basis, shall have the right to elect all remaining members of the Board of Directors and to fill any vacancies with respect thereto.

(g) California Section 2115. To the extent that Section 2115 of the California General Corporation Law makes Section 708 subdivisions (a), (b) and (c) of the California General

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Corporation Law applicable to the Corporation, the Corporation’s stockholders shall have the right to cumulate their votes in connection with the election of directors as provided by Section 708 subdivisions (a), (b) and (c) of the California General Corporation Law.

4. Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert. Each share of Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 and Series C3 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series A Issue Price, Original Series A1 Issue Price, Original Series B Issue Price, Original Series B1 Issue Price, Original Series C Issue Price, Original Series C1 Issue Price, Original Series C2 Issue Price or Original Series C3 Issue Price, as applicable, by the Series A Conversion Price, Series A1 Conversion Price, Series B Conversion Price, Series B1 Conversion Price, Series C Conversion Price, Series C1 Conversion Price, Series C2 Conversion Price or Series C3 Conversion Price, as applicable and each as defined below, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The number of shares of Common Stock into which each series of Preferred Stock is convertible is hereinafter collectively referred to as the “Conversion Rate” for such series. The conversion price for each of the Series A Preferred Stock (the “Series A Conversion Price”), Series A1 Preferred Stock (the “Series A1 Conversion Price”), Series B Preferred Stock (the “Series B Conversion Price”), Series B1 Preferred Stock (the “Series B1 Conversion Price”), Series C Preferred Stock (the “Series C Conversion Price”), Series C1 Preferred Stock (the “Series C1 Conversion Price”), Series C2 Preferred Stock (the “Series C2 Conversion Price”) and Series C3 Preferred Stock (the “Series C3 Conversion Price”) shall initially be the Original Series A Issue Price, Original Series A1 Issue Price, Original Series B Issue Price, Original Series B1 Issue Price, Original Series C Issue Price, Original Series C1 Issue Price, Original Series C2 Issue Price or Original Series C3 Issue Price, as applicable. The Series A Conversion Price, Series A1 Conversion Price, Series B Conversion Price, Series B1 Conversion Price, Series C Conversion Price, Series C1 Conversion Price, Series C2 Conversion Price and Series C3 Conversion Price shall be subject to adjustment as hereinafter provided.

(b) Automatic Conversion. Each share of Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Rate then in effect for each such series of Preferred Stock upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of Preferred Stock then outstanding, voting together as a single class on an as-converted basis, or (ii) immediately prior to the closing of the sale of the Corporation’s Common Stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended (the “Securities Act”), other than a registration relating solely to a transaction under Rule 145 under such Act (or any successor thereto) or to an employee benefit plan of the Corporation, in which (i) the valuation of the Company (as determined by multiplying the public offering price per share of Common Stock as printed on the front cover of the final prospectus for the public offering by the number of shares of Common Stock

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of the Company then outstanding, including all shares of Common Stock then issuable upon conversion of all then outstanding Preferred Stock of the Company and all shares of Common Stock then issuable upon exercise of then outstanding stock options of the Company) immediately prior to the closing of such public offering is at least one hundred fifty million dollars ($150,000,000), and (ii) the aggregate gross proceeds to the Corporation (prior to deduction for underwriters’ discounts and expenses) equal or exceed $30,000,000.

(c) Mechanics of Conversion.

(i) Before any holder of Preferred Stock shall be entitled voluntarily to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such stock, and shall give written notice to the Corporation at such office of election to convert the same and shall state therein the number of shares to be converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

(ii) If the conversion is in connection with an underwritten offering of securities pursuant to the Securities Act, the conversion may, at the option of any holder tendering shares of Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities.

(d) Conversion Price Adjustments of Preferred Stock for Certain Diluting Issuances.

(i) Special Definitions. For purposes of this Section C.4(d), the following definitions apply:

(A) “Options” shall mean rights, options, or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (defined below).

(B) “Original Issue Date” shall mean the date on which a share of Series C Preferred Stock was first issued.

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(C) “Convertible Securities” shall mean any evidences of indebtedness, shares (other than Common Stock and Preferred Stock) or other securities convertible into or exchangeable for Common Stock.

(D) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section C.4(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date, other than:

(1) shares of the Corporation’s Common Stock issued upon conversion of the Preferred Stock that is outstanding as of the Original Issue Date;

(2) shares issued pursuant to the bona fide acquisition of another corporation by the Corporation by merger, purchase or exclusive license of substantially all of the assets, or other reorganization, which is approved by the Board of Directors;

(3) shares of the Corporation’s capital stock (or related Options or Convertible Securities) issued to employees, officers, directors, consultants, or other persons performing services for the Corporation pursuant to any stock offering, plan, or other arrangement approved by the Board of Directors;

(4) shares issued to financial institutions primarily in connection with the extension of credit to the Corporation or in connection with the lease of equipment and approved by the Board of Directors;

(5) shares issued primarily in connection with a strategic investment or acquisition of intellectual property or technology as approved by the Board of Directors;

(6) shares of the Corporation’s Common Stock issued in connection with any stock split, stock dividend, or recapitalization by the Corporation;

(7) 57,500 shares of Common Stock of the Corporation issued to Peter Bick pursuant to a mutual agreement executed prior to the original issue date of the Series B Preferred Stock; or

(8) shares of Common Stock issued by the Corporation in satisfaction of a judgment or settlement of claims (the terms of which are approved by the Board of Directors) made by that certain individual with whom the Corporation participated in mediation with on December 7, 2001, or shares of Common Stock otherwise issued by the Corporation in connection with any such settlement or judgment to investors in the Corporation’s Series B Preferred Stock financing pursuant to a written agreement dated as of the original issue date of the Series B Preferred Stock.

(ii) No Adjustment of Conversion Price. Any provision herein to the contrary notwithstanding, no adjustment in the Series A, Series B, Series C or Series C2

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Conversion Price, as applicable, shall be made in respect of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Section C.4(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, in effect on the date of, and immediately prior to, such issue.

(iii) Deemed Issue of Additional Shares of Common Stock. In the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities then entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein designed to protect against dilution) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(A) no further adjustments in the Series A, Series B, Series C or Series C2 Conversion Price shall be made upon the subsequent issue of shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;

(B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, then the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities (provided, however, that no such adjustment of the Series A, Series B, Series C or Series C2 Conversion Price shall affect Common Stock previously issued upon conversion of the Series A, Series B, Series C or Series C2 Preferred Stock);

(C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:

(1) in the case of Convertible Securities or Options for Common Stock the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the

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consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and

(2) in the case of Options for Convertible Securities only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section C.4(d)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised;

(D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Series A, Series B, Series C or Series C2 Conversion Price to an amount which exceeds the lower of (a) the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, on the original adjustment date, or (b) the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Corporation, at any time after the Original Issue Date shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section C.4(d)(iii)) without consideration or for a consideration per share less than the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, in effect on the date of and immediately prior to such issue (a “Dilutive Issuance”), then and in such event, the Series A, Series B, Series C or Series C2 Conversion Price, as applicable, shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Series A, Series B, Series C or Series C2 Conversion Price, as applicable, by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Series A, Series B, Series C or Series C2 Conversion Price in effect immediately prior to such issuance, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued or deemed issued. For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or Convertible Securities had been fully exercised and converted immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date.

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(v) Shadow Preferred.

(A) Definitions.

(1) “Pro Rata Share” with respect to each holder of Preferred Stock shall mean that portion of the total dollar amount of the Dilutive Issuance equal to (i) the amount of the Dilutive Issuance actually offered to all holders of Preferred Stock by the Board of Directors of the Corporation (ii) multiplied by a fraction, the numerator of which is the number of shares of Common Stock issuable upon conversion of all Preferred Stock held by such holder as of the date of the Issuance Notice, as defined below, and the denominator of which is the total number of shares of Common Stock issuable upon conversion of all Preferred Stock outstanding as of such date.

(2) “Participating Investor” shall mean any holder of Preferred Stock that purchases at least its Pro Rata Share of a Dilutive Issuance, provided however, that if a holder is a member of a group of Affiliated Entities holding Preferred Stock (“Affiliate Group”) and the holders making up such Affiliate Group (together with any other Affiliated Entity of a member of the Affiliate Group who did not acquire such shares of Preferred Stock at the same time as other members of the Affiliate Group) in the aggregate purchase a dollar amount of such Dilutive Issuance equal to the aggregate Pro-Rata Share of all holders making up such Affiliate Group, then all such holders in such Affiliate Group shall be deemed to be Participating Investors.

(3) “Nonparticipating Investor” shall mean any holder of Preferred Stock that is not a Participating Investor.

(4) “Affiliated Entity” shall mean, only for purposes of this Section C.4(d)(v), as to any entity, another entity that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such specified entity.

(B) Pay to Play; Conversion.

(1) In the event the Corporation proposes to undertake a Dilutive Issuance in which equity securities of the Corporation are to be sold, it shall give each holder of Preferred Stock a written notice (the “Issuance Notice”) of its intention, describing the type of new securities, the price and number of shares and the general terms upon which the Corporation proposes to issue such new securities, at least twenty-one days prior to the date of such Dilutive Issuance. Each holder of Preferred Stock may, within ten (10) days from the time of actual receipt by the holder (by mail or overnight delivery) of the Issuance Notice, provide written notice to the Corporation that such holder agrees to become a Participating Investor for the price and upon the terms specified in the Issuance Notice. In the event that such holder fails to give such notice within the ten (10) day period, or fails to actually purchase its Pro Rata Share of the Dilutive Issuance (other than as a result of the Corporation failing to offer such holder an opportunity to purchase its Pro Rata Share) at the closing of such Dilutive Issuance, such holder shall be deemed to be a Nonparticipating Investor.

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(2) To the extent of the percentage of the Pro Rata Share not purchased (the “Refused Percentage”) by each Nonparticipating Investor, that number of outstanding shares of Series A Preferred Stock, that number of outstanding shares of Series B Preferred Stock, that number of outstanding shares of Series C Preferred Stock and that number of outstanding shares of Series C2 Preferred Stock held by such Nonparticipating Investor equal to the product of (x) the number of shares of Series A, Series B, Series C or Series C2 Preferred Stock, as applicable, held by the Nonparticipating Investor, times (y) the Refused Percentage, shall each be converted automatically on the date (the “Closing Date”) of closing of the applicable Dilutive Issuance (provided that the Corporation timely gave the Issuance Notice to such holder of Preferred Stock) into shares of Series A1 Preferred Stock with respect to Series A Preferred Stock, Series B1 Preferred Stock with respect to Series B Preferred Stock, Series C1 Preferred Stock with respect to Series C Preferred Stock or Series C3 Preferred Stock with respect to the Series C2 Preferred Stock, as applicable, on a one for one basis.

(3) Upon the conversion of Preferred Stock held by a Nonparticipating Investor as set forth herein, such shares of Preferred Stock shall no longer be outstanding on the books of the Corporation, and may not be reissued and the Nonparticipating Investor shall be treated for all purposes as the record holder of such shares of Series A1, Series B1, Series C1 or Series C3 Preferred Stock on the Closing Date. No shares of Series A1, Series B1, Series C1 or Series C3 Preferred Stock shall be issued except as set forth in this Section C.4(d)(v) upon conversion of shares of Preferred Stock.

(4) No adjustment in the Conversion Price of the Series A1, Series B1, Series C1 or Series C3 Preferred Stock shall be made in respect of the issuance of Additional Shares of Common Stock, regardless of the issuance price of such shares, except for the issuance of such shares as a stock dividend, stock split, or in connection with such other transaction as provided in Section C.4(e) or (f) hereof.

(vi) Determination of Consideration. For purposes of this Section C.4(d), the consideration received by the Corporation for the issue or deemed issue of any Additional Shares of Common Stock shall be computed as follows:

(A) Cash and Property. Such consideration shall:

(1) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation;

(2) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

(3) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (1) and (2) above, as determined in good faith by the Board of Directors of the Corporation.

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(B) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section C.4(d)(iii), relating to Options and Convertible Securities shall be determined by dividing:

(1) the total amount, if any, received by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by

(2) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) ultimately issuable upon the exercise of such Options or conversion or exchange of such Convertible Securities.

(e) Adjustments to Conversion Prices for Stock Dividends and for Combinations or Subdivisions of Common Stock. In the event that this Corporation at any time or from time to time after the Original Issue Date shall declare or pay, without consideration, any dividend on the Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock), or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 and Series C3 Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate. In the event that this Corporation shall declare or pay, without consideration, any dividend on the Common Stock payable in any right to acquire Common Stock for no consideration, then the Corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock.

(f) Adjustments for Reclassification, Exchange and Substitution. If at any time or from time to time after the Original Issue Date the Common Stock issuable upon the conversion of the Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than by an event for which an adjustment is otherwise made pursuant to Section C.4(e) or Section C.4(g)), then in any such event each holder of Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to

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such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(g) Reorganizations, Mergers and Consolidations. If at any time or from time to time after the Original Issue Date there is a reorganization of the Corporation (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in Section C.4(e) or (f)) or a merger or consolidation of the Corporation with or into another corporation (except an event which is governed under Section C.2), then, as a part of such reorganization, merger or consolidation, provision shall be made so that the holders of the Preferred Stock thereafter shall be entitled to receive, upon conversion of the Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of such successor corporation resulting from such reorganization, merger or consolidation, to which such holder would have been entitled if immediately prior to such reorganization, merger or consolidation such holder had converted its shares of Preferred Stock into Common Stock. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section C.4(g) with respect to the rights of the holders of the Preferred Stock after the reorganization, merger or consolidation to the end that the provisions of this Section C.4(g) (including adjustment of the Conversion Price then in effect and number of shares issuable upon conversion of the Preferred Stock) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may be practicable. This Section C.4(g) shall similarly apply to successive reorganizations, mergers and consolidations. Notwithstanding anything to the contrary contained in this Section C.4(g), if any reorganization, merger or consolidation is approved by the vote of shareholders required by Section C.5 hereof, then such transaction and the rights of the holders of Preferred Stock and Common Stock pursuant to such reorganization, merger or consolidation will be governed by the documents entered into in connection with such transaction and not by the provisions of this Section C.4(g).

(h) No Impairment. The Corporation will not, by amendment of its certificate of incorporation or bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section C.4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Preferred Stock against impairment.

(i) Certificates as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Conversion Price pursuant to this Section C.4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Preferred Stock, as applicable, a certificate executed by the Corporation’s President or Chief Financial Officer setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price for

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such series of Preferred Stock at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Preferred Stock, as applicable.

(j) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(k) Issue Taxes. The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.

(l) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Corporation’s certificate of incorporation.

(m) Fractional Shares. No fractional share shall be issued upon the conversion of any share or shares of Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors).

(n) Notices. Any notice required by the provisions of this Corporation’s certificate of incorporation to be given to the holders of Preferred Stock shall be deemed given if

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deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder’s address appearing on the books of the Corporation.

5. Restrictions and Limitations. So long as one million (1,000,000) shares of Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of at least a majority of the holders of the then outstanding shares of the Preferred Stock, voting together as a class on an as-converted basis:

(a) Alter, change or waive any provision of this Corporation’s certificate of incorporation or bylaws so as to amend or otherwise change the rights, preferences or privileges or powers of, or restrictions provided for the benefit of the shares of any series of Preferred Stock;

(b) Cause (i) the acquisition of the Corporation by means of merger, consolidation or other form of corporate reorganization, or any transaction or series of related transactions in which the shareholders of the Corporation immediately preceding such reorganization or transaction do not own directly or indirectly outstanding securities possessing a majority of the voting power of the surviving entity, or (ii) a sale, exclusive license or transfer of all or substantially all of the assets of the Corporation;

(c) Create or authorize any new class or series of capital stock or issue such shares, having rights, preferences, or privileges superior to or on parity with any series of the Preferred Stock;

(d) Increase or decrease the authorized number of shares of Common Stock or Preferred Stock;

(e) Reclassify any outstanding capital stock into shares having rights, preferences, privileges or priority senior to or on parity with the preferences of any series of the Preferred Stock;

(f) Effect a liquidation or dissolution of the Corporation;

(g) (i) Declare any dividend, or effect any other distribution on the Common Stock or any series of the Preferred Stock, or (ii) redeem, repurchase or otherwise acquire any shares of its capital stock, except (x) redemption or repurchase of shares of Common Stock from employees or consultants upon termination of their employment or service pursuant to agreements providing for such repurchase that are approved by the Board of Directors or (y) redemption or repurchase of shares made in accordance with Section C.7 below; or

(h) Decrease the authorized number of directors below seven (7).

6. No Reissuance of Preferred Stock. No share or shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue.

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7. Redemption.

(a) After June 30, 2008, this Corporation shall redeem, upon the written request (the “Preferred Exercise Notice”) of the holders of at least a majority of the outstanding shares of Preferred Stock (the “Redemption Threshold”), voting or consenting, as the case may be, as a single class on an as-converted basis, from any source of funds legally available therefor, the Preferred Stock in three (3) annual installments beginning on the 45^th day after receipt by the Corporation of the Preferred Exercise Notice and continuing thereafter on each yearly anniversary of such date (each a “Redemption Date”). The Corporation shall effect such redemptions on the applicable Redemption Dates by paying in cash in exchange for the shares of Preferred Stock to be redeemed a sum equal to the Original Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Issue Price, as applicable, per share of Series A, Series A1, Series B, Series B1, Series C, Series C1, Series C2 or Series C3 Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus dividends on such shares at the rate of ten percent (10%) compounded annually from, with respect to each such share of Preferred Stock, the date that such share of Preferred Stock was issued through each such Redemption Date (the “Redemption Price”), provided that, for purposes of this Section C.7 only, the date of issue of a share of Series A1, Series B1, Series C1 or Series C3 Preferred Stock shall be the date of issuance of the shares of Series A, Series B, Series C or Series C2 Preferred Stock, as applicable, that were converted into such shares of Series A1, Series B1, Series C1 or Series C3 Preferred Stock, as applicable. The Corporation shall redeem on any one Redemption Date up to a number of shares of each series of Preferred Stock determined by dividing (i) the aggregate number of outstanding shares of each such series of Preferred Stock outstanding immediately prior to the regularly scheduled annual Redemption Date by (ii) the number of remaining regularly scheduled annual Redemption Dates (including the Redemption Date to which such calculation applies). Notwithstanding the foregoing, the Corporation shall be required to redeem any Preferred Stock outstanding on the last Redemption Date.

Any redemption effected pursuant to this Section C.7 shall be made among the holders of Preferred Stock as to each outstanding series of Preferred Stock on a pro rata basis in proportion to the aggregate of shares of such series of Preferred Stock held by such holder.

(b) At least fifteen (15), but no more than 30 days prior to each Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of Preferred Stock to be redeemed, at the address last shown on the records of the Corporation for such holder, notifying such holder of the redemption to be effected, specifying the number of shares and series of Preferred Stock to be redeemed from such holder, the Redemption Date, the Redemption Price for each series of Preferred Stock, the place at which payment may be obtained and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, their certificate or certificates representing the shares to be redeemed (the “Redemption Notice”). Except as provided in paragraph (c) below, on or after the Redemption Date, each holder of Preferred Stock to be redeemed shall surrender to this Corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption

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Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(c) From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of such shares of Preferred Stock designated for redemption in the Redemption Notice as holders of such shares of Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the Corporation legally available for redemption of shares of Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum number of such shares ratably among the holders of such shares based upon their holdings of Preferred Stock. The shares of Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of shares of Preferred Stock such funds will immediately be used to redeem the balance of the shares which the Corporation has become obliged to redeem on any Redemption Date, but which it has not redeemed (the date of each such additional redemption also a “Redemption Date” hereunder).

(d) On or prior to each Redemption Date, the Corporation shall deposit the Redemption Price of all shares of Preferred Stock designated for redemption in the Redemption Notice and not yet redeemed with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the Redemption Price for such shares to their respective holders on or after the Redemption Date upon receipt of notification from the Corporation that such holder has surrendered his share certificate to the Corporation pursuant to paragraph (b) immediately above. As of the Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be shareholders with respect to such shares and shall have no rights with respect thereto except the right to receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of their certificates therefore. Such instructions shall also provide that any moneys deposited by the Corporation pursuant to this paragraph (d) for the redemption of shares thereafter converted into shares of the Corporation’s Common Stock pursuant to the terms hereof prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion. The balance of any monies deposited by the Corporation pursuant to this paragraph (d) remaining unclaimed at the expiration of two (2) years following the Redemption Date for which such monies were deposited shall thereafter be returned to the Corporation upon its request expressed in a resolution of its Board of Directors and payment for redemption of such shares shall thereafter be due to the holder directly from the Corporation.

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ARTICLE V

The Corporation is to have perpetual existence.

ARTICLE VI

Elections for directors need not be by ballot unless a stockholder demands election by ballot at the meeting and before the voting begins or unless the bylaws of the Corporation shall require.

ARTICLE VII

Unless otherwise set forth herein, the number of directors which constitute the Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation.

ARTICLE VIII

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

ARTICLE IX

1. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

2. The Corporation shall have the power to indemnify, to the extent permitted by the Delaware General Corporation Law, as it presently exists or may hereafter be amended from time to time, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

3. Neither any amendment nor repeal of this Article IX, nor the adoption of any provision of this Corporation’s Certificate of Incorporation inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX, in respect of any matter occurring, or any action or

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proceeding accruing or arising or that, but for this Article IX, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE X

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

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EX-3.1.1

Exhibit 3.1.1

NEUROGESX, INC.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

NeurogesX, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

A. The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on January 9, 2007.

B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware (the “DGCL”), and has been duly approved by the written consent of the stockholders of the corporation in accordance with Section 228 of the DGCL.

C. The Certificate of Incorporation of the corporation is hereby amended and restated in its entirety to read as follows:

ARTICLE I

The name of the corporation is NeurogesX, Inc.

ARTICLE II

The address of the corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

The corporation shall have authority to issue shares as follows:

100,000,000 shares of Common Stock, par value $0.001 per share. Each share of Common Stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at a meeting of stockholders.

10,000,000 shares of Preferred Stock, par value $0.001 per share, which may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board of Directors). The Board of Directors is further authorized, subject to limitations prescribed by law, to fix by resolution or resolutions the designations, powers, preferences and rights, and the

qualifications, limitations or restrictions thereof, of any wholly unissued series of Preferred Stock, including without limitation authority to fix by resolution or resolutions the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing.

The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subsequent to the issuance of shares of such series then outstanding, subject to the powers, preferences and rights, and the qualifications, limitations and restrictions thereof stated in the Certificate of Incorporation or the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

ARTICLE V

The number of directors that constitutes the entire Board of Directors of the corporation shall be fixed by, or in the manner provided in, the Bylaws of the corporation. At each annual meeting of stockholders, directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected and until their successors have been duly elected and qualified or until their earlier resignation or removal; except that if any such election shall not be so held, such election shall take place at a stockholders’ meeting called and held in accordance with the DGCL.

Effective upon the effective date of the corporation’s initial public offering (the “Effective Date”), the directors of the corporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. The Board of Directors may assign members of the Board of Directors already in office to such classes at the time such classification becomes effective. The term of office of the initial Class I directors shall expire at the first regularly-scheduled annual meeting of the stockholders following the Effective Date, the term of office of the initial Class II directors shall expire at the second annual meeting of the stockholders following the Effective Date and the term of office of the initial Class III directors shall expire at the third annual meeting of the stockholders following the Effective Date. At each annual meeting of stockholders, commencing with the first regularly-scheduled annual meeting of stockholders following the Effective Date, each of the successors elected to replace the directors of a Class whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting next succeeding his or her election and until his or her respective successor shall have been duly elected and qualified.

Notwithstanding the foregoing provisions of this Article, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

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Any director may be removed from office by the stockholders of the corporation only for cause. Vacancies occurring on the Board of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director, at any meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be duly elected and qualified.

ARTICLE VI

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the corporation is expressly authorized to adopt, amend or repeal the Bylaws of the corporation.

ARTICLE VII

Elections of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.

ARTICLE VIII

No action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws, and no action shall be taken by the stockholders by written consent. The affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the then outstanding voting securities of the corporation, voting together as a single class, shall be required for the amendment, repeal or modification of the provisions of Article V, Article VI or Article VIII of this Certificate of Incorporation or Sections 2.1 (Place of Meetings), 2.2 (Annual Meeting), 2.3 (Special Meeting), 2.4 (Advance Notice Procedures; Notice of Stockholders’ Meetings), 2.9 (Voting), or 3.2 (Number of Directors) of the corporation’s Bylaws.

ARTICLE IX

To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

The corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including

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attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.

The corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, any employee or agent of the corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.

Neither any amendment nor repeal of this Article IX, nor the adoption of any provision of this corporation’s Certificate of Incorporation inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any cause of action, suit or proceeding accruing or arising or that, but for this Article IX, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE X

Except as provided in Article IX above, the corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

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IN WITNESS WHEREOF, NeurogesX, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by the President and Chief Executive Officer of the corporation on this      day of              2007.

By:
	Anthony DiTonno
	President and Chief Executive Officer

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EX-3.2

EXHIBIT 3.2

BYLAWS OF

NEUROGESX, INC.

Adopted January 10, 2007

TABLE OF CONTENTS

	Page
ARTICLE I — MEETINGS OF STOCKHOLDERS	1
1.1        Place of Meetings	1
1.2        Annual Meeting	1
1.3        Special Meeting	1
1.4        Notice of Stockholders’ Meetings	2
1.5        Quorum	2
1.6        Adjourned Meeting; Notice	2
1.7        Conduct of Business	2
1.8        Voting	2
1.9        Stockholder Action by Written Consent Without a Meeting	3
1.10      Record Date for Stockholder Notice; Voting; Giving Consents	4
1.11      Proxies	5
1.12      List of Stockholders Entitled to Vote	5
ARTICLE II — DIRECTORS	5
2.1        Powers	5
2.2        Number of Directors	5
2.3        Election, Qualification and Term of Office of Directors	6
2.4        Resignation and Vacancies	6
2.5        Place of Meetings; Meetings by Telephone	7
2.6        Conduct of Business	7
2.7        Regular Meetings	7
2.8        Special Meetings; Notice	7
2.9        Quorum; Voting	8
2.10      Board Action by Written Consent Without a Meeting	8
2.11      Fees and Compensation of Directors	8
2.12      Removal of Directors	8
ARTICLE III — COMMITTEES	8
3.1        Committees of Directors	8
3.2        Committee Minutes	9
3.3        Meetings and Actions of Committees	9
3.4        Subcommittees	9
ARTICLE IV — OFFICERS	10
4.1        Officers	10
4.2        Appointment of Officers	10
4.3        Subordinate Officers	10
4.4        Removal and Resignation of Officers	10
4.5        Vacancies in Offices	10

4.6        Representation of Shares of Other Corporations	10
4.7        Authority and Duties of Officers	10
ARTICLE V — INDEMNIFICATION	11
5.1        Indemnification of Directors and Officers in Third Party Proceedings	11
5.2        Indemnification of Directors and Officers in Actions by or in the Right of the Company	11
5.3        Successful Defense	11
5.4        Indemnification of Others	12
5.5        Advanced Payment of Expenses	12
5.6        Limitation on Indemnification and Advancement of Expenses	12
5.7        Determination; Claim	13
5.8        Non-Exclusivity of Rights	13
5.9        Insurance	13
5.10      Survival	13
5.11      Effect of Repeal or Modification	13
5.12      Certain Definitions	13
ARTICLE VI — STOCK	14
6.1        Stock Certificates; Partly Paid Shares	14
6.2        Special Designation on Certificates	14
6.3        Lost Certificates	14
6.4        Dividends	15
6.5        Stock Transfer Agreements	15
6.6        Registered Stockholders	15
6.7        Transfers	15
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER	15
7.1        Notice of Stockholder Meetings	15
7.2        Notice by Electronic Transmission	16
7.3        Notice to Stockholders Sharing an Address	16
7.4        Notice to Person with Whom Communication is Unlawful	17
7.5        Waiver of Notice	17
ARTICLE VIII — GENERAL MATTERS	17
8.1        Fiscal Year	17
8.2        Seal	17
8.3        Annual Report	17
8.4         Construction; Definitions	18
ARTICLE IX — AMENDMENTS	18

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BYLAWS

ARTICLE I — MEETINGS OF STOCKHOLDERS

1.1 Place of Meetings. Meetings of stockholders of NeurogesX, Inc. (the “Company”) shall be held at any place, within or outside the State of Delaware, determined by the Company’s board of directors (the “Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.

1.2 Annual Meeting. An annual meeting of stockholders shall be held for the election of directors at such date and time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Company’s certificate of incorporation and these bylaws, (ii) the stockholders take action by written consent to elect directors and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

1.3 Special Meeting. A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board, Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

If any person(s) other than the Board calls a special meeting, the request shall:

(i) be in writing;

(ii) specify the time of such meeting and the general nature of the business proposed to be transacted; and

(iii) be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company.

The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

1.4 Notice of Stockholders’ Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.

1.5 Quorum. Except as otherwise provided by law, the certificate of incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in section 1.6, until a quorum is present or represented.

1.6 Adjourned Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

1.7 Conduct of Business. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

1.8 Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of section 1.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

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Except as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission (as defined in section 7.2 of these bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

1.9 Stockholder Action by Written Consent Without a Meeting. Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

An electronic transmission (as defined in section 7.2) consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.

In the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the corporate records.

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Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

1.10 Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date:

(i) in the case of determination of stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting;

(ii) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board; and

(iii) in the case of determination of stockholders for any other action, shall not be more than 60 days prior to such other action.

If no record date is fixed by the Board:

(i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;

(ii) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and

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(iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided that the Board may fix a new record date for the adjourned meeting.

1.11 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

1.12 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

ARTICLE II — DIRECTORS

2.1 Powers. The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

2.2 Number of Directors. The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of

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the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

2.3 Election, Qualification and Term of Office of Directors. Except as provided in section 2.4 of these bylaws, and subject to sections 1.2 and 1.9 of these bylaws, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

2.4 Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

Unless otherwise provided in the certificate of incorporation or these bylaws:

(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to

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replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

2.5 Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

2.6 Conduct of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

2.7 Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

2.8 Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile; or

(iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the

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holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.

2.9 Quorum; Voting. At all meetings of the Board, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

2.10 Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

2.11 Fees and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

2.12 Removal of Directors. Unless otherwise restricted by statute, the certificate of incorporation or these bylaws, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE III — COMMITTEES

3.1 Committees of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not

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such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.

3.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

3.3 Meetings and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) section 2.5 (Place of Meetings; Meetings by Telephone);

(ii) section 2.7 (Regular Meetings);

(iii) section 2.8 (Special Meetings; Notice);

(iv) section 2.9 (Quorum; Voting);

(v) section 2.10 (Board Action by Written Consent Without a Meeting); and

(vi) section 7.5 (Waiver of Notice)

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board; and

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

3.4 Subcommittees. Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

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ARTICLE IV — OFFICERS

4.1 Officers. The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

4.2 Appointment of Officers. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of section 4.3 of these bylaws.

4.3 Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

4.4 Removal and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.

4.5 Vacancies in Offices. Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in section 4.3.

4.6 Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

4.7 Authority and Duties of Officers. Except as otherwise provided in these bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

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ARTICLE V — INDEMNIFICATION

5.1 Indemnification of Directors and Officers in Third Party Proceedings. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

5.2 Indemnification of Directors and Officers in Actions by or in the Right of the Company. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

5.3 Successful Defense. To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in section 5.1 or section 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

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5.4 Indemnification of Others. Subject to the other provisions of this Article V, the Company shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

5.5 Advanced Payment of Expenses. Expenses (including attorneys’ fees) incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article V or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate.

Notwithstanding the foregoing, unless otherwise determined pursuant to section 5.8, no advance shall be made by the Company to an officer of the Company (except by reason of the fact that such officer is or was a director of the Company, in which event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Company.

5.6 Limitation on Indemnification and Advancement of Expenses. Subject to the requirements in section 5.3 and the DGCL, the Company shall not be required to provide indemnification or, with respect to clauses (i), (iii) and (iv) below, advance expenses to any person pursuant to this Article V:

(i) in connection with any Proceeding (or part thereof) initiated by such person except (i) as otherwise required by law, (ii) in specific cases if the Proceeding was authorized by the Board, or (iii) as is required to be made under section 5.7;

(ii) in connection with any Proceeding (or part thereof) against such person providing for an accounting or disgorgement of profits pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state or local statutory law or common law;

(iii) for amounts for which payment has actually been made to or on behalf of such person under any statute, insurance policy or indemnity provision, except with respect to any excess beyond the amount paid; or

(iv) if prohibited by applicable law.

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5.7 Determination; Claim. If a claim for indemnification or advancement of expenses under this Article V is not paid in full within 60 days after a written claim therefor has been received by the Company, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such suit, the Company shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses under applicable law.

5.8 Non-Exclusivity of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

5.9 Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.

5.10 Survival. The rights to indemnification and advancement of expenses conferred by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

5.11 Effect of Repeal or Modification. Any repeal or modification of this Article V shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

5.12 Certain Definitions. For purposes of this Article V, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director,

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officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article V.

ARTICLE VI— STOCK

6.1 Stock Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

6.2 Special Designation on Certificates. If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock a statement that the Company will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

6.3 Lost Certificates. Except as provided in this section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company

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and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

6.4 Dividends. The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation.

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

6.5 Stock Transfer Agreements. The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

6.6 Registered Stockholders. The Company:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

6.7 Transfers. Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed.

ARTICLE VII— MANNER OF GIVING NOTICE AND WAIVER

7.1 Notice of Stockholder Meetings. Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

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7.2 Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

(i) the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

(ii) such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv) if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

7.3 Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders,

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any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

7.4 Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

7.5 Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII — GENERAL MATTERS

8.1 Fiscal Year. The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.

8.2 Seal. The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

8.3 Annual Report. The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).

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8.4 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE IX — AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.

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NEUROGESX, INC.

CERTIFICATE OF ADOPTION OF BYLAWS

The undersigned hereby certifies that he or she is the duly elected, qualified and acting Secretary or Assistant Secretary of NeurogesX, Inc., a Delaware corporation (the “Company”), and that the foregoing bylaws, comprising 20 pages, were adopted as the bylaws of the Company on January 10, 2007.

The undersigned has executed this certificate as of January 10, 2007.

/S/    MICHAEL J. O’DONNELL        

(signature)

Michael J. O’Donnell

(print name)

Secretary

(title)

EX-3.2.1

Exhibit 3.2.1

AMENDED AND RESTATED BYLAWS OF

NEUROGESX, INC.

(as amended on [            ], 200   effective as of the

closing of the corporation’s initial public offering)

TABLE OF CONTENTS

		Page
ARTICLE I - CORPORATE OFFICES		1
1.1	REGISTERED OFFICE	1
1.2	OTHER OFFICES	1
ARTICLE II - MEETINGS OF STOCKHOLDERS		1
2.1	PLACE OF MEETINGS	1
2.2	ANNUAL MEETING	1
2.3	SPECIAL MEETING	1
2.4	ADVANCE NOTICE PROCEDURES; NOTICE OF STOCKHOLDERS’ MEETINGS	2
2.5	QUORUM	3
2.6	ADJOURNED MEETING; NOTICE	3
2.7	CONDUCT OF BUSINESS	4
2.8	VOTING	4
2.9	STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING	4
2.10	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS	4
2.11	PROXIES	5
2.12	LIST OF STOCKHOLDERS ENTITLED TO VOTE	5
2.13	INSPECTORS OF ELECTION	5
ARTICLE III - DIRECTORS		6
3.1	POWERS	6
3.2	NUMBER OF DIRECTORS	6
3.3	ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS	6
3.4	RESIGNATION AND VACANCIES	7
3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE	7
3.6	REGULAR MEETINGS	7
3.7	SPECIAL MEETINGS; NOTICE	8
3.8	QUORUM; VOTING	8
3.9	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING	8
3.10	FEES AND COMPENSATION OF DIRECTORS	9
3.11	REMOVAL OF DIRECTORS	9
ARTICLE IV - COMMITTEES		9
4.1	COMMITTEES OF DIRECTORS	9
4.2	COMMITTEE MINUTES	9
4.3	MEETINGS AND ACTION OF COMMITTEES	9
4.4	SUBCOMMITTEES	10
ARTICLE V - OFFICERS		10
5.1	OFFICERS	10
5.2	APPOINTMENT OF OFFICERS	10

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TABLE OF CONTENTS

(continued)

		Page
5.3	SUBORDINATE OFFICERS	11
5.4	REMOVAL AND RESIGNATION OF OFFICERS	11
5.5	VACANCIES IN OFFICES	11
5.6	REPRESENTATION OF SHARES OF OTHER CORPORATIONS	11
5.7	AUTHORITY AND DUTIES OF OFFICERS	11
ARTICLE VI - STOCK		12
6.1	STOCK CERTIFICATES; PARTLY PAID SHARES	12
6.2	SPECIAL DESIGNATION ON CERTIFICATES	12
6.3	LOST CERTIFICATES	12
6.4	DIVIDENDS	13
6.5	TRANSFER OF STOCK	13
6.6	STOCK TRANSFER AGREEMENTS	13
6.7	REGISTERED STOCKHOLDERS	13
ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER		13
7.1	NOTICE OF STOCKHOLDERS’ MEETINGS	13
7.2	NOTICE BY ELECTRONIC TRANSMISSION	14
7.3	NOTICE TO STOCKHOLDERS SHARING AN ADDRESS	15
7.4	NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL	15
7.5	WAIVER OF NOTICE	15
ARTICLE VIII - INDEMNIFICATION		15
8.1	INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS	15
8.2	INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION	16
8.3	SUCCESSFUL DEFENSE	16
8.4	INDEMNIFICATION OF OTHERS	16
8.5	ADVANCED PAYMENT OF EXPENSES	16
8.6	LIMITATION ON INDEMNIFICATION AND ADVANCEMENT OF EXPENSES	17
8.7	DETERMINATION; CLAIM	17
8.8	NON-EXCLUSIVITY OF RIGHTS	17
8.9	INSURANCE	18
8.10	SURVIVAL	18
8.11	EFFECT OF REPEAL OR MODIFICATION	18
8.12	CERTAIN DEFINITIONS	18
ARTICLE IX - GENERAL MATTERS		18
9.1	EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS	18
9.2	FISCAL YEAR	19
9.3	SEAL	19
9.4	CONSTRUCTION; DEFINITIONS	19
ARTICLE X - AMENDMENTS		19

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BYLAWS OF NEUROGESX, INC.

ARTICLE I - CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of NeurogesX, Inc. shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.

1.2 OTHER OFFICES

The corporation’s board of directors (the “Board”) may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year. The Board shall designate the date and time of the annual meeting. In the absence of such designation the annual meeting of stockholders shall be held on the second Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding business day. At the annual meeting, directors shall be elected and any other proper business may be transacted.

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called at any time by the Board, chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer), but such special meetings may not be called by any other person or persons.

No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

2.4 ADVANCE NOTICE PROCEDURES; NOTICE OF STOCKHOLDERS’ MEETINGS

(i) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (B) otherwise properly brought before the meeting by or at the direction of the board of directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days before the one year anniversary of the date on which the corporation first mailed its proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date of the prior year’s meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of one hundred twenty (120) calendar days in advance of such annual meeting and ten (10) calendar days following the date on which public announcement of the date of the meeting is first made. A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, (c) the class and number of shares of the corporation that are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business, and (e) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), in the stockholder’s capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder’s meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (i). The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (i), and, if the chairperson should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

(ii) Only persons who are nominated in accordance with the procedures set forth in this paragraph (ii) shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (ii). Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation in accordance with the provisions of paragraph (i) of this Section 2.4. Such stockholder’s notice shall set forth (a) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation that are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in

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solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (b) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (i) of this Section 2.4. At the request of the board of directors, any person nominated by a stockholder for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (ii). The chairperson of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination shall be disregarded.

These provisions shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors and committees of the board of directors, but in connection therewith no new business shall be acted upon at any such meeting unless stated, filed and received as herein provided. Notwithstanding anything in these bylaws to the contrary, no business brought before a meeting by a stockholder shall be conducted at an annual meeting except in accordance with procedures set forth in this Section 2.4.

Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.

2.5 QUORUM

The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.6 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place if any thereof, and the means of remote communications if any by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

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2.7 CONDUCT OF BUSINESS

The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

2.8 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

2.9 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Subject to the rights of the holders of the shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as dividend or upon liquidation, any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not be effected by any consent in writing by such stockholders.

2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other such action.

If the Board does not so fix a record date:

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

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A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

2.11 PROXIES

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal place of business. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

2.13 INSPECTORS OF ELECTION

A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person.

Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

Such inspectors shall:

(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

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(ii) receive votes, ballots or consents;

(iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;

(iv) count and tabulate all votes or consents;

(v) determine when the polls shall close;

(vi) determine the result; and

(vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

ARTICLE III - DIRECTORS

3.1 POWERS

The business and affairs of the corporation shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

3.2 NUMBER OF DIRECTORS

The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.

If so provided in the certificate of incorporation, the directors of the corporation shall be divided into three classes.

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3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6 REGULAR MEETINGS

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

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3.7 SPECIAL MEETINGS; NOTICE

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.

Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile; or

(iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.

3.8 QUORUM; VOTING

At all meetings of the Board, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if

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all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.10 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

3.11 REMOVAL OF DIRECTORS

Any director may be removed from office by the stockholders of the corporation only for cause.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV - COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The Board may, by resolution passed by a majority of the authorized number of directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) Section 3.5 (place of meetings and meetings by telephone);

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(ii) Section 3.6 (regular meetings);

(iii) Section 3.7 (special meetings and notice);

(iv) Section 3.8 (quorum; voting);

(v) Section 7.5 (waiver of notice); and

(vi) Section 3.9 (action without a meeting)

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board; and

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

4.4 SUBCOMMITTEES

Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

ARTICLE V - OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

5.2 APPOINTMENT OF OFFICERS

The Board shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

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5.3 SUBORDINATE OFFICERS

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES

Any vacancy occurring in any office of the corporation shall be filled by the Board or as provided in Section 5.3.

5.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairperson of the Board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7 AUTHORITY AND DUTIES OF OFFICERS

All officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

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ARTICLE VI - STOCK

6.1 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of the corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson of the Board or vice-chairperson of the Board, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation shall not have power to issue a certificate in bearer form.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

6.2 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

6.3 LOST CERTIFICATES

Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

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6.4 DIVIDENDS

The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the corporation’s capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock, subject to the provisions of the certificate of incorporation.

The Board may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

6.5 TRANSFER OF STOCK

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

6.6 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

6.7 REGISTERED STOCKHOLDERS

The corporation:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER

7.1 NOTICE OF STOCKHOLDERS’ MEETINGS

Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the corporation’s records. An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

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7.2 NOTICE BY ELECTRONIC TRANSMISSION

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:

(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and

(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv) if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

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7.3 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS

Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been given written notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

7.4 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL

Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

7.5 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII - INDEMNIFICATION

8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS

Subject to the other provisions of this Article VIII, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably

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believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

8.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION

Subject to the other provisions of this Article VIII, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

8.3 SUCCESSFUL DEFENSE

To the extent that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

8.4 INDEMNIFICATION OF OTHERS

Subject to the other provisions of this Article VIII, the corporation shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

8.5 ADVANCED PAYMENT OF EXPENSES

Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

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Notwithstanding the foregoing, unless otherwise determined pursuant to Section 8.8, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, in which event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

8.6 LIMITATION ON INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

Subject to the requirements in Section 8.3 and the DGCL, the corporation shall not be required to provide indemnification or, with respect to clauses (i), (iii) and (iv) below, advance expenses to any person pursuant to this Article VIII:

(i) in connection with any Proceeding (or part thereof) initiated by such person except (i) as otherwise required by law, (ii) in specific cases if the Proceeding was authorized by the Board, or (iii) as is required to be made under Section 8.7;

(ii) on account of any Proceeding (or part thereof) against such person providing for an accounting or disgorgement of profits pursuant to the provisions of Section 16(b) of the 1934 Act, or similar provisions of any federal, state or local statutory law or common law;

(iii) for expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; or

(iv) if prohibited by applicable law.

8.7 DETERMINATION; CLAIM

If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 60 days after a written claim therefor has been received by the corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such suit, the corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses under applicable law.

8.8 NON-EXCLUSIVITY OF RIGHTS

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

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8.9 INSURANCE

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the DGCL.

8.10 SURVIVAL

The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

8.11 EFFECT OF REPEAL OR MODIFICATION

Any repeal or modification of this Article VIII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

8.12 CERTAIN DEFINITIONS

For purposes of this Article VIII, references to the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VIII.

ARTICLE IX - GENERAL MATTERS

9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

Except as otherwise provided by law, the certificate of incorporation or these bylaws, the Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific

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instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

9.2 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the Board and may be changed by the Board.

9.3 SEAL

The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

9.4 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE X - - AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.

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NEUROGESX, INC.

CERTIFICATE OF AMENDMENT OF BYLAWS

The undersigned hereby certifies that he or she is the duly elected, qualified, and acting Secretary or Assistant Secretary of NeurogesX, Inc., a Delaware corporation and that the foregoing bylaws, comprising nineteen pages, were amended and restated on [                    ] by the corporation’s board of directors.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this      day of             ,     .

Secretary

EX-4.2

Exhibit 4.2

NEUROGESX, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

TABLE OF CONTENTS

			Page
1.	Restrictions on Transferability of Securities; Registration Rights		2
	1.1	Certain Definitions	2
	1.2	Requested Registration	4
	1.3	Company Registration	6
	1.4	Expenses of Registration	7
	1.5	Registration on Form S-3	8
	1.6	Registration Procedures	8
	1.7	Indemnification	10
	1.8	Information by Holder	12
	1.9	Limitations on Subsequent Registration Rights	12
	1.10	Rule 144 Reporting	12
	1.11	Transfer or Assignment of Registration Rights	13
	1.12	“Market Stand-Off” Agreement	13
	1.13	Delay of Registration	14
	1.14	Termination/Deferral of Registration Rights	14
2.	Covenants of the Company		15
	2.1	Right of First Offer	15
	2.2	Delivery of Financial Statements	16
	2.3	Inspection	17
	2.4	Termination of Covenants	17
	2.5	Stock Vesting Restrictions	17
	2.6	Proprietary Information and Inventions Assignment Agreements	17
	2.7	Key Person Life Insurance	17
	2.8	Intellectual Property	17
	2.9	Use of Proceeds	17
	2.10	D&O Insurance	18
3.	Investors’ Right of First Refusal and Co-Sale Right		18
	3.1	Restrictions on Transfer	18
	3.2	Right of First Refusal and Co-Sale	18
	3.3	Exempt Transfers	20
	3.4	Prohibited Transfers	21
	3.5	Legends	22
	3.6	Non-Contravention	22
4.	Miscellaneous		23
	4.1	Governing Law	23
	4.2	Successors and Assigns	23
	4.3	Entire Agreement; Amendment: Waiver	23
	4.4	Notices	23
	4.5	Delays or Omissions	24

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TABLE OF CONTENTS

(Continued)

		Page
4.6	Rights; Separability	24
4.7	Information Confidential	24
4.8	Titles and Subtitles	24
4.9	Counterparts	24

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NEUROGESX, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

THIS THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), made and entered into as of the 14th day of November, 2005, by and among NeurogesX, Inc., a California corporation (the “Company”), the persons identified on Exhibit A attached hereto (each, an “Investor” and collectively, the “Investors”), and the persons identified on Exhibit B attached hereto (each, a “Founder” and collectively, the “Founders”); provided however, and notwithstanding anything to the contrary in this Agreement, that Silicon Valley Bank and Silicon Valley Bancshares, their affiliates or assigns (collectively, “SVB”) shall only be a party to this Agreement for purposes of Sections 1 and 4 hereto, and shall not have or be deemed to have (or have the right to transfer or be deemed to have the right to transfer) any of the rights of the Investors under Sections 2 and 3 hereto.

W I T N E S S E T H:

WHEREAS, the Investors desire to obtain certain rights regarding registration of the Company’s securities under the Securities Act of 1933, as amended (“Registration Rights”), certain preemptive rights regarding the Company’s equity offerings (“Preemptive Rights”), certain rights to information of the Company (“Information Rights”) and certain rights of first refusal and co-sale with regard to shares of capital stock of the Company held by the Founders (“Co-Sale Rights”).

WHEREAS, the Company and the Prior Investor Parties (as defined below), to induce the Investors to invest, desires to grant the Investors such rights.

WHEREAS, certain of the Investors (the “Prior Investor Parties”) possess, Registration Rights, Information Rights, Preemptive Rights, Co-Sale Rights and other rights pursuant to that certain Amended and Restated Investors’ Rights Agreement dated as of February 18, 2004 between the Company, the Prior Investor Parties and the Founders (the “Prior Agreement”), and hold Registrable Securities, as defined in the Prior Agreement;

WHEREAS, Section 4.3 of the Prior Agreement allows the amendment of such Prior Agreement with a written instrument signed by the Company and the holders of at least a majority of the Registrable Securities (as defined in the Prior Agreement);

WHEREAS, the undersigned Prior Investor Parties desire to amend and restate in its entirety the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement; and

WHEREAS, certain Investors are parties to the Series C2 Preferred Stock Purchase Agreement dated as of the date hereof between the Company and such Investors (the “Preferred Stock Purchase Agreement”), such Investors’ obligations under which are conditioned upon the execution and delivery of this Agreement by the Company, the Investors, the holders of a majority of the Registrable Securities (as defined in the Prior Agreement) held by the Prior Investor Parties.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the parties hereto and to the Prior Agreement hereby agree that the Prior Agreement shall be amended and restated in its entirety by this Agreement, and hereby consent to such amendment and restatement, and the parties hereto further agree as follows:

1. Restrictions on Transferability of Securities; Registration Rights.

1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

(a) “Closing” shall mean the “Closing” as defined in the Preferred Stock Purchase Agreement.

(b) “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

(c) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

(d) “Holder” shall mean any person or entity who holds Registrable Securities and any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 1.11 hereof; provided, however, that a record holder of Shares convertible into Registrable Securities shall be deemed, for purposes of this Agreement, to be the Holder of such Registrable Securities.

(e) “Initiating Holders” shall mean any Holder or Holders who in the aggregate holds or is deemed to hold, in the case of Section 1.2, at least twenty-five percent (25%) or, in the case of Section 1.5, hold at least twenty percent (20%) of the aggregate total number of outstanding Shares (on or as-converted to Common Stock basis) and shares of Common Stock issued on conversion thereof.

(f) “Major Investors” shall mean a Holder that, together with its affiliates holds or is deemed to hold at least fifty thousand (50,000) shares (subject to appropriate adjustments for stock splits, stock dividends, combinations and other recapitalizations) of Registrable Securities. A Major Investor includes any general partners and affiliates of a Major Investor (including in the case of a venture capital fund partners and funds affiliated with such fund); provided however, and notwithstanding the foregoing, SVB (along with its affiliates and transferees of Registrable Securities held by SVB or its affiliates) shall not be deemed to be a “Major Investor” for purposes of this Agreement.

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(g) “Registrable Securities” shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares, (ii) shares of Common Stock issued or issuable pursuant to the conversion of shares of (A) Series A Preferred Stock issued pursuant to exercise or conversion of that certain warrant, dated as of December 14, 2000, to purchase 33,600 shares of Series A Preferred Stock of the Company (the “Series A Warrant Shares”) issued to Silicon Valley Bank (the “Series A Warrant”), (B) Series A1 Preferred Stock issued in connection with the conversion of the Series A Warrant Shares after the date of exercise or conversion of the Series A Warrant, (C) Series B Preferred Stock issued pursuant to exercise or conversion of that certain warrant, dated as of May 1, 2002, to purchase 20,000 shares of Series B Preferred Stock of the Company (the “Series B Warrant Shares”) issued to Silicon Valley Bank (the “Series B Warrant”), or (D) Series B1 Preferred Stock issued in connection with the conversion of the Series B Warrant Shares after the date of exercise or conversion of the Series B Warrant, and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) and (ii) above, provided, however, that Registrable Securities shall not include any shares of Common Stock which have previously been registered or which have been sold to the public. The number of shares of “Registrable Securities then outstanding” or “outstanding Registrable Securities” (as those terms are used in this Agreement) shall mean the number of shares of Common Stock which are Registrable Securities that are then (1) issued and outstanding or (2) issuable pursuant to the exercise or conversion of then outstanding and then exercisable and qualifying options, warrants or convertible securities.

(h) The terms “register,” “registered” and “registration” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

(i) “Registration Expenses” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and disbursements of one special counsel representing all selling Holders, blue sky fees and expenses, accounting fees and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses and fees and disbursements of additional counsel for the Holders.

(j) “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

(k) “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

(l) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

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(m) “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).

(n) “Shares” shall mean the Company’s (i) Series A Preferred Stock sold pursuant to that certain Series A Preferred Stock Purchase Agreement dated June 28, 2000 (including the shares of Series A1 Preferred Stock that may be issued on conversion of such shares of Series A Preferred Stock) by and among the Company and the Investors listed on Exhibit A thereto, (ii) Series B Preferred Stock sold pursuant to that certain Series B Preferred Stock Purchase Agreement dated January 18, 2002 (including the Series B1 Preferred Stock that may be issued on conversion of such shares of Series B Preferred Stock) by and among the Company and the Investors listed on Exhibit A thereto, (iii) Series C Preferred Stock sold pursuant to the Series C Preferred Stock Purchase Agreement dated February 18, 2004 (including the shares of Series C1 Preferred Stock that may be issued in conversion of such shares of Series C Preferred Stock), and (iv) Series C2 Preferred Stock sold pursuant to the Preferred Stock Purchase Agreement and that may be issued upon conversion or exercise of the Warrants as defined in, and acquired pursuant to, the Preferred Stock Purchase Agreement (including the shares of Series C3 Preferred Stock that may be issued in conversion of the shares of Series C2 Preferred Stock, and shares of equity securities that may be issued in exchange of shares of Series C2 Preferred Stock pursuant to the terms of Section 1.5 of the Preferred Stock Purchase Agreement).

1.2 Requested Registration.

(a) Request for Registration.

(A) If the Company shall receive from Initiating Holders at any time or times after the earlier of (i) December 31, 2006 or (ii) six (6) months after the effective date of the first registration statement filed by the Company covering an underwritten offering of any of its securities to the general public, a written request that the Company effect any registration with respect to all or a part of the Registrable Securities having an aggregate offering price (prior to deduction for underwriter’s discounts and commissions related to the issuance) of at least $10,000,000 the Company will:

(i) promptly give written notice of the proposed registration to all other Holders; and

(ii) as soon as practicable, use commercially reasonable efforts to effect such registration (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and as would permit or facilitate the sale and distribution to the public of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered.

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(B) The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 1.2:

(i) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(ii) After the Company has initiated two (2) such registrations pursuant to this Section 1.2(a) (counting, for these purposes only, registrations which have been declared or ordered effective and pursuant to which securities have been sold);

(iii) During the period starting with the date thirty (30) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred twenty (120) days after the effective date of, a Company-initiated registration (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a Rule 145 transaction); provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;

(iv) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.5 hereof;

(b) Subject to Sections 1.2(a)(B)(i) through (iv) (except in the case of a request that is subject to Section 1.5, in which case (ii) and (iv) above shall not apply), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders; provided, however, that if (i) in the good faith judgment of the Board of Directors of the Company, such registration would be seriously detrimental to the Company and the Board of Directors of the Company concludes, as a result, that it is essential to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for the period during which such disclosure would be seriously detrimental, provided that the Company may not defer the filing for a period of more than ninety (90) days after receipt of the request of the Initiating Holders, and, provided further, that the Company shall not defer its obligation in this manner more than twice in any twelve (12) month period.

The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Section 1.2(d) hereof, include other securities of the Company, and may include securities of the Company being sold for the account of the Company.

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(c) Underwriting. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as part of their request made pursuant to Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a)(A)(i) above. The right of any Holder to registration pursuant to Section 1.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder with respect to such participation and inclusion) to the extent provided herein. A Holder may elect to include in such underwriting all or a part of the Registrable Securities he holds.

(d) Procedures. If the Company shall request inclusion in any registration pursuant to Section 1.2 of Common Stock being sold for its own account, or if other persons shall request inclusion of their Common Stock in any registration pursuant to Section 1.2, such securities may be included in the underwriting conditioned on the Company or such other shareholders, as applicable, agreeing to participate in such registration as the terms set forth in this Section 1 (including Section 1.12). The Company shall (together with all Holders and other persons proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders, which underwriters are reasonably acceptable to the Company. Notwithstanding any other provision of this Section 1.2, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities and other securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that no Registrable Securities shall be excluded from such underwriting until all other securities of the Company and any other shareholders are first excluded.

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company. The securities so excluded shall also be withdrawn from registration. Any Registrable Securities or other securities excluded shall also be withdrawn from such registration.

1.3 Company Registration.

(a) If the Company shall determine to register any of its securities for its own account (other than pursuant to Section 1.2 or 1.5 hereof), other than a registration relating solely to employee benefit plans, or a registration relating solely to a Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will:

(i) promptly give to each Holder written notice thereof; and

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(ii) include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 1.3(b) below, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by any Holder and deemed delivered to the Company within twenty (20) days after the written notice from the Company described in clause (i) above is deemed delivered by the Company pursuant to Section 4.4. Such written request may specify all or a part of a Holder’s Registrable Securities.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.3(a)(i). In such event, the right of any Holder to registration pursuant to this Section 1.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company.

Notwithstanding any other provision of this Agreement, if the managing underwriter determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first, to the Company, second to Holders requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on the number of Registrable Securities held by each such Holder and third, to each other holder of securities of the Company; provided however, that the right of the underwriters to exclude shares (including Registrable Securities) from the registration and underwriting as described above shall be restricted so that the number of Registrable Securities included in any such registration is not reduced below thirty percent (30%) of the shares included in the registration, except for a registration relating to the Company’s initial public offering, from which all Registrable Securities may be excluded (provided that all securities held by other shareholders of the Company are excluded first). If any person does not agree to the terms of any such underwriting, they shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.

1.4 Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 1.3 and 1.5 hereof, and the two registrations pursuant to Section 1.2 hereof shall be borne by the Company. All Selling Expenses relating to securities so registered shall be borne by the holders of such securities pro rata on the basis of the number of shares of securities so registered on their behalf.

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1.5 Registration on Form S-3.

(a) After its initial public offering, the Company shall use commercially reasonable efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, if the Company shall receive from an Initiating Holder or Initiating Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holders, then the Company will do the following:

(i) Promptly give written notice of the proposed registration and the Initiating Holder’s or Initiating Holders’ request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities.

(ii) As soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Initiating Holder’s or Initiating Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 1.5 if: (i) the Initiating Holders, together with any other Holders of Registrable Securities of the Company, propose to sell Registrable Securities on Form S-3 at an aggregate price to the public of less than $1,000,000, (ii) the Company shall furnish the certification described in paragraph 1.2(b) (but provided, further, that the Company may only defer such requested filing for up to ninety (90) days once in a twelve (12) month period), or (iii) the Company has, within the twelve (12) month period preceding the date of such request already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.5.

(b) If a request complying with the requirements of Section 1.5(a) hereof is delivered to the Company, the provisions of Sections 1.2(a)(A) and (B)(i) and (iii) and Section 1.2(b) hereof shall apply to such registration. If the registration is for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d) hereof shall apply to such registration.

1.6 Registration Procedures. In the case of each registration effected by the Company pursuant to Section 1, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use commercially reasonable efforts to:

(a) Keep such registration effective for a period of one hundred twenty (120) days or until the Holder or Holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such one hundred twenty (120) day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Securities Act governing the

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obligation to file a post-effective amendment permit (in lieu of filing a post-effective amendment that (A) includes any prospectus required by Section 10(a)(3) of the Securities Act or (B) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement) the incorporation by reference of information required to be included in (A) and (B) of the immediately preceding parenthetical to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement;

(b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

(c) Furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;

(d) Notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;

(e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed;

(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(g) Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the Registration Statement; and

(h) In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 1.2 hereof, the Company will enter into an underwriting agreement reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains customary underwriting provisions and provided further that if the underwriter so requests the underwriting agreement will contain customary contribution provisions.

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1.7 Indemnification.

(a) The Company will indemnify each Holder, each of its officers, directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 1, and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular, or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation (or alleged violation) by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company or any other federal or state securities law or regulation and relating to action or inaction required of the Company in connection with any such registration, qualification, or compliance, and will reimburse each such Holder, each of its officers, directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter, and each person who controls any such underwriter, as incurred, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or expense arises out of or is based on any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. It is agreed that the indemnity agreement contained in this Section 1.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent has not been unreasonably withheld).

(b) Each Holder will, if Registrable Securities held by him are included in the securities as to which such registration, qualification, or compliance is being effected, indemnify (to the extent of the net proceeds from the sale of Registrable Securities by such Holder in the registration, qualification or compliance) the Company, each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, and each of their officers, directors, and partners, and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular, or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will

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reimburse the Company and such Holders, directors, officers, partners, legal counsel, and accountants, persons, underwriters, or control persons, as incurred, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein, provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld).

(c) Each party entitled to indemnification under this Section 1.7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

(d) If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided, however, that, in any such case, no Holder of Registrable Securities that is an Indemnifying Party will be required to contribute any amount in excess of the net proceeds to it of all shares of Registrable Securities sold by it in the registration relating to such loss, liability, claim, damage or expense. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

1.8 Information by Holder. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 1.

1.9 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder: (i) to make any demand registration, or (ii) to include such securities in any registration filed under Section 1.2 or 1.3 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which are included. Notwithstanding the foregoing, the Company may grant to parties acquiring securities of the Company registration rights under this Agreement as Holders of Registrable Securities on parity with those granted the Holders hereunder: (x) if such securities are acquired primarily in connection with the extension of credit to the Company, the lease or equipment or real property, strategic investment, acquisition of intellectual property or technology or corporate partnering or similar transactions in each case as approved by the Board of Directors; and (y) the aggregate total number of shares of Common Stock of the Company granted registration rights pursuant to this sentence (on an as exercised and converted basis) does not exceed 600,000 (as adjusted for stock splits, stock dividends, stock combinations or the like).

1.10 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its best efforts to:

(a) Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after ninety (90) days following the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements;

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(c) So long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

1.11 Transfer or Assignment of Registration Rights. The rights found in Section 1 may be assigned only if a Holder transfers at least (i) 100,000 Shares and/or shares of Registrable Securities (as presently constituted and subject to adjustments for stock splits, stock divided, reverse stock splits, and the like); or (ii) all of the Shares and shares of Registrable Securities held by the transferor Holder, provided that, with respect to each such transfer or assignment, the Company be given prior written notice of the transfer, the transferee or assignee is not a competitor of the Company as determined in good faith by this Board of Directors, the transferee or assignee agrees in writing to all provisions contained in this Agreement and that such transfer otherwise be effected in accordance with applicable securities laws. Notwithstanding the foregoing (except for the requirement of prior written notice), a Holder may transfer any or all of their Shares and/or Registrable Securities to any constituent partner, member, or stockholder of such Holder or any fund, partnership or limited liability company that is an affiliate of such Holder.

1.12 “Market Stand-Off” Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, an Investor shall not sell (including, without limitation, any short sale) or otherwise transfer or dispose of any Common Stock and options (or other securities) of the Company held by such Investor (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act (the “Standoff Period”), provided that:

(a) such one hundred eighty (180) day “market stand-off” agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underwritten offering; and

(b) all Holders and officers and directors of the Company enter into similar agreements.

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In order to enforce the covenants set forth in this Section 1.12, and until the expiration of Standoff Period, each certificate held by a Holder representing Registrable Securities shall bear the following legend:

“UPON THE REQUEST OF THE COMPANY OR THE UNDERWRITERS, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, SHORT SOLD, LOANED, MADE SUBJECT TO AN OPTION TO PURCHASE SUCH SECURITIES OR OTHERWISE DISPOSED OF FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR THE UNDERWRITERS.”

The Company may impose stop-transfer instructions with respect to Registrable Securities of each Holder (and the shares or securities of every other person subject to the restrictions set forth in this Section 1.12).

1.13 Delay of Registration. No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.

1.14 Termination/Deferral of Registration Rights. The right of any Holder to request registration or inclusion in any registration pursuant to Section 1.2, 1.3 or 1.5 shall terminate five (5) years following the closing of the first firm commitment public offering of Common Stock of the Company in which (i) the valuation of the Company (as determined by multiplying the public offering price per share of Common Stock as printed on the front cover of the final prospectus for the public offering by the number of shares of Common Stock of the Company then outstanding, including all shares of Common Stock then issuable upon conversion of all then outstanding Preferred Stock of the Company and all shares of Common Stock then issuable upon exercise of then outstanding stock options of the Company) immediately prior to the closing of such public offering is at least one hundred fifty million dollars ($150,000,000), and (ii) the aggregate gross proceeds to the Company (prior to deduction of underwriters’ discounts and expenses) equal or exceed $30,000,000 (a “Qualified IPO”). Prior to such termination, a Holder of less than 1% of the then outstanding shares of capital stock of the Company shall not have registration rights under Sections 1.2 or 1.5 hereof during any period of time prior to such termination when all Registrable Securities held (or deemed held) by such Holder may be sold pursuant to Rule 144 under the Securities Act (or any successor regulation) during a three month period.

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2. Covenants of the Company. The Company hereby covenants and agrees as follows:

2.1 Right of First Offer. The Company hereby grants to each Major Investor the right of first offer to purchase a pro rata share of New Securities (as defined in this Section 2.1) which the Company may, from time to time, propose to sell and issue. A Major Investor’s pro rata share, for purposes of this right of first offer, is the ratio of the number of shares of Common Stock owned by such Holder immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise and conversion of all outstanding rights, options and warrants to acquire equity securities of the Company held by such Holder) to the total number of shares of Common Stock outstanding immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise and conversion of all outstanding rights, options and warrants to acquire equity securities of the Company). This right of first offer shall be subject to the following provisions:

(a) “New Securities” shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; provided that the term “New Securities” does not include (i) securities purchased under the Preferred Stock Purchase Agreement; (ii) securities issued upon conversion of Shares; (iii) shares issued pursuant to the bona fide acquisition of another corporation by the Company by merger, purchase of substantially all of the assets, or other reorganizations, which is approved by the Board of Directors; (iv) shares issued to financial institutions primarily in connection with the extension of credit to the Company or the lease of equipment or real property and approved by the Board of Directors; (v) shares of Common Stock issued to employees, consultants, officers or directors of, or contractors, consultants or advisors to, the Company pursuant to stock purchase or stock option plans, stock bonuses or awards, contracts or other arrangements that are approved by the Board of Directors; (vi) shares issued primarily in connection with a strategic investment, acquisition of intellectual property or technology or corporate partnering transactions or similar arrangements as approved by the Board of Directors; (vii) securities issued in a public offering pursuant to a registration under the Securities Act in which all of the shares of Preferred Stock of the Company converted into Common Stock pursuant to the Company’s articles of incorporation; (viii) securities issued in connection with any stock split, stock dividend or recapitalization of the Company; (ix) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (ix) above; and (x) the issuance of 57,500 shares of Common Stock of the Company to Dr. Peter Bick pursuant to a written agreement between Dr. Bick and the Company executed by the parties prior to the date of this Agreement.

(b) In the event the Company proposes to undertake an issuance of New Securities subject to a Major Investor’s right of first offer, it shall give each such Holder written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each such Holder shall have twenty (20) days after any such notice is delivered to agree to purchase such Holder’s pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.

(c) In the event such Holders fail to exercise fully their rights of first offer as provided for herein within such twenty (20) day period, the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of such agreement) to sell the New Securities respecting which such Holders’ right of first offer option set forth in this Section 2.1 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company’s notice to such Holders pursuant to Section 2.1(b). In the event the Company has not sold within such ninety (90) day period or entered into an agreement to sell the New Securities in accordance with the foregoing within ninety (90) days from the date of such agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to such Holders in the manner provided in Section 2.1(b) above.

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(d) The rights found in Section 2.1 may be assigned only if a Holder transfers to such assignee at least: (i) 100,000 Shares and/or shares of Registrable Securities (as presently constituted and subject to adjustments for stock splits, stock divided, reverse stock splits, and the like); or (ii) all of the Shares and/or shares of Registrable Securities held by the transferor Holder, provided that, with respect to each such transfer or assignment, the Company be given prior written notice of the transfer, the transferee or assignee is not a competitor of the Company as determined in good faith by this Board of Directors, the transferee or assignee agrees in writing to all provisions contained in this Agreement and that such transfer otherwise be effected in accordance with applicable securities laws. Notwithstanding the foregoing, a Holder may transfer any or all of their Shares and/or Registrable Securities to any constituent partner, member, or stockholder of such Holder or any fund, partnership or limited liability company that is an affiliate of such Holder.

2.2 Delivery of Financial Statements. The Company shall deliver to each Holder, so long as such Holder holds or is deemed to hold (i) at least two hundred fifty thousand (250,000) shares of Registrable Securities (subject to appropriate adjustment for stock splits, dividends, combinations and other recapitalizations) with respect to subsections (a), (b) and (d) and (ii) at least one million (1,000,000) shares of Registrable Securities (subject to appropriate adjustment for stock splits, dividends, combinations and other recapitalizations) with respect to subsection (c) (each, a “Qualifying Investor”):

(a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of shareholders’ equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be prepared in accordance with generally accepted accounting principles (“GAAP”), and audited and certified by independent public accountants of nationally recognized standing selected by the Company; along with a management report describing progress, changes, and issues since the end of the last fiscal quarter relating to research and development, business development, intellectual property, and other topics deemed reasonably relevant to the Company;

(b) as soon as practicable, but in any event within thirty (30) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter; along with a management report describing progress, changes, and issues since the end of the last fiscal quarter relating to research and development, business development, intellectual property, and other topics deemed reasonably relevant to the Company;

(c) as soon as practicable, but in any event within thirty (30) days after the end of each month, an unaudited statement of cash flows and an unaudited statement of cash position; and

(d) as soon as practicable, but in any event no later than thirty days prior to the next fiscal year, an annual operating budget for the next fiscal year as approved by the Board of Directors.

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2.3 Inspection. The Company shall permit each Investor, so long as such Investor shall be a Qualifying Investor, at such holder’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Qualifying Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.3 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information unless the recipient is not deemed in good faith by the Board of Directors to be a competitor or reasonably likely to be a potential competitor of the Company and such recipient signs an appropriate nondisclosure agreement.

2.4 Termination of Covenants. The covenants set forth in this Section 2 shall terminate and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Securities Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated, provided that the covenants in this Section 2 other then Section 2.1 shall also terminate when the Company first becomes subject to the periodic reporting requirements of section 13 or 15(d) of the Exchange Act, whichever event shall first occur.

2.5 Stock Vesting Restrictions. The Company hereby covenants and agrees that except as otherwise approved by the Board of Directors of the Company, all stock and stock equivalents issued after the Closing to employees, directors and consultants shall be subject to vesting as follows: twenty-five percent (25%) to vest at the end of the first year following such issuance, with the remaining seventy-five percent (75%) to vest monthly over the next three (3) years. Except as otherwise approved by the Board of Directors of the Company, any repurchase option shall provide that upon termination of the employment, the consulting engagement or the director relationship of such party with the Company, whether with or without cause, the Company or its assignee (to the extent permissible under applicable securities law qualification) will retain the option to repurchase at cost any unvested shares then held by such employee, consultant or director.

2.6 Proprietary Information and Inventions Assignment Agreements. Each of the Company’s directors, officers, employees and consultants shall execute a Proprietary Information and Inventions Assignment Agreement in a form reasonably acceptable to the Investors.

2.7 Key Person Life Insurance. The Company shall maintain a key-man life insurance policy for its CEO in the amount of at least $1,000,000, naming the Company as beneficiary.

2.8 Intellectual Property. The Company will use all reasonably efforts to take all steps reasonably necessary to preserve its legal rights in, and the secrecy of, all of its Proprietary Assets, as such term is defined in the Preferred Stock Purchase Agreement, except for those for which disclosure is required for legitimate business or legal reasons.

2.9 Use of Proceeds. The Company shall use the proceeds from the sale of the Series C Preferred Stock and Warrants pursuant to the Preferred Stock Purchase Agreement for working capital, capital expenditures and general corporate purposes.

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2.10 D&O Insurance. The Company shall use commercially reasonable efforts to acquire within 90 days from the date hereof, and thereafter maintain, director and officer liability insurance (and pay all premiums thereon) in form and amount reasonably acceptable to the Board of Directors of the Company.

3. Investors’ Right of First Refusal and Co-Sale Right.

3.1 Restrictions on Transfer. During the term of this Agreement, all of the capital stock of the Company now owned or hereafter acquired by the Founders (the “Founders’ Shares”) shall be subject to the terms and conditions of this Section 3. No transfer, whether voluntary or involuntary, of the Founders’ Shares shall be valid unless it is made pursuant to the terms and conditions of this Section 3.

3.2 Right of First Refusal and Co-Sale. In the event that a Founder desires to sell (or otherwise transfer) any Founders’ Shares (a “Transfer”), the Founder shall first notify the Company and each of the Investors in writing of the proposed disposition (a “Transfer Notice”). Each Transfer Notice shall contain all material terms of the proposed sale (or other transfer), including, without limitation, a copy of any written offer received, the name and address of the prospective purchaser (or transferee), the purchase price and terms of payment (to the extent applicable), the date and place of the proposed sale (or transfer), and the number and description of Founders’ Shares proposed to be sold (or transferred ) by the Founder (the “Offered Shares”).

(a) Right of First Refusal.

(i) Company’s Right of First Refusal. The Company shall have an option for a period of fifteen (15) days from the date of delivery of the Transfer Notice to elect to purchase the Offered Shares at the same price and subject to the same material terms and conditions as described in the Transfer Notice (or terms and conditions as similar as reasonably possible). The Company may exercise such purchase option and, thereby, purchase all (or a portion of) the Offered Shares by notifying the selling Founder in writing before expiration of the such fifteen (15) day period as to the number of such shares that it wishes to purchase. If the Company gives the selling Founder notice that it desires to purchase such shares, then payment for the Offered Shares shall be by check or wire transfer, against delivery of the Offered Shares to be purchased at a place agreed upon between the parties and at the time of the scheduled closing therefor, which shall be no later than the later of (i) thirty (30) days after the delivery of the Transfer Notice or (ii) the date contemplated in the Transfer Notice for the closing with the prospective third party transferee(s). If the Company fails to purchase all of the Offered Shares by exercising the option granted in this Section 3.2(a)(i) within the period provided, the Company shall so notify each Investor in writing (the “Additional Transfer Notice”) and the Offered Shares remaining shall be subject to the options granted to the Investors pursuant to this Agreement. The Additional Transfer Notice shall include all of the information and certifications required in a Transfer Notice and shall additionally identify the Offered Shares that the Company has declined to purchase (the “Remaining Shares”) and briefly describe the Investors’ rights of first refusal and co-sale with respect to the proposed Transfer.

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(ii) Investors’ Right of First Refusal. The Investors shall have an option for a period of twenty (20) days from the date of delivery of the Additional Transfer Notice set forth in Section 3.2(a)(i) to elect to purchase up to their respective pro rata shares of the Remaining Shares at the same price and subject to the same material terms and conditions as described in the Additional Transfer Notice. Each Investor may exercise such purchase option and, thereby, purchase all or any portion of his, her or its pro rata share of the Remaining Shares, by notifying the selling Founder and the Company in writing, before expiration of such twenty (20) day period as to the number of such shares which he, she or it wishes to purchase. For the purpose of the preceding sentence, each Investor’s pro rata share shall be a fraction of the Remaining Shares, the numerator of which shall be the number of shares of Common Stock (including Common Stock issuable upon conversion of Preferred Stock) owned by such Investor on the date of the Additional Transfer Notice and the denominator of which shall be the total number of shares of Common Stock held by all Investors (including Common Stock issuable upon conversion of Preferred Stock) on the date of the Additional Transfer Notice. If an Investor gives the selling Founder notice that it desires to purchase its pro rata share of the Remaining Shares, then payment for the Remaining Shares shall be by check or wire transfer, against delivery of the Remaining Shares to be purchased at a place agreed upon between the parties and at the time of the scheduled closing therefor, which shall be no later than the later of (i) thirty (30) days after the Investor’s receipt of the Additional Transfer Notice or (ii) the date contemplated in the Transfer Notice for the closing with the prospective third party transferee(s).

(b) Investors’ Right of Co-Sale. To the extent the Company and the Investors do not exercise their respective rights of first refusal as to all of the Offered Shares or the Remaining Shares, as applicable, pursuant to Section 3(a), then each Investor (a “Selling Investor” for purposes of this subsection 3(b)) which notifies the selling Founder in writing within twenty (20) days after the date of delivery of the Additional Transfer Notice, shall have the right to participate in such sale of Founder Shares on the same terms and conditions as specified in the Additional Transfer Notice. Such Selling Investor’s notice to the selling Founder shall indicate the number of shares the Selling Investor wishes to sell under his, her or its right to participate. To the extent one or more of the Investors exercise such right of participation in accordance with the terms and conditions set forth below, the number of Founder Shares that the selling Founder may sell in the Transfer shall be correspondingly reduced. Each Selling Investor may sell all or any part of that number of shares (less any Remaining Shares to be purchase by such Selling Investor pursuant to Section 3.2(a)(ii)) equal to the product obtained by multiplying (i) the aggregate number of Remaining Shares covered by the Additional Transfer Notice by (ii) a fraction, the numerator of which shall be the number of shares of Common Stock (including Common Stock issuable upon conversion of Preferred Stock) owned by the Selling Investor on the date of the Additional Transfer Notice and the denominator of which shall be the total number of shares of Common Stock held by all Investors (including Common Stock issuable upon conversion of Preferred Stock) on the date of the Additional Transfer Notice. Each Selling Investor shall effect its participation in the sale by promptly delivering to the selling Founder for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer. To the extent that any prospective purchaser or purchasers refuse to purchase shares or other securities from a Selling Investor exercising its rights of co-sale hereunder, the selling Founder shall not sell to such prospective purchaser or purchasers any Founder Shares unless and until, simultaneously with such sale, the selling Founder purchases such shares or other securities from such Selling Investor for the same consideration and on the same terms and conditions as the proposed transfer described in the Transfer Notice.

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(c) Non-Exercise. To the extent that the Company and the Investors have not exercised their respective rights of first refusal as to the Offered Shares or the Remaining Shares, as applicable, within the time periods specified in Section 3.2(a) and the Investors have not exercised their rights to participate in the sale of the Remaining Shares, then the selling Founder shall be free to sell the Founder Shares to such prospective purchaser on the same terms and conditions as outlined in the Transfer Notice, and provided that in the event such Founder Shares are not sold within ninety (90) days of the date of the notice, they shall once again be subject to the right of first refusal and co-sale provided herein.

(d) The exercise or non-exercise of the rights of participation by a participant in one or more sales of Common Stock made by the Transferring Founder shall not adversely affect its rights to participate in subsequent sales of Common Stock subject to Section 3.1.

(e) The rights afforded Investors under this Section 3 shall terminate upon the closing of a Qualified IPO.

3.3 Exempt Transfers.

(a) Notwithstanding the foregoing, the first refusal and co-sale rights of the Investors and the Company shall not apply to (i) any pledge of Founders’ Shares made pursuant to a bona fide loan transaction that creates a mere security interest, (ii) any transfer to the ancestors, descendants or spouse, or to trusts for the benefit of such persons or a Founder; (iii) any bona fide gift; (iv) transfers over the duration of this Agreement that in the aggregate do not exceed five percent (5%) of the aggregate amount of Founders’ Shares held by a Founder as of the date of this Agreement (adjusted for stock splits, dividends, combinations, recapitalizations and the like); or (v) the transfer of 207,000 shares of Common Stock held by Dr. Wendye Robbins to Dr. Peter Bick; provided, however, that (A) the transferring Founder shall inform the Investors of such pledge, transfer or gift prior to effecting it and (B) the pledgee, transferee or donee shall furnish to the Company and the Investors a written agreement to be bound by and comply with all the provisions of this Section 3. Such transferred Founders’ Shares shall remain “Founders’ Shares” hereunder, and such pledgee, transferee, or donee shall be treated as a “Founder” for purposes of this Agreement.

(b) Notwithstanding the foregoing, the provisions of Section 3 shall not apply to the sale of any Founders’ Shares (i) to the public pursuant to a registration statement filed with, and declared effective by, the SEC under the Securities Act; or (ii) to the Company; or (iii) any transfer by a Founder if prior to such sale the Founder held less than one percent (1%) of the Company’s outstanding shares.

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3.4 Prohibited Transfers.

(a) In the event a Founder (a “Contravening Founder”) should sell any Founders’ Shares in contravention of the first refusal and co-sale rights of the Investors under this Section 3 (a “Prohibited Transfer”), the Investors, in addition to such other remedies as may be available under the law, in equity or hereunder, shall have the put option provided below, and the Contravening Founder shall be bound by the applicable provisions of such option.

(b) In the event of a Prohibited Transfer, each Investor shall have the right to sell to the Contravening Founder the type and number of shares of stock equal to the type and number of shares each Investor would have been entitled to transfer to the prospective purchaser had the Prohibited Transfer under Section 3 hereof been effected pursuant to and in compliance with the terms of this Agreement. Such sale shall be made on the following terms and conditions:

(i) The price per share at which the shares are to be sold to the Contravening Founder shall be equal to the price per share paid by the purchaser to the Contravening Founder in the Prohibited Transfer. The Contravening Founder shall also reimburse each Investor for any and all fees and expenses, including legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Investors’ rights under this Section 3.

(ii) Within ninety (90) days after the later of the dates on which the Investors: (A) received notice of the Prohibited Transfer or (B) otherwise became aware of the Prohibited Transfer, each Investor shall, if exercising the option created hereby, deliver to the Contravening Founder the certificate(s) representing the shares to be sold, each certificate to be properly endorsed for transfer or otherwise deliver such certificates to the Company to be held in trust by the Company pending receipt of payment therefore by the Contravening Founder.

(iii) The Contravening Founder shall, upon receipt of the certificate(s) pursuant to subparagraph 3.3(b)(ii) or receipt by the Company of notice that it holds such certificates in trust, pay the aggregate purchase price therefor and the amount of reimbursable fees and expenses, as specified in subparagraph 3.4(b)(i) above, in cash or by other means acceptable to the Investor.

(iv) Notwithstanding the foregoing, any attempt by the Contravening Founder to transfer Founders’ Shares in violation of Section 3 shall be void, and the Company agrees it will not effect such a transfer and will not treat any alleged transferee as the holder of such shares without the written consent of a majority in interest of the Investors and non-Contravening Founders.

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3.5 Legends.

(a) Legends. The Company and the Founders agree to imprint all certificates of capital stock of the Company now held by or hereafter issued to the Founder during the term of this Section 3, with the following legends:

(i) In connection with the restrictions set forth in this Section 3:

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.

(ii) Until the expiration of any market stand off period following the initial public offering of the securities of the Company agreed to between the Company and any Founder or an underwriter of the Company’s initial public offering and any Founder:

UPON THE REQUEST OF THE COMPANY OR THE UNDERWRITERS, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, SHORT SOLD, LOANED, MADE SUBJECT TO AN OPTION TO PURCHASE SUCH SECURITIES OR OTHERWISE DISPOSED OF FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR THE UNDERWRITERS.

(b) Each Founder agrees that the Company may instruct its transfer agent to impose transfer restrictions on the shares represented by certificates bearing the legends referred to in Section 3.5(a) to enforce the provisions of this Agreement and any market stand-off agreement, and the Company agrees to promptly do so. The legend set forth in Section 3.5(a)(i) may be removed upon the closing of a Qualified IPO.

3.6 Non-Contravention. To the extent that the provisions of any agreement between the Company and any Founder (each, a “Founder Agreement”) conflict with the ability of the Company or the Investors from exercising their rights pursuant to Sections 3.1, 3.2 and 3.4 of this Agreement with respect to any Transfer that is not exempt under Section 3.3 hereof or any Prohibited Transfer, the parties hereto hereby agree that the terms of Sections 3.1, 3.2 and 3.4 hereof shall supercede the terms of such Founder Agreement with respect to such Prohibited Transfer or non-exempt Transfer. Except as otherwise set forth in this Section 3.6 the obligations of any Founder under any Founder Agreement shall be in addition to, and shall not be superceded by, the obligations of each of the Founders under this Section 3.

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4. Miscellaneous.

4.1 Governing Law. This Agreement shall be governed in all respects by the laws of the State of California, as if entered into by and between California residents exclusively for performance entirely within California.

4.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

4.3 Entire Agreement; Amendment: Waiver. This Agreement, together with all exhibits hereto, constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof and supercedes any and all prior negotiations, correspondence, agreements (including, without limitation, the Prior Agreements), and understandings or obligations between the parties respecting the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Company and the holders of at least a majority of the Registrable Securities not resold to the public in a registered offering under the Securities Act and any such amendment, waiver, discharge or termination shall be binding on all the parties hereto, provided that no amendment or waiver which, by its express terms, affects the express rights or obligations hereunder of an Investor materially and adversely and differently than the express rights or obligations hereunder of the other Investors shall be binding as to such Investor unless that Investor consents in writing to such amendment or waiver. Notwithstanding the foregoing, any amendment to the provisions of Section 3 hereof shall also require the consent of the Founders holding a majority of the voting power of all Founders shares held by all Founders, provided that no amendment or waiver which, by its express terms, affects the express rights or obligations hereunder of a Founder materially and adversely and differently than the express rights or obligations hereunder of the other Founders shall be binding as to such Founder unless that Founder consents in writing to such amendment or waiver. Notwithstanding anything herein to the contrary, any Investor who purchases Shares at a Subsequent Closing, as such terms are defined in the Preferred Stock Purchase Agreement, in accordance with Section 1 of the Preferred Stock Purchase Agreement shall automatically become a party to this Agreement pursuant to this Section 4.3 upon the delivery by such Investor of a signature page hereto without any requirement to obtain the consent or approval of any other Investor or Founder. Exhibit A hereto will be amended and restated and distributed to the Investors and Founders hereunder if any additional Investors are added as parties to this Agreement in any Subsequent Closing pursuant to Section 1 of the Preferred Stock Purchase Agreement.

4.4 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed given for purposes of this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business day after deposit with a nationally recognized express overnight courier for deliveries in the United States; (iii) three (3) business days after deposit with an internationally recognized express courier for deliveries across international borders; or (iv) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries, in each of the foregoing cases with delivery fees and/or postage prepaid; and addressed to the party to be notified at such party’s address as set forth in the records of the Company, or as subsequently modified by at least ten (10) days written notice from such party.

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4.5 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party, upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-breaching party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default therefore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement or any waiver on the part of any party of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

4.6 Rights; Separability. Unless otherwise expressly provided herein, each Holder’s rights hereunder are several rights, not rights jointly held with any of the other Holders. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

4.7 Information Confidential. Each Holder acknowledges that the information received by them pursuant to Section 2.2 and 2.3 may be confidential and for its use only, and it will not use such confidential information in violation of the Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement or as a shareholder, unless the Company has made such information available to the public generally or such Holder is required to disclose such information by a governmental body.

4.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

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

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IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

COMPANY
NEUROGESX, INC., a California corporation
By:	/S/    ANTHONY DITONNO
	Anthony DiTonno
	Chief Executive Officer
Address:
	981 Industrial Road, Suite F San Carlos, CA 94070

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

FOUNDERS:

/S/    KEITH BLEY

Keith Bley

/S/    ANTHONY DITONNO

Anthony DiTonno

Linda Grais

The Howard D. & Victoria L. Palefsky Trust Agreement dated 10/17/01
By:	/S/    HOWARD D. PALEFSKY
Title:	Trustee

/S/    HOWARD D. PALEFSKY

Howard D. Palefsky

Wendye McGahey, TTEE of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended 9/17/01

Craig McGahey, TTEE of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended 9/17/01

Craig Mollnow McGahey SEP-IRA

By:

Title:

Wendye Robbins

Brett Robertson

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Alta California Partners II, L.P.
	By:	Alta California Management Partners II, LLC
	Its:	General Partner
	By:	/S/    ILLEGIBLE
		Member
	Alta Embarcadero Partners II, LLC
	By:	/S/    HILARY STRAIN
		Under Power of Attorney
	Alta California Partners II, L.P. – New Poll
	By:	Alta California Management Partners II, LLC – New Pool, its General Partner
	By:	/S/    ILLEGIBLE
		Managing Director
	Alta BioPharma Partners III, L.P.
	By:	Alta BioPharma Management Partners III, LLC
	By:	/S/    ILLEGIBLE
		Director
	Alta BioPharma Partners III GmbH & Co. Beteiligungs KG
	By:	Alta BioPharma Management Partners III, LLC
	By:	/S/    ILLEGIBLE
		Director
	Alta Embarcadero BioPharma Partners III, LLC
	By:	/S/    HILARY STRAIN
		V.P. of Finance & Admin.

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	ARCH Venture Fund V, L.P.
	By:	ARCH Venture Partners V, L.P.
	Its:	General Partner
	By:	ARCH Venture Partners V, LLC
	Its:	General Partner
	By:	/S/    ILLEGIBLE
	Its:	Managing Director
	ARCH V Entrepreneurs Fund, L.P.
	By:	ARCH Venture Partners V, L.P.
	Its:	General Partner
	By:	ARCH Venture Partners V, LLC
	Its:	General Partner
	By:	/S/    ILLEGIBLE
	Its:	Managing Director
	Healthcare Focus Fund, L.P.
	By:	ARCH Venture Partners V, L.P.
	Its:	General Partner
	By:	ARCH Venture Partners V, LLC
	Its:	General Partner
	By:	/S/    ILLEGIBLE
	Its:	Managing Director

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Lysbeth W. Anderson Trust DTD 7/83
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Brenton Warren Anderson as TTEE of the Brenton Warren Anderson Trust dated June 12, 1997, as amended

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Lysanna Anderson, TTEE, Lysanna Anderson Trust dated August 3, 1998

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Keith Bley

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Craig McGahey, TTEE of the Trust of Craig & Wendye McGahey dtd 3/19/97, as amended 9/17/01
	Wendye McGahey, TTEE of the Trust of Craig & Wendye McGahey dtd 3/19/97, as amended 9/17/01

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Montreux Equity Partners II SBIC, L.P.
	By:	Montreux Equity Management II SBIC, LLC, its General Partner
	By:	/S/    DANIEL K. TURNER
	Name:	Daniel K. Turner III
	Title:	Managing Member
	Montreux Equity Partners III SBIC, L.P.
	By:	Montreux Equity Management III SBIC, LLC, its General Partner
	By:	/S/    DANIEL K. TURNER
	Name:	Daniel K. Turner III
	Title:	Managing Member

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	The Howard D. & Victoria L. Palefsky Trust Agreement dated October 17, 2001
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Rogers Family Trust dated 1/21/81, as amended
	By:	/S/    ROY L. ROGERS
		Roy L. Rogers, Trustee
	Roy and Ruth Rogers Unitrust dated 9/28/89
	By:	/S/    ROY L. ROGERS

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	The Duke University Special Venture Fund, Inc.
	By:
		Douglas M. Able, III
	By:
		Gregory A. Hudgins

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Security Trust Company, Custodian FBO Frank R. Ruderman IRA
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	UNC Investment Fund, LLC
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Pacven Walden Ventures V, L.P.
	By:	Pacven Walden Management V, Co., Ltd.
	Its:	General Partner
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, Director
	Pacven Walden Ventures Parallel V-A C.V.
	By:	Pacven Walden Management V, Co., Ltd.
	Its:	General Partner
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, Director
	Pacven Walden Ventures Parallel V-B C.V.
	By:	Pacven Walden Management V, Co., Ltd.
	Its:	General Partner
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, Director
	Pacven Walden Ventures V-QP Associates Fund, L.P.
	By:	Pacven Walden Management V, Co., Ltd.
	Its:	General Partner
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, Director
	Seed Ventures III Pte. Ltd.
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, Director

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	International Venture Capital Investment III Corporation
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, President
	International Venture Capital Investment Corporation
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, President
	Asian Venture Capital Investment Corporation
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan, President
	Pacven Walden Ventures V Associates Fund, L.P.
	By:	/S/    LIP-BU TAN
		Lip-Bu Tan

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Teachers Insurance and Annuity Association of America
	By:	/S/    ILLEGIBLE
	Title:	Director

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR	/S/    KAREN J. HARDER
	Karen J. Harder

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	WS Investment Company, LLC (2001A)
	By:
	Title:
	Michael J. O’Donnell

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	For purposes of Sections 1 and 4 only:
	Silicon Valley Bank
	By:
	Name:
	Title:
	Silicon Valley Bancshares
	By:
	Name:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Dow Employees’ Pension Plan
	By:	Diamond Capital Management Inc. Its Agent
	By:	/S/    KENNETH J. VAN HEEL
	Name:	Kenneth J. Van Heel
	Title:	Sr. Investment Manager
	Union Carbide Employees’ Pension Plan
	By:	Diamond Capital Management Inc. Its Agent
	By:	/S/    KENNETH J. VAN HEEL
	Name:	Kenneth J. Van Heel
	Title:	Sr. Investment Manager

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	The Global Life Sciences Ventures Funds II
	GmbH & Co. KG
	Represented by its General Partner
	The Global Life Sciences Ventures GmbH
	By:	/S/    ILLEGIBLE
	Title:
	The Global Life Sciences Ventures Funds II Limited Partnership
	Represented by its General Partner
	Global Life Sciences Ventures (GP) Limited
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	/S/    JEAN-JACQUES BIENAIME
	Jean-Jacques Bienaime

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Craig Mollnow McGahey SEP-IRA
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Keith Bley

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Dr. Juerg Eckhardt

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Dr. Heinz Schaller

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Lysbeth W. Anderson Trust DTD 7/83
	By:
	Title:
	John W. Working TTEE U/A 7/13/94 By JW Working Inter-Vivos Trust
	By:
	Title:

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	John Walter Richwood

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:
	Gary H. Stroy

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	MC Life Science Ventures, Inc.
	By:	/S/    TSUNEHIKO YANAGIHARA
	Name:	Tsunehiko Yanagihara
	Title:	President

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	MunMun International Ltd.
	By:	/S/    VERNON CESSIN
	Name:	Vernon Cessin
	Title:	Attorney-in-fact

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Saudi Venture Development Company
	By:	/S/    FAISAL AL-HEJAILAN
	Name:	Faisal Al-Hejailan
	Title:	President

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

INVESTOR:	Palefsky Childrens’ Irrevocable Trust fbo Alexis Nicole Palefsky
	By:	/S/    HOWARD D. PALEFSKY
	Title:	Trustee
	Palefsky Childrens’ Irrevocable Trust fbo Nicholas Howard Palefsky
	By:	/S/    HOWARD D. PALEFSKY
	Title:	Trustee
	Palefsky Childrens’ Irrevocable Trust fbo Jessica Victoria Baxter
	By:	/S/    HOWARD D. PALEFSKY
	Title:	Trustee

[Signature Page to the Third Amended and Restated Investors’ Rights Agreement]

Exhibit A

Preferred Stock Investors

Series A Preferred:

Alta California Partners II, L.P.

Alta Embarcadero Partners II, L.P.

Lysanna Anderson Trustee Lysanna Anderson Trust dtd 8/3/98

Brenton Warren Anderson as TTEE of the Brenton Warren Anderson

    Trust dated 6/12/97, as amended

Lysbeth W. Anderson Trust DTD 7/83

ARCH Venture Fund V, L.P.

Keith Bley

Craig McGahey, TTEE of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended

Wendye McGahey, TTEE of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended

Montreux Equity Partners II SBIC, L.P.

The Howard D. & Victoria L. Palefsky Trust Agreement dated 10/17/01

The Rogers Family Trust dated 1/21/81, as amended

Warrant to Purchase Series A Preferred:

Silicon Valley Bank

Series B Preferred:

Alta California Partners II, L.P.

Alta Embarcadero Partners II, L.P.

Lysbeth W. Anderson Trust DTD 7/83

Brenton Warren Anderson as TTEE of the Brenton Warren Anderson Trust dated 6/12/97, as amended

ARCH Venture Fund V, L.P.

ARCH V Entrepreneurs Fund, L.P.

Healthcare Focus Fund, L.P.

Duke University Special Ventures Fund, Inc.

Montreux Equity Partners II SBIC, L.P.

Rogers Family Trust dated 1/21/81, as amended

Roy & Ruth Rogers Unitrust dated 9/28/89

Security Trust Company, FBO Frank Ruderman IRA

UNC Investment Fund, LLC

Pacven Walden Ventures V, L.P.

Pacven Walden Ventures Parallel V-A C.V.

Pacven Walden Ventures Parallel V-B C.V.

Pacven Walden Ventures V-QP Associates Fund, L.P.

Seed Ventures III Pte. Ltd.

International Venture Capital Investment III Corporation

International Venture Capital Investment Corporation

Asian Venture Capital Investment Corporation

Teachers Insurance and Annuity Association of America

Karen J. Harder

WS Investment Company, LLC (2001A)

Michael J. O’Donnell

Warrant to Purchase Series B Preferred:

Silicon Valley Bank

Series C Preferred:

Alta California Partners II, L.P.

Alta Embarcadero Partners II, L.P.

Alta BioPharma Partners III, L.P.

Alta BioPharma Partners III GmbH & Co. Beteiligungs KG

Alta Embarcadero BioPharma Partners III, LLC

ARCH Venture Fund V, L.P.

ARCH V Entrepreneurs Fund, L.P.

Healthcare Focus Fund, L.P.

Montreux Equity Partners II SBIC, L.P.

Montreux Equity Partners III SBIC, L.P.

Rogers Family Trust dated 1/21/81, as amended

Roy & Ruth Rogers Unitrust dated 9/28/89

UNC Investment Fund, LLC

Pacven Walden Ventures V, L.P.

Pacven Walden Ventures Parallel V-A, C.V.

Pacven Walden Ventures Parallel V-B C.V.

Pacven Walden Ventures V Associates Fund, L.P.

Pacven Walden Ventures V-QP Associates Fund, L.P.

International Venture Capital Investment III Corporation

International Venture Capital Investment Corporation

Asian Venture Capital Investment Corporation

Teachers Insurance and Annuity Association of America

Dow Employees’ Pension Plan

Union Carbide Employees’ Pension Plan

The Global Life Sciences Ventures Funds II GmbH & Co. KG

The Global Life Science Ventures Funds II Limited Partnership

Jean-Jacques Bienaime

Craig Mollnow McGahey SEP-IRA

Brenton Warren Anderson as TTEE of the Brenton Warren Anderson Trust dated 6/12/97, as amended

Keith Bley

Dr. Juerg Eckhardt

Dr. Heinz Schaller

Lysbeth W. Anderson Trust DTD 7/83

JW Working Inter-Vivos Trust

John Walter Richwood

Series C2 Preferred:

Alta California Partners II, L.P.

Alta Embarcadero Partners II, LLC

Alta California Partners II, L.P. – New Pool

Alta BioPharma Partners III, L.P.

Alta BioPharma Partners GmbH & Co. Beteiligungs KG

Alta Embarcadero BioPharma Partners III, L.P.

ARCH Venture Fund V, L.P.

ARCH V Entrepreneurs Fund, L.P.

Healthcare Focus Fund, L.P.

Montreux Equity Partners II SBIC, L.P.

Montreux Equity Partners III SBIC, L.P.

Rogers Family Trust dtd 1/21/81, as amended

Roy & Ruth Rogers Unitrust dated 9/28/89

Pacven Walden Ventures V, L.P.

Pacven Walden Venture Parallel V-A, C.V.

Pacven Walden Venture Parallel V-B, C.V.

Pacven Walden Ventures V Associates Fund, L.P.

Pacven Walden Ventures V-QP Associates Fund, L.P.

International Venture Capital Investment III Corporation

International Venture Capital Investment Corporation

Asian Venture Capital Investment Corporation

Teachers Insurance and Annuity Association of America

Dow Employees’ Pension Plan

Union Carbide Employees’ Pension Plan

The Global Life Science Ventures Fund II GmbH & Co.

The Global Life Science Ventures Funds II Limited

Jean-Jacques Bienaime

MC Life Science Ventures, Inc.

MunMun International Ltd.

Saudi Venture Development Company

Karen Harder

Palefsky Childrens’ Irrevocable Trust fbo Alexis Nicole Palefsky

Palefsky Childrens’ Irrevocable Trust fbo Nicholas Howard Palefksy

Palefsky Childrens’ Irrevocable Trust fbo Jessica Victoria Baxter

Exhibit B

Founders

Keith Bley

Anthony DiTonno

Linda Grais

Howard D. Palefsky

The Howard D. & Victoria L. Palefsky Trust Agreement

Wendye Robbins

Craig and Wendye McGahey, TTEES of the Trust of Wendye & Craig McGahey, dated 3/19/97, as amended 9/17/01

Brett Robertson

EX-4.3

EXHIBIT 4.3

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: NeurogesX, Inc., a California corporation

Number of Shares: 33,600

Class of Stock: Series A Preferred

Initial Exercise Price: $0.625 per share

Issue Date: December 14, 2000

Expiration Date: The later of either (i) 7 years from Company’s initial public offering, or (ii) December 14, 2010.

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the corporation (the “Company”) at the initial exercise price per Share (the “Warrant Price”) all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE.

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.

1.3 Fair Market Value. If the Shares are traded in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6 Assumption on Sale, Merger, or Consolidation of the Company.

1.6.1 “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.6.2 Assumption of Warrant. Upon the closing of any Acquisition, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Initial Exercise Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock (or the Shares if the Shares are securities other than common stock) payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, or, if the Shares are securities other than common stock, subdivides the Shares in a transaction that increases the amount of common stock into which the Shares are convertible, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Initial Exercise Price shall be proportionately increased.

2.2 Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or

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series as the Shares to common stock pursuant to the terms of the Company’s Articles of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Initial Exercise Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Articles (Certificate) of Incorporation. The provisions set forth for the Shares in the Company’s Articles (Certificate) of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the same series of shares granted to the Holder.

2.4 No Impairment. The Company shall not, by amendment of its Articles of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.1 Representations and Warranties. The Company represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than (i) the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold and (ii) the fair market value of the Shares as of the date of this Warrant.

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(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Capitalization Table previously provided to Holder remains true and complete as of the Issue Date.

3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.3 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be subject to the registration rights set forth in the Company’s Investor Rights Agreement or similar agreement. The provisions set forth in the Company’s Investors’ Rights Agreement or similar agreement relating to the above in effect as of the Issue Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the same series of shares granted to the Holder.

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and warrants to the Company as follows:

4.1 Purchase for Own Account. Except for transfers to Holder’s affiliates, this Warrant and the securities to be acquired upon exercise of this Warrant by the Holder will be acquired for investment for the Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the 1933 Act, and the Holder has no present intention of

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selling, granting any participation in, or otherwise distributing the same. If not an individual, the Holder also represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2 Disclosure of Information. The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access.

4.3 Investment Experience. The Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. The Holder: (i) has experience as an investor in securities of companies in the development stage and acknowledges that the Holder is able to fend for itself, can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4 Accredited Investor Status. The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the 1933 Act.

ARTICLE 5. MISCELLANEOUS.

5.1 Term: This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

5.2 Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER ANY APPLICABLE STATE LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THERE OF UNDER SUCH ACT AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO MARKET STAND-OFF RESTRICTION PURSUANT TO AN AGREEMENT EXECUTED BY THE HOLDER OF THE SHARES, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. THE HOLDER OF THESE SHARES HAS CONSENTED TO THE ENTRY OF STOP TRANSFER INSTRUCTIONS WITH THE ISSUER’S TRANSFER AGENT AGAINST THE TRANSFER OF THESE SHARES IN ORDER TO ENFORCE THE PROVISIONS OF SUCH AGREEMENT. AS A RESULT OF THIS MARKET STAND-OFF RESTRICTION, THESE SHARES MAY NOT BE TRANSFERRED DURING THE PERIOD ENDING 180 DAYS AFTER THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT.

5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4 Transfer Procedure. Subject to the provisions of Section 5.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares or The Silicon Valley Bank Foundation, or to any affiliate of Holder, or, to any other transferee by giving the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant to any person who directly competes with the Company unless the Company’s stock is publicly traded.

5.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such holder from time to time. All notices to the Holder shall be addressed as follows:

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Silicon Valley Bank

Attn: Treasury Department

3003 Tasman Drive, HG 110

Santa Clara, CA 95054

5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

5.7 Attorney’s Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

5.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

5.9 Market Stand-Off Provision. Holder agrees to be bound by the “Market Stand-Off” provision (the “Market Stand-Off Provision”) in section 1.12 of Company’s Investors’ Rights Agreement (the “Rights Agreement”) dated June 5, 2000. The Market Stand-Off Provision provisions set forth in the Rights Agreement may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the series of Shares granted pursuant to this Warrant.

“COMPANY”
NeurogesX, Inc.
By:	/s/ Howard Palefsky
Name:	Howard Palefsky
	(Print)
Title:	Chairman of the Board, President or
	Vice President
By:
Name:
	(Print)
Title:	Chief Financial Officer, Secretary,
	Assistant Treasurer or Assistant
	Secretary

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“HOLDER”

Silicon Valley Bank

By:

Name:

Title:

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APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase              shares of the Common/Series              Preferred [strike one] Stock of NeurogesX, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for              of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing the shares in the name specified below:

Holders Name

(Address)

3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution except in compliance with applicable securities laws.

HOLDER:

By:

Name:

Title:

    (Date)

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EX-4.4

EXHIBIT 4.4

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: NeurogesX, Inc., a California corporation

Number of Shares: 20,000

Class of Stock: Series B Preferred

Initial Exercise Price: $0.75 per share

Issue Date: May 1, 2002

Expiration Date: The later of either (i) May 1, 2012 or (ii) 7 years from Company’s initial public offering.

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the corporation (the “Company”) at the initial exercise price per Share (the “Warrant Price”) all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE.

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.

1.3 Fair Market Value. If the Shares are traded in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6 Assumption on Sale, Merger, or Consolidation of the Company.

1.6.1 “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.6.2 Assumption of Warrant. Upon the closing of any Acquisition, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Initial Exercise Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock (or the Shares if the Shares are securities other than common stock) payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, or, if the Shares are securities other than common stock, subdivides the Shares in a transaction that increases the amount of common stock into which the Shares are convertible, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Initial Exercise Price shall be proportionately increased.

2.2 Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or

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series as the Shares to common stock pursuant to the terms of the Company’s Articles of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Initial Exercise Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Articles (Certificate) of Incorporation. The provisions set forth for the Shares in the Company’s Articles (Certificate) of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the same series of shares granted to the Holder.

2.4 No Impairment. The Company shall not, by amendment of its Articles of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.1 Representations and Warranties. The Company represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than (i) the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold and (ii) the fair market value of the Shares as of the date of this Warrant.

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(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Capitalization Table previously provided to Holder remains true and complete as of the Issue Date.

3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.3 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be subject to the registration rights set forth in the Company’s Amended and Restated Investor Rights Agreement dated January 18, 2001 (the “Rights Agreement”) and Holder agrees to become signatory to the Rights Agreement or its successor, if requested to do so by the Company. The provisions set forth in the Rights Agreement relating to the above in effect as of the Issue Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the same series of shares granted to the Holder.

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and warrants to the Company as follows:

4.1 Purchase for Own Account. Except for transfers to Holder’s affiliates, this Warrant and the securities to be acquired upon exercise of this Warrant by the Holder will be acquired for investment for the Holder’s account, not as a nominee or agent, and not with a view to the public

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resale or distribution within the meaning of the 1933 Act, and the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. If not an individual, the Holder also represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2 Disclosure of Information. The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access.

4.3 Investment Experience. The Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. The Holder: (i) has experience as an investor in securities of companies in the development stage and acknowledges that the Holder is able to fend for itself, can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4 Accredited Investor Status. The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the 1933 Act.

ARTICLE 5. MISCELLANEOUS.

5.1 Term: This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

5.2 Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER ANY APPLICABLE STATE LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THERE OF UNDER SUCH ACT AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO MARKET STAND-OFF RESTRICTION PURSUANT TO AN AGREEMENT EXECUTED BY THE HOLDER OF THE SHARES, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. THE HOLDER OF THESE SHARES HAS CONSENTED TO THE ENTRY OF STOP TRANSFER INSTRUCTIONS WITH THE ISSUER’S TRANSFER AGENT AGAINST THE TRANSFER OF THESE SHARES IN ORDER TO ENFORCE THE PROVISIONS OF SUCH AGREEMENT. AS A RESULT OF THIS MARKET STAND-OFF RESTRICTION, THESE SHARES MAY NOT BE TRANSFERRED DURING THE PERIOD ENDING 180 DAYS AFTER THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT.

5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4 Transfer Procedure. Subject to the provisions of Section 5.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares or The Silicon Valley Bank Foundation, or to any affiliate of Holder, or, to any other transferee by giving the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant to any person who directly competes with the Company unless the Company’s stock is publicly traded.

5.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such holder from time to time. All notices to the Holder shall be addressed as follows:

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Silicon Valley Bank

Attn: Treasury Department

3003 Tasman Drive, HG 110

Santa Clara, CA 95054

5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

5.7 Attorney’s Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

5.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

5.9 Market Stand-Off Provision. Holder agrees to be bound by the “Market Stand-Off” provision (the “Market Stand-Off Provision”) in section 1.12 of the Rights Agreement. The Market Stand-Off Provision provisions set forth in the Rights Agreement may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects Holder in the same manner as they affect all other shareholders of the series of Shares granted pursuant to this Warrant.

“COMPANY”
NeurogesX, Inc.
By:	/s/ Howard Palefsky
Name:	Howard Palefsky
	(Print)
Title:	Chairman of the Board, President or
	Vice President
By:	/s/ Darrell W. Baggs
Name:	Darrell W. Baggs
	(Print)
Title:	Chief Financial Officer, Secretary,
	Assistant Treasurer or Assistant
	Secretary

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“HOLDER”

Silicon Valley Bank

By:

Name:

Title:

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APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase              shares of the Common/Series              Preferred [strike one] Stock of NeurogesX, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for              of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing the shares in the name specified below:

Holders Name

(Address)

3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution except in compliance with applicable securities laws.

HOLDER:

By:

Name:

Title:

    (Date)

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EX-4.5

EXHIBIT 4.5

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.

NEUROGESX, INC.

WARRANT TO PURCHASE SHARES

OF SERIES C-2 PREFERRED STOCK

THIS CERTIFIES THAT, for value received, HORIZON TECHNOLOGY FUNDING COMPANY II LLC and its assignees are entitled to subscribe for and purchase that number of the fully paid and nonassessable shares of Series C-2 Preferred Stock (as adjusted pursuant to Section 4 hereof, the “Shares”) of NEUROGESX, INC., a Delaware corporation (the “Company”), as determined pursuant to the next paragraph hereof at the price of $0.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the “Warrant Price”), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term “Series Preferred” shall mean the Company’s Series C-2 Preferred Stock and any stock into or for which such Series C-2 Preferred Stock may hereafter be converted or exchanged, and after the conversion of the Series C-2 Preferred Stock to Common Stock shall mean the Company’s Common Stock, (b) the term “Date of Grant” shall mean July 7, 2006, and (c) the term “Other Warrants” shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of or in lieu of this Warrant. The term “Warrant” as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise.

The number of shares for which this Warrant is exercisable shall equal the sum of (a) 240,000 plus (b) if and only if, the Company shall have borrowed Loan B (as defined in that certain Venture Loan and Security Agreement by and among the Company, Horizon Technology Funding Company LLC (“Horizon”) and Oxford Finance Corporation (“Oxford”) dated on or about the Date of Grant (the “Loan Agreement”)), 105,000.

1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. Notwithstanding the term of this Warrant fixed pursuant to this Section 1, upon the consummation of an Acquisition (as defined below), this Warrant shall automatically be exercised pursuant to Section 10.2 hereof, without any action by holder. “Acquisition” means: (i) a sale of all or substantially all of

the Company’s assets to an Unaffiliated Entity (as defined below), or (ii) the merger, consolidation or acquisition of the Company with, into or by an Unaffiliated Entity (other than a merger or consolidation for the principle purpose of changing the domicile of the Company or a bona fide round of preferred stock equity financing), that results in the transfer of more than fifty percent (50%) of the outstanding voting power of the Company, and where the consideration for the assets of the Company or the Company is cash or securities of a publicly traded company with a market capitalization of not less than Three Hundred Fifty Million Dollars ($350,000,000). “Unaffiliated Entity” means any entity that is owned or controlled by parties who own less than twenty percent (20%) of the combined voting power of the voting securities of the Company immediately prior to such merger, consolidation or acquisition.

2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly completed and executed) at the principal office of the Company and by the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company (a “Wire Transfer”) of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased; (b) if in connection with a registered public offering of the Company’s securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased; or (c) exercise of the “net issuance” right provided for in Section 10.2 hereof. The person or persons in whose name(s) any certificate(s) representing shares of Series Preferred shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period; provided, however, at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested by the holder of this Warrant, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the holder exercising this Warrant) within the time period required to settle any trade made by the holder after exercise of this Warrant.

3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes,

liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Series Preferred to provide for the exercise of the rights represented by this Warrant and a sufficient number of shares of its Common Stock to provide for the conversion of the Series Preferred into Common Stock.

4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a) Reclassification or Merger. Subject to termination pursuant to Section 1, hereof, in case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon exercise of this Warrant the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, merger or sale by a holder of the number of shares of Series Preferred then purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Section 4(a) shall similarly apply to successive reclassifications, changes, mergers and sales.

(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Series Preferred, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.

(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Series Preferred payable in Series Preferred, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Series Preferred outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Series Preferred outstanding immediately after such

dividend or distribution; or (ii) make any other distribution with respect to Series Preferred (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the Company such that the holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Series Preferred (or Common Stock issuable upon conversion thereof) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.

(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Series Preferred purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.

(e) Antidilution Rights. The other antidilution rights applicable to the Shares of Series Preferred purchasable hereunder are set forth in the Company’s Fourth Amended and Restated Articles of Incorporation, as amended through the Date of Grant (the “Charter”). The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.

5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant. In addition, whenever the conversion price or conversion ratio of the Series Preferred shall be adjusted, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the conversion price or ratio of the Series Preferred after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant.

6. Fractional Shares. No fractional shares of Series Preferred will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Series Preferred on the date of exercise as reasonably determined in good faith by the Company’s Board of Directors.

7. Compliance with Act; Disposition of Warrant or Shares of Series Preferred.

(a) Compliance with Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Series Preferred to be issued upon exercise hereof and any Common Stock issued upon conversion thereof are being acquired for investment and that such

holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Series Preferred to be issued upon exercise hereof or any Common Stock issued upon conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the “Act”) or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Series Preferred so purchased (and any shares of Common Stock issued upon conversion thereof) are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Series Preferred issued upon exercise of this Warrant and all shares of Common Stock issued upon conversion thereof (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”

Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows:

(1) The holder is aware of the Company’s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof in violation of the Act.

(2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder’s investment intent as expressed herein.

(3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act.

(4) The holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Series Preferred acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares of Series Preferred or Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Series Preferred to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Series Preferred or Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Series Preferred or Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Series Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. It shall be a condition to any transfer of this Warrant, that the transferee shall agree in writing to be bound by the terms of this Warrant as if an original holder hereof.

(c) Lock-Up Period; Agreement. In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the holder of this Warrant agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company, however or whenever acquired (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering. The obligations described in Section 7(c) shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of the Company held by the holder of this Warrant. The holder of this Warrant agrees that it will not transfer this Warrant or any shares received directly or

indirectly as a result of the exercise of this Warrant unless the transferee(s) agrees in writing to be bound by all of the provisions of this Section 7(c). Each certificate representing any securities of the Company held by the holder of this Warrant shall be stamped or otherwise imprinted with a legend substantially similar to the following:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, AS SET FORTH IN AN AGREEMENT AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”

(d) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Series Preferred or Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a partner or to a limited liability company of which the holder is a member, or (iii) to any affiliate of the holder if the holder is a corporation (“affiliate” for purposes herein shall include but not be limited to a business development company (as such term is defined in Section 2(a)(48) of the Investment Company Act of 1940, as amended) in which, either prior to such transaction or transactions or as a result thereof, any one or more members of the Warrant holder has an equity ownership interest (individually or together with other such members) of more than 5%); provided, however, in any such transfer, if applicable, the transferee shall agree in writing as a condition of such transfer to be bound by the terms of this Warrant as if an original holder hereof.

8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Series Preferred or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of such class or series of the securities of the Company for which this Warrant is exerciseable concurrently with the distribution thereof to such shareholders.

9. Registration Rights. The holder of this Warrant (including any permitted transferees or assigns) shall be added as a party to the Company’s Third Amended and Restated Investors’ Rights Agreement dated as of November 14, 2005 (the “Rights Agreement”) so that the holder shall have those rights as set forth in the Joinder Agreement attached hereto as Exhibit A-3.

10. Additional Rights.

10.1 Acquisition Transactions. The Company shall provide the holder of this Warrant with at least ten (10) days’ written notice prior to closing thereof of the terms and conditions of an Acquisition transaction.

10.2 Right to Convert Warrant into Stock: Net Issuance.

(a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the “Conversion Right”) into shares of Series Preferred as provided in this Section 10.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the “Converted Warrant Shares”), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Series Preferred as is determined according to the following formula:

X = B- A

                    Y

Where:	X =	the number of shares of Series Preferred that shall be issued to holder
	Y =	the fair market value of one share of Series Preferred
	A =	the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price)
	B =	the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 10 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant.

(b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the

Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the “Conversion Date”), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company’s Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a “Public Offering”) or Acquisition. Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date.

(c) Determination of Fair Market Value. For purposes of this Section 10.2, “fair market value” of a share of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company’s Registration Statement relating to such Public Offering (“Registration Statement”) has been declared effective by the Securities and Exchange Commission, then the initial “Price to Public” specified in the final prospectus with respect to such offering.

(ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows:

(A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible;

(B) If traded on the Nasdaq Stock Market or other over-the-counter system, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible; and

(C) If there is no public market for the Common Stock, then fair market value shall be determined by the Board of Directors of the Company in good faith.

In making a determination under clauses (A) or (B) above, if on the Determination Date, five trading days had not passed since the Company’s initial public offering of its Common Stock (“IPO”) effected pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Act, then the fair market value of the Common Stock shall be the average closing prices or closing bid prices, as applicable, for the shorter period beginning on and including the date of the IPO and ending on the trading day prior to the Determination Date (or if such period includes only one trading day the closing price or closing bid price, as applicable, for such trading day).

10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Series Preferred is greater than the Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of the Series Preferred upon such expiration shall be determined pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if any, the holder hereof is to receive by reason of such automatic exercise.

11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows:

(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies.

(b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.

(c) The rights, preferences, privileges and restrictions granted to or imposed upon the Series Preferred and the holders thereof are as set forth in the Charter, and on the Date of Grant, each share of the Series Preferred represented by this Warrant is convertible into one share of Common Stock.

(d) The shares of Common Stock issuable upon conversion of the Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms of the Charter will be validly issued, fully paid and nonassessable.

(e) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company’s Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound (except as would not reasonably be expected to have a material adverse effect on the Company) or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.

(f) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, could have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.

(g) The number of shares of Common Stock of the Company outstanding on the date hereof, on a fully diluted basis (assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options and warrants), does not exceed 144,000,000 shares.

12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.

14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof.

15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

16. Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Delaware.

18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.

19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.

20. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

21. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

22. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

23. Entire Agreement; Modification. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.

NEUROGESX, INC.
By:	/s/ Stephen Ghiglieri
Name:	Stephen Ghiglieri
Title:	CFO
Address:	981F Industrial Road
	San Carlos, CA 94070

EXHIBIT A-1

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. The undersigned hereby:

¨ elects to purchase             shares of [Series Preferred Stock] [Common Stock] of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please issue a certificate or certificates representing              shares in the name of the undersigned or in such other name or names as are specified below:

(Name)

(Address)

3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.

(Signature)

    (Date)

EXHIBIT A-2

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. Contingent upon and effective immediately prior to the closing (the “Closing”) of the Company’s public offering contemplated by the Registration Statement on Form S        , filed             , 200    , the undersigned hereby:

¨ elects to purchase              shares of [Series Preferred Stock] [Common Stock] of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please deliver to the custodian for the selling shareholders a stock certificate representing such              shares.

3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $             or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.

(Signature)

    (Date)

EXHIBIT A-3

JOINDER AGREEMENT

WHEREAS, the undersigned              (the “Joining Parties”) and NeurogesX, Inc., a California corporation (the “Company”), have entered into a certain Venture Loan and Security Agreement (the “LSA”), dated as of                  , 2006, and certain other related agreements contemplated thereby, pursuant to which, among other things, the Company will issue to the Joining Parties Warrants (the “Warrant”) to purchase an aggregate of up to 840,000 shares of the Company’s Series C-2 Preferred Stock, at an exercise price of $0.75 per share (the “Shares”);

WHEREAS, the parties hereto desire the Joining Parties to have certain registration rights with respect to the shares of Common Stock of the Company issuable upon conversion of the Shares pursuant to Sections 1.1 - 1.14 of that certain Amended and Restated Investors’ Rights Agreement, dated as of November 14, 2005, by and among the Company and the other parties named therein, as the same may be amended and/or restated from time to time (the “Rights Agreement”), and that the Joining Parties be added to the Rights Agreement as parties thereto for the purpose of granting such registration rights;

WHEREAS, Section 4.3 of the Rights Agreement allows the amendment or waiver of such Rights Agreement with the written consent of the Company and the holders of at least a majority Registrable Securities, as defined therein, outstanding (the “Majority Holders”); and

NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged by the parties hereto, the parties hereby covenant and agree as follows:

1. The shares of Common Stock of the Company issuable upon conversion of the Shares shall constitute “Registrable Securities,” as such term is defined in Section 1.1(g) of the Rights Agreement, for all intents and purposes of the registration rights and related provisions and obligations set forth in Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement.

2. The Joining Parties shall be treated for all purposes under Section 1.1 through 1.14 inclusive, and Section 4 of the Rights Agreement as “Holders,” as such term is defined in Section 1.01(d) of the Rights Agreement; provided however, that the Joining Parties shall not be considered “Initiating Holders” as such term is defined in Section 1.1(e).

3. The Joining Parties agree to be bound by the terms and conditions of Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement and shall succeed to and assume all of the rights and obligations of Holders of Registrable Securities for all intents and purposes of such Sections, provided that, the Joining Parties shall not be deemed to possess any rights set forth in Sections 2 or 3 of the Rights Agreement.

4. All notices and other communications under the Rights Agreement shall be made to the Joining Parties at the addresses specified below and thereafter at such other address, notice of which is given in accordance with Section 4.4 of the Rights Agreement:

If to Horizon or Agent:	Horizon Technology Funding Company LLC 76 Batterson Park Road Farmington, CT 06032 Attention: Legal Department Fax: (860) 676-8655 Ph: (860) 676-8654
If to Oxford:	Oxford Finance Corporation 133 N.Fairfax Street Alexandria, VA 22314 Attn: Mike Altenburger, Chief Financial Officer Fax: (703) 519-4910 Ph: (703) 519-6017

5. The Rights Agreement as modified herein shall remain in full force and effect as so modified.

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

NEUROGESX, INC.

By:

Name:

Title:

JOINING PARTIES:

[TO COME]

INVESTORS:

See attached pages.

Agreed and Accepted:

EX-4.6

EXHIBIT 4.6

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.

NEUROGESX, INC.

WARRANT TO PURCHASE SHARES

OF SERIES C-2 PREFERRED STOCK

THIS CERTIFIES THAT, for value received, HORIZON TECHNOLOGY FUNDING COMPANY III LLC and its assignees are entitled to subscribe for and purchase that number of the fully paid and nonassessable shares of Series C-2 Preferred Stock (as adjusted pursuant to Section 4 hereof, the “Shares”) of NEUROGESX, INC., a Delaware corporation (the “Company”), as determined pursuant to the next paragraph hereof at the price of $0.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the “Warrant Price”), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term “Series Preferred” shall mean the Company’s Series C-2 Preferred Stock and any stock into or for which such Series C-2 Preferred Stock may hereafter be converted or exchanged, and after the conversion of the Series C-2 Preferred Stock to Common Stock shall mean the Company’s Common Stock, (b) the term “Date of Grant” shall mean July 7, 2006, and (c) the term “Other Warrants” shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of or in lieu of this Warrant. The term “Warrant” as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise.

The number of shares for which this Warrant is exercisable shall equal the sum of (a) 240,000 plus (b) if and only if, the Company shall have borrowed Loan B (as defined in that certain Venture Loan and Security Agreement by and among the Company, Horizon Technology Funding Company LLC (“Horizon”) and Oxford Finance Corporation (“Oxford”) dated on or about the Date of Grant (the “Loan Agreement”)), 105,000.

1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. Notwithstanding the term of this Warrant fixed pursuant to this Section 1, upon the consummation of an Acquisition (as defined below), this Warrant shall automatically be exercised pursuant to Section 10.2 hereof, without any action by holder. “Acquisition” means: (i) a sale of all or substantially all of

the Company’s assets to an Unaffiliated Entity (as defined below), or (ii) the merger, consolidation or acquisition of the Company with, into or by an Unaffiliated Entity (other than a merger or consolidation for the principle purpose of changing the domicile of the Company or a bona fide round of preferred stock equity financing), that results in the transfer of more than fifty percent (50%) of the outstanding voting power of the Company, and where the consideration for the assets of the Company or the Company is cash or securities of a publicly traded company with a market capitalization of not less than Three Hundred Fifty Million Dollars ($350,000,000). “Unaffiliated Entity” means any entity that is owned or controlled by parties who own less than twenty percent (20%) of the combined voting power of the voting securities of the Company immediately prior to such merger, consolidation or acquisition.

2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly completed and executed) at the principal office of the Company and by the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company (a “Wire Transfer”) of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased; (b) if in connection with a registered public offering of the Company’s securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased; or (c) exercise of the “net issuance” right provided for in Section 10.2 hereof. The person or persons in whose name(s) any certificate(s) representing shares of Series Preferred shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period; provided, however, at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested by the holder of this Warrant, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the holder exercising this Warrant) within the time period required to settle any trade made by the holder after exercise of this Warrant.

3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes,

liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Series Preferred to provide for the exercise of the rights represented by this Warrant and a sufficient number of shares of its Common Stock to provide for the conversion of the Series Preferred into Common Stock.

4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a) Reclassification or Merger. Subject to termination pursuant to Section 1, hereof, in case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon exercise of this Warrant the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, merger or sale by a holder of the number of shares of Series Preferred then purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Section 4(a) shall similarly apply to successive reclassifications, changes, mergers and sales.

(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Series Preferred, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.

(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Series Preferred payable in Series Preferred, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Series Preferred outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Series Preferred outstanding immediately after such

dividend or distribution; or (ii) make any other distribution with respect to Series Preferred (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the Company such that the holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Series Preferred (or Common Stock issuable upon conversion thereof) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.

(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Series Preferred purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.

(e) Antidilution Rights. The other antidilution rights applicable to the Shares of Series Preferred purchasable hereunder are set forth in the Company’s Fourth Amended and Restated Articles of Incorporation, as amended through the Date of Grant (the “Charter”). The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.

5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant. In addition, whenever the conversion price or conversion ratio of the Series Preferred shall be adjusted, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the conversion price or ratio of the Series Preferred after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant.

6. Fractional Shares. No fractional shares of Series Preferred will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Series Preferred on the date of exercise as reasonably determined in good faith by the Company’s Board of Directors.

7. Compliance with Act; Disposition of Warrant or Shares of Series Preferred.

(a) Compliance with Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Series Preferred to be issued upon exercise hereof and any Common Stock issued upon conversion thereof are being acquired for investment and that such

holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Series Preferred to be issued upon exercise hereof or any Common Stock issued upon conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the “Act”) or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Series Preferred so purchased (and any shares of Common Stock issued upon conversion thereof) are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Series Preferred issued upon exercise of this Warrant and all shares of Common Stock issued upon conversion thereof (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”

Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows:

(1) The holder is aware of the Company’s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof in violation of the Act.

(2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder’s investment intent as expressed herein.

(3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act.

(4) The holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Series Preferred acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares of Series Preferred or Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Series Preferred to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Series Preferred or Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Series Preferred or Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Series Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. It shall be a condition to any transfer of this Warrant, that the transferee shall agree in writing to be bound by the terms of this Warrant as if an original holder hereof.

(c) Lock-Up Period; Agreement. In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the holder of this Warrant agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company, however or whenever acquired (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering. The obligations described in Section 7(c) shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of the Company held by the holder of this Warrant. The holder of this Warrant agrees that it will not transfer this Warrant or any shares received directly or

indirectly as a result of the exercise of this Warrant unless the transferee(s) agrees in writing to be bound by all of the provisions of this Section 7(c). Each certificate representing any securities of the Company held by the holder of this Warrant shall be stamped or otherwise imprinted with a legend substantially similar to the following:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, AS SET FORTH IN AN AGREEMENT AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”

(d) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Series Preferred or Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a partner or to a limited liability company of which the holder is a member, or (iii) to any affiliate of the holder if the holder is a corporation (“affiliate” for purposes herein shall include but not be limited to a business development company (as such term is defined in Section 2(a)(48) of the Investment Company Act of 1940, as amended) in which, either prior to such transaction or transactions or as a result thereof, any one or more members of the Warrant holder has an equity ownership interest (individually or together with other such members) of more than 5%); provided, however, in any such transfer, if applicable, the transferee shall agree in writing as a condition of such transfer to be bound by the terms of this Warrant as if an original holder hereof.

8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Series Preferred or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of such class or series of the securities of the Company for which this Warrant is exerciseable concurrently with the distribution thereof to such shareholders.

9. Registration Rights. The holder of this Warrant (including any permitted transferees or assigns) shall be added as a party to the Company’s Third Amended and Restated Investors’ Rights Agreement dated as of November 14, 2005 (the “Rights Agreement”) so that the holder shall have those rights as set forth in the Joinder Agreement attached hereto as Exhibit A-3.

10. Additional Rights.

10.1 Acquisition Transactions. The Company shall provide the holder of this Warrant with at least ten (10) days’ written notice prior to closing thereof of the terms and conditions of an Acquisition transaction.

10.2 Right to Convert Warrant into Stock: Net Issuance.

(a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the “Conversion Right”) into shares of Series Preferred as provided in this Section 10.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the “Converted Warrant Shares”), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Series Preferred as is determined according to the following formula:

X = B- A

                    Y

Where:	X =	the number of shares of Series Preferred that shall be issued to holder
	Y =	the fair market value of one share of Series Preferred
	A =	the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price)
	B =	the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 10 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant.

(b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the

Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the “Conversion Date”), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company’s Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a “Public Offering”) or Acquisition. Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date.

(c) Determination of Fair Market Value. For purposes of this Section 10.2, “fair market value” of a share of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company’s Registration Statement relating to such Public Offering (“Registration Statement”) has been declared effective by the Securities and Exchange Commission, then the initial “Price to Public” specified in the final prospectus with respect to such offering.

(ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows:

(A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible;

(B) If traded on the Nasdaq Stock Market or other over-the-counter system, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible; and

(C) If there is no public market for the Common Stock, then fair market value shall be determined by the Board of Directors of the Company in good faith.

In making a determination under clauses (A) or (B) above, if on the Determination Date, five trading days had not passed since the Company’s initial public offering of its Common Stock (“IPO”) effected pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Act, then the fair market value of the Common Stock shall be the average closing prices or closing bid prices, as applicable, for the shorter period beginning on and including the date of the IPO and ending on the trading day prior to the Determination Date (or if such period includes only one trading day the closing price or closing bid price, as applicable, for such trading day).

10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Series Preferred is greater than the Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of the Series Preferred upon such expiration shall be determined pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if any, the holder hereof is to receive by reason of such automatic exercise.

11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows:

(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies.

(b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.

(c) The rights, preferences, privileges and restrictions granted to or imposed upon the Series Preferred and the holders thereof are as set forth in the Charter, and on the Date of Grant, each share of the Series Preferred represented by this Warrant is convertible into one share of Common Stock.

(d) The shares of Common Stock issuable upon conversion of the Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms of the Charter will be validly issued, fully paid and nonassessable.

(e) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company’s Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound (except as would not reasonably be expected to have a material adverse effect on the Company) or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.

(f) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, could have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.

(g) The number of shares of Common Stock of the Company outstanding on the date hereof, on a fully diluted basis (assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options and warrants), does not exceed 144,000,000 shares.

12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.

14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof.

15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

16. Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Delaware.

18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.

19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.

20. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

21. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

22. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

23. Entire Agreement; Modification. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.

NEUROGESX, INC.
By:	/s/ Stephen Ghiglieri
Name:	Stephen Ghiglieri
Title:	CFO
Address:	981F Industrial Road
	San Carlos, CA 94070

EXHIBIT A-1

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. The undersigned hereby:

¨ elects to purchase              shares of [Series Preferred Stock] [Common Stock] of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please issue a certificate or certificates representing              shares in the name of the undersigned or in such other name or names as are specified below:

(Name)

(Address)

3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.

(Signature)

    (Date)

EXHIBIT A-2

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. Contingent upon and effective immediately prior to the closing (the “Closing”) of the Company’s public offering contemplated by the Registration Statement on Form S        , filed                     , 200    , the undersigned hereby:

¨ elects to purchase              shares of [Series Preferred Stock] [Common Stock] of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please deliver to the custodian for the selling shareholders a stock certificate representing such              shares.

3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $             or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.

(Signature)

    (Date)

EXHIBIT A-3

JOINDER AGREEMENT

WHEREAS, the undersigned              (the “Joining Parties”) and NeurogesX, Inc., a California corporation (the “Company”), have entered into a certain Venture Loan and Security Agreement (the “LSA”), dated as of                      , 2006, and certain other related agreements contemplated thereby, pursuant to which, among other things, the Company will issue to the Joining Parties Warrants (the “Warrant”) to purchase an aggregate of up to 840,000 shares of the Company’s Series C-2 Preferred Stock, at an exercise price of $0.75 per share (the “Shares”);

WHEREAS, the parties hereto desire the Joining Parties to have certain registration rights with respect to the shares of Common Stock of the Company issuable upon conversion of the Shares pursuant to Sections 1.1 - 1.14 of that certain Amended and Restated Investors’ Rights Agreement, dated as of November 14, 2005, by and among the Company and the other parties named therein, as the same may be amended and/or restated from time to time (the “Rights Agreement”), and that the Joining Parties be added to the Rights Agreement as parties thereto for the purpose of granting such registration rights;

WHEREAS, Section 4.3 of the Rights Agreement allows the amendment or waiver of such Rights Agreement with the written consent of the Company and the holders of at least a majority Registrable Securities, as defined therein, outstanding (the “Majority Holders”); and

NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged by the parties hereto, the parties hereby covenant and agree as follows:

1. The shares of Common Stock of the Company issuable upon conversion of the Shares shall constitute “Registrable Securities,” as such term is defined in Section 1.1(g) of the Rights Agreement, for all intents and purposes of the registration rights and related provisions and obligations set forth in Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement.

2. The Joining Parties shall be treated for all purposes under Section 1.1 through 1.14 inclusive, and Section 4 of the Rights Agreement as “Holders,” as such term is defined in Section 1.01(d) of the Rights Agreement; provided however, that the Joining Parties shall not be considered “Initiating Holders” as such term is defined in Section 1.1(e).

3. The Joining Parties agree to be bound by the terms and conditions of Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement and shall succeed to and assume all of the rights and obligations of Holders of Registrable Securities for all intents and purposes of such Sections, provided that, the Joining Parties shall not be deemed to possess any rights set forth in Sections 2 or 3 of the Rights Agreement.

4. All notices and other communications under the Rights Agreement shall be made to the Joining Parties at the addresses specified below and thereafter at such other address, notice of which is given in accordance with Section 4.4 of the Rights Agreement:

If to Horizon or Agent:	Horizon Technology Funding Company LLC 76 Batterson Park Road Farmington, CT 06032 Attention: Legal Department Fax: (860) 676-8655 Ph: (860) 676-8654
If to Oxford:	Oxford Finance Corporation 133 N.Fairfax Street Alexandria, VA 22314 Attn: Mike Altenburger, Chief Financial Officer Fax: (703) 519-4910 Ph: (703) 519-6017

5. The Rights Agreement as modified herein shall remain in full force and effect as so modified.

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

NEUROGESX, INC.

By:

Name:

Title:

JOINING PARTIES:

[TO COME]

INVESTORS:

See attached pages.

Agreed and Accepted:

EX-4.7

EXHIBIT 4.7

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.

NEUROGESX, INC.

WARRANT TO PURCHASE 150,000 SHARES

OF SERIES C-2 PREFERRED STOCK

THIS CERTIFIES THAT, for value received, OXFORD FINANCE CORPORATION and its assignees are entitled to subscribe for and purchase 150,000 of the fully paid and nonassessable shares of Series C-2 Preferred Stock (as adjusted pursuant to Section 4 hereof, the “Shares”) of NEUROGESX, INC., a Delaware corporation (the “Company”), at the price of $0.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the “Warrant Price”), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term “Series Preferred” shall mean the Company’s Series C-2 Preferred Stock and any stock into or for which such Series C-2 Preferred Stock may hereafter be converted or exchanged, and after the conversion of the Series C-2 Preferred Stock to Common Stock shall mean the Company’s Common Stock, (b) the term “Date of Grant” shall mean July 7, 2006, and (c) the term “Other Warrants” shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of or in lieu of this Warrant. The term “Warrant” as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise.

1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through seven (7) years after the Date of Grant. Notwithstanding the term of this Warrant fixed pursuant to this Section 1, upon the consummation of an Acquisition (as defined below), this Warrant shall automatically be exercised pursuant to Section 10.2 hereof, without any action by holder. “Acquisition” means: (i) a sale of all or substantially all of the Company’s assets to an Unaffiliated Entity (as defined below), or (ii) the merger, consolidation or acquisition of the Company with, into or by an Unaffiliated Entity (other than a merger or consolidation for the principle purpose of changing the domicile of the Company or a bona fide round of preferred stock equity financing), that results in the transfer of more than fifty percent (50%) of the outstanding voting power of the Company, and where the consideration for the assets of the Company or the Company is cash or securities of a publicly traded company with a market capitalization of not less than Three Hundred Fifty Million Dollars ($350,000,000). “Unaffiliated

Entity” means any entity that is owned or controlled by parties who own less than twenty percent (20%) of the combined voting power of the voting securities of the Company immediately prior to such merger, consolidation or acquisition.

2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly completed and executed) at the principal office of the Company and by the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company (a “Wire Transfer”) of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased; (b) if in connection with a registered public offering of the Company’s securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased; or (c) exercise of the “net issuance” right provided for in Section 10.2 hereof. The person or persons in whose name(s) any certificate(s) representing shares of Series Preferred shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period; provided, however, at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested by the holder of this Warrant, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the holder exercising this Warrant) within the time period required to settle any trade made by the holder after exercise of this Warrant.

3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Series Preferred to provide for the exercise of the rights represented by this Warrant and a sufficient number of shares of its Common Stock to provide for the conversion of the Series Preferred into Common Stock.

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4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a) Reclassification or Merger. Subject to termination pursuant to Section 1, hereof, in case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon exercise of this Warrant the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, merger or sale by a holder of the number of shares of Series Preferred then purchasable under this Warrant. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Section 4(a) shall similarly apply to successive reclassifications, changes, mergers and sales.

(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Series Preferred, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.

(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Series Preferred payable in Series Preferred, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Series Preferred outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Series Preferred outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Series Preferred (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the Company such that the holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Series Preferred (or Common Stock issuable upon conversion thereof) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.

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(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Series Preferred purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.

(e) Antidilution Rights. The other antidilution rights applicable to the Shares of Series Preferred purchasable hereunder are set forth in the Company’s Fourth Amended and Restated Articles of Incorporation, as amended through the Date of Grant (the “Charter”). The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.

5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant. In addition, whenever the conversion price or conversion ratio of the Series Preferred shall be adjusted, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the conversion price or ratio of the Series Preferred after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant.

6. Fractional Shares. No fractional shares of Series Preferred will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Series Preferred on the date of exercise as reasonably determined in good faith by the Company’s Board of Directors.

7. Compliance with Act; Disposition of Warrant or Shares of Series Preferred.

(a) Compliance with Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Series Preferred to be issued upon exercise hereof and any Common Stock issued upon conversion thereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Series Preferred to be issued upon exercise hereof or any Common Stock issued upon conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the “Act”) or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Series Preferred so purchased (and any shares of Common Stock issued upon conversion thereof) are being acquired for investment and not with a view toward distribution or resale in violation of the Act and

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shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Series Preferred issued upon exercise of this Warrant and all shares of Common Stock issued upon conversion thereof (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”

Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows:

(1) The holder is aware of the Company’s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof in violation of the Act.

(2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder’s investment intent as expressed herein.

(3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act.

(4) The holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Series Preferred acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or

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such shares of Series Preferred or Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Series Preferred to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Series Preferred or Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Series Preferred or Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Series Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. It shall be a condition to any transfer of this Warrant, that the transferee shall agree in writing to be bound by the terms of this Warrant as if an original holder hereof.

(c) Lock-Up Period; Agreement. In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the holder of this Warrant agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company, however or whenever acquired (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering. The obligations described in Section 7(c) shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of the Company held by the holder of this Warrant. The holder of this Warrant agrees that it will not transfer this Warrant or any shares received directly or indirectly as a result of the exercise of this Warrant unless the transferee(s) agrees in writing to be bound by all of the provisions of this Section 7(c). Each certificate representing any securities of the Company held by the holder of this Warrant shall be stamped or otherwise imprinted with a legend substantially similar to the following:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, AS SET FORTH IN AN AGREEMENT AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”

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(d) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Series Preferred or Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a partner or to a limited liability company of which the holder is a member, or (iii) to any affiliate of the holder if the holder is a corporation (“affiliate” for purposes herein shall include but not be limited to a business development company (as such term is defined in Section 2(a)(48) of the Investment Company Act of 1940, as amended) in which, either prior to such transaction or transactions or as a result thereof, any one or more members of the Warrant holder has an equity ownership interest (individually or together with other such members) of more than 5%); provided, however, in any such transfer, if applicable, the transferee shall agree in writing as a condition of such transfer to be bound by the terms of this Warrant as if an original holder hereof.

8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Series Preferred or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of such class or series of the securities of the Company for which this Warrant is exerciseable concurrently with the distribution thereof to such shareholders.

9. Registration Rights. The holder of this Warrant (including any permitted transferees or assigns) shall be added as a party to the Company’s Third Amended and Restated Investors’ Rights Agreement dated as of November 14, 2005 (the “Rights Agreement”) so that the holder shall have those rights as set forth in the Joinder Agreement attached hereto as Exhibit A-3.

10. Additional Rights.

10.1 Acquisition Transactions. The Company shall provide the holder of this Warrant with at least ten (10) days’ written notice prior to closing thereof of the terms and conditions of an Acquisition transaction.

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10.2 Right to Convert Warrant into Stock: Net Issuance.

(a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the “Conversion Right”) into shares of Series Preferred as provided in this Section 10.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the “Converted Warrant Shares”), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Series Preferred as is determined according to the following formula:

X = B - A

                    Y

Where:	X =	the number of shares of Series Preferred that shall be issued to holder
	Y =	the fair market value of one share of Series Preferred
	A =	the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price)
	B =	the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 10 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant.

(b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the “Conversion Date”), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company’s Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a “Public Offering”) or Acquisition. Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date.

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(c) Determination of Fair Market Value. For purposes of this Section 10.2, “fair market value” of a share of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company’s Registration Statement relating to such Public Offering (“Registration Statement”) has been declared effective by the Securities and Exchange Commission, then the initial “Price to Public” specified in the final prospectus with respect to such offering.

(ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows:

(A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible;

(B) If traded on the Nasdaq Stock Market or other over-the-counter system, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the five trading days immediately prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible; and

(C) If there is no public market for the Common Stock, then fair market value shall be determined by the Board of Directors of the Company in good faith.

In making a determination under clauses (A) or (B) above, if on the Determination Date, five trading days had not passed since the Company’s initial public offering of its Common Stock (“IPO”) effected pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Act, then the fair market value of the Common Stock shall be the average closing prices or closing bid prices, as applicable, for the shorter period beginning on and including the date of the IPO and ending on the trading day prior to the Determination Date (or if such period includes only one trading day the closing price or closing bid price, as applicable, for such trading day).

10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Series Preferred is greater than the Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before its expiration. For

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purposes of such automatic exercise, the fair market value of one share of the Series Preferred upon such expiration shall be determined pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if any, the holder hereof is to receive by reason of such automatic exercise.

11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows:

(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies.

(b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.

(c) The rights, preferences, privileges and restrictions granted to or imposed upon the Series Preferred and the holders thereof are as set forth in the Charter, and on the Date of Grant, each share of the Series Preferred represented by this Warrant is convertible into one share of Common Stock.

(d) The shares of Common Stock issuable upon conversion of the Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms of the Charter will be validly issued, fully paid and nonassessable.

(e) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company’s Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound (except as would not reasonably be expected to have a material adverse effect on the Company) or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby.

(f) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, could have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.

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(g) The number of shares of Common Stock of the Company outstanding on the date hereof, on a fully diluted basis (assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options and warrants), does not exceed 144,000,000 shares.

12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.

14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof.

15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

16. Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Delaware.

18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.

19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.

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20. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

21. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

22. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

23. Entire Agreement; Modification. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

The Company has caused this Warrant to be duly executed and delivered as of the Date of Grant specified above.

NEUROGESX, INC.
By:	/s/ Stephen Ghiglieri
Name:	Stephen Ghiglieri
Title:	CFO
Address:	981F Industrial Road San Carlos, CA 94070

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EXHIBIT A-1

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. The undersigned hereby:

¨ elects to purchase              shares of [Series Preferred Stock] [Common Stock] of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please issue a certificate or certificates representing              shares in the name of the undersigned or in such other name or names as are specified below:

(Name)

(Address)

3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.

(Signature)

    (Date)

EXHIBIT A-2

NOTICE OF EXERCISE

To: NEUROGESX, INC. (the “Company”)

1. Contingent upon and effective immediately prior to the closing (the “Closing”) of the Company’s public offering contemplated by the Registration Statement on Form S    , filed             , 200    , the undersigned hereby:

¨ elects to purchase              shares of [Series Preferred Stock] [Common Stock] of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or

¨ elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to              Shares of [Series Preferred Stock] [Common Stock].

2. Please deliver to the custodian for the selling shareholders a stock certificate representing such              shares.

3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $             or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.

(Signature)

      (Date)

EXHIBIT A-3

JOINDER AGREEMENT

WHEREAS, the undersigned              (the “Joining Parties”) and NeurogesX, Inc., a California corporation (the “Company”), have entered into a certain Venture Loan and Security Agreement (the “LSA”), dated as of                  , 2006, and certain other related agreements contemplated thereby, pursuant to which, among other things, the Company will issue to the Joining Parties Warrants (the “Warrant”) to purchase an aggregate of up to 840,000 shares of the Company’s Series C-2 Preferred Stock, at an exercise price of $0.75 per share (the “Shares”);

WHEREAS, the parties hereto desire the Joining Parties to have certain registration rights with respect to the shares of Common Stock of the Company issuable upon conversion of the Shares pursuant to Sections 1.1 - 1.14 of that certain Amended and Restated Investors’ Rights Agreement, dated as of November 14, 2005, by and among the Company and the other parties named therein, as the same may be amended and/or restated from time to time (the “Rights Agreement”), and that the Joining Parties be added to the Rights Agreement as parties thereto for the purpose of granting such registration rights;

WHEREAS, Section 4.3 of the Rights Agreement allows the amendment or waiver of such Rights Agreement with the written consent of the Company and the holders of at least a majority Registrable Securities, as defined therein, outstanding (the “Majority Holders”); and

NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged by the parties hereto, the parties hereby covenant and agree as follows:

1. The shares of Common Stock of the Company issuable upon conversion of the Shares shall constitute “Registrable Securities,” as such term is defined in Section 1.1(g) of the Rights Agreement, for all intents and purposes of the registration rights and related provisions and obligations set forth in Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement.

2. The Joining Parties shall be treated for all purposes under Section 1.1 through 1.14 inclusive, and Section 4 of the Rights Agreement as “Holders,” as such term is defined in Section 1.01(d) of the Rights Agreement; provided however, that the Joining Parties shall not be considered “Initiating Holders” as such term is defined in Section 1.1(e).

3. The Joining Parties agree to be bound by the terms and conditions of Sections 1.1 through 1.14 inclusive and Section 4 of the Rights Agreement and shall succeed to and assume all of the rights and obligations of Holders of Registrable Securities for all intents and purposes of such Sections, provided that, the Joining Parties shall not be deemed to possess any rights set forth in Sections 2 or 3 of the Rights Agreement.

4. All notices and other communications under the Rights Agreement shall be made to the Joining Parties at the addresses specified below and thereafter at such other address, notice of which is given in accordance with Section 4.4 of the Rights Agreement:

If to Horizon or Agent:	Horizon Technology Funding Company LLC 76 Batterson Park Road Farmington, CT 06032 Attention: Legal Department Fax: (860) 676-8655 Ph: (860) 676-8654
If to Oxford:	Oxford Finance Corporation 133 N.Fairfax Street Alexandria, VA 22314 Attn: Mike Altenburger, Chief Financial Officer Fax: (703) 519-4910 Ph: (703) 519-6017

5. The Rights Agreement as modified herein shall remain in full force and effect as so modified.

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

NEUROGESX, INC.

By:

Name:

Title:

JOINING PARTIES:

[TO COME]

INVESTORS:

See attached pages.

Agreed and Accepted:

EX-4.8

Exhibit 4.8

THE SECURITIES REPRESENTED BY AND UNDERLYING THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR RULE OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

“FIRST WARRANT”

STOCK PURCHASE WARRANT

To Purchase Shares of Series C2 Preferred Stock of

NeurogesX, Inc.

WHEREAS, This Warrant is being delivered as one of the “First Warrants” as such term is defined in the Series C2 Preferred Stock Purchase Agreement, dated as of                     , 2005 (the “SPA”).

WHEREAS, All terms undefined herein shall have the meaning for such terms as set forth in the SPA.

THIS CERTIFIES that, for value received, «Name» or its registered assigns (the “Holder”), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or prior to the Termination Date (as defined below), but not thereafter, to subscribe for and purchase, from NeurogesX, Inc., a California corporation (the “Company”), up to an aggregate number of shares of Series C2 Preferred Stock of the Company (the “Shares”) equal to one-half of the number of Initial Closing Shares, First Mandatory Closing Shares, Second Mandatory Closing Shares and Milestone Closing Shares purchased by the Holder (or the original holder of this First Warrant) at a price per Share of $0.75 (the “Exercise Price”). Until such time as this Warrant is exercised in full or expires, the Exercise Price and the number of securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided. The term “Termination Date” shall mean March 31, 2007.

1. Title to Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable in accordance with the terms of this Warrant upon delivery of this Warrant by the holder hereof together with the Assignment Form annexed hereto as Attachment C properly endorsed to the office or agency of the Company, referred to in Sections 2 and 3 hereof.

2. Exercise of Warrant.

(a) Subject to Section 10 hereof, the purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time before the close of business on the Termination Date by the delivery of this Warrant and the Notice of Exercise form annexed hereto as Attachment A duly executed to the office of the Company in San Carlos, California (or such other office or agency of the Company as it may designate by notice in writing to

the registered holder hereof at the address of such holder appearing on the books of the Company), and upon payment of the Exercise Price for the Shares thereby purchased (by (i) cash, (ii) by check or bank draft payable to the order of the Company, (iii) by cancellation of indebtedness of the Company to the holder hereof, if any, at the time of exercise in an amount equal to the aggregate purchase price of the Shares thereby purchased, or (iv) any combination of the foregoing); whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of Shares so purchased. The Company agrees that if at the time of the surrender of this Warrant and purchase the holder hereof shall be entitled to exercise this Warrant, the Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such Shares at the close of business on the date on which this Warrant shall have been exercised as aforesaid.

(b) If this Warrant is exercised in part, the holder of this Warrant shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of Shares in respect of which this Warrant shall not have been exercised.

3. Right to Convert Warrant. The registered holder hereof shall have the right to convert this Warrant, without the payment of any consideration in addition to the consideration provided for in this Section 3, by the delivery of this Warrant and the Notice of Conversion form annexed hereto as Attachment B duly executed to the office of the Company in San Carlos, California (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), in whole or in part, at any time before the close of business on the Termination Date, into the Shares as provided for in this Section 3. Upon exercise of this conversion right, the holder hereof shall be entitled to receive that number of Shares determined in accordance with the following formula:

X=	Y(A-B)
	A

Where:

A	=	the Fair Market Value (as defined below) of one (1) Share as of the date a conversion of this Warrant is made.
B	=	the Exercise Price for one (1) Share under this Warrant in effect as of the time of such conversion.
X	=	the number of Shares issuable to the holder pursuant to this Section 3.
Y	=	the number of Shares covered by this Warrant that the holder of this warrant elects to convert pursuant to this Section 3.

“Fair Market Value” of a Share shall mean:

(a) if the conversion right is being exercised contemporaneously with occurrence of the Company’s initial public offering, the product of (i) initial public offering price per share (before deducting underwriting commissions and discounts and offering expenses) and (ii) the number of shares of Common Stock issuable upon conversion of one (1) Share issuable upon exercise of this Warrant;

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(b) if the conversion right is being exercised at a time where there exists a public market for the Company’s Common Stock at the time of such exercise, the product of (i) the average of the closing price quoted on the exchange on which the Common Stock is listed as published in the Wall Street Journal for the five (5) trading days prior to the date of determination of Fair Market Value and (ii) the number of shares of Common Stock that would have been issued with respect to such Share had such Share been converted into shares of Common Stock as of the consummation of the initial public offering (as equitably adjusted for all stock splits, recapitalizations and the like after the date of conversion).

(c) in all other cases, the fair value as determined in good faith by the Company’s Board of Directors.

Upon conversion of this Warrant in full, the registered holder hereof shall be entitled to receive a certificate for the number of Shares determined in accordance with this Section 3. Upon conversion of this Warrant in part, the registered holder hereof shall be entitled to receive a certificate for the number of Shares determined in accordance with this Section 3, and a new warrant, which shall be dated as of the date of this Warrant, covering the number of Shares remaining under this Warrant after a conversion pursuant to this Section 3.

4. Issuance of Stock; No Fractional Shares or Scrip. Certificates for the stock purchased hereunder or issuable upon conversion hereof shall be delivered to the holder hereof promptly after the date on which this Warrant shall have been exercised or converted as aforesaid. The Company covenants that all Shares which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company agrees that, if at the time of the surrender of this Warrant and exercise of the rights represented hereby, the holder hereof shall be entitled to exercise such rights, the Shares so issued shall be and be deemed to be issued to such holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised or converted as aforesaid. No fractional shares or scrip representing fractional shares shall be issued upon the exercise or conversion of this Warrant. If upon any exercise of this Warrant a fraction of a share results, the Company may in its sole discretion, either (i) round down to the nearest whole share and pay the cash value of any such fractional share or (ii) round up to the nearest whole share.

5. Charges, Taxes and Expenses. Issuance of certificates for the Shares upon the exercise or conversion of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for Shares are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise or conversion shall be accompanied by the Assignment Form attached hereto duly executed by the

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holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for the Shares, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6. No Rights as Shareholders. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise or conversion hereof.

7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Company, for a new Warrant of like tenor and dated as of such exchange.

The Company shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

10. Acquisition and Dilution.

(a) Merger, Sale of Assets, etc.

(i) “Acquisition.” For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company (including a sale of all or substantially all of the intellectual property of the Company), or any reorganization, consolidation, acquisition or merger of the Company where the holders of the Company’s securities before the transaction own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

(ii) If at any time after the date hereof the Company proposes to consummate an Acquisition in which the shareholders of the Company shall receive cash or publicly traded securities in exchange for their shares of stock in the Company pursuant to such transaction, then the Company shall give the holder of this Warrant written notice (the “Merger Notice”) of such impending transaction not later than fifteen (15) days prior to the shareholders’ meeting called to approve such transaction, or fifteen (15) days prior to the closing of such transaction, whichever is

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earlier, and shall also notify the holder of this Warrant of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction, and the Company shall thereafter give the holder of this Warrant prompt notice of any material changes. To the extent this Warrant has not been exercised or converted in full by the closing of such transaction then this Warrant shall automatically be terminated upon the closing of such transaction. In such event, the holder may provide an exercise notice hereunder that is contingent upon consummation of any such Acquisition.

(iii) If either (x) this Warrant is not terminated in an Acquisition pursuant to the provisions of Section 10(a)(ii), (a “Non-Terminating Acquisition”) or (y) upon any reorganization, consolidation, acquisition or merger of the Company where the holders of the Company’s securities before the transaction own at least 50% of the outstanding voting securities of the surviving entity after the transaction (a “Non Qualifying Acquisition”), then, as a condition of such Non- Terminating Acquisition or Non-Qualifying Acquisition, as applicable, lawful and adequate provisions shall be made by the Company whereby the Holder shall thereafter have the right to purchase and receive (in lieu of the shares of the Preferred Stock or Common Stock, as applicable, of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Preferred Stock or Common Stock, as applicable, equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant. In the event of any Non- Terminating Acquisition or Non-Qualifying Acquisition, as applicable,, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.

(b) Reclassification, etc. If the Company at any time shall, by subdivision, combination or reclassification of security or otherwise, change any of the securities to which purchase rights under this Warrant exist into the same or a different number of securities of any class or classes, this Warrant shall thereafter be to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. If the Company shall subdivide the Shares, by split-up or otherwise, or combine the Shares, or issue additional shares of its Series C2 Preferred Stock in payment of a stock dividend on the Shares, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Exercise Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.

(c) Conversion of Stock. In case all the authorized Shares are converted into other securities or property, or the Shares otherwise ceases to exist, then, in such case, the Holder, upon exercise of this First Warrant at any time after the date on which the Shares is so converted or ceases to exist (the “Conversion Date”), shall receive, in lieu of the number of Shares that would have been

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issuable upon such exercise immediately prior to the Conversion Date (the “Former Number of Shares”), the stock and other securities and property which the Holder would have been entitled to receive upon the Conversion Date if the Holder had exercised this First Warrant with respect to the Former Number of Shares immediately prior to the Conversion Date (all subject to further adjustment as provided in this First Warrant).

(d) Cash Distributions. No adjustment on account of cash dividends on the Shares issuable upon the exercise of this Warrant will be made to the purchase price or the number of Shares under this Warrant.

(e) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Preferred Stock and Common Stock a sufficient number of shares to provide, respectively, for the exercise or conversion of this Warrant in full, and the conversion into shares of Common Stock of all Shares receivable upon such exercise or conversion. The Company further covenants that such shares as may be issued pursuant to such exercise or conversion will, upon issuance after the exercise or conversion in accordance with the terms of Section 2 or 3 above, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof, but only to the extent that the Company is required to pay such taxes, liens and charges pursuant to the terms of this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Shares upon the exercise of the purchase rights under this Warrant.

(f) Conversion Price Adjustments. The rate at which the Shares are convertible into shares of Common Stock of the Company is subject to adjustment as set forth in the Company’s articles of incorporation, as amended from time to time. Any adjustment to the conversion rate of the Shares issuable upon the exercise of this Warrant effected prior to any exercise or conversion of this Warrant shall apply to any Shares thereafter issued pursuant to the terms hereof.

(g) Certificate of Adjustment. Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly deliver to the holder of the Warrant a certificate of the President of the Company setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(h) No Impairment. The Company will not, by amendment of its articles of incorporation or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights and obligations that the holder of this Warrant possesses pursuant to this Warrant.

11. Restrictions on Transferability of Securities.

(a) Restrictions on Transferability. This Warrant, the Shares issuable upon exercise of this Warrant, and the shares of Common Stock issuable upon conversion of the Shares

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(collectively the “Securities”) shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 11, which conditions are intended to ensure compliance with the provisions of the Securities Act. Each holder of any of the Securities will cause any proposed purchaser, assignee, transferee, or pledgee of the Securities held by such holder to agree in writing to take and hold such Securities subject to the provisions and upon the conditions specified in this Warrant as if such purchaser, assignee, transferee or pledgee were the Holder hereunder.

(b) Restrictive Legends. Each certificate representing the Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 11(c) below) be stamped or otherwise imprinted with legends in substantially the following form (in addition to any legend required under applicable state securities laws):

(i) 33 Act Legend.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR RULE OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

(ii) Lock-Up Legend.

UPON THE REQUEST OF THE COMPANY OR THE UNDERWRITERS, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, SHORT SOLD, LOANED, MADE SUBJECT TO AN OPTION TO PURCHASE SUCH SECURITIES OR OTHERWISE DISPOSED OF FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR THE UNDERWRITERS.

The Holder and each holder of Securities and each subsequent assignee, transferee or pledgee (hereinafter collectively, including the Holder, referred to as a “Holder”) consents to the Company making a notation on its records and giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer established in Sections 11 and 14.

(c) Notice of Proposed Transfers. Each Holder of a certificate representing the Securities, by acceptance thereof, agrees to comply in all respects with the provisions of Sections 11 and 14. Prior to any proposed sale, assignment, transfer or pledge (a “Transfer”) of any Securities (other than (i) a transfer not involving a change in beneficial ownership, (ii) in transactions involving the distribution without consideration of Securities by a Holder to any of its affiliates, equityholders, members, retired members, partners, or retired partners, or to the estate of any of its equityholders,

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members, retired members, partners or retired partners, (iii) a transfer to an affiliated fund, partnership or company, which is not a competitor of the Company (as determined in good faith by the Company’s Board of Directors), subject to compliance with applicable securities laws or (iv) transfers in compliance with Rule 144, so long as the Company is furnished with satisfactory evidence of compliance with such Rule), unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Holder thereof shall give prior written notice to the Company of such Holder’s intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and shall be accompanied, at such Holder’s expense, by either (i) an opinion of counsel (who shall, and whose opinion shall be, addressed to the Company and reasonably satisfactory to the Company) to the effect that the proposed transfer of the Securities may be effected without registration under the Securities Act or (ii) a “no action” letter from the Securities and Exchange Commission (the “Commission”) to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the Holder of such Securities shall be entitled to transfer such Securities in accordance with the terms of the notice delivered by such Holder to the Company. Each certificate evidencing the Securities transferred as above provided shall bear (except if such transfer is made pursuant to Rule 144, in which case the legend set forth in Section 11(b)(i) shall not be required) the restrictive legends set forth in Section 11(b) above, except that each such certificate shall not bear the legend set forth in Section 11(b)(i) if in the opinion of counsel for such Holder and in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provision of the Securities Act. Notwithstanding the foregoing, upon exercise of this First Warrant, in the event that the Holder is a party to, and or subject to the provisions of, that certain Third Amended and Restated Investors’ Rights Agreement dated as of the original date of issuance of this First Warrant, as the same may be amended from time to time, then (x) the provisions of this Section 11(c) shall be inapplicable to the Transfer of any of the Shares issuable upon exercise or conversion of this First Warrant and (y) the terms and conditions of Section 3.9 of the SPA shall apply to the Transfer of any of the Shares issuable upon exercise or conversion of this First Warrant as though the Holder were an Investor (as defined therein).

(d) Removal of Restrictions on Transfer of Securities. The legend referred to in Section 11(b)(i) hereof stamped on a certificate evidencing the Securities and the stock transfer instructions and record notations with respect to the Securities shall be removed, and the Company shall issue a certificate without such legend to the Holder of the Securities, if the Securities are registered under the Securities Act, or if such Holder provides the Company with an opinion of counsel (which may be counsel for the Company) reasonably satisfactory to the Company to the effect that a public sale or transfer of such security may be made without registration under the Securities Act or such Holder provides the Company with reasonable assurances, which may, at the option of the Company, include an opinion of counsel (which may be counsel for the Company) reasonably satisfactory to the Company, that such security can be sold pursuant to paragraph (k) of Rule 144 (or any successor provision) under the Securities Act. After the expiration of the Lock-Up Period (as defined in Section 14 below), and upon request of the Holder, the legend referred to in Section 11(b)(ii) hereof stamped on a certificate evidencing the Securities and the stock transfer instructions and record notations with respect to the Securities shall be removed, and the Company shall issue a certificate without such legend to the Holder of the Securities.

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12. Investment Representations of the Holder. With respect to the acquisition of any of the Securities, the Holder hereby represents and warrants to the Company as follows:

(a) Experience. The Holder has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.

(b) Investment. The Holder is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Holder understands that the Securities have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder’s representations as expressed herein.

(c) Rule 144. The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Securities Act, or unless an exemption from such registration is available. The Holder is aware of the provisions of Rules 144 and 144A promulgated under the Securities Act that permit limited resale of securities purchased in a private placement subject to satisfaction of certain conditions.

(d) No Public Market. The Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

(e) Access to Data. The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management and has also had an opportunity to ask questions of the Company’s officers, which questions were answered to the Holder’s satisfaction.

13. Notices. If at any time prior to the exercise or conversion of this Warrant in full the Company takes a record of the holders of the Company’s stock for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company will give to the holder of this Warrant, at least thirty (30) days prior to the date specified therein, written notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

14. Lock-Up Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, no Holder shall sell (including, without limitation, any short sale) or otherwise transfer or dispose of any Common Stock and options (or other securities) of the Company held by such Holder (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock-Up Period”), provided that: (i) such one hundred

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eighty (180) day “market stand-off” agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underwritten offering; and (ii) all Holders, as such term is defined in the Third Amended and Restated Holders’ Rights Agreement, dated as of October __, 2005, as the same may be amended and/or restated from time to time, and officers and directors of the Company enter into similar agreements. The Company may impose stop-transfer instructions with respect to Securities of a Holder to enforce the provisions of this Section 14.

15. Miscellaneous.

(a) Issue Date. The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall be governed in all respects by the laws of the State of California.

(b) Waivers and Amendments. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than a majority of the Common Stock issued or issuable upon conversion of the Series C2 Preferred Stock issued pursuant to the SPA and the Warrants, provided that no amendment or waiver which, by its express terms, affects the express rights or obligations hereunder of the Holder differently than the express rights or obligations of the First Warrants held by all Holders shall be binding as to the Holder unless the Holder consents in writing to such amendment or waiver. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities issued under this Warrant at the time outstanding (including securities into which such securities have been converted), each future holder of all such securities and the Company. The Holder acknowledges that by the operation of this Section (and subject to the limitations set forth herein) hereof the holders of more than a majority of the Common Stock issued or issuable upon conversion of the Series C2 Preferred Stock issued pursuant to the SPA and the Warrants will have the right and power to diminish or eliminate all rights of the Holder under this Warrant.

(c) Notices. All notices and other communications required or permitted to be given under this Warrant shall be in writing and shall be deemed effectively given upon personal delivery, delivery by nationally recognized courier or upon deposit with the United States Post Office (by first class mail, postage prepaid) addressed as follows: (i) if to the Company, at the address of its principal office in the State of California, or at such other address as the Company shall have furnished Holder in writing, and (ii) if to the Holder, to the address set forth for such Holder on Exhibit A to the SPA, or such other address as the Holder shall have furnished the Company in writing.

(d) Survival. The provisions of Sections 11 and 14 hereof shall survive the exercise or conversion of this Warrant and shall remain in effect until such time as the Holder or any Holder no longer holds Securities.

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(e) Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets. All of the covenants and agreements of the Company shall inure to the benefit of successors and assigns of the holder hereof.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized.

Dated:                     , 2005

NEUROGESX, INC.

Name:

By:

Title:

Agreed and Accepted:

HOLDER:

Name:	«Name»
By:
Title:

ATTACHMENT A

NOTICE OF EXERCISE

To: NeurogesX, Inc.

(1) The undersigned hereby elects to purchase                      shares of [Series C2 Preferred Stock] of NeurogesX, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full for such shares, together with all applicable transfer taxes, if any.

(2) Please issue a certificate of certificates representing said shares of [Series C2 Preferred Stock] in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

(3) The undersigned represents that the aforesaid shares of [Series C2 Preferred Stock] are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

        (Date) (Signature)

ATTACHMENT B

NOTICE OF CONVERSION

To: NeurogesX, Inc.

(1) The undersigned hereby elects to convert                      shares of the attached Warrant into such number of shares of [Series C2 Preferred Stock] of NeurogesX, Inc. as is determined pursuant to Section 3 of such Warrant, which conversion shall be effected pursuant to the terms of the attached Warrant.

(2) Please issue a certificate or certificates representing said shares of NeurogesX, Inc. [Series C2 Preferred Stock] in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

(3) The undersigned represents that the aforesaid shares of NeurogesX, Inc. [Series C2 Preferred Stock] are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

        (Date) (Signature)

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ATTACHMENT C

ASSIGNMENT FORM

(To assign the foregoing warrant, execute this form and supply the

required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

(Please Print)

whose address is 

(Please Print)

Dated:                     , 20    

Transferring Holder’s Signature:

Transferring Holder’s Address:

Signed in the presence of:

NOTE: The signature to this Assignment Form set forth above must correspond with the name of the Holder as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

In connection with the transfer of the Warrant (or a portion thereof) to the undersigned, the undersigned hereby agrees to be bound by and comply with all of the provisions and obligations applicable to the Holder contained in the Warrant and to execute any further documentation necessary to carry out the intent of the foregoing agreement to be bound.

Transferee Holder’s Signature:

Transferee Holder’s Name (printed):

Transferee Holder’s Address:

EX-4.9

Exhibit 4.9

THE SECURITIES REPRESENTED BY AND UNDERLYING THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR RULE OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

“SECOND WARRANT”

STOCK PURCHASE WARRANT

To Purchase Shares of Series C2 Preferred Stock of

NeurogesX, Inc.

WHEREAS, This Warrant is being delivered as one of the “Second Warrants,” as such term is defined in the Series C2 Preferred Stock Purchase Agreement, dated as of                     , 2005 (the “SPA”).

WHEREAS, All terms undefined herein shall have the meaning for such terms as set forth in the SPA.

THIS CERTIFIES that, for value received, «Name» or its registered assigns (the “Holder”), is entitled, upon the terms and subject to the conditions hereinafter set forth, during the Exercise Period, as defined below, but not thereafter, to subscribe for and purchase, from NeurogesX, Inc., a California corporation (the “Company”), up to an aggregate number of shares of Series C2 Preferred Stock of the Company (the “Shares”) equal to the Holder’s Pro Rata Portion, as defined below, of the Leftover Shares, as defined below, at a price per Share of $0.75 (the “Exercise Price”). Until such time as this Warrant is exercised in full or expires, the Exercise Price and the number of securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided.

For purposes of this Warrant, the term “Exercise Period” shall mean the period beginning on the date which is the 5^th business day (the “Start Date”) after the date on which all of the First Warrants have been terminated (the “First Warrant Termination Date”) and continuing until the 20^th business day after the First Warrant Termination Date (the “Second Warrant Termination Date”).

For purposes of this Warrant, the term “Leftover Shares” shall mean the difference between (i) the aggregate maximum number of Shares underlying all First Warrants issued under the SPA that were not acquired (or deemed to be acquired) as of the First Warrant Termination Date and (ii) the aggregate incremental number of Shares that were not actually acquired because of an election to convert such First Warrants pursuant to Section 3 thereof (“Conversion Shares”).

For purposes of this Warrant, the term “Pro Rata Portion” shall be mean, with respect to the Holder, the product of (i) the Leftover Shares and (ii) the quotient of (x) the number of Shares that the Holder has acquired (or deemed to acquire) as of the First Warrant Termination Date pursuant to the SPA and its First Warrant increased by any applicable Conversion Shares and (y) the aggregate

number of Shares that have been acquired (or deemed to be acquired) as of the First Warrant Termination Date pursuant to the SPA and all First Warrants by holders that have validly elected to exercise its rights to acquire Shares pursuant to the Second Warrants increased by all applicable Conversion Shares.

In determining “Leftover Shares” and “Pro Rata Portion” all references to Series C2 Preferred Stock shall be deemed to mean the securities into which shares of Series C2 Preferred Stock have been converted in the event of any such conversion.

Notwithstanding the foregoing, this Second Warrant shall terminate immediately and the Holder shall have no rights hereunder (including, without limitation, the right to exercise or convert this Second Warrant), as of immediately after First Warrant Termination Date if the Holder (or its assignor) has not acquired (or been deemed to acquire) the maximum number of shares of the Company’s equity securities to which it was entitled to acquire pursuant to the First Warrant acquired by the Holder (or its assignor) and the SPA (the “Maximum Amount”).

By the 3rd business day after the First Warrant Termination Date, the Company shall deliver to each Holder that has acquired (or been deemed to acquire) its Maximum Amount, a written notice setting forth such Investor’s Pro Rata Portion of the Leftover Shares.

1. Title to Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable in accordance with the terms of this Warrant upon delivery of this Warrant by the holder hereof together with the Assignment Form annexed hereto as Attachment C properly endorsed to the office or agency of the Company, referred to in Sections 2 and 3 hereof.

2. Exercise of Warrant.

(a) Subject to Section 10 hereof, the purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time after the Start Date and before the close of business on the Termination Date by the delivery of this Warrant and the Notice of Exercise form annexed hereto as Attachment A duly executed to the office of the Company in San Carlos, California (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), and upon payment of the Exercise Price for the Shares thereby purchased (by (i) cash, (ii) by check or bank draft payable to the order of the Company, (iii) by cancellation of indebtedness of the Company to the holder hereof, if any, at the time of exercise in an amount equal to the aggregate purchase price of the Shares thereby purchased, or (iv) any combination of the foregoing); whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of Shares so purchased. The Company agrees that if at the time of the surrender of this Warrant and purchase the holder hereof shall be entitled to exercise this Warrant, the Shares so purchased shall be and be deemed to be issued to such holder as the record owner of such Shares at the close of business on the date on which this Warrant shall have been exercised as aforesaid.

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(b) If this Warrant is exercised in part, the holder of this Warrant shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of Shares in respect of which this Warrant shall not have been exercised.

3. Right to Convert Warrant. The registered holder hereof shall have the right to convert this Warrant, without the payment of any consideration in addition to the consideration provided for in this Section 3, by the delivery of this Warrant and the Notice of Conversion form annexed hereto as Attachment B duly executed to the office of the Company in San Carlos, California (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), in whole or in part, at any time after the Start Date and before the close of business on the Termination Date, into the Shares as provided for in this Section 3. Upon exercise of this conversion right, the holder hereof shall be entitled to receive that number of Shares determined in accordance with the following formula:

X=	Y(A-B)
	A

Where:

A	=	the Fair Market Value (as defined below) of one (1) Share as of the date a conversion of this Warrant is made.
B	=	the Exercise Price for one (1) Share under this Warrant in effect as of the time of such conversion.
X	=	the number of Shares issuable to the holder pursuant to this Section 3.
Y	=	the number of Shares covered by this Warrant that the holder of this warrant elects to convert pursuant to this Section 3.

“Fair Market Value” of a Share shall mean:

(a) if the conversion right is being exercised contemporaneously with occurrence of the Company’s initial public offering, the product of (i) initial public offering price per share (before deducting underwriting commissions and discounts and offering expenses) and (ii) the number of shares of Common Stock issuable upon conversion of one (1) Share issuable upon exercise of this Warrant;

(b) if the conversion right is being exercised at a time where there exists a public market for the Company’s Common Stock at the time of such exercise, the product of (i) the average of the closing price quoted on the exchange on which the Common Stock is listed as published in the Wall Street Journal for the five (5) trading days prior to the date of determination of Fair Market Value and (ii) the number of shares of Common Stock that would have been issued with respect to such Share had such Share been converted into shares of Common Stock as of the consummation of the initial public offering (as equitably adjusted for all stock splits, recapitalizations and the like after the date of conversion).

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(c) in all other cases, the fair value as determined in good faith by the Company’s Board of Directors.

Upon conversion of this Warrant in full, the registered holder hereof shall be entitled to receive a certificate for the number of Shares determined in accordance with this Section 3. Upon conversion of this Warrant in part, the registered holder hereof shall be entitled to receive a certificate for the number of Shares determined in accordance with this Section 3, and a new warrant, which shall be dated as of the date of this Warrant, covering the number of Shares remaining under this Warrant after a conversion pursuant to this Section 3.

4. Issuance of Stock; No Fractional Shares or Scrip. Certificates for the stock purchased hereunder or issuable upon conversion hereof shall be delivered to the holder hereof promptly after the date on which this Warrant shall have been exercised or converted as aforesaid. The Company covenants that all Shares which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company agrees that, if at the time of the surrender of this Warrant and exercise of the rights represented hereby, the holder hereof shall be entitled to exercise such rights, the Shares so issued shall be and be deemed to be issued to such holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been exercised or converted as aforesaid. No fractional shares or scrip representing fractional shares shall be issued upon the exercise or conversion of this Warrant. If upon any exercise of this Warrant a fraction of a share results, the Company may in its sole discretion, either (i) round down to the nearest whole share and pay the cash value of any such fractional share or (ii) round up to the nearest whole share.

5. Charges, Taxes and Expenses. Issuance of certificates for the Shares upon the exercise or conversion of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for Shares are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise or conversion shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for the Shares, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6. No Rights as Shareholders. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise or conversion hereof.

7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Company, for a new Warrant of like tenor and dated as of such exchange.

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The Company shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

10. Acquisition and Dilution.

(a) Merger, Sale of Assets, etc.

(i) “Acquisition.” For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company (including a sale of all or substantially all of the intellectual property of the Company), or any reorganization, consolidation, acquisition or merger of the Company where the holders of the Company’s securities before the transaction own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

(ii) If at any time after the date hereof the Company proposes to consummate an Acquisition in which the shareholders of the Company shall receive cash or publicly traded securities in exchange for their shares of stock in the Company pursuant to such transaction, then the Company shall give the holder of this Warrant written notice (the “Merger Notice”) of such impending transaction not later than fifteen (15) days prior to the shareholders’ meeting called to approve such transaction, or fifteen (15) days prior to the closing of such transaction, whichever is earlier, and shall also notify the holder of this Warrant of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction, and the Company shall thereafter give the holder of this Warrant prompt notice of any material changes. To the extent this Warrant has not been exercised or converted in full by the closing of such transaction then this Warrant shall automatically be terminated upon the closing of such transaction. In such event, the holder may provide an exercise notice hereunder that is contingent upon consummation of any such Acquisition.

(iii) If either (x) this Warrant is not terminated in an Acquisition pursuant to the provisions of Section 10(a)(ii), (a “Non-Terminating Acquisition”) or (y) upon any reorganization, consolidation, acquisition or merger of the Company where the holders of the

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Company’s securities before the transaction own at least 50% of the outstanding voting securities of the surviving entity after the transaction (a “Non Qualifying Acquisition”), then, as a condition of such Non- Terminating Acquisition or Non-Qualifying Acquisition, as applicable, lawful and adequate provisions shall be made by the Company whereby the Holder shall thereafter have the right to purchase and receive (in lieu of the shares of the Preferred Stock or Common Stock, as applicable, of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Preferred Stock or Common Stock, as applicable, equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant. In the event of any Non- Terminating Acquisition or Non-Qualifying Acquisition, as applicable,, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.

(b) Reclassification, etc. If the Company at any time shall, by subdivision, combination or reclassification of security or otherwise, change any of the securities to which purchase rights under this Warrant exist into the same or a different number of securities of any class or classes, this Warrant shall thereafter be to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change. If the Company shall subdivide the Shares, by split-up or otherwise, or combine the Shares, or issue additional shares of its Series C2 Preferred Stock in payment of a stock dividend on the Shares, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Exercise Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.

(c) Conversion of Stock. In case all the authorized Shares are converted into other securities or property, or the Shares otherwise ceases to exist, then, in such case, the Holder, upon exercise of this Second Warrant at any time after the date on which the Shares is so converted or ceases to exist (the “Conversion Date”), shall receive, in lieu of the number of Shares that would have been issuable upon such exercise immediately prior to the Conversion Date (the “Former Number of Shares”), the stock and other securities and property which the Holder would have been entitled to receive upon the Conversion Date if the Holder had exercised this Second Warrant with respect to the Former Number of Shares immediately prior to the Conversion Date (all subject to further adjustment as provided in this Second Warrant).

(d) Cash Distributions. No adjustment on account of cash dividends on the Shares issuable upon the exercise of this Warrant will be made to the purchase price or the number of Shares under this Warrant.

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(e) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Preferred Stock and Common Stock a sufficient number of shares to provide, respectively, for the exercise or conversion of this Warrant in full, and the conversion into shares of Common Stock of all Shares receivable upon such exercise or conversion. The Company further covenants that such shares as may be issued pursuant to such exercise or conversion will, upon issuance after the exercise or conversion in accordance with the terms of Section 2 or 3 above, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof, but only to the extent that the Company is required to pay such taxes, liens and charges pursuant to the terms of this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Shares upon the exercise of the purchase rights under this Warrant.

(f) Conversion Price Adjustments. The rate at which the Shares are convertible into shares of Common Stock of the Company is subject to adjustment as set forth in the Company’s articles of incorporation, as amended from time to time. Any adjustment to the conversion rate of the Shares issuable upon the exercise of this Warrant effected prior to any exercise or conversion of this Warrant shall apply to any Shares thereafter issued pursuant to the terms hereof.

(g) Certificate of Adjustment. Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly deliver to the holder of the Warrant a certificate of the President of the Company setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(h) No Impairment. The Company will not, by amendment of its articles of incorporation or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights and obligations that the holder of this Warrant possesses pursuant to this Warrant.

11. Restrictions on Transferability of Securities.

(a) Restrictions on Transferability. This Warrant, the Shares issuable upon exercise of this Warrant, and the shares of Common Stock issuable upon conversion of the Shares (collectively the “Securities”) shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 11, which conditions are intended to ensure compliance with the provisions of the Securities Act. Each holder of any of the Securities will cause any proposed purchaser, assignee, transferee, or pledgee of the Securities held by such holder to agree in writing to take and hold such Securities subject to the provisions and upon the conditions specified in this Warrant as if such purchaser, assignee, transferee or pledgee were the Holder hereunder.

(b) Restrictive Legends. Each certificate representing the Securities and any other securities issued in respect of the Securities upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of

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Section 11(c) below) be stamped or otherwise imprinted with legends in substantially the following form (in addition to any legend required under applicable state securities laws):

(i) 33 Act Legend.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR RULE OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

(ii) Lock-Up Legend.

UPON THE REQUEST OF THE COMPANY OR THE UNDERWRITERS, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, SHORT SOLD, LOANED, MADE SUBJECT TO AN OPTION TO PURCHASE SUCH SECURITIES OR OTHERWISE DISPOSED OF FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR THE UNDERWRITERS.

The Holder and each holder of Securities and each subsequent assignee, transferee or pledgee (hereinafter collectively, including the Holder, referred to as a “Holder”) consents to the Company making a notation on its records and giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer established in Sections 11 and 14.

(c) Notice of Proposed Transfers. Each Holder of a certificate representing the Securities, by acceptance thereof, agrees to comply in all respects with the provisions of Sections 11 and 14. Prior to any proposed sale, assignment, transfer or pledge (a “Transfer”) of any Securities (other than (i) a transfer not involving a change in beneficial ownership, (ii) in transactions involving the distribution without consideration of Securities by a Holder to any of its affiliates, equityholders, members, retired members, partners, or retired partners, or to the estate of any of its equityholders, members, retired members, partners or retired partners, (iii) a transfer to an affiliated fund, partnership or company, which is not a competitor of the Company (as determined in good faith by the Company’s Board of Directors), subject to compliance with applicable securities laws or (iv) transfers in compliance with Rule 144, so long as the Company is furnished with satisfactory evidence of compliance with such Rule), unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Holder thereof shall give prior written notice to the Company of such Holder’s intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and shall be accompanied, at such Holder’s expense, by either (i) an opinion of counsel (who shall, and whose opinion shall be, addressed to the Company and

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reasonably satisfactory to the Company) to the effect that the proposed transfer of the Securities may be effected without registration under the Securities Act or (ii) a “no action” letter from the Securities and Exchange Commission (the “Commission”) to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the Holder of such Securities shall be entitled to transfer such Securities in accordance with the terms of the notice delivered by such Holder to the Company. Each certificate evidencing the Securities transferred as above provided shall bear (except if such transfer is made pursuant to Rule 144, in which case the legend set forth in Section 11(b)(i) shall not be required) the restrictive legends set forth in Section 11(b) above, except that each such certificate shall not bear the legend set forth in Section 11(b)(i) if in the opinion of counsel for such Holder and in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provision of the Securities Act. Notwithstanding the foregoing, upon exercise of this Second Warrant, in the event that the Holder is a party to, and or subject to the provisions of, that certain Third Amended and Restated Investors’ Rights Agreement dated as of the original date of issuance of this Second Warrant, as the same may be amended from time to time, then (x) the provisions of this Section 11(c) shall be inapplicable to the Transfer of any of the Shares issuable upon exercise or conversion of this Second Warrant and (y) the terms and conditions of Section 3.9 of the SPA shall apply to the Transfer of any of the Shares issuable upon exercise or conversion of this Second Warrant as though the Holder were an Investor (as defined therein).

(d) Removal of Restrictions on Transfer of Securities. The legend referred to in Section 11(b)(i) hereof stamped on a certificate evidencing the Securities and the stock transfer instructions and record notations with respect to the Securities shall be removed, and the Company shall issue a certificate without such legend to the Holder of the Securities, if the Securities are registered under the Securities Act, or if such Holder provides the Company with an opinion of counsel (which may be counsel for the Company) reasonably satisfactory to the Company to the effect that a public sale or transfer of such security may be made without registration under the Securities Act or such Holder provides the Company with reasonable assurances, which may, at the option of the Company, include an opinion of counsel (which may be counsel for the Company) reasonably satisfactory to the Company, that such security can be sold pursuant to paragraph (k) of Rule 144 (or any successor provision) under the Securities Act. After the expiration of the Lock-Up Period (as defined in Section 14 below), and upon request of the Holder, the legend referred to in Section 11(b)(ii) hereof stamped on a certificate evidencing the Securities and the stock transfer instructions and record notations with respect to the Securities shall be removed, and the Company shall issue a certificate without such legend to the Holder of the Securities.

12. Investment Representations of the Holder. With respect to the acquisition of any of the Securities, the Holder hereby represents and warrants to the Company as follows:

(a) Experience. The Holder has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.

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(b) Investment. The Holder is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Holder understands that the Securities have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder’s representations as expressed herein.

(c) Rule 144. The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Securities Act, or unless an exemption from such registration is available. The Holder is aware of the provisions of Rules 144 and 144A promulgated under the Securities Act that permit limited resale of securities purchased in a private placement subject to satisfaction of certain conditions.

(d) No Public Market. The Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

(e) Access to Data. The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management and has also had an opportunity to ask questions of the Company’s officers, which questions were answered to the Holder’s satisfaction.

13. Notices. If at any time prior to the exercise or conversion of this Warrant in full the Company takes a record of the holders of the Company’s stock for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company will give to the holder of this Warrant, at least thirty (30) days prior to the date specified therein, written notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

14. Lock-Up Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the Company, no Holder shall sell (including, without limitation, any short sale) or otherwise transfer or dispose of any Common Stock and options (or other securities) of the Company held by such Holder (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock-Up Period”), provided that: (i) such one hundred eighty (180) day “market stand-off” agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underwritten offering; and (ii) all Holders, as such term is defined in the Third Amended and Restated Holders’ Rights Agreement, dated as of October __, 2005, as the same may be amended and/or restated from time to time, and officers and directors of the Company enter into similar agreements. The Company may impose stop-transfer instructions with respect to Securities of a Holder to enforce the provisions of this Section 14.

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15. Miscellaneous.

(a) Issue Date. The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall be governed in all respects by the laws of the State of California.

(b) Waivers and Amendments. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than a majority of the Common Stock issued or issuable upon conversion of the Series C2 Preferred Stock issued pursuant to the SPA and the Warrants, provided that no amendment or waiver which, by its express terms, affects the express rights or obligations hereunder of the Holder differently than the express rights or obligations of the Second Warrants held by all Holders shall be binding as to the Holder unless the Holder consents in writing to such amendment or waiver. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities issued under this Warrant at the time outstanding (including securities into which such securities have been converted), each future holder of all such securities and the Company. The Holder acknowledges that by the operation of this Section (and subject to the limitations set forth herein) hereof the holders of more than a majority of the Common Stock issued or issuable upon conversion of the Series C2 Preferred Stock issued pursuant to the SPA and the Warrants will have the right and power to diminish or eliminate all rights of the Holder under this Warrant.

(c) Notices. All notices and other communications required or permitted to be given under this Warrant shall be in writing and shall be deemed effectively given upon personal delivery, delivery by nationally recognized courier or upon deposit with the United States Post Office (by first class mail, postage prepaid) addressed as follows: (i) if to the Company, at the address of its principal office in the State of California, or at such other address as the Company shall have furnished Holder in writing, and (ii) if to the Holder, to the address set forth for such Holder on Exhibit A to the SPA, or such other address as the Holder shall have furnished the Company in writing.

(d) Survival. The provisions of Sections 11 and 14 hereof shall survive the exercise or conversion of this Warrant and shall remain in effect until such time as the Holder or any Holder no longer holds Securities.

(e) Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets. All of the covenants and agreements of the Company shall inure to the benefit of successors and assigns of the holder hereof.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized.

Dated:                     , 2005

NEUROGESX, INC.

Name:

By:

Title:

Agreed and Accepted:

HOLDER:

[INSERT SIGNATURE BLOCK]

ATTACHMENT A

NOTICE OF EXERCISE

To: NeurogesX, Inc.

(1) The undersigned hereby elects to purchase                      shares of [Series C2 Preferred Stock] of NeurogesX, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full for such shares, together with all applicable transfer taxes, if any.

(2) Please issue a certificate of certificates representing said shares of [Series C2 Preferred Stock] in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

(3) The undersigned represents that the aforesaid shares of [Series C2 Preferred Stock] are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

        (Date) (Signature)

ATTACHMENT B

NOTICE OF CONVERSION

To: NeurogesX, Inc.

(1) The undersigned hereby elects to convert                      shares of the attached Warrant into such number of shares of [Series C2 Preferred Stock] of NeurogesX, Inc. as is determined pursuant to Section 3 of such Warrant, which conversion shall be effected pursuant to the terms of the attached Warrant.

(2) Please issue a certificate or certificates representing said shares of NeurogesX, Inc. [Series C2 Preferred Stock] in the name of the undersigned or in such other name as is specified below:

(Name)

(Address)

(3) The undersigned represents that the aforesaid shares of NeurogesX, Inc. [Series C2 Preferred Stock] are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

(Date) (Signature)

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ATTACHMENT C

ASSIGNMENT FORM

(To assign the foregoing warrant, execute this form and supply the

required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

(Please Print)

whose address is 

(Please Print)

Dated:                     , 20    

Transferring Holder’s Signature:

Transferring Holder’s Address:

Signed in the presence of:

NOTE: The signature to this Assignment Form set forth above must correspond with the name of the Holder as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

In connection with the transfer of the Warrant (or a portion thereof) to the undersigned, the undersigned hereby agrees to be bound by and comply with all of the provisions and obligations applicable to the Holder contained in the Warrant and to execute any further documentation necessary to carry out the intent of the foregoing agreement to be bound.

Transferee Holder’s Signature:

Transferee Holder’s Name (printed):

Transferee Holder’s Address:

EX-10.1

Exhibit 10.1

NEUROGESX, INC.,

a California corporation

2000 STOCK INCENTIVE PLAN

(Effective June 5, 2000, As Amended March 16, 2006)

TABLE OF CONTENTS

	Page
1. Purpose	1
2. Definitions	1
(a)    “Acceleration Agreement” shall mean an employment or other agreement between the Company and an Offeree or Optionee addressing the acceleration of vesting of Shares, Options or Restricted Stock, respectively, upon or in connection with a Change of Control	1
(b)    “Board”	1
(c)    “Change of Control” shall mean an acquisition of the Company by another entity in which the Company or the shareholders of the Company receive cash or publicly traded securities and that involves (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities, (ii) a sale of all or substantially all of the assets or outstanding stock of the Company, or (iii) the consummation of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation	2
(d)    “Code”	2
(e)    “Committee”	2
(f)     “Common Stock”	2
(g)    “Company”	2
(h)    “Consultant”	2
(i)     “Director”	2
(j)     “Employee”	2
(k)    “Exercise Price”	2
(l)     “Fair Market Value”	2
(m)   “Incentive Stock Option” or “ISO”	2
(n)    “Non-Employee Director”	2
(o)    “Nonstatutory Option” or “NSO”	2
(p)    “Offeree”	2
(q)    “Officer”	2
(r)     “Option”	2

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TABLE OF CONTENTS

(continued)

	Page
(s)    “Optionee”	2
(t)     “Parent”	3
(u)    “Plan”	3
(v)    “Purchase Price”	3
(w)   “Restricted Stock”	3
(x)    “Service”	3
(y)    “Stock Option Agreement”	3
(z)    “Stock Option Agreement”	3
(aa)  “Stock Purchase Right”	3
(bb)  “Subsidiary”	3
(cc)  “Ten Percent Shareholder”	3
3. Administration	3
(a)    Committees of the Board	3
(b)    Authority of the Board	4
4. Eligibility	4
5. Stock Subject to Plan	4
(a)    Basic Limitation	4
(b)    Additional Shares	4
6. Terms and Conditions of Grants or Sales	4
(a)    Stock Option Agreement	4
(b)    Duration of Offers and Nontransferability of Rights	4
(c)    Purchase Price	4
(d)    Withholding Taxes	5
(e)    Change of Control	5
(f)     Restrictions on Transfer of Common Stock	5
7. Terms and Conditions of Options	5
(a)    Stock Option Agreement	5
(b)    Number of Shares	5
(c)    Exercise Price	5
(d)    Withholding Taxes	6
(e)    Exercisability	6
(f)     Term	6
(g)    Nontransferability	6
(h)    Exercise of Options on Termination of Service	6
(i)     No Rights as a Shareholder	6
(j)     Modification, Extension and Assumption of Options	7
(k)    Change of Control	7

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TABLE OF CONTENTS

(continued)

	Page
(l)     Restrictions on Transfer	7
8. Forms of Payment	7
(a)    General Rule	7
(b)    Surrender of Stock	8
(c)    Promissory Notes	8
(d)    Cashless Exercise	8
9. Adjustments Upon Changes in Common Stock	8
(a)    General	8
(b)    Mergers and Consolidations	8
(c)    Reservation of Rights	9
10. Legal Requirements	9
(a)    Restrictions on Issuance	9
(b)    Financial Reports	9
11. No Employment Rights	9
12. Duration and Amendments	9
(a)    Term of the Plan	9
(b)    Right to Amend or Terminate the Plan	10
(c)    Effect of Amendment or Termination	10
13. Stock Purchase Rights	10
(a)    Rights to Purchase	10
(b)    Repurchase Option	10
(c)    Other Provisions	10
(d)    Rights as a Shareholder	11
(e)    Change of Control	11

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NEUROGESX, INC.

2000 STOCK INCENTIVE PLAN

Adopted By the Board June 5, 2000

Approved By Shareholders June 5, 2000

As Amended March 16, 2006

1. Purpose. The purpose of the NeurogesX, Inc. 2000 Stock Incentive Plan (the “Plan”) is to offer selected employees, directors and consultants of NeurogesX, Inc., a California corporation (the “Company”), an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, to encourage such persons to remain in the employ of the Company and to attract new employees with outstanding qualifications. Stock purchase rights may also be granted under the Plan.

The Plan provides for the direct grant or sale of Common Stock and for the grant of Options to purchase Common Stock. Options granted under the Plan may include Nonstatutory Options as well as Incentive Stock Options intended to qualify under section 422 of the Internal Revenue Code.

2. Definitions.

(a) “Acceleration Agreement” shall mean an employment or other agreement between the Company and an Offeree or Optionee addressing the acceleration of vesting of Shares, Options or Restricted Stock, respectively, upon or in connection with a Change of Control.

(b) “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

(c) “Change of Control” shall mean an acquisition of the Company by another entity in which the Company or the shareholders of the Company receive cash or publicly traded securities and that involves (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities, (ii) a sale of all or substantially all of the assets or outstanding stock of the Company, or (iii) the consummation of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) “Committee” shall mean a committee consisting of one or more members of the Board that is appointed by the Board to administer the Plan.

(f) “Common Stock” means the Company’s common stock.

(g) “Company” shall mean NeurogesX, Inc., a California corporation.

(h) “Consultant” shall mean an individual who performs bona fide services to the Company, a Parent or a Subsidiary other than as an Employee.

(i) “Director” shall mean a member of the Board.

(j) “Employee” shall mean any individual, including Officers and Directors, who is a common-law employee of the Company, a Parent or a Subsidiary. The payment of a Director’s fee by the Company shall not be sufficient to constitute “employment” by the Company.

(k) “Exercise Price” shall mean the amount for which one share of Common Stock may be purchased upon exercise of an Option, as specified by the Board in the applicable Stock Option Agreement.

(l) “Fair Market Value” shall mean the fair market value of a share of Common Stock, as determined by the Board in good faith. Such determination shall be conclusive and binding on all persons.

(m) “Incentive Stock Option” or “ISO” shall mean an incentive stock option described in Code section 422(b).

(n) “Non-Employee Director” shall mean a member of the Board who is not an Employee.

(o) “Nonstatutory Option” or “NSO” shall mean a stock option that is not an ISO.

(p) “Offeree” shall mean an individual to whom the Board has offered the right to acquire Common Stock other than upon exercise of an Option.

(q) “Officer” means a person who is an officer of the Company within the meaning of section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(r) “Option” shall mean an ISO or NSO granted under the Plan entitling the holder to purchase Common Stock.

(s) “Optionee” shall mean an Employee or Consultant who holds an Option.

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(t) “Parent” shall have the meaning set forth in section 424(e) of the Code.

(u) “Plan” shall mean this 2000 Stock Incentive Plan.

(v) “Purchase Price” shall mean the consideration for which one share of Common Stock may be acquired under the Plan pursuant to a grant or sale under Section 6 or Section 13, respectively, as specified by the Board.

(w) “Restricted Stock” means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 13 below.

(x) “Service” shall mean service as an Employee, Non-Employee Director or Consultant.

(y) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to an Option.

(z) “Stock Option Agreement” shall mean the agreement between the Company and an Offeree who acquires Common Stock under the Plan (other than pursuant to an Option) that contains the terms, conditions and restrictions pertaining to the acquisition of such Common Stock.

(aa) “Stock Purchase Right” means a right to purchase Common Stock pursuant to Section 13 below.

(bb) “Subsidiary” shall have the meaning set forth in section 424(f) of the Code. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

(cc) “Ten Percent Shareholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of section 424(d) of the Code shall be applied.

3. Administration.

(a) Committees of the Board. The Board shall administer the Plan. However, any or all administrative functions otherwise exercisable by the Board may be delegated to a Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. Any reference to the Board in the Plan shall be construed as a reference to the Committee (if any) to whom the Board has assigned a particular function.

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(b) Authority of the Board. Subject to the provisions of the Plan, the Board shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Board shall be final and binding on all parties who have an interest in the Plan or any option or shares issued thereunder.

4. Eligibility. Only Employees, Non-Employee Directors and Consultants shall be eligible for the grant of Options or the direct grant or sale of Common Stock. Only Employees shall be eligible for the grant of ISOs.

5. Stock Subject to Plan.

(a) Basic Limitation. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued under the Plan shall not exceed Sixteen Million Seven Hundred Fifteen Thousand (16,215,000) shares, subject to adjustment pursuant to Section 9.

(b) Additional Shares. If any outstanding Option or other right to acquire Common Stock for any reason expires or is canceled, forfeited or otherwise terminated, the Common Stock allocable to the unexercised portion of such Option or other right shall again be available for the purposes of the Plan. If shares of Common Stock issued under the Plan are reacquired by the Company pursuant to any right of repurchase or right of first refusal, such shares of Common Stock shall again be available for the purposes of the Plan, except such shares shall not be available for ISOs.

6. Terms and Conditions of Grants or Sales.

(a) Stock Option Agreement. Each grant or sale of Common Stock under the Plan other than upon exercise of an Option shall be evidenced by a Stock Option Agreement between the Offeree and the Company. Such grant or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board deems appropriate for inclusion in such Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

(b) Duration of Offers and Nontransferability of Rights. Any right to acquire Common Stock under the Plan other than an Option shall automatically expire if not exercised by the Offeree within the number of days specified by the Board and communicated to the Offeree. Such right shall not be transferable and shall be exercisable only by the Offeree to whom such right was granted.

(c) Purchase Price. The Purchase Price shall be established by the Board and set forth in the Stock Option Agreement and, to the extent required to comply with the California Corporations Code or the regulations thereunder, shall not be less than eighty-five percent (85%) of Fair Market Value (one hundred percent (100%) for Ten Percent Shareholders). The Purchase Price shall be payable in a form described in Section 8 or, in the discretion of the Board, in consideration for past services rendered to the Company or for its benefit.

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(d) Withholding Taxes. As a condition to the purchase of Common Stock, the Offeree shall make such arrangements as the Board may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such purchase.

(e) Change of Control. Upon a Change of Control, any Shares acquired pursuant to this Section 6 will vest and have any Company repurchase or reacquisition right lapse as to 25% of such Shares (but in no event shall the number of Shares which so vests exceed the number of Shares issued pursuant an award under this Section 6). Notwithstanding the foregoing, this Section 6(e) will not apply, and no vesting will occur as the result of this Section 6(e), to Shares held by an Offeree if such Offeree has an Acceleration Agreement, which agreement may provide for more or less acceleration of vesting than provided under this Section 6(e). In the event an Offeree has been awarded one or more grants under this Section 6 and such Offeree’s Acceleration Agreements, if any, do not cover one or more of such awards, then the awards not covered by an Acceleration Agreement will vest in accordance with the terms of this Section 6(e) upon a Change of Control.

(f) Restrictions on Transfer of Common Stock. No Common Stock granted or sold under the Plan may be sold, made the subject of any short sale or loan, hypothecated, pledged, optioned or otherwise transferred or disposed of by the offeree thereof for such period of time (not to exceed one hundred eighty (180) days) following the effective date of a registration statement covering securities of the Company filed under the Securities Act of 1933, as amended, unless such restriction is consented to or waived by the managing underwriter of such registration. Subject to the preceding sentence, any Common Stock granted or sold under the Plan shall be subject to such special conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine. Such restrictions shall apply in addition to any general restrictions that may apply to all holders of Common Stock.

7. Terms and Conditions of Options.

(a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Options shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board deems appropriate for inclusion in such Stock Option Agreements. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

(b) Number of Shares. Each Stock Option Agreement shall specify the number of shares of Common Stock that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 9. The Stock Option Agreement shall also specify whether the Option is an ISO or a NSO.

(c) Exercise Price. An Option’s Exercise Price shall be established by the Board and set forth in a Stock Option Agreement. The Exercise Price of an ISO shall not be less than one hundred percent (100%) of the Fair Market Value (one hundred ten percent (110%) for Ten Percent Shareholders) on the date of grant. The Exercise Price of a NSO shall not be less than eight-five percent (85%) of the Fair Market Value (one hundred ten percent (110%) for Ten Percent

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Shareholders) on the date of grant. The Exercise Price shall be payable in a form described in Section 8. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set prescribed in this paragraph if the Option grant is attributable to the issuance or assumption of an option in a transaction to which Code section 424(a) applies.

(d) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Board may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Board may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Common Stock acquired by exercising an Option.

(e) Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to vest or become exercisable. To the extent required to comply with the California Corporations Code or the regulations thereunder, an Option granted to Employees who are not officers shall vest and become exercisable no less rapidly than the rate of twenty percent (20%) per year for each of the first five (5) years from the date of grant. Subject to the preceding sentence, the vesting of any Option shall be determined by the Board in its sole discretion. A Stock Option Agreement may permit an Optionee to exercise an Option before it is vested, subject to the Company’s right of repurchase over any shares acquired under the unvested portion of the Option (an “early exercise”), which right of repurchase shall lapse at the same rate the Option would have vested had there been no early exercise.

(f) Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed ten (10) years from the date of grant (five (5) years in the case of an ISO granted to a Ten Percent Shareholder). Subject to the preceding sentence, the Board at its sole discretion shall determine when an Option is to expire.

(g) Nontransferability. No Option shall be transferable by the Optionee other than by will or by the laws of descent and distribution. An Option may be exercised during the lifetime of the Optionee only or by the guardian or legal representative of the Optionee. No Option or interest therein may be transferred, assigned, pledged or hypothecated by the Optionee during his lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

(h) Exercise of Options on Termination of Service. To the extent required to comply with the California Corporations Code or the regulations thereunder, each Stock Option Agreement shall provide that the Optionee shall have the right to exercise the Option following termination of the Optionee’s Service, during the Option’s term, for at least thirty (30) days following termination of Service for any reason except termination for cause, death or disability, and for at least six (6) months following termination of Service due to death or disability.

(i) No Rights as a Shareholder. An Optionee, or a transferee of an Optionee, shall have no rights as a Shareholder with respect to any Common Stock covered by an Option until such person becomes entitled to receive such Common Stock by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option and executing a form of Stock Option Agreement.

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(j) Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of shares of Common Stock and at the same or a different Exercise Price. Notwithstanding the foregoing, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option.

(k) Change of Control. Upon a Change of Control, all outstanding Options on the date of such Change of Control will vest and become exercisable as to 25% of the Shares subject to such Options (that is, in addition to the Shares subject to such Options which have vested and become exercisable as of the date of such Change of Control), but in no event shall the number of Shares subject to such Options which so vest exceed the total number of Shares subject to such Options. In all other respects, each such Option will continue to be bound by and subject to the terms of its applicable Option Agreement and the Plan. Notwithstanding the foregoing, this Section 7(k) will not apply, and no vesting will occur as the result of this Section 7(k), to Options held by an Optionee if such Optionee has an Acceleration Agreement, which agreement may provide for more or less acceleration of vesting than provided under this Section 7(k). In the event an Optionee has been awarded one or more Options under this Section 7 and such Optionee’s Acceleration Agreements, if any, do not cover one or more of such Options, then the Options not covered by an Acceleration Agreement will vest in accordance with the terms of this Section 7(k) upon a Change of Control.

(l) Restrictions on Transfer. No shares of Common Stock issued upon exercise of an Option may be sold or otherwise transferred or disposed of by the Optionee during the one hundred eighty (180) day period following the effective date of a registration statement covering securities of the Company filed under the Securities Act of 1933 (unless such restriction is consented to or waived by the managing underwriter). Subject to the preceding sentence, any Common Stock issued upon exercise of an Option shall be subject to such rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine. Such restrictions shall apply in addition to any restrictions that may apply to holders of Common Stock generally. Any right to repurchase an Optionee’s Common Stock at the original Exercise Price upon termination of the Optionee’s Service shall lapse at least as rapidly as the schedule set forth in subsection (e) above. Any such repurchase right may be exercised only within ninety (90) days after the termination of the Optionee’s Service for cash or for cancellation of indebtedness incurred in purchasing the Common Stock.

8. Forms of Payment.

(a) General Rule. The entire Purchase Price or Exercise Price shall be payable in cash or cash equivalents acceptable to the Company at the time of exercise or purchase, except as otherwise provided in this Section 8.

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(b) Surrender of Stock. To the extent that a Stock Option Agreement or Stock Option Agreement so provides, payment may be made all or in part with Common Stock that has already been owned by the Optionee or the Optionee’s representative for any time period specified by the Board and that are surrendered to the Company in good form for transfer. Such Common Stock shall be valued at Fair Market Value on the date when the new Common Stock is purchased under the Plan.

(c) Promissory Notes. To the extent that a Stock Option Agreement or Stock Option Agreement so provides, payment may be made all or in part with a full recourse promissory note executed by the Optionee. The interest rate and other terms and conditions of such note shall be determined by the Board. The Board may require that the Optionee pledge his or her Common Stock to the Company for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Common Stock be released to the Optionee until such note is paid in full, unless otherwise provided in the Stock Option Agreement or Stock Option Agreement.

(d) Cashless Exercise. To the extent that a Stock Option Agreement so provides and a public market for the Common Stock exists, payment may be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction to a securities broker to sell Common Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.

9. Adjustments Upon Changes in Common Stock.

(a) General. In the event of a subdivision of the outstanding Common Stock, a declaration of a dividend payable in Common Stock, a declaration of an extraordinary dividend payable in a form other than Common Stock in an amount that has a material effect on the value of Common Stock, a combination or consolidation of the outstanding Common Stock into a lesser number of shares, a recapitalization, a reclassification or a similar occurrence, the Board shall make appropriate adjustments in one or more of (i) the number of shares of Common Stock available for future grants of Options or other rights to acquire Common Stock under Section 5, (ii) the number of shares of Common Stock covered by each outstanding Option or other right to acquire Common Stock or (iii) the Exercise Price of each outstanding Option or the Purchase Price of each other right to acquire Common Stock.

(b) Mergers and Consolidations. In the event that the Company is a party to a merger or consolidation, outstanding Options or other rights to acquire Common Stock shall be subject to the agreement of merger or reorganization. Such agreement, without an Optionee’s consent, may provide for:

(i) The continuation of such outstanding Options by the Company (if the Company is the surviving corporation);

(ii) The assumption of the Plan and such outstanding Options by the surviving corporation or its parent;

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(iii) The substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options; or

(iv) The cancellation of such outstanding Options to the extent not exercised before the merger or consolidation.

(c) Reservation of Rights. Except as provided in this Section 9, an Optionee or Offeree shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend, or (iii) any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to an Option, or the number of shares subject to any other right to acquire Common Stock and/or the Exercise Price or Purchase Price. The grant of an Option or other right to acquire Common Stock pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

10. Legal Requirements.

(a) Restrictions on Issuance. Common Stock shall not be issued under the Plan unless the issuance and delivery of such Common Stock complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency that the Company determines is necessary or advisable.

(b) Financial Reports. To the extent required to comply with the California Corporations Code or the regulations thereunder, not less often than annually the Company shall furnish to Optionees and Offerees Company summary financial information including a balance sheet regarding the Company’s financial condition and results of operations, unless such Optionees or Offerees have duties with the Company that assure them access to equivalent information. Such financial statements need not be audited.

11. No Employment Rights. No provision of the Plan, nor any Option granted or other right to acquire Common Stock granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee, Consultant or Non-Employee Director. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason.

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12. Duration and Amendments.

(a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board, subject to the approval of the Company’s Shareholders. In the event that the Shareholders fail to approve the Plan within twelve (12) months after its adoption by the Board, any Option grants or other right to acquire Common Stock already made shall be null and void, and no additional Option grants or other right to acquire Common Stock shall be made after such date. The Plan shall terminate automatically ten (10) years after its adoption by the Board and may be terminated on any earlier date pursuant to subsection (b) below.

(b) Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan at any time. Rights under any Option granted or other right to acquire Common Stock granted before amendment of the Plan shall not be materially altered, or impaired adversely, by such amendment, except with consent of the Optionee or Offeree. An amendment of the Plan shall be subject to the approval of the Company’s Shareholders only to the extent required by applicable laws, regulations or rules.

(c) Effect of Amendment or Termination. No Common Stock shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Common Stock previously issued or Option previously granted under the Plan.

13. Stock Purchase Rights.

(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Board determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Board makes the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock Option Agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as “Restricted Stock.”

(b) Repurchase Option. Unless the Board determines otherwise, the Restricted Stock Option Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s employment or engagement with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Option Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Board may determine, but in no case at a rate of less than twenty percent (20%) per year over five (5) years from the date of purchase.

(c) Other Provisions. The Restricted Stock Option Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Board in its sole discretion. In addition, the provisions of Restricted Stock Option Agreements need not be the same with respect to each purchaser.

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(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 9 of the Plan.

(e) Change of Control. Upon a Change of Control, any Restricted Stock acquired pursuant to a Stock Purchase Right will vest and have any Company repurchase option lapse as to 25% of such Restricted Stock (but in no event shall the number of Shares which so vests exceed the number of Shares issued pursuant to such Stock Purchase Right). Notwithstanding the foregoing, this Section 13(e) will not apply, and no vesting will occur as the result of this Section 13(e), to Restricted Stock held by an Offeree if such Offeree has an Acceleration Agreement, which agreement may provide for more or less acceleration of vesting than provided under this Section 13(e). In the event an Offeree has been awarded one or more Stock Purchase Rights under this Section 13 and such Offeree’s Acceleration Agreements, if any, do not cover one or more of such awards, then the Stock Purchase Rights (or the Restricted Stock acquired pursuant thereto) not covered by an Acceleration Agreement will vest in accordance with the terms of this Section 13(e) upon a Change of Control.

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EX-10.2

Exhibit 10.2

NEUROGESX, INC.

2007 STOCK PLAN

1. Purposes of the Plan. The purposes of this Plan are:

• to attract and retain the best available personnel for positions of substantial responsibility,

• to provide additional incentive to Employees, Directors and Consultants, and

• to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.

2. Definitions. As used herein, the following definitions will apply:

(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.

(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(c) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares.

(d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “Change in Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two (2)-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(h) “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means NeurogesX, Inc., a Delaware corporation, or any successor thereto.

(k) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

(l) “Director” means a member of the Board.

(m) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(n) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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(p) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.

(q) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(iii) For purposes of any Awards granted on the Registration Date, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company’s Common Stock; or

(iv) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.

(r) “Fiscal Year” means the fiscal year of the Company.

(s) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(t) “Inside Director” means a Director who is an Employee.

(u) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(v) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(w) “Option” means a stock option granted pursuant to the Plan.

(x) “Outside Director” means a Director who is not an Employee.

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(y) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(z) “Participant” means the holder of an outstanding Award.

(aa) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10.

(bb) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.

(cc) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

(dd) “Plan” means this 2007 Stock Plan.

(ee) “Registration Date” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s securities.

(ff) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option.

(gg) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(hh) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(ii) “Section 16(b)” means Section 16(b) of the Exchange Act.

(jj) “Service Provider” means an Employee, Director or Consultant.

(kk) “Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

(ll) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 9 is designated as a Stock Appreciation Right.

(mm) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

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3. Stock Subject to the Plan.

(a) Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is 20,000,000 Shares, plus (i) any Shares that, as of the Registration Date, have been reserved but not issued pursuant to any awards granted under the NeurogesX 2000 Incentive Stock Plan (the “Old Plan”) and are not subject to any awards granted thereunder, and (ii) any Shares subject to stock options or similar awards granted under the Old Plan that expire or otherwise terminate without having been exercised in full and Shares issued pursuant to awards granted under the Old Plan that are forfeited to or repurchased by the Company, with the maximum number of Shares to be added to the Plan pursuant to clauses (i) and (ii) equal to 13,000,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

(b) Automatic Share Reserve Increase. The number of Shares available for issuance under the Plan shall be increased on the first day of each Fiscal Year beginning with the 2008 Fiscal Year, in an amount equal to the least of (A) 20,000,000 Shares, (B) five percent (5%) of the outstanding Shares on the last day of the immediately preceding Fiscal Year or (C) such number of Shares determined by the Board.

(c) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to or repurchased by the Company due to failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to Stock Appreciation Rights, only Shares actually issued pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock Appreciation Rights will remain available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan pursuant to Section 3(c).

(d) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.

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4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Awards may be granted hereunder;

(iii) to determine the number of Shares to be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;

(vi) to determine the terms and conditions of any, and to institute any Exchange Program;

(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

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(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(ix) to modify or amend each Award (subject to Section 19(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Awards;

(x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 15;

(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award

(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.

5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Stock Options.

(a) Limitations. Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

(b) Term of Option. The term of each Option will be stated in the Award Agreement. In the case of an Incentive Stock Option, the term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

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(c) Option Exercise Price and Consideration.

(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, subject to the following:

(1) In the case of an Incentive Stock Option

a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.

b) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, (4) other Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by the Participant and not subject to substantial risk of forfeiture for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised; (5) consideration received by the Company under a broker-assisted (or other) cashless exercise program implemented by the Company in connection with the Plan; (6) any combination of the foregoing methods of payment; or (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

(d) Exercise of Option.

(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.

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An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.

Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

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(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

7. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.

(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.

(c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

(e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.

(f) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

(g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.

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(h) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.

8. Restricted Stock Units.

(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it shall advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units.

(b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion.

(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant shall be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.

(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may only settle earned Restricted Stock Units in cash, Shares, or a combination of both.

(e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units shall be forfeited to the Company.

9. Stock Appreciation Rights.

(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.

(b) Number of Shares. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Service Provider.

(c) Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to exercise of an Stock Appreciation Right shall be determined by the Administrator and shall be no less than one hundred percent (100%) of the Fair Market Value per share on the date of grant. Otherwise, subject to Section 6(a) of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan.

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(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(e) Expiration of Stock Appreciation Rights. An Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will apply to Stock Appreciation Rights.

(f) Payment of Stock Appreciation Right Amount. Upon exercise of an Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.

At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

10. Performance Units and Performance Shares.

(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant.

(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.

(c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.

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(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.

(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.

(f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

11. Formula Awards to Outside Directors.

(a) General. Outside Directors will be entitled to receive all types of Awards (except Incentive Stock Options) under this Plan, including discretionary Awards not covered under this Section 11. All grants of Awards to Outside Directors pursuant to this Section will be automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following provisions:

(b) Type of Option. If Options are granted pursuant to this Section they will be Nonstatutory Stock Options and, except as otherwise provided herein, will be subject to the other terms and conditions of the Plan.

(c) No Discretion. No person will have any discretion to select which Outside Directors will be granted Awards under this Section or to determine the number of Shares to be covered by such Awards (except as provided in Sections 11(g) and 14).

(d) Initial Award. Each person who first becomes an Outside Director following the Registration Date will be automatically granted an Option to purchase 200,000 Shares (the “Initial Award”) on or about the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director, but who remains a Director, will not receive an Initial Award.

(e) Annual Award. Each Outside Director will be automatically granted an Option to purchase 50,000 Shares (an “Annual Award”) on each date of the annual meeting of the stockholders of the Company beginning in 2007, if as of such date, he or she will have served on the Board for at least the preceding twelve (12) months.

(f) Terms. The terms of each Award granted pursuant to this Section will be as follows:

(i) The term of the Award will be ten (10) years.

(ii) The exercise price for Shares subject to Awards will be 100% of the Fair Market Value on the grant date.

(iii) Subject to Section 14, the Initial Award will vest and become exercisable as to twenty-five percent (25%) of the Shares subject to the Initial Option on each anniversary of its grant date, provided that the Participant continues to serve as a Director through each such date.

(iv) Subject to Section 14, the Annual Award will vest and become exercisable as to one hundred percent (100%) of the Shares subject to such Award on the day prior to the next year’s annual shareholder meeting (but in no event later than December 31 of the calendar year following the calendar year during which the Annual Award is granted), provided that the Participant continues to serve as a Director through such date.

(g) Adjustments. The Administrator in its discretion may change and otherwise revise the terms of Awards granted under this Section 11, including, without limitation, the number of Shares and exercise prices thereof, for Awards granted on or after the date the Administrator determines to make any such change or revision.

12. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the ninety-first (91^st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

13. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.

14. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits in Sections 3 and 11 of the Plan.

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(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

(c) Change in Control. In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines, including, without limitation, that each Award be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. The Administrator shall not be required to treat all Awards similarly in the transaction.

In the event that the successor corporation does not assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

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(d) Outside Director Awards. With respect to Awards granted to an Outside Director that are assumed or substituted for, if on the date of or following such assumption or substitution the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant (unless such resignation is at the request of the acquirer), then the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying such Award, including those Shares which would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Performance Units and Performance Shares, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.

15. Tax Withholding.

(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).

(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, or (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

16. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

17. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

18. Term of Plan. Subject to Section 22 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years from the date adopted by the Board, unless terminated earlier under Section 19 of the Plan.

19. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

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(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

20. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

21. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.

22. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.

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EX-10.3

Exhibit 10.3

NEUROGESX, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock through accumulated payroll deductions. The Company’s intention is to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the Plan, accordingly, will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code.

2. Definitions.

(a) “Administrator” means the Board or any Committee designated by the Board to administer the Plan pursuant to Section 14.

(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(c) “Board” means the Board of Directors of the Company.

(d) “Change in Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) A change in the composition of the Board occurring within a two (2)-year period, as a result of which less than a majority of the Directors are Incumbent Directors. “Incumbent Directors” means Directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of Directors to the Company).

(e) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(f) “Committee” means a committee of the Board appointed in accordance with Section 14 hereof.

(g) “Common Stock” means the common stock of the Company.

(h) “Company” means NeurogesX, Inc., a Delaware corporation.

(i) “Compensation” means an Employee’s base straight time gross earnings, commissions (to the extent such commissions are an integral, recurring part of compensation), overtime and shift premium, but exclusive of payments for incentive compensation, bonuses and other compensation.

(j) “Designated Subsidiary” means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan.

(k) “Director” means a member of the Board.

(l) “Eligible Employee” means any individual who is a common law employee of an Employer and is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar year by the Employer. For purposes of the Plan, the employment relationship will be treated as continuing intact while the individual is on sick leave or other leave of absence that the Employer approves. Where the period of leave exceeds ninety (90) days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the ninety-first (91^st) day of such leave. The Administrator, in its discretion, from time to time may, prior to an Offering Date for all options to be granted on such Offering Date, determine (on a uniform and nondiscriminatory basis) that the definition of Eligible Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), (iv) is an officer or other manager, or (v) is a highly compensated employee under Section 414(q) of the Code.

(m) “Employer” means any one or all of the Company and its Designated Subsidiaries.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

(o) “Exercise Date” means the first Trading Day on or after May 15 and November 15 of each year. The first Exercise Date under the Plan will be November 15, 2007.

(p) “Fair Market Value” means, as of any date and unless the Administrator determines otherwise, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value will be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof will be determined in good faith by the Administrator; or

(iv) For purposes of the Offering Date of the first Offering Period under the Plan, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement on Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Common Stock (the “Registration Statement”).

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(q) “Fiscal Year” means the fiscal year of the Company.

(r) “Offering Date” means the first Trading Day of each Offering Period.

(s) “Offering Periods” means the periods of approximately twelve months during which an option granted pursuant to the Plan may be exercised, (i) commencing on the first Trading Day on or after May 15 of each year and terminating on the first Trading Day on or following May 15, approximately twelve months later, and (ii) commencing on the first Trading Day on or after November 15 of each year and terminating on the first Trading Day on or following November 15, approximately twelve months later; provided, however, that the first Offering Period under the Plan will commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company’s Registration Statement effective and ending on the first Trading Day on or after May 15, 2008; and provided, further, that the second Offering Period under the Plan will commence on the first Trading Day on or after November 15, 2007. The duration and timing of Offering Periods may be changed pursuant to Sections 4 and 20.

(t) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(u) “Plan” means this NeurogesX 2007 Employee Stock Purchase Plan.

(v) “Purchase Period” means the period during an Offering Period which shares of Common Stock may be purchased on a participant’s behalf in accordance with the terms of the Plan. Unless the Administrator provides otherwise, the Purchase Period will mean the approximately six month period commencing on one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period will commence on the Offering Date and end with the next Exercise Date.

(w) “Purchase Price” means an amount equal to eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be determined for subsequent Offering Periods by the Administrator subject to compliance with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule) or pursuant to Section 20.

(x) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

(y) “Trading Day” means a day on which the national stock exchange upon which the Common Stock is listed is open for trading.

3. Eligibility.

(a) First Offering Period. Any individual who is an Eligible Employee immediately prior to the first Offering Period will be automatically enrolled in the first Offering Period.

(b) Subsequent Offering Periods. Any Eligible Employee on a given Offering Date subsequent to the first Offering Period will be eligible to participate in the Plan, subject to the requirements of Section 5.

(c) Limitations. Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company

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or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time.

4. Offering Periods. The Plan will be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 15 and November 15 each year, or on such other date as the Administrator will determine; provided, however, that the first Offering Period under the Plan will commence with the first Trading Day on or after the date upon which the Company’s Registration Statement is declared effective by the Securities and Exchange Commission and end on the first Trading Day on or after the earlier of (i) May 15, 2008, or (ii) twenty-seven (27) months from the beginning of the first Offering Period. The Administrator will have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.

5. Participation.

(a) First Offering Period. An Eligible Employee will be entitled to continue to participate in the first Offering Period pursuant to Section 3(a) only if such individual submits a subscription agreement authorizing payroll deductions in a form determined by the Administrator (which may be similar to the form attached hereto as Exhibit A) to the Company’s designated plan administrator (i) no earlier than the effective date of the Form S-8 registration statement with respect to the issuance of Common Stock under this Plan and (ii) no later than ten (10) business days following the effective date of such S-8 registration statement or such other period of time as the Administrator may determine (the “Enrollment Window”). An Eligible Employee’s failure to submit the subscription agreement during the Enrollment Window will result in the automatic termination of such individual’s participation in the first Offering Period.

(b) Subsequent Offering Periods. An Eligible Employee may participate in the Plan pursuant to Section 3(b) by (i) submitting to the Company’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an applicable Offering Date, a properly completed subscription agreement authorizing payroll deductions in the form provided by the Administrator for such purpose, or (ii) following an electronic or other enrollment procedure prescribed by the Administrator.

6. Payroll Deductions.

(a) At the time a participant enrolls in the Plan pursuant to Section 5, he or she will elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a participant will have the payroll deductions made on such day applied to his or her account under the subsequent Purchase or Offering Period. A participant’s subscription agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.

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(b) Payroll deductions for a participant will commence on the first pay day following the Offering Date and will end on the last pay day prior to the Exercise Date of such

Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof; provided, however, that for the first Offering Period, payroll deductions will commence on the first pay day on or following the end of the Enrollment Window.

(c) All payroll deductions made for a participant will be credited to his or her account under the Plan and will be withheld in whole percentages only. A participant may not make any additional payments into such account.

(d) A participant may discontinue his or her participation in the Plan as provided in Section 10, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by (i) properly completing and submitting to the Company’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an applicable Exercise Date, a new subscription agreement authorizing the change in payroll deduction rate in the form provided by the Administrator for such purpose, or (ii) following an electronic or other procedure prescribed by the Administrator; provided, however, that a participant may only make one payroll deduction change during each Purchase Period. If a participant has not followed such procedures to change the rate of payroll deductions, the rate of his or her payroll deductions will continue at the originally elected rate throughout the Offering Period and future Offering Periods (unless terminated as provided in Section 10). The Administrator may, in its sole discretion, limit the nature and/or number of payroll deduction rate changes that may be made by participants during any Offering Period. Any change in payroll deduction rate made pursuant to this Section 6(d) will be effective as of the first full payroll period following five (5) business days after the date on which the change is made by the participant (unless the Administrator, in its sole discretion, elects to process a given change in payroll deduction rate more quickly).

(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(c), a participant’s payroll deductions may be decreased to zero percent (0%) at any time during a Purchase Period. Subject to Section 423(b)(8) of the Code and Section 3(c) hereof, payroll deductions will recommence at the rate originally elected by the participant effective as of the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10.

(f) At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company’s or Employer’s federal, state, or any other tax liability payable to any authority, national insurance, social security or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company or the Employer may, but will not be obligated to, withhold from the participant’s compensation the amount necessary for the Company or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Employer any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee.

7. Grant of Option. On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such Eligible Employee’s payroll deductions accumulated prior to such Exercise Date and retained in the Eligible Employee’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event will an Eligible Employee be permitted to purchase during each Purchase Period more than 2,000 shares of the Common Stock

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(subject to any adjustment pursuant to Section 19), and provided further that such purchase will be subject to the limitations set forth in Sections 3(c) and 13. The Eligible Employee may accept the grant of such option with respect to the first Offering Period by submitting a properly completed subscription agreement in accordance with the requirements of Section 5(a) on or before the last day of the Enrollment Window, and (ii) with respect to any future Offering Period under the Plan, by electing to participate in the Plan in accordance with the requirements of Section 5(b). The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that an Eligible Employee may purchase during each Purchase Period of an Offering Period. Exercise of the option will occur as provided in Section 8, unless the participant has withdrawn pursuant to Section 10. The option will expire on the last day of the Offering Period.

8. Exercise of Option.

(a) Unless a participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option will be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares of Common Stock will be purchased; any payroll deductions accumulated in a participant’s account which are not sufficient to purchase a full share will be retained in the participant’s account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as provided in Section 10. Any other funds left over in a participant’s account after the Exercise Date will be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shares hereunder is exercisable only by him or her.

(b) If the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the Plan on such Exercise Date, the Administrator may in its sole discretion provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Offering Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect or terminate all Offering Periods then in effect pursuant to Section 20. The Company may make a pro rata allocation of the shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s stockholders subsequent to such Offering Date.

9. Delivery. As soon as reasonably practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each participant the shares purchased upon exercise of his or her option in a form determined by the Administrator (in its sole discretion) and pursuant to rules established by the Administrator. The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated methods of share transfer. The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares. No participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the participant as provided in this Section 9.

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10. Withdrawal.

(a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by (i) submitting to the Company’s payroll office (or its designee) a written notice of withdrawal in the form prescribed by the Administrator for such purpose, or (ii) following an electronic or other withdrawal procedure prescribed by the Administrator. All of the participant’s payroll deductions credited to his or her account will be paid to such participant promptly after receipt of notice of withdrawal and such participant’s option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of the succeeding Offering Period, unless the participant re-enrolls in the Plan in accordance with the provisions of Section 5.

(b) A participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws.

11. Termination of Employment. Upon a participant’s ceasing to be an Eligible Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such participant’s option will be automatically terminated.

12. Interest. No interest will accrue on the payroll deductions of a participant in the Plan.

13. Stock.

(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of Common Stock which will be made available for sale under the Plan will be 5,000,000 shares, plus an annual increase to be added on the first day of each Fiscal Year beginning with the 2008 Fiscal Year, equal to the least of (i) 8,000,000 shares of Common Stock, (ii) 2% of the outstanding shares of Common Stock on such date or (iii) an amount determined by the Administrator.

(b) Until the shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a participant will only have the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder will exist with respect to such shares.

(c) Shares of Common Stock to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse.

14. Administration. The Plan will be administered by the Board or a Committee appointed by the Board, which Committee will be constituted to comply with Applicable Laws. The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Administrator will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures

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for jurisdictions outside of the United States. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of payroll deductions, making of contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold payroll deductions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates which vary with local requirements.

15. Designation of Beneficiary.

(a) A participant may file a designation of a beneficiary who is to receive any shares of Common Stock and cash, if any, from the participant’s account under the Plan in the event of such participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the participant at any time by notice in a form determined by the Administrator. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

(c) All beneficiary designations will be in such form and manner as the Administrator may designate from time to time.

16. Transferability. Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.

17. Use of Funds. The Company may use all payroll deductions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such payroll deductions. Until shares of Common Stock are issued, participants will only have the rights of an unsecured creditor with respect to such shares.

18. Reports. Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participating Eligible Employees at least annually, which statements will set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.

19. Adjustments, Dissolution, Liquidation, Merger or Change in Control.

(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,

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repurchase, or exchange of Common Stock or other securities of the Company, or other change in the corporate structure of the Company affecting the Common Stock occurs, the Administrator, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall, in such manner as it may deem equitable, adjust the number and class of Common Stock which may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 7 and 13.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a new Exercise Date (the “New Exercise Date”), and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date will be before the date of the Company’s proposed dissolution or liquidation. The Administrator will notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

(c) Merger or Change in Control. In the event of a merger or Change in Control, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period with respect to which such option relates will be shortened by setting a new Exercise Date (the “New Exercise Date”) and will end on the New Exercise Date. The New Exercise Date will occur before the date of the Company’s proposed merger or Change in Control. The Administrator will notify each participant in writing prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

20. Amendment or Termination.

(a) The Administrator, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Administrator, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Exercise Date (which may be sooner than originally scheduled, if determined by the Administrator in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 19). If the Offering Periods are terminated prior to expiration, all amounts then credited to participants’ accounts which have not been used to purchase shares of Common Stock will be returned to the participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable.

(b) Without stockholder consent and without limiting Section 20(a), the Administrator will be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the

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purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable which are consistent with the Plan.

(c) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(i) amending the Plan to conform with the safe harbor definition under Statement of Financial Accounting Standards 123(R), including with respect to an Offering Period underway at the time;

(ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

(iii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action;

(iv) reducing the maximum percentage of Compensation a participant may elect to set aside as payroll deductions; and

(v) reducing the maximum number of Shares a participant may purchase during any Offering Period or Purchase Period.

Such modifications or amendments will not require stockholder approval or the consent of any Plan participants.

21. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan will be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

22. Conditions Upon Issuance of Shares. Shares of Common Stock will not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

23. Term of Plan. The Plan will become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It will continue in effect for a term of twenty (20) years, unless sooner terminated under Section 20.

24. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.

25. Automatic Transfer to Low Price Offering Period. To the extent permitted by Applicable Laws, if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Offering Date of such Offering Period, then all participants in such Offering Period will be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period.

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EXHIBIT A

NEUROGESX, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

             Original Application Offering Date:                        

             Change in Payroll Deduction Rate

             Change of Beneficiary(ies)

1.                                           hereby elects to participate in the NeurogesX, Inc. 2007 Employee Stock Purchase Plan (the “Plan”) and subscribes to purchase shares of the Company’s Common Stock in accordance with this Subscription Agreement and the Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount of         % of my Compensation on each payday (from 0 to 15%) during the Offering Period in accordance with the Plan. (Please note that no fractional percentages are permitted.)

3. I understand that said payroll deductions will be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option and purchase Common Stock under the Plan.

4. I have received a copy of the complete Plan and its accompanying prospectus. I understand that my participation in the Plan is in all respects subject to the terms of the Plan.

5. Shares of Common Stock purchased for me under the Plan should be issued in the name(s) of (Eligible Employee or Eligible Employee and Spouse only).

6. I understand that if I dispose of any shares received by me pursuant to the Employee Stock Purchase Plan within two (2) years after the Offering Date (the first day of the Offering Period during which I purchased such shares) or one (1) year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within thirty (30) days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the two (2)-year and one (1)-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (a) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (b) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain.

7. I hereby agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan.

8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan:

NAME: (Please print)
	(First)	(Middle)	(Last)

Relationship
Percentage Benefit	(Address)

NAME: (please print)
	(First)	(Middle)	(Last)

Relationship
Percentage of Benefit	(Address)

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Employee’s Social

Security Number:

Employee’s Address:

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT WILL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated: ______________________________________
	Signature of Employee
Dated: ______________________________________
	Spouse’s Signature (If beneficiary other than spouse)

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EXHIBIT B

NEUROGESX, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the NeurogesX, Inc. 2007 Employee Stock Purchase Plan that began on                     ,              (the “Offering Date”) hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned will be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement.

Name and Address of Participant:

Signature:

Date:

EX-10.4

EXHIBIT 10.4

NEUROGESX, INC.

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of             , 2004 by and between NeurogesX, Inc., a California corporation (the “Company”), and              (“Indemnitee”).

RECITALS

A. The Company desires to attract and retain the services of highly qualified individuals to serve as officers, directors and agents of the Company.

B. The Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors, officers and other agents of the Company.

C. The Company desires to provide indemnification and other rights to Indemnitee in consideration for Indemnitee’s service to the Company.

In consideration of the covenants and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Indemnification.

(a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that Indemnitee is or was a director, officer, employee or other agent of the Company or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines, settlements (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) and other amounts actually and reasonably incurred by Indemnitee in connection with the Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company, and, in the case of any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company or (ii) Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the Company to procure a judgment in

its favor by reason of the fact that Indemnitee is or was a director, officer, employee or other agent of the Company or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action if Indemnitee acted in good faith, in a manner Indemnitee believed to be in the best interests of the Company and its shareholders, except that no indemnification shall be made (i) in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company in the performance of Indemnitee’s duty to the Company and its shareholders unless and only to the extent that the court in which such Proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and then only to the extent that the court shall determine, (ii) of amounts paid in settling or otherwise disposing of a pending action without court approval or (iii) of expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval.

2. Expenses; Indemnification Procedure.

(a) Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee in defending any Proceeding referenced in Section 1(a) or (b) hereof prior to the final disposition of the Proceeding (but not amounts actually paid in settlement of any such Proceeding). Indemnitee hereby undertakes to repay such amounts advanced if it shall be determined ultimately that Indemnitee is not entitled to be indemnified by the Company as authorized hereby or by Section 317 of the California General Corporation Law. The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company.

(b) Notice; Cooperation by Indemnitee. Indemnitee shall, as soon as practicable and as a condition precedent to Indemnitee’s right to be indemnified or to receive any advancement of expenses under this Agreement, give the Company written notice of any claim made against Indemnitee for which indemnification or advancement of expenses will or could be sought under this Agreement, specifying the nature of such claim in reasonable detail. Notice to the Company shall be directed to the Chief Executive Officer of the Company, or the Chief Financial Officer if Indemnitee is the Chief Executive Officer, in accordance with Section 14 hereof. Any delay in providing notice will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial. Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(c) Procedure. Any indemnification provided for in Section 1 hereof shall be made no later than forty-five (45) days after written notice by Indemnitee requesting payment. If a claim under this Agreement, under any statute or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification is not paid in full by the Company within forty-five (45) days after such written notice, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 13 hereof, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any Proceeding in advance of its final

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disposition) that Indemnitee has not met the standards of conduct which make it permissible under this Agreement or applicable law for the Company to indemnify Indemnitee for the amount claimed, and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Subsection 2(a) hereof unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its shareholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its shareholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

(d) Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to Section 2(b) hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of the Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all commercially reasonable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(e) Selection of Counsel. In the event the Company shall be obligated under Section 2(a) hereof to pay the expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon giving written notice to Indemnitee of its election so to do. After giving such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (i) Indemnitee shall have the right to employ Indemnitee’s counsel in any such Proceeding at Indemnitee’s expense; and (ii) if (A) the Company has expressly authorized (and continues to authorize) the employment of counsel by Indemnitee at the Company’s expense, (B) the use of counsel chosen by the Company to represent Indemnitee would present such counsel with a conflict of interest or (C) the Company shall not, in fact, have employed counsel reasonably satisfactory to Indemnitee within a reasonable time after notice of the institution of such Proceeding, then Indemnitee shall have the right to employ counsel at the expense of the Company in accordance herewith.

3. Additional Indemnification Rights; Nonexclusivity.

(a) Scope. Subject to Section 8 hereof and any other provision of this Agreement that prohibits, limits or conditions indemnification by the Company, the Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law for any acts, omissions or transactions while acting in the capacity of, or that are otherwise related to the fact that Indemnitee was or is serving as, a director, officer, employee or other agent of the Company or, to the extent Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another

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corporation, partnership, joint venture, trust or other enterprise, such other corporation, partnership, joint venture, trust or other enterprise. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of a California corporation to indemnify a member of its Board of Directors, an officer or other corporate agent, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s obligations, under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a California corporation to indemnify a member of its Board of Directors, an officer or other corporate agent, such changes, to the extent required by such law, statute or rule to be applied to this Agreement, shall have the effect on this Agreement and the parties’ rights and obligations hereunder as is required by such law, statute or rule.

(b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of shareholders or disinterested directors, the California General Corporation Law or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity at the time of any covered Proceeding.

4. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines, settlements or other amounts actually and reasonably incurred by Indemnitee in connection with any Proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines, settlements or other amounts to which Indemnitee is entitled.

5. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers and other corporate agents under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

6. Directors’ and Officers’ Liability Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to insure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors under such policy or policies, if Indemnitee is a director; or of the Company’s officers under such policy or policies, if Indemnitee is not a director of

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the Company but is an officer; or of the Company’s key employees under such policy or policies, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain any insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company.

7. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 7. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

8. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a) Excluded Acts. To indemnify Indemnitee (i) for any acts or omissions or transactions from which a director may not be relieved of liability under the California General Corporation Law or (ii) for breach of duty to the Company or its shareholders as to circumstances in which indemnity is expressly prohibited by Section 317 of the California General Corporation Law; or

(b) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings or claims initiated or brought to enforce this Agreement or a right to indemnification under Section 317 of the California General Corporation Law or under any other statute or law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit; or

(c) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to proceedings or claims initiated or brought to enforce this Agreement or a right to indemnification under Section 317 of the California General Corporation Law or under any other statute or law, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or

(d) Duplicate Payments. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent Indemnitee has otherwise received payment of amounts otherwise indemnifiable under this Agreement pursuant to (i) a policy of directors’ and

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officers’ liability insurance maintained by the Company, (ii) the Company’s Articles of Incorporation or Bylaws, (iii) Section 317 or any other applicable provisions of the California General Corporation Law or (iv) any other agreement; or

(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

9. Effectiveness of Agreement. To the extent that the indemnification permitted under the terms of certain provisions of this Agreement exceeds the scope of the indemnification specifically provided for in the California General Corporation Law, such provisions shall not be effective unless and until the Company’s Articles of Incorporation duly authorize such additional rights of indemnification. In all other respects, the balance of this Agreement shall be effective as of the date set forth on the first page of this Agreement and may apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was a director, officer, employee or other agent of the Company, or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the time such act or omission occurred.

10. Construction of Certain Phrases.

(a) For purposes of this Agreement, references to the “Company” shall also include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(b) For purposes of this Agreement, references to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.

11. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original.

12. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, executors, administrators and similar legal representatives.

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13. Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, a court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked or (iii) if sent by other means, on the date such notice is actually received by the relevant party. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice in accordance herewith. Notices to the Company shall be sent with a copy to Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304, attention: Michael O’Donnell.

15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of California for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action or proceeding instituted under this Agreement shall be brought only in the state courts of the State of California.

16. Choice of Law. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of California as applied to contracts between California residents entered into and to be performed entirely within California.

17. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

18. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

19. Integration and Entire Agreement. This Agreement (i) sets forth the entire understanding between the parties with respect to the subject matter hereof, (ii) supersedes all previous written or oral negotiations, commitments, understandings and agreements relating to the subject matter hereof and (iii) merges all prior and contemporaneous discussions between the parties.

(signature page follows)

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

NEUROGESX, INC.
By:
Name:
Title:
Address:	981 Industrial Road, Suite F San Carlos, CA 94070

Agreed to and accepted:

INDEMNITEE

(type or print name)

(signature)

(street address)

(city, state and zip code)

(Signature page to Indemnification Agreement)

EX-10.5

EXHIBIT 10.5

THREE SISTERS RANCH

E N T E R P R I S E S LLC

BASIC LEASE INFORMATION
Lease Date:	August 11, 2000
Tenant	Advanced Analgesics, Inc., a California corporation
Tenant’s Address:	174 Warren Road San Mateo, California 94401
Landlord:	Three Sisters Ranch Enterprises LLC
Landlord’s Address:	P. O. Box 1444 San Carlos, CA 94070
Project:	San Carlos Business Park
Description	That six (6) building project totaling approximately 123,280± square feet, commonly known as San Carlos Business Park, San Carlos, CA. The project is outlined in green on Exhibit A.
Building Description:	That approximately 17,612± square foot, one story tilt-up concrete building known as 969 Industrial Road in San Carlos, California. The building is outlined in blue on Exhibit A.
Premises:	That approximately 4,812± square feet of rentable area known as 969 Industrial Road, Suite C, San Carlos, California. The demised premises are outlined in red on Exhibit A and the Site Plan is attached hereto as Exhibit B.
Permitted Use:	Research and Development, office, warehouse, manufacturing and concurrent related legal issues which Premises shall also be used in conformance with the restrictions and limitations imposed by the City of San Carlos by virtue of the Premises’ location within the Planned Manufacturing Zoning District (PM) of San Carlos or any subsequent commercial zoning designation by the City of San Carlos and which Premises shall also be used in conformance with the restrictions, limitations and practice imposed by any governmental, “quasi”-governmental or other authority whose regulation, practice or licensing Tenant is subject thereto.
Parking Density:	Three (3) parking spaces per 1,000 sq. ft., total of fourteen (14) spaces.
Condition of Premises/Tenant Improvements	See Paragraph 37.
Estimated Term Commencement Date:	August 15, 2000. See Paragraph 2.
Early Occupancy:	Tenant shall be entitled to occupy the Premises on or after August 1, 2000, only upon execution of this Lease, approval by Landlord of Letter of Credit, and the payment to Landlord in the total amount of $80,931.22, which amount represents as follows:
	Rent - August 15-31, 2000: Rent - September 2000: Last Month’s Rent: Security Deposit:	$11,332.25 (includes CAM) $22,664.52 (includes CAM) $23,434.44 (CAM not included) $23,500.00 (CAM not included) $80,931.22
Length of Term:	The term of the lease shall be three (3) years with the expiration date being August 31, 2003. See Paragraph 3.

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Base Rent	Months 1   - 12:          $4.50/sq.ft/mo. NNN    =    $21,654.00/mo. Months 13 - 24:          $4.68/sq.ft/mo. NNN    =    $22,520.16/mo. Months 25 - - 36:          $4.87/sq.ft/mo. NNN    =    $23,434.44/mo.
Estimated First Year Basic Operating Cost:	$0.21/sq.ft/mo.  =  $1,010.52/mo.  =  $12,126.24/yr.
Tenant’s Proportionate Share:	Of Building: 27.3% / Of Project: 3.9%
Security Deposit:	Twenty Three Thousand Five Hundred plus CAM ($23,500 plus CAM) [equal to last month’s rent].
Additional Security Deposit:	As a condition precedent to Tenant’s ability to occupy the Premises or enforce this Lease, Tenant shall supply to Landlord a standby Letter of Credit in the amount of One Hundred Twenty Nine Thousand Nine Hundred and Twenty Four and 00/100 Dollars ($129,924.00) for security deposit equal to six month’s rent. The Letter of Credit shall be renewed at least thirty (30) days prior to the anniversary of such Lease in the amount of the subsequent six-month’s rent.
	The Letter of Credit applicable to year 2 and 3 of the Lease Term shall be in the total amount of $135,120.96 and $140,606.64, respectively.
	Should such Letter of Credit be cancelled, terminated or not otherwise renewed and timely delivered to Landlord, such event shall constitute a default under this Lease.
	It is hereby agreed, that any and all Security Deposits and Letters of Credit are not to be applied to Rent, rather, other obligations of Tenant under the Lease where Tenant is in Default and Landlord incurs damages from same.
Applicable Interest Rate:	Maximum legal rate. See Par. 26C, D.
Brokers:	Craig McGahey of Staubach Company for Tenant Robert L. McSweeney of CB Richard Ellis for Landlord
The foregoing Basic Lease Information is incorporated into and made a part of this Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the respective information above and shall be construed to incorporate all of the terms provided under the particular Lease paragraph pertaining to such information. In the event of any conflict between the Basic Lease Information and the Lease, the latter shall control.

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TABLE OF CONTENTS

	Page
BASIC LEASE INFORMATION	i
PREMISES	1
POSSESSION AND LEASE COMMENCEMENT	1
TERM	1
USE	2
RULES AND REGULATIONS	4
RENT	4
BASIC OPERATING COST	4
INSURANCE AND INDEMNIFICATION	7
WAIVER OF SUBROGATION	9
LANDLORD’S REPAIRS AND SERVICES	9
TENANT’S REPAIRS	9
ALTERATIONS	10
SIGNS	11
INSPECTION/POSTING NOTICES	11
UTILITIES	11
SUBORDINATION	12
FINANCIAL STATEMENTS	12
ESTOPPEL CERTIFICATE	12
SECURITY DEPOSIT	12
TENANT’S REMEDIES	13
ASSIGNMENT AND SUBLETTING	13
AUTHORITY OF PARTIES	14
CONDEMNATION	14
CASUALTY DAMAGE	14
HOLDING OVER	16
DEFAULT	16
LIENS	18
TRANSFERS BY LANDLORD	19
RIGHT OF LANDLORD TO PERFORM TENANT’S COVENANTS	19
WAIVER	19
NOTICES	19
ATTORNEYS’ FEES	20
SUCCESSORS AND ASSIGNS	20
FORCE MAJEURE	20

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BROKERAGE COMMISSION	20
MISCELLANEOUS	20
CONDITION OF PREMISES/TENANT IMPROVEMENTS	22
EARLY OCCUPANCY	22
NO LIABILITY	22
RENEWAL OPTION CONDITIONS	22
EXHIBITS A, B, C AND D

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	LEASE
	THIS LEASE is made as of this      day of August, 2000, by and between Three Sisters Ranch Enterprises LLC, a California limited liability company (hereinafter called “Landlord”) and Advanced Analgesics, Inc, a California corporation (hereinafter called “Tenant”).
PREMISES	1. Landlord leases to Tenant and Tenant leases from Landlord, upon the terms and conditions hereinafter set forth, those premises (the “Premises”) outlined in red on Exhibit A and described in the Basic Lease Information. The Premises may be all or part of the building (the “Building”) or of the project (the “Project”) which may consist of more than one building. The Building and Project are outlined in blue and green respectively on Exhibit A.
POSSESSION AND LEASE COMMENCEMENT	2. A. Existing Improvements. In the event this Lease pertains to a Premises in which the interior improvements have already been constructed (“Existing Improvements”), the provisions of this Paragraph 2.A. shall apply and the term commencement date (“Term Commencement Date”) shall be the earlier of the date on which: (1) Tenant takes possession of some or all of the Premises; or (2) Landlord delivers written notice to Tenant that Tenant may occupy the Premises. If for any reason Landlord cannot deliver possession of the Premises to Tenant on the Estimated Term Commencement Date, Landlord shall not be subject to any liability therefor, nor shall Landlord be in default hereunder, and Tenant agrees to accept possession of the Premises at such time as Landlord is able to deliver the same, which date shall then be deemed the Term Commencement Date. Tenant shall not be liable for any Rent for any period prior to the Term Commencement Date. Tenant acknowledges that Tenant has inspected and accepts the Premises in their present condition, broom clean, “as is”, as suitable for the purpose for which the Premises are leased. Tenant agrees that said Premises and other improvements are in good and satisfactory condition as of when possession was taken. Tenant further acknowledges that no representations as to the condition or repair of the Premises nor promises to alter, remodel or improve the Premises have been made by Landlord unless such are expressly set forth in this Lease. Tenant shall, upon demand, execute and deliver to Landlord a letter of acceptance of delivery of the Premises.
	B. Construction of Improvements. In the event this Lease pertains to a Building to be constructed or improvements to be construed within a Building, the provisions of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A. above and the term commencement date (“Term Commencement Date”) shall be the earlier of the date on which: (1) Tenant takes possession of some or all of the Premises, or (2) the improvements constructed or to be constructed in the Premises shall have been substantially completed in accordance with this Lease. If for any reason Landlord cannot deliver possession of the Premises to Tenant on the Estimated Term Commencement Date, Landlord shall not be subject to any liability therefore, nor shall Landlord be in default hereunder. In the event of any dispute as to substantial completion of work performed or required to be performed by Landlord, the certificate of Landlord’s architect, general contractor, or contractor shall be conclusive. Substantial completion shall have occurred notwithstanding Tenant’s submission of a punch list to landlord, which Tenant shall submit, if at all, within thirty (30) days after the Term Commencement Date. Tenant shall, upon demand, execute and deliver to Landlord a letter of acceptance of delivery of the Premises.
TERM	3. The Term of this Lease shall commence on the Term Commencement Date and continue in full force and effect for the number of months designated as the Length of Term in the Basic Lease Information or until this Lease is sooner terminated as otherwise

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	provided herein. If the Term Commencement Date is a date other than the first day of the calendar month, the Term shall be the number of months of the Length of Term in addition to the remainder of the calendar month following the Term Commencement Date.
USE	4. A. General. Tenant shall use the Premises for the Permitted Use and for no other use or purpose. Tenant shall control Tenant’s employees, agents, customers, visitors, invitees, licensees, contractors, assignees and subtenants (collectively, “Tenant’s Parties”) in such a manner that Tenant and Tenant’s Parties cumulatively do not exceed the Parking Density specified in the Basic Lease Information at any time. Tenant and Tenant’s parties shall have the nonexclusive right to use, in common with other parties occupying the Building or Project, the parking areas and driveways of the Project, subject to such reasonable rules and regulations as Landlord may from time to time prescribe.
	B. Limitations.
	(1) Tenant shall not permit any odors, smoke, dust, gas, substances, noise or vibrations to emanate from the Premises, nor take any action which could reasonably and potentially constitute a nuisance or could disturb, obstruct or endanger any other tenants of the Building or Project in which the Premises are situated, or interfere with their use of their respective premises. Storage outside the Premises of materials, vehicles or any other items is prohibited. Tenant shall not use or allow the Premises to be used for any improper, immoral or unlawful purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. Tenant shall not allow any sale by auction upon the Premises, or place any loads upon the floors, walls or ceilings which endanger the structure, or place any harmful liquids or chemicals in the drainage system of the Building or Project. No waste, materials or refuse shall be dumped upon or permitted to remain outside the Premises except in trash containers placed inside exterior enclosures designated for that purpose by Landlord and except in strict compliance with any laws or regulations attendant to disposal of such waste, materials or refuse. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of the above-referenced rules or any other terms or provisions of such tenant’s or occupant’s lease or other contract. Tenant shall in all respects comply with and abide by the Sign Criteria for San Carlos Park attached hereto as Exhibit “C” and incorporated herein by reference.
	(2) Provided Tenant delivers to Landlord prior to Lease Commencement or occupation of animal facility and thereafter, whenever renewed and/or re-issued by the applicable governmental, “quasi”-governmental, or other authoritative agency or body [health, R&D, animal testing or otherwise], whose regulation, practice or licensing Tenant is subject, any and all permits, certificates or other approvals which evidence Tenant’s ability to operate its animal testing facility and which evidence compliance with all applicable regulations and/or laws, Tenant shall be permitted to construct and operate small animal testing facility within the Premises. Notwithstanding the above, the following uses of the Premises shall be a Default by Tenant and shall be prohibited within the Premises (collectively, “Prohibited Uses”): i) the housing of laboratory animals other than common rodents, ii) the housing of animals in a space larger than one thousand (1,000) square feet, iii) the utilization of any form of experimental procedure which uses harmful radioactive materials, viruses or bacteria, iv) the material violation of generally accepted industry standards for animal testing facility compliance or certification; and v) any use of the Premises that is not a Permitted Use. Tenant hereby agrees to defend, indemnify and hold Landlord harmless from and against any loss, damages, liability, fees or costs incurred, of whatever kind or nature (including reasonable attorney’s fees and costs), as a direct or indirect consequence of Tenant’s breach or violation of any obligation under this Section.
	C. Compliance with Regulations. By entering the Premises, Tenant accepts the Premises in the condition existing as of the date of such entry, subject to all existing or future applicable municipal, state and federal and other governmental statutes,

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regulations, laws and ordinances, including zoning ordinances and regulations governing and relating to the use, occupancy and possession of the Premises and the use, storage, generation and disposal of Hazardous Materials (hereinafter defined) in, on and under the Premises (collectively “Regulations”). Tenant, at its sole expense, shall use and occupy the Premises in compliance with all laws, including, without limitation, the Americans With Disabilities Act, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now applicable and/or applicable to the Premises after the Commencement Date (collectively, “Legal Requirements”). The Premises shall not be used as a place of public accommodation under the Americans With Disabilities Act or similar state statutes or local ordinances or any regulations promulgated thereunder, all as may be amended from time to time. Tenant shall, at its expense, make any alterations or modifications, within or without the Premises, that are required by Legal Requirements related to Tenant’s use or occupation of the Premises. Except for pre-existing violations Tenant shall, at Tenant’s sole expense, strictly comply with all Regulations now in force or which may hereafter be in force relating to the Premises and Tenant’s use of the Premises and/or the use, storage or generation of Hazardous Materials in, on and under the Premises by Tenant or Tenant’s Parties. Tenant shall at its sole cost and expense obtain any and all licenses or permits necessary for Tenant’s particular use of the Premises. Tenant shall comply with the requirements of any board of fire underwriters or other similar body now or hereafter constituted. Tenant shall be solely responsible for compliance with any requirements for modification to the Premises to provide for fire prevention or suppression improvements or modifications, including sprinkler requirements, as public officials or law may require. Tenant shall not do or permit anything to be done in, on, or about the Premises or bring or keep anything which will in any way increase the rate of any insurance upon the Premises, Building or Project, or upon any contents therein (unless Tenant agrees to pay for the cost of such increase and the cost of removing the cause of such increase upon termination of the tenancy), or cause a cancellation of said insurance. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against any loss, cost, expense, damage, attorneys’ fees, experts’ fees or liability arising out of the failure to Tenant to comply with any applicable law or regulation or comply with the requirements as set forth herein. The taking of possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken.

D. Hazardous Wastes Materials. Tenant shall not cause, or allow any of Tenant’s Parties to cause, any Hazardous Materials to be used, generated, stored or disposed of on or about the Premises, the Building or the Project except for normal quantities of standard office supplies (e.g., copier toner). As used in this Lease, “Hazardous Materials” shall include, but not be limited to, “hazardous materials,” “hazardous wastes,” “toxic substances,” “dangerous and/or harmful chemicals” or other similar designations in any federal, state or local law, regulation, or ordinance. Landlord shall have the right but not the obligation at all reasonable times, upon not less than forty-eight (48) hours notice to Tenant (except in the case of emergency) and subject to all reasonable security measures of Tenant, to inspect the Premises and to conduct tests and investigations to determine whether Tenant is in compliance with the foregoing provisions, the costs of all such inspections, tests and investigations to be borne by Landlord unless Landlord can establish that any such inspection, test or investigation, or the cost of same, was reasonable under the circumstances. Notwithstanding the above, should Landlord uncover a violation by Tenant of any environmental law reasonably likely to result in contamination of any part of the Premises, Building or Project, any use by Tenant of any Hazardous Materials not otherwise permitted elsewhere in this Lease, or a Default by Tenant under Section 4 of this Lease, the costs of all such inspections, tests and investigations shall be borne by Tenant. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against all liabilities, losses, costs and expenses, (including without limitation attorneys’ and experts’ fees and expenses) demands, causes of action, claims or judgments directly or indirectly arising out of the use, generation, storage or disposal of Hazardous Materials, of whatever kind or nature in, on or under the Premises, Building or Project by Tenant or any of Tenant’s Parties, which indemnity shall include,

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	without limitation, the cost of any required or necessary repair, cleanup or detoxification, and the preparation of any closure or other required plans, whether such action is required or necessary prior to or following the termination of this Lease. Neither the written consent by Landlord to the use, generation, storage or disposal of Hazardous Materials nor the strict compliance by Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant from Tenant’s obligation of indemnification pursuant to this Lease. Tenant’s obligation pursuant to the foregoing indemnity shall survive the termination of this Lease. Tenant shall not be liable for and shall not be obligated to provide indemnification to Landlord for any losses, claims, liabilities or damages (including attorneys’ fees and consultants’ fees) arising out of or in connection with the presence of any Hazardous Materials in, on or under the Premises, Building or Project except to the extent that the same is connected to or emanates from any use, generation, storage or disposal of such Hazardous Materials by Tenant or Tenant’s Parties.
	Further, and prior to the Term Commencement Date, Tenant shall deliver to Landlord a comprehensive list of each specific, and any and all individual chemicals, compounds or Hazardous Materials, presently used, or which might be used at some future date (attached hereto as Exhibit “D”), in the course of its business. Notwithstanding the foregoing, and provided Tenant complies with all other provisions, terms and conditions of this Lease, including but not limited to Permitted Uses of the Premises and Section 4 of this Lease, Tenant shall be allowed to use those chemicals and/or substances identified in Exhibit “D”.
RULES AND REGULATIONS	5. Tenant shall faithfully observe and comply with any rules and regulations Landlord may from time to time prescribe in writing for the purpose of maintaining the proper care, cleanliness, safety, traffic flow and general order of the Premises or Project. Tenant shall cause Tenant’s Parties to comply with such rules and regulations. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of the rules and regulations.
RENT	6. A. Base Rent. Tenant shall pay to Landlord, without demand throughout the Term, Base Rent as specified in the Basic Lease Information, payable in monthly installments in advance on or before the first day of each calendar month, in lawful money of the United States, without deduction or offset whatsoever, at the address specified in the Basic Lease Information or to such other place as Landlord may from time to time designate in writing.
	B. Additional Rent. All monies other than Base Rent required to be paid by Tenant hereunder, including, but not limited to, the interest and late charge described in Paragraph 26.D., any monies spent by Landlord pursuant to Paragraph 29, Tenant’s Proportionate Share of Basic Operating Cost, as specified in Paragraph 7 of this Lease, attorneys fees, as specified in Paragraph 32A and 32B, and any applicable amortized Tenant Improvement Allowance Repayment, as specified in Paragraph 37, shall be considered additional rent (“Additional Rent”). “Rent” shall mean Base Rent and Additional Rent. Rent due for any partial month at the commencement or expiration (but not for termination due to the default or Tenant) of the Lease Term shall be prorated based on the actual number of days in the applicable month.
BASIC OPERATING COST	7. A. Basic Operating Cost. In addition to the Base Rent required to be paid hereunder, Tenant shall pay as Additional Rent, Tenant’s Proportionate Share, as defined in the Basic Lease Information, of Basic Operating Cost in the manner set forth below. Landlord shall account for each item of Basic Operating Cost as either a cost attributable to the Building or to the Project, as determined by Landlord in Landlord’s sole and reasonable discretion, and unless provided to the contrary in this Lease, Tenant shall pay the applicable Tenant’s Proportionate Share of each such Basic Operating Cost, as set forth in the Basic Lease Information. Basic Operating Cost shall mean all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay, because of or in connection with the management, maintenance, preservation and operation of the Project and its supporting facilities (determined in accordance with generally accepted accounting principles, consistently applied) including but not limited to the following:

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(1) Taxes. All real property taxes, possessory interest taxes, business or license taxes or fees, service payments in lieu of such taxes or fees, annual or periodic license or use fees, excises, transit charges, housing fund assessments, open space charges, assessments, levies, fees or charges general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind (including fees “in-lieu” of any such tax or assessment) which are assessed, levied, charged, confirmed, or imposed by any public authority upon the Project, its operations or the Rent (or any portion or component thereof) (all of the foregoing being hereinafter collectively referred to as “real property taxes”), or any tax imposed in substitution, partially or totally, of any tax previously included within the definition of real property taxes, or any additional tax the nature of which was previously included within the definition of real property taxes, except (a) inheritance or estate taxes imposed upon or assessed against the Project, or any part thereof or interest therein, (b) taxes computed upon the basis of net income of Landlord or the owner of any interest therein, including capital gains tax, (c) additional taxes resulting from the improvement of any portion of the Project other than the Premises or the Building for the sole use of other tenants, or (d) tax penalties as a result of Landlord’s failure to make payments or file informational returns unless such failure was caused in part by a default of Tenant, except as otherwise provided in the following sentence. Basic Operating Cost shall also include any taxes, assessments, or any other fees imposed by any public authority upon or measured by the monthly rental or other charges payable hereunder, including, without limitation, any gross income tax or excise tax levied by the local governmental body with respect to receipt of such rental, or upon, with respect to or by reason of the development, possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof, or upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. In the event that it shall not be lawful for Tenant to reimburse Landlord for all or any part of such taxes, the monthly rental payable to Landlord under this Lease shall be revised to net to Landlord the same total net rental after imposition of any such taxes by Landlord as would have been payable to Landlord prior to the payment of any such taxes.

(2) Insurance. All insurance premiums and costs, including but not limited to, any deductible amounts, premiums and cost of insurance incurred by Landlord, as more fully set forth in Paragraph 8.A. herein.

(3) Repairs and Improvements. Repairs, replacements and general maintenance for the Premises, Building and Project (except for those repairs expressly made the financial responsibility of Landlord pursuant to the terms of this Lease, repairs to the extent paid for by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to tenants of the Project other than Tenant). Such repairs, replacements, and general maintenance shall include the cost of any capital improvements made to or capital assets acquired for the Project, Building, or Premises after the Term Commencement Date that reduce any other Basic Operating Cost, are reasonably necessary for the health and safety of the occupants of the Project, or are made to the Building by Landlord after the date of this Lease and are required under any governmental law or regulation, such costs or allocable portions thereof to be amortized over the estimated useful life of such improvement or asset as Landlord shall reasonably determine, together with interest on the unamortized balance at the “prime rate” charged at the time such improvements or capital assets are constructed or acquired by Bank of America, N. T. S. A. (San Francisco), plus two (2) percentage points, but in no event more than the maximum rate permitted by law.

(4) Services. All expenses relating to maintenance, janitorial and service agreements and services, and costs of supplies and equipment used in maintaining the Premises, Building and Project and the equipment therein and the adjacent sidewalks, driveways, parking and service areas, including, without limitation, alarm service, window cleaning, elevator maintenance, Building exterior maintenance and landscaping.

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(5) Utilities. Utilities which benefit all or a portion of the Premises, Building or Project.

(6) Management Fee. A management and accounting cost recovery fee equal to five percent (5%) of the sum of Base Rent and Basic Operating Cost.

(7) Legal and Accounting. Legal and accounting expenses relating to the Project, including the cost of audits by certified public accountants, excluding therefrom all such expenses directly resulting from Landlord’s breach of any other lease or agreement, unless such breach was caused in whole or part by the default of Tenant.

In the event that the Building is not fully occupied during any fiscal year during the Term as determined by Landlord, an adjustment shall be made in computing the Basic Operating Cost for such year so that Tenant pays an equitable portion of all variable items of Basic Operating Cost, as reasonably determined by Landlord. Basic Operating Cost shall not include specific costs incurred for the account of, separately billed to and paid by specific tenants. Notwithstanding anything herein to the contrary, in any instance wherein Landlord, in Landlord’s sole and reasonable discretion, deems Tenant to be responsible for any amounts greater than Tenant’s Proportionate Share, Landlord shall have the right to allocate costs in any manner Landlord deems appropriate.

B. Payment of Estimated Basic Operating Cost. “Estimated Basic Operating Cost” for any particular year shall mean Landlord’s estimate of the Basic Operating Cost for such fiscal year made prior to commencement of such fiscal year as hereinafter provided. Landlord shall have the right from time to time to revise its fiscal year and interim accounting periods so long as the periods as so revised are reconciled with prior periods in accordance with generally accepted accounting principles applied in a consistent manner. During the last month of each fiscal year during the Term, or as soon thereafter as practicable, Landlord shall give Tenant written notice of the Estimated Basic Operating Cost for the ensuing fiscal year. Tenant shall pay Tenant’s Proportionate Share of the Estimated Operating Cost with installments of Base Rent for the fiscal year to which the Estimated Basic Operating Cost applies in monthly installments on the first day of each calendar month during such year, in advance. If at any time during the course of the fiscal year, Landlord determines that Basic Operating Cost is projected to vary from the then Estimated Basic Operating Cost by more than ten percent (10%), Landlord may, by written notice to Tenant, revise the Estimated Basic Operating Cost for the balance of such fiscal year, and Tenant’s monthly installments for the remainder of such year shall be adjusted so that by the end of such fiscal year Tenant has paid to Landlord Tenant’s Proportionate Share of the revised Estimated Basic Operating Cost for such year.

C. Computation of Basic Operating Cost Adjustment. “Basic Operating Cost Adjustment” shall mean the difference between Estimated Basic Operating Cost and Basic Operating Cost for any fiscal year determined as hereinafter provided. Within one hundred twenty (120) days after the end of each fiscal year, as determined by Landlord, or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement of Basic Operating Cost for the fiscal year just ended, accompanied by a computation of Basic Operating Cost Adjustment. If such statement shows that Tenant’s payment based upon Estimated Basic Operating Cost is less than Tenant’s Proportionate Share of Basic Operating Cost, then Tenant shall pay to Landlord the difference within twenty (20) days after receipt of such statement. If such statement shows that Tenant’s payments of Estimated Basic Operating Cost exceed Tenant’s Proportionate Share of Basic Operating Cost, then (provided that Tenant is not in default under this Lease) Landlord shall pay to Tenant the difference within twenty (20) days after delivery of such statement to Tenant. If this Lease has been terminated or the Term hereof has expired prior to the date of such statement, then the Basic Operating Cost Adjustment shall be paid by the appropriate party within twenty (20) days after the date of delivery of the statement. Should this Lease commence or terminate at any time other than the first day of the fiscal year, Tenant’s Proportionate Share of the Basic Operating Cost adjustment shall be prorated by reference to the exact number of calendar days during such fiscal year that this Lease is in effect.

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	D. Net Lease. This shall be a net Lease and Base Rent shall be paid to Landlord absolutely net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Basic Operating Cost and the Basic Operating Cost Adjustment are intended to pass on to Tenant and reimburse Landlord for all costs and expense of the nature described in Paragraph 7.A. incurred in connection with the ownership, maintenance and operation of the Building or Project and such additional facilities now and in subsequent years as may be determined by Landlord to the be necessary to the Building or Project.
	E. Tenant Audit. In the event that Tenant shall dispute the amount set forth in any statement provided by Landlord under Paragraph 7.B or 7.C. above, Tenant shall have the right, not later than thirty (30) days following the receipt of such statement and upon the condition that Tenant shall first deposit with Landlord the full amount in dispute, to cause Landlord’s books and records with respect to Basic Operating Cost for such fiscal year to be audited by certified public accountants selected by Tenant and subject to Landlord’s reasonable right of approval. The Basic Operating Cost Adjustment shall be appropriately adjusted on the basis of such audit. If such audit discloses a liability for a refund in excess of ten percent (10%) of Tenant’s Proportionate Share of the Basic Operating Cost Adjustment previously reported, the cost of such audit shall be borne by Landlord; otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not request an audit in accordance with the provisions of this Paragraph 7.E. within thirty (30) days after receipt of Landlord’s statement provided pursuant to Paragraph 7.B. or 7.C., such statement shall be final and binding for all purposes hereof.
	F. Three Day Notice. In the event Tenant fails to pay Basic Operating Costs when due as Additional Rent, such failure shall constitute a default in the payment of Rent under Paragraph 26A(2) and Tenant shall be subject to the default provision of Article 26, which shall include Landlord’s right to serve a three (3) day notice to pay rent or quit on Tenant.
INSURANCE AND INDEMNIFICATION	8. A. Landlord’s Insurance. Landlord agrees to the extent reasonably available to maintain insurance insuring the Building against fire, lightning, vandalism and malicious mischief (including, if Landlord elects, “All Risk” coverage, earthquake, and/or flood insurance), in an amount not less than eight percent (80%) of the replacement cost thereof, with deductibles and the form and endorsements of such coverage as selected by Landlord. Such insurance may also include, at Landlord’s option, insurance against loss of Base Rent and Additional Rent, in an amount equal to the amount of Base Rent and Additional Rent payable by Tenant for a period of at least twelve (12) months commencing on the date of loss. Such insurance shall be for the sole benefit of Landlord and under Landlord’s sole control. Landlord shall not be obligated to insure any furniture, equipment, machinery, goods or supplies which Tenant may keep or maintain in the Premises, or any leasehold improvements, additions or alterations within the Premises (but Landlord shall be required to insure the Tenant Improvements described on Exhibit B hereto and any other alterations to the Premises made and paid for by Landlord). Landlord may also carry such other insurance as Landlord may deem prudent or advisable, including, without limitation, liability insurance in such amounts and on such terms as Landlord shall determine.
	B. Tenant’s Insurance.
	(1) Property Insurance. Tenant shall procure at Tenant’s sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term, insurance on all personal property and fixtures of Tenant and improvements made by or for Tenant to the Premises, insuring such property for the full replacement value of such property.
	(2) Liability Insurance. Tenant shall procure at Tenant’s sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term either Comprehensive General Liability Insurance or Commercial General Liability insurance applying to the use and occupancy of the Premises and the Building, and any part of either, and any areas adjacent thereto, and the business operated by Tenant, or by

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any other occupant on the Premises. Such insurance shall include Broad Form Contractual Liability insurance coverage insuring all of Tenant’s indemnity obligations under this Lease. Such coverage shall have a minimum combined single limit of liability of at least One Million Dollars ($1,000,000.00), and a general aggregate limit of Two Million Dollars ($2,000,000.00) loss, personal injury and other covered loss, however occasioned, occurring during the policy term, shall be endorsed to add Landlord and any party holding an interest to which this Lease may be subordinated as an additional insured (provided written notice of the name of such party(ies) has been given to Tenant), and shall provide that such coverage shall be primary and that any insurance maintained by Landlord shall be excess insurance only. Such coverage shall also contain endorsements: (i) deleting any employee exclusion on personal injury coverage; (ii) including employees as additional insureds; and (iii) providing for coverage of employer’s automobile non-ownership liability. All such insurance shall provide for severability of interests; shall provide that an act or omission of one of the named insureds shall not reduce or avoid coverage to the other named insureds; and shall afford coverage for all claims based on acts, omissions, injury and damage, which claims occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period. Said coverage shall be written on an “occurrence” basis, if available. If an “occurrence” basis form is not available, Tenant must purchase “tail” coverage for the most number of years available, and tenant must also purchase “tail” coverage if the retroactive date of an “occurrence” basis form is changed so as to leave a gap in coverage for Occurrences that might have occurred in prior years. If a “claims made” policy is ever used, the policy must be endorsed so that Landlord is given the right to purchase “tail” coverage should Tenant for any reason not do so or if the policy is to be canceled for nonpayment of premium.

(3) General Insurance Requirements. All coverages described in this Paragraph 8.B. shall be endorsed to provide Landlord with thirty (30) days’ notice of cancellation or change in terms. If at any time during the Term the amount or coverage of insurance which Tenant is required to carry under this Paragraph 8.B. is, in Landlord’s reasonable judgment, materially less than the amount or type of insurance coverage typically carried by owners or tenants of properties located in the general area in which the Premises are located which are similar to and operated for similar purposes as the Premises, Landlord shall have the right to require Tenant to increase the amount or change the types of insurance coverage required under this Paragraph 8.B. All insurance policies required to be carried under this Lease shall be written by companies rated A+XII or better in “Best’s Insurance Guide” and authorized to do business in California. Deductible amounts under any insurance policies required hereunder shall not exceed Five Thousand Dollars ($5,000.00). Tenant shall deliver to Landlord on or before the Term Commencement Date, and thereafter at least thirty (30) days before the expiration dates of the expiring policies, certified copies of Tenant’s insurance policies, or a certificate evidencing the same issued by the insurer thereunder, showing that all premiums have been paid for the full policy period; and, in the event Tenant shall fail to procure such insurance, or to deliver such policies or certificates, Landlord may, at Landlord’s option and in addition to Landlord’s other remedies in the event of a default by Tenant hereunder, procure the same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent.

C. Indemnification. Landlord shall not be liable to Tenant for any loss or damage to person or property caused by theft, fire, acts of God, acts of a public enemy, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority or for any damage or inconvenience which may arise through repair or alteration of any part of the Building or Project or failure to make any such repair, except as expressly otherwise provided in Paragraph 10. Tenant shall indemnify, defend by counsel acceptable to Landlord, protect and hold Landlord, its members, managers, directors, officers, employees, attorneys, agents, successors, assigns and lenders harmless from and against any and all liabilities, losses, costs, damages, injuries or expenses, including reasonable attorneys’ fees, experts’ fees and court costs, arising out of or related to: (1) claims of injury to or death of persons or damage to property, including the person and property of Landlord, its members, managers, directors, officers, employees, agents,

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	occurring or resulting directly or indirectly from the use or occupancy of the Premises, or from any activities of Tenant, Tenant Parties or anyone in or about the Premises or Project, or from any cause whatsoever; including but not limited to claims of Petroleum Products and Hazardous Material contamination on site (except those claims caused solely by willful acts or omissions of Landlord or environmental conditions pre-existing Tenant’s tenancy); and (2) claims for work or labor performed, or for materials or supplies furnished to or at the request of Tenant in connection with performance of any work done for the account of Tenant in the performance of any covenant contained in this Lease. The foregoing indemnity shall not be applicable to claims arising from the active negligence or willful misconduct of Landlord or its agents or employees. The provisions of this Paragraph 8.C. shall survive the expiration or termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination.
WAIVER OF SUBROGATION	9. To the extent permitted by law and without affecting the coverage provided by insurance to be maintained hereunder, Landlord and Tenant each waive any right to recover against the other for: (a) damages for injury to or death of persons; (b) damages to property; (c) damages to the Premises or any part thereof, and (d) claims arising by reason of the foregoing due to hazards covered by insurance to the extent of proceeds recovered therefrom. This provision is intended to waive fully, and for the benefit of each party, any rights and/or claims which might give rise to a right of subrogation in favor of any insurance carrier. The coverage obtained by each party pursuant to this Lease shall include, without limitation, a waiver of subrogation by the carrier which conforms to the provisions of this paragraph.
LANDLORD’S REPAIRS AND SERVICES	10. Landlord shall at Landlord’s expense maintain the structural soundness of the structural beams of the roof, foundations and exterior walls of the Building in good repair, reasonable wear and tear excepted. The term “exterior walls” as used herein shall not include windows, glass or plate glass, doors, special store fronts or office entries. Landlord shall perform on behalf of Tenant and other tenants of the Project, as an item of Basic Operating Cost, the maintenance of the Building, Project, and public and common areas of the Project, including but not limited to the roof, pest extermination, the landscaped areas, parking areas, driveways, the truck staging areas, rail spur areas, fire sprinkler systems, sanitary and storm sewer lines, utility services, electric and telephone equipment servicing the Building(s) exterior lighting, and anything which affects the operation and exterior appearance of the Project, which determination shall be at Landlord’s sole and reasonable discretion. Except for the expenses directly involving the items specifically described in the first sentence of this Paragraph 10, Tenant shall reimburse Landlord for all costs in accordance with Paragraph 7. Any damage caused by or repairs necessitated by any act of Tenant may be repaired by Landlord at Landlord’s option and at Tenant’s expense. Tenant shall immediately give Landlord written notice of any defect or need of repairs after which Landlord shall have a reasonable opportunity to repair same. Except to the extent of any liability arising from the active negligence or willful misconduct or Landlord, or its agents or employees, Landlord’s liability with respect to any defects, repairs, or maintenance for which Landlord is responsible under any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance.
TENANT’S REPAIRS	11. Tenant shall at Tenant’s expense maintain all parts of the Premises in a good clean and secure condition and promptly make all necessary repairs and replacements, including but not limited to all windows, glass, doors, walls and wall finishes, floor covering, truck doors, dock bumpers, dock plates and levelers, plumbing work and fixtures, electrical and lighting systems, and fire sprinklers. Tenant shall at Tenant’s expense also perform regular removal of trash and debris. Tenant shall, at Tenant’s own expense: (a) enter into a regular janitorial maintenance contract for the cleaning and maintenance of the Premises; and (b) enter into a regularly scheduled preventative maintenance and service contract with a maintenance contractor for servicing all hot water, heating and air conditioning systems and equipment within or serving the Premises. The janitor and the maintenance contractor and all contracts must be approved by Landlord. The service contract must include all services suggested by the equipment manufacturer within the

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operation/maintenance manual and must become effective and a copy thereof delivered to Landlord within thirty (30) days after the Term Commencement Date. Tenant shall not damage any demising wall or disturb the integrity and support provided by any demising wall and shall, at its own expense, immediately repair any damage to any demising wall caused by Tenant or Tenant’s Parties.

ALTERATIONS

12. Tenant shall not make, or allow to be made, any alterations, physical additions or improvements (“Tenant Owned Improvements”) in, about or to the Premises without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld with respect to proposed Tenant Owned Improvements which: (a) comply with all applicable laws, ordinances, rules and regulations; (b) are in Landlord’s opinion compatible with the Project and its mechanical, plumbing, electrical, heating/ventilation/air conditioning systems; and (c) will not interfere with the use and occupancy of any other portion of the Building or Project by any other tenant or its invitees. Specifically, but without limiting the generality of the foregoing, Landlord shall have the right of written consent for all plans and specifications for all proposed Tenant Owned Improvements, construction means and methods, all appropriate permits and licenses, any contractor or subcontractor to be employed on the work of Tenant Owned Improvements, and the time for performance of such work. Tenant shall also supply to Landlord any documents and information reasonably requested by Landlord in connection with Landlord’s consideration of a request for approval hereunder. Tenant shall reimburse Landlord for all costs which Landlord may incur in connection with the granting approval to Tenant for any such alterations and additions, including any costs or expenses which Landlord may incur in electing to have outside architects and engineers review said plans and specifications. Subject to Landlord’s rights to require their removal, approve their removal or become owner thereof, as set forth below, all Tenant Owned Improvements shall be the property of Tenant, but considered part of the Premises. Landlord may, at any time and at its option, elect in writing to Tenant to be the owner of all or any specified part of the Tenant Owned Improvements. Unless otherwise instructed to remove the Tenant Owned Improvements, upon expiration or sooner termination of this Lease, all of the Tenant Owned Improvements shall become the property of Landlord. During the Term of the Lease, including any extension or renewal thereof, Tenant shall not remove any Tenant Owned Improvements unless such removal is necessary for Tenant to make new alterations or physical additions, or install new improvements that do not diminish the value of the Premises, the Building or the Project as compared to the value of the Premises, the Building or the Project with the existing Tenant Owned Improvements, and in any event Tenant obtains the prior the prior written approval of Landlord which approval shall be made or withheld in Landlord’s sole and absolute discretion. Landlord may, at Landlord’s option, require that Tenant, at Tenant’s expense, remove any or all Tenant Owned Improvements and restore the Premises by the expiration or sooner termination of this Lease to their condition existing prior to the construction of any such Tenant Owned Improvements, reasonable wear and tear excepted. All such removals and restoration shall be accomplished in a good and workmanlike manner so as not to cause any damage to the Premises or Project whatsoever. If Tenant fails to so remove such Tenant Owned Improvements or Tenant’s trade fixtures or furniture, Landlord may keep and use them or remove any of them and cause them to be stored or sold in accordance with applicable law, at Tenant’s sole expense. In addition to and wholly apart from Tenant’s obligations to pay Tenant’s Proportionate Share of Basic Operating Cost, Tenant shall be responsible for and shall pay prior to delinquency any taxes or governmental service fees, posessory interest taxes, fees or charges in lieu of any such taxes, capital levies, or other charges imposed upon, levied with respect to or assessed against its personal property, on the value of the alterations, additions or improvements within the Premises, and on Tenant’s interest pursuant to this Lease. To the extent that any such taxes are not separately assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by Landlord. Tenant, at its own cost and expense and without Landlord’s prior approval, may erect such shelves, bins, machinery, non-structural alterations not in excess of Five Thousand Dollars ($5,000.00) in any one instance, and trade fixtures (collectively “Trade Fixtures”)

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	in the ordinary course of its business provided that such do not alter the basic character of the Premises, do not overload or damage the Premises, and may be removed without injury to the Premises, and the construction, erection, and installation thereof complies with all Legal Requirements and with Landlord’s requirements set forth above. Tenant shall remove its Trade Fixtures and shall repair any damage caused by such removal.
SIGNS	13. All signs, notices and graphics of every kind or character, visible in or from public view or corridors, the common areas or the exterior of the Premises, shall be subject to Landlord’s prior written approval. Tenant shall not place or maintain any banners whatsoever or any window decor in or on any exterior window or window fronting upon any common areas or service area or upon any truck door or man doors without Landlord’s prior written approval. Any installation of signs or graphics on or about the Premises and Project shall be subject to any applicable governmental laws, ordinances, regulations and to any other requirements imposed by Landlord. Tenant shall remove all such signs and graphics prior to the termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury or defacement of the Premises, Building or Project and any other impairment or discoloration caused by such installation or removal. Notwithstanding the above, Landlord shall allow Tenant to install, at Tenant’s sole cost and expense, building signage subject to approval of Landlord and, if and to the extent required, the City of San Carlos and consistent with the San Carlos Business Park Signage Program as set forth in Exhibit C to the Lease, attached hereto.
INSPECTION/POSTING NOTICES	14. After reasonable notice, which shall usually be twenty four (24) hours, except in emergencies where no such notice shall be required, Landlord, and landlord’s agents and representatives, shall have the right to enter the Premises to inspect the same, to clean, to perform such work as may be permitted or required hereunder, to make repairs or alterations to the Premises or Project or to other tenant spaces therein, to deal with emergencies, to post such notices as may be required by law to prevent the perfection of liens against Landlord’s interest in the Project or to exhibit the Premises to prospective tenants, purchasers, encumbrancers or others, or for any other purpose as Landlord may deem necessary or desirable; provided, however, that Landlord shall use reasonable efforts not to unreasonably interfere with Tenant’s business operations, and shall, to the extent that it does not interfere with any right of Landlord hereunder, be accompanied by a representative of Tenant and comply with Tenant’s reasonable security measures. Tenant shall rot be entitled to any abatement of Rent by reason of the exercise of any such right of entry. At any time within six (6) months prior to the end of the Term, Landlord shall have the right to erect on the Premises and/or Project a suitable sign indicating that the Premises are available for lease. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Premises and shall meet with Landlord for joint inspection of the Premises at the time of vacating. In the event of Tenant’s failure to give such notice or participate in such joint inspection, Landlord’s inspection at or after Tenant’s vacating the Premises shall conclusively be deemed correct for purposes of determining Tenant’s responsibility for repairs and restoration.
UTILITIES	15. Except to the extent such are payable as a Basic Operating Cost under Paragraph 7, Tenant shall pay directly for all water, gas, heat, air conditioning, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto, and maintenance charges for utilities and shall furnish all electric light bulbs, ballasts and tubes. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion, as determined by Landlord, of all charges jointly serving other premises. Landlord shall not be liable for any damages directly or indirectly resulting from nor shall the Rent or any monies owed Landlord under this Lease herein reserved be abated by reason of: (a) the installation, use or interruption of use of any equipment used in connection with the furnishing of any such utilities or services; (b) the failure to furnish or delay in furnishing any such utilities or services when such failure or delay is caused by acts of God or the elements, labor disturbances of any character, or any other accidents or other conditions beyond the reasonable control of Landlord; or (c) the limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of

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	energy or any other service or utility whatsoever serving the Premises or the Project. Landlord shall be entitled to cooperate voluntarily and in a reasonable manner with efforts of national, state or local governmental agencies or utility supplies in reducing energy or other resource consumption. The obligation to make services available hereunder shall be subject to the limitations of any such voluntary, reasonable program.
SUBORDINATION	16. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, the Tenant shall be subject and subordinate at all times to: (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises and/or the land upon which the Premises and Project are situated, or both; and (b) any, mortgage or deed of trust which may now exist or be placed upon said Project, land, ground leases or underlying leases, or Landlord’s interest or estate in any said items which is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord at the option of such successor in interest Within ten (10) days after request by Landlord, Tenant shall execute and deliver any additional documents evidencing Tenant’s attornment or the subordination of this Lease with respect to any such ground leases or underlying leases or any such mortgage or deed of trust, in the form requested by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of trust.
FINANCIAL STATEMENTS	17. At the request of Landlord, but not more than once a year unless in conjunction with a possible sale or financing of the Project, Tenant shall provide to Landlord Tenant’s current financial statement or other information discussing financial worth of Tenant, which Landlord shall use solely for purposes of this Lease and in connection with the ownership, management and disposition of the Project, and which Landlord shall hold in confidence.
ESTOPPEL CERTIFICATE	18. Tenant agrees from time to time within ten (10) days after request of Landlord, to deliver to Landlord, or Landlord’s designee, an estoppel certificate stating that this Lease is in full force and effect, the date to which Rent has been paid, the unexpired portion of this Lease, and such other matters pertaining to this Lease as may be reasonably requested by landlord. Failure by Tenant to execute and deliver such certificate shall constitute an acceptance of the Premises and acknowledgment by Tenant that the statements included are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this Paragraph may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Project or any interest therein. The parties agree that Tenant’s obligation to furnish such estoppel certificates in a timely fashion is a material inducement for Landlord’s execution of the Lease, and shall be an event of default if Tenant fails to fully comply. Tenant shall indemnify Lessor for any loss caused by Tenant’s failure to timely execute an estoppel certificate, including consequential damages such as loss of financing or refinancing or loss of a potential sale of the Property, all of which events are deemed foreseeable by the parties to this Lease.
SECURITY DEPOSIT	19. Tenant agrees to deposit with Landlord upon execution of this Lease, a Security Deposit as stated in the Basic Lease Information and subject to the terms as stated therein, which sum shall be held by Landlord, without obligation for interest, as security for the performance of Tenant’s covenants and obligations under this Lease, except as stated in the Basic Lease Information. The Security Deposit is not an advance rental deposit or a measure of damages incurred by Landlord in case of Tenant’s default. Upon the occurrence of any event of default by Tenant, landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such fund to the extent necessary to make good any arrears of Rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default, and Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the Security Deposit to its original amount. Although the Security Deposit shall

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	be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this Lease that all of Tenant’s obligations under this Lease have been fulfilled. Landlord may use and commingle the Security Deposit with other funds of Landlord.
TENANT’S REMEDIES	20. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease are not personal obligations of the individual or other partners, directors, officers and, shareholders of Landlord, and Tenant agrees to look solely to Landlord’s interest in the Project for the recovery of any amount from Landlord, and shall not look to other assets of Landlord nor seek recourse against the assets of the individual or other partner, directors, officers and shareholders of Landlord. Any lien obtained to enforce any such judgment and any levy of execution thereon shall be subject and subordinate to any lien, mortgage or deed of trust on the Project.
ASSIGNMENT AND SUBLETTING	21. A. General. Tenant shall not assign this Lease, except as described below. Tenant shall not sublet the Premises or any part thereof without Landlord’s prior written approval except as provided herein. If Tenant desires to sublet any or all of the Premises, Tenant shall give Landlord written notice forty five (45) days prior to the anticipated effective date of the sublease. Landlord shall then have a period of twenty (20) days following receipt of such notice to notify Tenant in writing that Landlord elects either: (1) to terminate this Lease as to the space so affected as of the date so requested by Tenant; or (2) to permit Tenant to sublet such space, subject, however, to Landlord’s prior written approval of the proposed subtenant and of any related documents or agreements associated with the sublease. Should Landlord fail to notify Tenant in writing of such election within said period, Landlord shall be deemed to have waived option (1) above, but written approval by Landlord of the proposed subtenant shall be still required. If Landlord does not exercise option (1) above, Landlord’s consent to a proposed sublease shall not be unreasonably withheld, conditioned or delayed. In the event that landlord does not exercise option (1) above, then Landlord shall then have a period of thirty (30) days after receiving the proposed documents associated with the proposed sublease to notify Tenant in writing whether Landlord approves of the proposed subtenant and of any related documents or agreements associated with the assignment or sublease. Landlord’s consent shall not be required for an assignment by Tenant to any wholly owned subsidiaries or commonly owned affiliates of Tenant; provided the proposed use of the Premises by such subsidiary or affiliate is conducive to the San Carlos Business Park. Without limiting the other instances in which it may be reasonable for Landlord to withhold Landlord’s consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold Landlord’s consent in the following instances: the use of the Premises by such proposed assignee or subtenant would not be a permitted use or would increase the Parking Density of the Project; the proposed assignee or subtenant is not of sound financial condition; the proposed assignee or subtenant is a governmental agency; the proposed assignee or subtenant does not have a good reputation as a tenant of property; the proposed assignee or subtenant is a person with whom Landlord is negotiating to lease space in the Project; the assignment or subletting would entail any alterations which would lessen the value of the leasehold improvements in the Premises; or if Tenant is in default of any monetary or material non-monetary obligation of Tenant under this Lease, or Tenant has defaulted under this Lease on three (3) or more occasions during any twelve months preceding the date that Tenant shall request consent. Failure by Landlord to approve a proposed assignee or subtenant shall not cause a termination of this Lease. Upon a termination under this Paragraph 21.A., Landlord may lease the Premise to any party, including parties with whom Tenant has negotiated an assignment or sublease, without incurring any liability to Tenant.
	B. Bonus Rent. Any Rent or other consideration realized by Tenant under any such sublease or assignment in excess of the Rent payable hereunder, after amortization of a reasonable brokerage commission shall be divided and paid, ten percent (10%) to Tenant, ninety percent (90%) to Landlord, after deducing Tenant’s costs. Such deducted costs shall be limited to brokerage commissions paid by Tenant and the costs paid by

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	Tenant for Landlord-approved Tenant Improvements. In any subletting or assignment undertaken by Tenant, Tenant shall diligently seek to obtain the maximum rental amount available in the marketplace for such subletting or assignment.
	C. Corporation. If Tenant is a corporation, a transfer of corporation shares by sale, assignment, bequest, inheritance, operation of law or other disposition (including such a transfer to or by a receiver or trustee in federal or state bankruptcy, insolvency or other proceedings), so as to result in a change in the present management control of such corporation or any of its parent corporations by the person or persons owning a majority of said corporate shares, shall constitute an assignment for purposes of this Lease.
	D. Partnership. If Tenant is a partnership, joint venture or other incorporated business form, a transfer of the interest or persons, firms or entities responsible for managerial control of Tenant by sale, assignment, bequest, inheritance, operation of law or other disposition, so as to result in a change in the present control of said entity and/or a change in the identity of the persons responsible for the general credit obligations of said entity shall constitute as assignment for all purposes of this Lease.
	E. Liability. No Assignment or subletting by Tenant shall relieve Tenant of any obligation under this Lease. Any assignment or subletting which conflicts with the provisions hereof shall be void.
AUTHORITY OF PARTIES	22. Landlord represents and warrants that it has full right and authority to enter into this Lease and to perform all of Landlord’s obligations hereunder. Tenant represents and warrants that it has full right and authority to enter into this Lease and to perform all of Tenant’s obligations hereunder.
CONDEMNATION	23. A. Condemnation Resulting in Termination. If the whole or any substantial part of the Project of which the Premises are a part should be taken or condemned for any public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking would prevent or materially interfere with the Permitted Use of the Premises, this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Premises shall have occurred.
	B. Condemnation Not Resulting in Termination. If a portion of the Project of which the Premises are a part should be taken or condemned for any public use under any governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this Lease is not terminated as provided in Paragraph 23.A., above, this Lease shall not terminate, but the Rent payable hereunder during the unexpired portion of the Lease shall be reduced, beginning on the date when the physical taking shall have occurred, to such amount as may be fair and reasonable under all of the circumstances.
	C. Award. Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance and Tenant shall have no claim against Landlord or otherwise for the value of any unexpired portion of this Lease. Notwithstanding the foregoing, any compensation specifically awarded Tenant for loss of business, Tenant’s personal property, moving costs or loss of goodwill, shall be and remain the property of Tenant.
CASUALTY DAMAGE	24. A. General. If the Premises or Building should be damaged or destroyed by fire, tornado or other casualty, Tenant shall give immediate written notice thereof to Landlord. Within thirty (30) days after Landlord’s receipt of such notice, Landlord shall notify Tenant whether in Landlord’s opinion such repairs can reasonably be made either: (1) within ninety (90) days; (2) in more than ninety (90) days but in less than one hundred eighty (180) days; or (3) in more than one hundred eighty (180) days from the date of such notice. Landlord’s determination shall be binding on Tenant.
	B. Less Than 90 Days. If the Premises or Building should be damaged by fire, tornado or other casualty but only to such extent that rebuilding or repairs can in Landlord’s estimation be reasonably completed within ninety (90) days after the date of

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such damage, this Lease shall not terminate, and provided that insurance proceeds are available to fully repair the damage, Landlord shall proceed to rebuild and repair the Premises to substantially or equivalently the same condition they were in prior to the occurrence of the casualty but in the manner determined by Landlord, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures additions and other leasehold improvements which may have been placed in, on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent of rental abatement insurance proceeds received by Landlord during the time and to the extent the Premises are unfit for occupancy.

C. Greater than 90 Days. If the Premises or Building should be damaged by fire, tornado or other casualty but only to such extent that rebuilding or repairs can in Landlord’s estimation be reasonably completed in more then ninety (90) days but in less than one hundred eighty (180) days, then Landlord shall have the option of either: (1) terminating the Lease effective upon the date of the occurrence of such damage, in which event the Rent shall be abated during the unexpired portion of the Lease; or (2) electing to rebuild or repair the Premises to substantially the condition in which they existed prior to such damage, provided that insurance proceeds are available, to fully repair the damage, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in, on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent of rental abatement insurance proceeds received by Landlord during the time and to the extent the Premises are unfit for occupancy. In the event that Landlord should fail to complete such repairs and rebuilding within one hundred eighty (180) days after the date upon which Landlord is notified by Tenant of such damage, such period of time to be extended for delays caused by the fault or neglect of Tenant or because of acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain materials, supplies or fuels, or delays of the contractors or subcontractors or any other causes or contingencies beyond the reasonable control of Landlord, provided however that in no event shall any such delay exceed more than one (1) year from the date of such damage. Tenant may at Tenant’s option within ten (10) days after the expiration of such one hundred eighty (180) day period (as such may be extended), terminate this Lease by delivering written notice of termination to Landlord as Tenant’s exclusive remedy, whereupon all rights hereunder shall cease mid terminate thirty (30) days after Landlord’s receipt of such termination notice.

D. Greater Than 180 Days. If the Premises or Building should be so damaged by fire, tornado or other casualty that rebuilding or repairs cannot in Landlord’s estimation be completed within one hundred eighty (180) days after such damage, Tenant shall have the right within ten (10) days after its receipt of notice of same from Landlord (which notice shall be given to Tenant not later than ninety (90) days after the occurrence of the damage), to terminate this Lease, whereupon this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective upon the date of the occurrence of such damage.

E. Tenant’s Fault. If the Premises or any other portion of the Building are damaged by fire or other casualty resulting from the fault, negligence, or breech of this Lease by Tenant or any of Tenant’s Parties, Base Rent and Additional Rent shall not be diminished during the repair of such damage and Tenant shall be liable to Landlord for the cost and expense of the repair and restoration of the Building caused thereby to the extent such cost and expense is not covered by insurance proceeds.

F. Uninsured Casualty. Notwithstanding anything herein to the contrary, in the event that the Premises or Building are damaged or destroyed and are not fully covered by the Insurance proceeds received by Landlord or in the event that the holder of any indebtedness secured by mortgage or deed of trust covering the Premises requires that the

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	insurance proceeds be applied to such indebtedness, then in either case Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within thirty (30) days after the date of notice to Landlord that said damage or destruction is not fully covered by insurance or such requirement is made by any such holder, as the case may be, whereupon all rights and obligations hereunder shall cease and terminate, unless within ten (10) days thereafter, Tenant notifies Landlord in writing that Tenant will pay for the cost of any such deficiency in excess the replacement cost of the Building, in which case, upon Tenant’s deposit with Landlord of sufficient funds to cover the anticipated deficiency, Landlord shall be obligated to keep the Lease in full force and effect and repair such damage.
	G. Waiver. Except as otherwise provided in this Paragraph 24, Tenant hereby waives the provisions of Sections 1932(a), 1933(4), 1941 and 1942 of the Civil Code of California.
HOLDING OVER	25. If Tenant shall retain possession of the Premises or any portion thereof without Landlord’s consent following the expiration of the Lease or sooner termination for any reason, that Tenant shall pay to Landlord the fair market rent for the Premises for the first ninety (90) days of such retention, and thereafter, shall pay to Landlord for each day of such retention twice the amount of the daily rental as of the last month prior to the date of expiration or termination. Tenant shall also indemnify, defend, protect and hold Landlord harmless from any loss, liability or cost, including reasonable attorneys’ fees, resulting form delay by Tenant in surrendering the Premises, including, without limitation, any claims made by any succeeding tenant founded on such delay. Acceptance of Rent by Landlord following expiration or termination shall not constitute a renewal of this Lease, and nothing contained in this Paragraph 25 shall waive Landlord’s right or reentry or any other right Unless Landlord consents in writing to Tenant’s holding over, Tenant shall be only a Tenant at sufferance, whether or not Landlord accepts any Rent from Tenant while Tenant is holding over without Landlord’s written consent. Additionally, in the event that upon termination of the Lease, Tenant has not fulfilled its obligation with respect to repairs and cleanup of the Premises or any other Tenant obligations as set forth in this Lease, then Landlord shall have the right to perform any such obligations as it deems necessary at Tenant’s sole cost and expense.
DEFAULT	26. A. Events of Default. The occurrence of any of the following shall constitute an event of default on the part of Tenant:
	(1) Abandonment. Abandonment of the Premises for a continuous period in excess of five (5) days. Tenant waives any right to notice Tenant may have under Section 1951.3 of the Civil Code of the State of California, the terms of this Paragraph 26.A being deemed such notice to Tenant as required by said Section 1951.3.
	(2) Nonpayment of Rent. Failure to pay any installment of Rent or any other amount due and payable hereunder within ten (10) days of the date when said payment is due.
	(3) Prohibited Use. Use of the Premises for any Prohibited Use as defined in Section 4.B. or other breach by Tenant of any Section 4 obligation.
	(4) Other Obligations. Failure to perform any obligation, agreement or covenant under this Lease other than those matters specified in subParagraphs (1) and (2) of this Paragraph 26.A., such failure continuing for thirty (30) days after written notice of such failure.
	(5) General Assignment. A general assignment by Tenant for the benefit of creditors.

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(6) Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant, or the filing of an involuntary petition by Tenant’s creditors, which involuntary petition remains undischarged for a period of thirty (30) days. In the event that under applicable law the trustee in bankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of the affirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenant’s obligations under this Lease.

(7) Receivership. The employment of a receiver to take possession of substantially all of Tenant’s assets or the Premises, if such appointment remains undismissed or undischarged for a period of ten (10) days after the order therefor.

(8) Attachment. The attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of ten (10) days after the levy thereof.

(9) Other Acts or Omissions. Any other acts or omissions by Tenant as described in this Lease.

B. Remedies Upon Default.

(1) Termination. In the event of the occurrence of any event of default, Landlord shall have the right to give a written termination notice to Tenant, and on the date specified in such notice, Tenant’s right to possession shall terminate, and this Lease shall terminate unless on or before such date all arrears of rental and all other sums payable by Tenant under this Lease and all costs and expenses incurred by or on behalf of Landlord hereunder shall have been paid by Tenant and all other events of default of this Lease by Tenant at the time existing shall have been fully remedied to the satisfaction of Landlord. At any time after such termination, Landlord may recover possession of the Premises or any part thereof and expel and remove therefrom Tenant and any other person occupying the same of, by any lawful means, and again repossess and enjoy the Premises without prejudice to any of the remedies that Landlord may have under this Lease, or at law or equity by reason of Tenant’s default or of such termination.

(2) Termination for Prohibited Use. The foregoing notwithstanding, if Tenant defaults by engaging in activities which constitute a Prohibited Use under Section 4B, Landlord shall have the right to terminate this Lease upon written notice and Tenant shall have thirty (30) days to vacate the Premises after receipt of such termination notice.

(3) Continuation After Default. Even though an event of default may have occurred, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession under Paragraph 26.B hereof, and Landlord may enforce all of Landlord’s rights and remedies under this Lease, including without limitation, the right to recover Rent as it becomes due, and Landlord, without terminating this Lease may exercise all of the rights and remedies of a Landlord under Section 1951.4 of the Civil Code of the State of California or any successor code section. Acts of maintenance, preservation or efforts for lease the Premises or the appointment of a receiver upon application of Landlord to protect Landlord’s interest under this Lease shall not constitute an election to terminate Tenant’s right to possession.

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	C. Damages After Default. Should Landlord terminate this Lease pursuant to the provisions of Paragraph 26.B hereof, Landlord shall have the rights and remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State of California, or successor code sections. Upon such termination, in addition to any other rights and remedies to which Landlord may be entitled under applicable law, Landlord shall be entitled to recover from Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination, (2) the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided; and (4) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which, in the ordinary course of things, would be likely to result thereform. The “worth at the time of award” of the amounts referred to in (1) and (2) above shall be computed by allowing interest at the Applicable Interest Rate (as set forth in the Basic Lease Information). The “worth at the time of award” of the amount referred to in (3) above shall be computed by discounting such amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). If this Lease provides for any periods during the Term during which Tenant is not required to pay Base Rent or if Tenant otherwise receives a Rent concession, then upon the occurrence of an event of default, Tenant shall owe to Landlord the full amount of such Base Rent or value of such Rent concession, plus interest at the Applicable Interest Rate, calculated from the date that such Base Rent or Rent concession would have been payable.
	D. Late Charge. If any installment of Rent is not paid within five (5) working days of the date when due, such amount shall bear interest at the Applicable Interest Rate from the date on which said payment shall be due until the date on which Landlord shall receive said payment. In addition, Tenant shall pay Landlord a late charge equal to five percent (5%) of the delinquency, to compensate Landlord for the loss of the use of the amount not paid and the administrative costs caused by the delinquency, the parties agreeing that Landlord’s damage by virtue of such delinquencies would be difficult to compute and the amount stated herein represents a reasonable estimate thereof. This provision shall not relieve Tenant of Tenant’s obligation to pay Rest at the time and in the manner herein specified.
	E. Remedies Cumulative. All rights, privileges and elections or remedies of the parties are cumulative and not alternative, to the extent permitted by law and except as otherwise provided herein.
LIENS	27. Tenant shall keep the Premises free from liens arising out of or related to work performed, materials or supplies furnished or obligation incurred by Tenant or in connection with work made, suffered or done by or on behalf of Tenant in or on the Premises or Project. In the event that Tenant shall not, within ten (10) days following the receipt by Tenant of notice of the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord on behalf of Tenant and all expenses incurred by Landlord in connection therefor shall be payable to Landlord by Tenant on demand with interest at the Applicable Interest Rate. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitting or required by law, or which Landlord shall deem proper, for the protection of Landlord, the Premises, the Project and any other party having an interest therein, from mechanics’ and materialmen’s liens, and Tenant shall give Landlord not less than ten (10) business days prior written notice of the commencement of any work in the Premises or Project which could lawfully give rise to a claim for mechanics’ or materialmen’s liens.

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TRANSFERS BY LANDLORD	28. In the event of a sale or conveyance by Landlord of the Building or a foreclosure by any creditor of landlord, the same shall operate to release Landlord from any liability upon any of the covenants, conditions or obligations, express or implied, herein contained in favor of Tenant, to the extent required to be performed after the passing of title to Landlord’s successor-in-interest. In such event, Tenant agrees to look solely to the responsibility of the successor-in-interest of Landlord under this Lease with respect to the performance of the covenants and duties of “Landlord” to be performed after the passing of title to Landlord’s successor-in-interest. This Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee, provided that Landlord shall be obligated to transfer Tenant’s Security Deposit to any such purchaser or assignee. Landlord’s successor(s)-in-interest shall not have liability to Tenant with respect to the failure to perform all of the obligations of “Landlord”, to the extent required to be performed prior to the date such successor(s)-in-interest became the owner of the Building.
RIGHT OF LANDLORD TO PERFORM TENANT’S COVENANTS	29. All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any of money, other than Base Rent and Basic Operating Cost, required to be paid by Tenant hereunder or shall fail to perform any other act on Tenant’s part to be performed hereunder, and such failure shall continue for five (5) days after notice thereof by Landlord, Landlord may, but shall not be obligated to do so, and without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such act on Tenant’s part to be made or performed. All sums, so paid by Landlord and all necessary incidental costs together with interest thereon at the Applicable Interest Rate from the date of such payment by Landlord shall be payable to Landlord on demand, and Tenant covenants to pay such sums, and Landlord shall have, in addition to any other right or remedy of Landlord, the same right and remedies in the event of the non-payment thereof by Tenant as in the case of default by Tenant in the payment of Base Rent and Basic Operating Cost.
WAIVER	30. If either Landlord or Tenant waives the performance of any Term, covenant or condition contained in this Lease, such waiver shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein. The acceptance of Rent by Landlord shall not constitute a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord’s knowledge of such preceding breach at the time Landlord accepted such Rent. Failure by Landlord or Tenant to enforce any of the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or to decrease the right to insist thereafter upon strict performance by the defaulting party. Waiver by Landlord or Tenant of any term, covenant or condition contained in this Lease may only be made by a written document signed by the waiving party.
NOTICES	31. Each provision of this Lease or of any applicable governmental laws, ordinances, regulations and other requirements with reference to sending, mailing or delivery of any notice or the making of any payment by Landlord or Tenant to the other shall be deemed to be compiled with when and if the following steps are taken:
	A. Rent. All Rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address act forth in the Basic Lease Information, or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant’s obligation to pay Rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until such Rent and other amounts have been actually received by Landlord.
	B. Other. All notices, demands, consents and approvals which may or are required to be given by either party to the other hereunder shall be in writing and either personally delivered, sent by commercial overnight courier, or mailed, certified or registered, postage prepaid, and addressed to the other party to be notified at the address for such party as specified in the Basic Lease Information or to such other place as the party to be notified may from time to time designate by at least fifteen (15) days notice to the notifying party.

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	Notices shall be deemed served upon receipt or refusal to accept delivery. Tenant appoints as its agent to receive the service of all default notices and notice of commencement of unlawful detainer proceedings the person in charge of or apparently in charge of occupying the Premises at the time, and, if there is no such person, then such service may be made by attaching the same on the main entrance of the Premises.
ATTORNEYS’ FEES	32. A. Approvals. Upon Tenant’s request for any approval from Landlord pursuant to the Lease, or in the event of any proposed modification of the terms of the Lease, Tenant shall pay all attorneys’ fees and costs incurred by Landlord in connection with any review of the Lease or other documents, or preparation of any documents in connection with such requested approval or proposed modification.
	B. Collection. In the event that Landlord places the enforcement of this Lease, or any part thereof, or the collection of any Rent due, or to become due hereunder, or recovery of possession of the Premises in the hands of an attorney, Tenant shall pay to Landlord, upon demand, Landlord’s reasonable attorneys’ fees and court costs.
	C. Litigation. In any action which Landlord or Tenant brings to enforce its respective rights hereunder, the unsuccessful party shall pay all costs incurred by the prevailing party including reasonable attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be a part of the judgment in said action.
SUCCESSORS AND ASSIGNS	33. This Lease shall be binding upon and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, its successors, and to the extent assignment is approved by Landlord hereunder, Tenant’s assigns. Landlord may transfer its obligations under this Lease to its successors in title, in which event Lessor shall be relieved of all obligations under this Lease and Tenant shall look solely to Landlord’s successor for performance of this Lease.
FORCE MAJEURE	34. Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of Landlord, provided, however, that the foregoing shall not extend the time at which Tenant shall be entitled to terminate this Lease or to an abatement of Rent pursuant to any express provisions set forth herein.
BROKERAGE COMMISSION	35. Landlord shall pay a brokerage commission to Broker in accordance with a separate agreement between Landlord and Broker. Tenant warrants to Landlord that Tenant’s sole contact with Landlord or with the Premises in connection with this transaction has been directly with Landlord and Broker, and that no other broker or finder can properly claim a right to a commission or a finder’s fee based upon contacts between the claimant and Tenant with respect to Landlord or the Premises. Tenant shall indemnify, defend by counsel acceptable to Landlord, protect and hold Landlord harmless from and against any loss, cost or expense, including, but not limited to attorneys’ fees and costs, resulting from any claim for a fee or commission by any broker or finder representing Tenant in connection with the Premises and this Lease other than Broker.
MISCELLANEOUS	36. A. General. The term “Tenant” or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their respective successors, executors, administrators and permitted assigns, according to the content hereof.
	B. Time. Time is of the essence regarding this Lease and all of its provisions.
	C. Choice of Law. This Lease shall in all respects be governed by the laws of the State of California.

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D. Entire Agreement. This Lease, together with its exhibits, contains all the agreements of the parties hereto and supersedes any previous negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its exhibits.

E. Modification. This Lease may not be modified except by a written instrument by the parties.

F. Severability. If, for any reason whatsoever, any of the provisions hereof shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and effect.

G. Recordation. Tenant shall not record this Lease or a short form memorandum hereof.

H. Examination of Lease. Submission of this Lease to Tenant does not constitute an option or offer to lease and this Lease is not effective otherwise until execution and delivery by both Landlord and Tenant.

I. Accord and Satisfaction. No payment by Tenant of a lesser amount than the Rent nor any endorsement on any check or letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction of full payment of Rent, and Landlord may accept such payment without prejudice to Landlord’s right to recover the balance of such Rent or to pursue other remedies.

J. Easements. Landlord may grant easements on the Project and dedicate for public use portions of the Project without Tenant’s consent, provided that no such grant or dedication shall materially interfere with Tenant’s access to or use of the Premises or Tenant’s parking rights. Upon Landlord’s demand, Tenant shall execute, acknowledge and deliver to Landlord documents, instruments, maps and plats necessary to effectuate Tenant’s covenants hereunder.

K. Drafting and Determination. The parties acknowledge that this Lease has been agreed to by both parties, that both Landlord and Tenant have consulted with attorneys with respect to the terms of this Lease and that no presumption shall be created against Landlord because Landlord drafted this Lease. Except as otherwise specifically set forth in this Lease, with respect to any consent, determination or estimation of Landlord required in this Lease or requested of Landlord, Landlord’s consent, determination or estimation shall be made in Landlord’s good faith opinion, whether objectively reasonable or unreasonable.

L. Exhibits. Exhibits A, B, C and D attached hereto are hereby incorporated herein by this reference.

M. No Light, Air or View Easement. Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to or in the vicinity of the Building shall in no way affect this Lease or impose any liability on Landlord.

N. No Third Party Benefit. This Lease is a contract between Landlord and Tenant and nothing herein is intended to create any third party benefit.

O. Security, Release and Indemnity. Tenant acknowledges and agrees that, while Landlord may elect to patrol the Project, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage to person or property suffered or incurred by Tenant, Tenant’s employees and invitees, including but not limited to, in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.

Tenant shall be responsible for provisions of security for its premises. Tenant shall defend, indemnify and hold Landlord harmless with respect to the Premises and any claims arising from or related to a purported breach of security or failure to provide security.

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CONDITION OF PREMISES/TENANT IMPROVEMENTS	37. Except as provided below in this Paragraph 37, there shall be no tenant improvements provided by Landlord, and Tenant accepts the Promises “As-Is” without any representation or warranty on the part of Landlord, except Landlord shall insure that the Premises and the building systems are in good working condition including but not limited to HVAC, electrical and plumbing, and all existing light fixtures shall be in good working order. The Tenant shall have the right to inspect the Premises to confirm that they are in good working condition prior to execution of the Lease.
	Landlord shall contribute a tenant improvement allowance of $4.00 per sq. ft. for the re-carpeting and re-painting of the Premises.
EARLY OCCUPANCY	38. To the extent described, and subject to the conditions in the Basic Lease Information, Tenant shall be allowed to occupy the Premises provided it pays Base Rent and Basic Operating Costs. Tenant shall perform all duties and obligations imposed by this Lease, including, but not limited to, those provisions relating to insurance and indemnification.
NO LIABILITY	39. Landlord shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Tenant, Tenant’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said injury or damages results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is accessible or not. Landlord shall not be liable for any damages arising from any act or neglect or any other Tenant of Landlord nor from the failure by Landlord to enforce the provisions of any other lease in the Project. Notwithstanding Landlord’s negligence or breach of this Lease, Landlord shall under no circumstances be liable for injury to Tenant’s business or for any loss of income or profit therefrom.
RENEWAL OPTION CONDITIONS	40. In the event that Landlord now or hereafter provides Tenant with any option to renew this Lease for any additional period after the expiration of the Term, Tenant shall not have the right to exercise such option if (a) Tenant is in default of any terms of the Lease at the time that Tenant’s right to exercise the option is in effect, (b) Tenant has been in default of any terms of the Lease three (3) or more times during the Term of the Lease, or (c) Tenant has assigned this Lease or sublet the Premises or any portion thereof with or without the consent of Landlord.

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IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written.

LANDLORD
THREE SISTERS RANCH ENTERPRISES LLC
BY:	/s/ Martin E. Ruberry
	Martin E. Ruberry
	General Manager
TENANT
ADVANCED ANALGESICS, INC.
BY:	/s/ illegible
	President

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SAN CARLOS BUSINESS PARK

EXHIBIT A

EXHIBIT B

(Site Plan Not to Scale)

969C Industrial Road

4,812 Square Feet

EXHIBIT C

Sign Criteria for San Carlos Business Park

Wall Signs

Tenant allowed one or two wall signs at discretion of landlord. Letters shall be manufactured by Gemini Incorporated, 1-800-538-8377. Letters to be 10” high, 1” deep injection molded plastic (“Minnesota Letters”), gloss black, Helvetica typeface, all capital letters, mounted with #2 pads, glued flush to wall. Company name only (no divisions, phone numbers, tag lines, etc.). Up to two lines allowed, justified either left or right margin based on nearest corner of building. If two lines, allow 5” space between lines. Conform to vertical placements used on existing signs.

Window Signs

Tenant allowed one window or door sign at main entrance. Sign shall be computer-cut white vinyl, placed on exterior of glass. Tenant may use door or window, but not both. Message may contain company name, logo, division, tag line, and up to three services provided, at discretion of tenant. No lettering to exceed 3” in height, no logo or trademark to exceed 6” in height. Total sign area not to exceed 16” high by 30” wide. Center all graphics 60” above ground level. Landlord to provide 4” high white address number at top of door, Helvetica Medium, 2” down from top of door.

Rear Door Signs

Tenant allowed one sign on rear man door. Sign shall be computer-cut black vinyl, placed on exterior of door. Text only, no logos allowed. Message may contain company name and shipping/receiving hours and information only, at discretion of tenant. Lettering to be Helvetica Medium, upper and lower case, 2” high, with 1” space between lines, centered. Up to four lines maximum allowed. Top line to be placed 2” below small window in door. Landlord to provide 4” high black address number at top of door, Helvetica Medium, 2” down from top of door.

Tenant Directory Monument Signs

Landlord shall provide lettering for tenant directory monument, at tenant’s expense. Tenant shall provide to landlord exact name that will be used on the appropriate sign. Name shall appear on both sides of one sign, as determined by landlord. Long company names may be edited or abbreviated as required to fit on the sign, subject to approval of tenant. Lettering shall be 3 5/8” high Univers Light Condensed, upper and lower case, white.

EXHIBIT D

All compounds are anticipated to be used in minute quantities within contained, enclosed systems.

1.      Volatile anesthetics (ie, halothane)

2.      Acids (ie, hydrochloric acid, sulfuric acid)

3.      Bases (ie, sodium hydroxide, potassium hydroxide)

EX-10.5.1

EXHIBIT 10.5.1

THREE SISTERS RANCH

ENTERPRISES LLC

First AMENDMENT

Original Premises: 969 Industrial Road, Suite C, San Carlos, California

New Premises: 981 Industrial Road, Suites D and F, San Carlos, California

THIS FIRST AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of December 10, 2001 (“Effective Date”), by and between THREE SISTERS RANCH ENTERPRISES, LLC, a California limited liability company (“Landlord”), and NEUROGESX, INC., a California corporation (“Tenant”) (Landlord and Tenant hereinafter may be referred to as the “Parties”), with respect to the following:

RECITALS

A. On or about August 11, 2000 Landlord and Tenant entered into a Lease Agreement (“Lease”), attached hereto as Exhibit A (the Lease and this Amendment may hereinafter be sometimes referred to in the aggregate as the “Lease”), respecting the premises at 969 Industrial Road, Suite C, San Carlos, California (the “Original Premises”).

B. Subsequent to the date on which Tenant and Landlord entered into the Lease, Tenant changed its name from Advanced Analgesics, Inc. to NeurogesX, Inc.

C. Tenant desires to move its operations from the Original Premises to a new location within the same Project at 981 Industrial Road, Suites D and F, San Carlos, California (the “Premises”).

D. The Parties hereby agree to amend the Lease to reflect the location change of Tenant.

E. The Parties hereby adopt the provisions of the Lease subject to this Amendment, which provides for certain modifications of the Lease in accordance with and subject to all the terms and conditions set forth herein.

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AGREEMENT

THEREFORE, IT IS HEREBY MUTUALLY AGREED by and between the Parties hereto as follows:

1. BUILDING DESCRIPTION. That approximately 23,200± square foot building known as 981 Industrial Road in San Carlos, California. The building is outlined in blue on Exhibit B.

2. PREMISES. That approximately 16,195± square feet of rentable area known as 981 Industrial Road, Suites D and F, San Carlos, California. The demised Premises are outlined in pink on Exhibit B and the Site Plan is attached hereto as Exhibit C.

3. PARKING DENSITY. Three (3) unreserved parking spaces per 1,000± sq.ft. of Rentable Area, up to a total of forty-nine (49) spaces.

4. ESTIMATED COMMENCEMENT DATE FOR NEW SPACE. The new space commencement date shall be upon substantial completion of Tenant Improvements, as provided in Section 12 hereto, to the Premises sufficient for occupancy, partial or complete, but in no event later than March 1, 2002 (“New Space Commencement Date”).

5. LENGTH OF NEW SPACE TERM. The term of the Lease shall be thirty-six (36) months from the New Space Commencement Date (“Term”).

6. TERMINATION OF EXISTING SPACE. Tenant shall, on or prior to the New Space Commencement Date, but in no event later than March 1, 2002, vacate and cease to occupy, in whole or in part, and shall remove all of its personal property from, the Original Premises. In the event Tenant fails to wholly vacate the Original Premises as provided above, Tenant’s obligations as to the Original Premises under the original Lease shall continue in full force and effect, including, but not limited to, all obligations of Tenant for payment of Rent for the Original Premises. Landlord may, at Landlord’s option, consider Tenant’s failure to vacate the Original Premises as provided herein, as a default under the terms of the original Lease. Upon the later of (i) the New Space Commencement Date or (ii) Tenant’s vacating of the Original Premises as provided herein or (iii) final inspection of the Original Premises by Landlord to its satisfaction, and Tenant’s delivery to Landlord of all Rent and any and all other funds and obligations due upon commencement of the New Space, Tenant’s obligations under Section 12 of the Original Lease, only with respect to the Original Premises, shall terminate.

7. BASE RENT. Base Rent provided below shall apply and be calculated based on the Term commencing on the New Space Commencement Date pursuant to Paragraph 4 and 5 above, as follows:

Months	1-12:	$	1.50/sq.ft/mo. NNN	=	$	24,292.50/mo.
Months	13-24:	$	1.55/sq.ft./mo. NNN	=	$	25,102.25/mo.
Months	25-36:	$	1.60/sq.ft./mo. NNN	=	$	25,912.00/mo.

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8. ESTIMATED FIRST YEAR BASIC OPERATING COST. The estimated first year basic operating cost for the first twelve(12) months of the new space lease is as follows:

$0.26/sq.ft./mo. = $4,210.70/mo. = $50,528.40/yr.

The operating cost for the balance of the Term shall be estimated and adjusted in accordance with the terms of the Lease.

9. TENANT’S PROPORTIONATE SHARE.

Of Building: 69.8% / Of Project: 13.1%

10. LAST MONTH’S RENT. Tenant shall deliver to Landlord upon execution of this Amendment, two thousand four hundred seventy-seven dollars and 56/100 ($2,477.56) as Last Month’s Rent so that the total amount of Last Month’s Rent on hand is twenty-five thousand nine hundred twelve dollars and 00/100 ($25,912.00).

11. SECURITY DEPOSIT. Tenant shall deliver to Landlord upon execution of this Amendment two thousand four hundred twelve dollars and 00/100 ($2,412.00) Cash Security Deposit so that the total amount of Cash Security Deposit on hand is twenty-five thousand nine hundred twelve dollars and 00/100 ($25,912.00).

Notwithstanding the expiration of the Term, or any other provision of the Lease, in the event that Tenant has and continues to fulfill all of its duties and obligations under this Lease, and that no amounts under the Letter of Credit have been drawn down and the Letter of Credit is and continues to be in effect, only then may the Letter of Credit applicable to year 1, 2 and 3 of the Term be reduced so as to be in the total amount of $97,170.00, $50,204.50, and $-0-, respectively. Provided, however, that in the event there is an event of monetary or material non-monetary default by Tenant beyond applicable notice and cure periods at any time during the Term, irrespective if any sums are actually drawn down under the Letter of Credit, Tenant shall immediately increase the sum of the Letter of Credit to an amount equal to no less than six (6) months Rent at the monthly rate of Rent then applicable. Provided further, that in the event there is an event of default under the Lease, Tenant shall not be entitled to the reductions in amount under the Letter of Credit during the period remaining under the Lease.

Tenant shall deliver to Landlord upon execution of this Amendment a current effective Letter of Credit in the specified amount and with respect to the new space. Should such Letter of Credit be cancelled, terminated or not otherwise renewed and timely delivered to Landlord or not issued for the benefit of Landlord or should an original of such Letter of Credit not, at all times, be kept on file with Landlord’s property manager, any such event shall constitute a default under the Lease.

12. CONDITION OF PREMISES/TENANT IMPROVEMENTS.

(a) Notwithstanding any provision of the Lease, except as provided below in this Section 12, there shall be no tenant improvements provided by Landlord, and Tenant accepts the Premises “As-Is” without any representation or warranty on the part of Landlord, except Landlord

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shall insure that the Premises and the building systems are in good working condition, including, but not limited to, HVAC, electrical and plumbing, and all existing light fixtures shall be in good working order. The Tenant shall have the right to inspect the Premises to confirm that they are in good working condition prior to execution of this Amendment to Lease.

(b) Landlord shall reimburse to Tenant costs actually incurred and paid by Tenant at the rate of Five Dollars and 00/100 ($5.00) per rentable square foot provided that the total of such reimbursement shall not exceed eighty thousand nine hundred seventy-five dollars and 00/100 ($80,975.00), for improvements to the new space Premises, including upgrading the existing restrooms, pursuant to improvements previously approved by Landlord as to be set out in working drawings to be submitted to Landlord pursuant to Section (d) below (“Tenant Improvements”).

(c) Any tenant improvements undertaken by the Tenant shall, at a minimum, meet or exceed the then existing minimum building standards in effect at the San Carlos Business Park and shall be accomplished in accordance with this Section, subject to the following modifications:

(i) Tenant shall not commence construction of any Tenant Improvements until:

(1) all required governmental approvals and permits required for the commencement of construction have been obtained,

(2) all requirements regarding insurance imposed by this Amendment and the Lease have been satisfied, and

(3) Tenant has given Landlord at least ten (10) days’ prior written notice of Tenant’s intention to commence construction, and has complied with Section (d) below.

(ii) In the event that Tenant shall make any alterations, additions, or improvements to the Premises pursuant to the terms and provisions of this Section 12, Tenant agrees to carry fire and extended coverage insurance upon such alterations, additions, or improvements. In addition, Tenant shall carry or cause to be carried all legally required liability coverage, including workers’ compensation insurance. It is expressly understood and agreed that Landlord shall not be required to insure any of such alterations, additions, or improvements under such insurance as Landlord may carry upon the Premises, and that Landlord shall not be required under the provisions relating to reconstruction of the Premises, or under any other circumstances whatsoever, to repair, reconstruct, or reinstall any such alterations, improvements, or additions.

(d) Landlord hereby approves Tenant’s use of CAS Architects as its architect and Rudolf and Sletten as its general contractor. Tenant shall deliver, prior to commencement of any Tenant Improvements, a set of working drawings acceptable to Landlord. Landlord shall approve or disapprove of said improvements. Tenant anticipates that it shall complete the Tenant Improvements in three phases. Tenant shall deliver to Landlord a set of acceptable working drawings and shall complete the improvements for each phase as Follows: Phase One in first quarter 2002, Phase Two in second quarter 2002, and Phase Three in second and third quarter 2002. Tenant shall not be required to remove any approved Tenant Improvements upon termination of the Lease provided that

Page 4 of 8

Tenant is not then in default under the Lease. Prior to vacating the Premises, any additional improvements constructed during the Term after the completion of the initial Tenant Improvements not approved by Landlord or specialized improvements not approved by Landlord may be required to be removed, at the option of the Landlord, and the Premises restored, at the sole cost and expense of Tenant, subject to ordinary wear and tear and Landlord’s review and approval.

13. RENEWAL OPTION CONDITIONS. Section 40 of the Lease is amended and restated in its entirety as follows:

(a) Tenant shall have the option (“Extension Option”) to extend the Term for one additional period of two (2) years (“Option Period”) by giving Landlord prior written notice of Tenant’s election to exercise this option not more than eighteen (18) months and no less than nine (9) months before the expiration of the Term as the same may have been extended. The Extension Option shall be on all the same terms of this Amendment and the Lease provided that the Monthly Rent for such Option Period shall be determined in accordance with this Section.

(b) The Extension Option is personal to the Tenant herein and any transfer of such Tenant’s interest in the Lease (other than a permitted transfer), whether or not consented to by Landlord, shall cause such Extension Option to terminate and be of no further force or effect

(c) For purposes of this section, Monthly Rent shall be determined as follows:

(i) Parties shall have thirty (30) days from the receipt by Landlord of Tenant’s notice electing to exercise the Extension Option, to agree on the Monthly Rent for the Option Period. If the Parties agree on the Monthly Rent for the Option Period, by such date, they shall immediately execute an amendment to the Lease stating the Monthly Rent for the Option Period and memorializing the extension of the Term in accordance with the section hereof.

(ii) If the Parties are unable to agree upon the Monthly Rent for the Option Period in accordance with Subsection 13(c)(i) above, then within fourteen (14) days after the Parties fail to agree on the Monthly Rent for the Option Period, each party, at its cost and by giving notice to the other party, shall appoint a real estate appraiser with at least five (5) years full time MAI appraisal experience in San Mateo County, to determine the Monthly Rent for the Option Period, and shall deliver to said appraiser, as well as the other party, such party’s proposal for the Monthly Rent for the Option Period. If a party does not appoint an appraiser within said fourteen (14) day period and the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall determine the Monthly Rent for the Option Period. If an appraiser is appointed by each of the Parties as provided in this section, they shall meet promptly and attempt to set the Monthly Rent for the Option Period, by agreeing on which party’s proposal most closely reflects the Fair Market Rental Value of the Premises for the Option Period. If they are unable to agree within thirty (30) days after the second appraiser has been appointed, the two appraisers shall within ten (10) days following the end of such thirty (30) day period choose a third appraiser or if the two appraisers cannot agree upon a third appraiser within such ten (10) day period, either of the Parties to this Lease, by giving ten (10) days’ written notice to the other party, can apply to the then Presiding Judge of the San Mateo County Superior Court for the appointment of a third appraiser who meets the qualifications stated in this section. Each of the Parties shall bear one-half

Page 5 of 8

of the cost of appointing the third appraiser together with one-half of such appraiser’s fee. The third appraiser, however, shall be a person who has not previously acted in any capacity for either party during the prior three years. Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall determine which party’s proposal more closely reflects the Fair Market Rental Value of the Premises for the Option Period. As used herein, “ Fair Market Rental Value” shall mean, the then prevailing annual rental rate per square foot of rentable area for office space in comparable buildings in San Mateo County which has been built out for occupancy, comparable in area and location to the space for which such rental rate is being determined (to the extent that quoted rental rates vary with regard to location), being leased for a duration comparable to the term for which such space is being leased and taking into consideration rental concessions and abatements, tenant improvement allowances, if any, being offered by Landlord, operating expenses and taxes, other adjustments to basic rent and other comparable factors.

(iii) After the appraisers determine Which party’s proposal more closely reflects the Fair Market Rental Value of the Premises for the Option Period, the appraisers shall immediately notify the Parties of their findings and the Parties shall immediately execute an amendment to this Lease stating the Monthly Rant for the Option Period and memorializing the extension of the Term in accordance with Section 40 of the Lease.

(d) Tenant shall not have the right to exercise the Extension Option or any option to renew the Lease that Landlord hereafter provides Tenant if (i) Tenant is in default of any terms of the Lease at the time that Tenant’s right to exercise the option is in effect, (ii) Tenant has been in default of any terms of the Lease three (3) or more times during the Term of the Lease, or (iii) Tenant has assigned the Lease or sublet the Premises or any portion thereof with or without the consent of Landlord.

14. MISCELLANEOUS.

All capitalized terms used, but not expressly defined, in this Amendment shall have the meanings assigned to them in the body of this Lease.

The provisions of this Amendment shall control if in conflict with any of the provisions of the body of the Lease or any exhibits or other attachments to the Lease.

Except as expressly provided in this Amendment, the Parties hereby reaffirm the Lease, and each provision thereof, in its entirety, and Tenant affirms that neither Landlord nor, to the best of Tenant’s knowledge, Tenant is in breach or default of any of their respective obligations under the Lease.

This Amendment may be executed in counterparts.

The Parties have executed this Amendment as of the date first set forth above.

Page 6 of 8

LANDLORD:		TENANT:
THREE SISTERS RANCH		NEUROGESX, INC
ENTERPRISES, LLC, a California		f/k/a Advanced Analgesics, Inc.
Limited Liability Company		a California Corporation
By:	/s/ Martine E. Ruberry	By:	/s/ Howard Palefsky
	Martin E. Ruberry		Howard Palefsky
Its:	President/CEO	Title:	President/CEO
			By:	/s/ Darrell W. Baggs
			Name:	Darrell W. Baggs
			Title:	CFO/Secretary

Page 7 of 8

EXHIBIT A

[LEASE AGREEMENT]

Page 8 of 8

EX-10.5.2

EXHIBIT 10.5.2

THREE SISTERS RANCH

ENTERPRISES LLC

SECOND AMENDMENT

THIS SECOND AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of March 3, 2005 (“Effective Date”), by and between THREE SISTERS RANCH ENTERPRISES, LLC, a California limited liability company (“Landlord”), and NEUROGESX, INC., a California corporation (“Tenant”):

This Second Lease Addendum is attached to and forms a part of the Lease identified below together with any amendments, modifications and exhibits. This Second Lease Addendum constitutes additional covenants and agreements which are intended to prevail in the event of any conflict between the covenants and agreements contained in this Second Lease Addendum and those contained in the Lease itself and/or the Lease Addenda. Except for the additions, changes and removals listed herein, all other terms and conditions of the Lease will remain in full force and effect throughout the term of the Lease.

RECITALS

A. On or about August 11, 2000, Landlord and Tenant entered into a lease (“Lease”), for the certain premises owned by Landlord and thereafter executed a first amendment on December 1, 2001 moving from the original premises of 969 Industrial Road, Suite C, San Carlos, CA to current premises. Tenant current leases 16,195 square feet of 981 Industrial Road, Suites D and F, San Carlos, California 94070 (together, the “Premises”), that are all part of a building complex more commonly known as the San Carlos Business Park.

B. Tenant has notified Landlord that Tenant intends to extend their lease that expires February 28, 2005 noted in recital A above.

TERMS AND CONDITIONS

THEREFORE, IT IS HEREBY MUTUALLY AGREED by and between the Parties hereto as follows:

1. During the remaining Term of the Lease, for so long as Tenant is not in material default under any of the provisions of the Lease shall be amended to read as follows:

2. The term of this Lease Extension shall commence March 1, 2005 and expire December 31, 2006.

3. Tenant would like to modify the amount of space presently Tenant currently leases by reducing the total rentable square footage to 10,956 square feet. The breakdown of this new space is as shown in Exhibit A.

4. Base Rent shall be $12,730.50 per month for the extended lease term. Reimbursable C.A.M. charges shall be $3,269.50 per month for the extended lease term. Total monthly rent for the extended term shall be $16,000.00 per month.

5. Landlord will provide or repair items detailed in e-mail to Marty Ruberry dated February 14, 2005 (shown in Exhibit B ).

6. Landlord will reduce last month’s rent and security deposit to $32,000.00 from $51,824.00. A refund check in the amount of $19,824.00 will be prepared upon execution of the lease amendment.

The provisions of this Amendment shall control if in conflict with any of the provisions of the body of the Lease or any exhibits or other attachments to the Lease.

Except as expressly provided in this Second Amendment, the Parties hereby reaffirm the Lease and each provision thereof, in its entirety, and Tenant affirms that neither Landlord nor, to the best of Tenant’s knowledge, Tenant is in breach or default of any of their respective obligations under the Lease.

This Amendment may be executed in counterparts.

IN WITNESS HEREOF, the Parties have executed this Second Lease Amendment as of the date first set forth above.

LANDLORD:		TENANT:
THREE SISTERS RANCH		NEUROGESX, INC.
ENTERPRISES, LLC, a California		a California Corporation
Limited Liability Company
By:	/s/ Martin E. Ruberry	By:	/s/ Stephen Ghiglieri
	Martin E. Ruberry		Stephen Ghiglieri
Its:	President		CFO
Date:	2/28/05	Date:	2/28/05
		By:
		Date:

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Exhibit “A”

[Blueprint of Premises]

Exhibit “B”

[E-mail to Martin Ruberry]

EX-10.5.3

EXHIBIT 10.5.3

BLACK MOUNTAIN HOLDINGS, LLC

THIRD AMENDMENT

THIS THIRD AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of November 15, 2006 (“Effective Date”), by and between BLACK MOUNTAIN HOLDINGS, LLC (fka) THREE SISTERS RANCH ENTERPRISES, LLC, a California limited liability company dba Black Mountain Properties, LLC (“Landlord”), and NEUROGESX, INC., a California corporation (“Tenant”):

This Third Lease Addendum is attached to and forms a part of the Lease identified below together with any amendments, modifications and exhibits, including prior Lease Addendums. This Third Lease Addendum constitutes additional covenants and agreements which are intended to prevail in the event of any conflict between the covenants and agreements contained in this Third Lease Addendum and those contained in the Lease itself and/or the Lease Addenda. Except for the additions, changes and removals listed herein, all other terms and conditions of the Lease will remain in full force and effect throughout the term of the Lease.

RECITALS

A. On or about August 11, 2000, Landlord and Tenant entered into a lease (“Lease”), and then amended on December 1, 2001 and then amended on March 3, 2005 for the certain premises owned by Landlord and attached hereto as Exhibit A. Tenant currently leases 10,956 square feet of 981 Industrial Road, Suite D & F, San Carlos, California 94070 (together, the “Premises”), that are all part of a building complex more commonly known as the San Carlos Business Park.

B. Tenant has notified Landlord that Tenant intends to extend their lease that will expire on December 31, 2006.

TERMS AND CONDITIONS

THEREFORE, IT IS HEREBY MUTUALLY AGREED by and between the Parties hereto as follows:

1. During the remaining Term of the Lease, for so long as Tenant is not in material default under any of the provisions of the Lease, the Lease shall be amended to read as follows:

2. The term of this Lease Extension shall commence January 1, 2007 and expire June 30, 2007.

3. Base Rent for the extended term shall be as follows:

Months 1– 6 (01/01/07 – 06/30/07) $1.26 sq. ft./mth. – $13,804.56 per month

Reimbursable C.A.M. charges will be at $0.30 per square foot per month ($3,286.80/ month) for January 1, 2007 through June 30, 2007.

Total Monthly Rent for six (6) month period will be $17,091.36 per month.

The provisions of this Amendment shall control if in conflict with any of the provisions of the body of the Lease or any exhibits or other attachments to the Lease.

Except as expressly provided in this Third Amendment, the Parties hereby reaffirm the Lease and each provision thereof, in its entirety, and Tenant affirms that neither Landlord nor, to the best of Tenant’s knowledge, Tenant is in breach or default of any of their respective obligations under the Lease.

This Amendment may be executed in counterparts.

IN WITNESS HEREOF, the Parties have executed this Third Lease Amendment as of the Effective Date set forth above.

LANDLORD:		TENANT:
BLACK MOUNTAIN HOLDINGS,		NEUROGESX, INC.
a California Limited Liability Company		a California Corporation
Dba Black Mountain Properties, LLC
By:	/s/ Steve Mitchell	By:	/s/ Stephen Ghiglieri
	Steve Mitchell		Stephen Ghiglieri, CFO
Its:	Senior Vice President of Operations
Date:	11/20/06	Date:	11/16/06

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Exhibit A

[Blueprint of Premises]

EX-10.6

Exhibit 10.6

EXCLUSIVE LICENSE AGREEMENT

between

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

and

NEUROGESX, INC.

for

HIGH DOSE CAPSAICIN FOR NEUROPATHIC PAIN

UCSF Case No. SF00-056

UC Case No. SF00-056

EXCLUSIVE LICENSE AGREEMENT

For

HIGH DOSE CAPSAICIN FOR NEUROPATHIC PAIN

This license agreement (the “Agreement”) is made effective November 1, 2000 (the “Effective Date”) between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation having its statewide administrative offices at 1111 Franklin Street, Oakland, California 94607-5200, (“The Regents”), and acting through its Office of Technology Management, University of California San Francisco, 1294 Ninth Avenue - Suite 1, Box 1209, San Francisco, CA 94143-1209 (“UCSF”), and NEUROGESX, INC., a California corporation having a principal place of business at 969C Industrial Boulevard, San Carlos, California, (the “Licensee”).

BACKGROUND

A. Certain inventions, generally characterized as “High Dose Capsaicin Relieves Neuropathic Pain” (collectively the “Invention”), were made in the course of research at the University of California San Francisco by Wendye R. Robbins as described in UCSF Case Number SF00-056, and are covered by Regents’ Patent Rights as defined below;

B. The Licensee has evaluated the Invention under a Secrecy Agreement with The Regents effective August 20, 1999 (U.C. Control No. 2000-20-0104);

E. The Licensee and The Regents have executed a Letter of Intent dated June 1, 2000 (U.C. Control No. 2000-30-0050) for the purpose of negotiating a license to Regents’ Patent Rights;

F. The Licensee wishes to obtain rights from The Regents for the commercial development, use, and sale of products from the Invention, and The Regents is willing to grant those rights so that the Invention may be developed to its fullest and the benefits enjoyed by the general public; and

G. The Licensee is a “small business firm” as defined in 15 U.S.C. §632;

H. Licensee recognizes and agrees that royalties due under this Agreement will be paid on both pending patent applications and issued patents;

In view of the foregoing, the parties agree:

1. DEFINITIONS

1.1 “Regents’ Patent Rights” means the Regents’ interest in any subject matter claimed in or covered by any of the following: Pending U.S. Patent Application Serial No. 08/746,207 entitled “Therapeutic Method with Capsaicin and Capsaicin Analogs” filed November 6, 1996, the continuation-in-part U.S. Patent Application Serial No. 08/990,633 entitled “Transdermal Therapeutic Device and Method with Capsaicin and Capsaicin Analogs” filed December 15, 1997 and assigned to The Regents; pending PCT Patent Application Serial No. PCT/US98/25794 of the same title, filed December 8, 1998 and assigned to The Regents; and continuing applications thereof including divisions, substitutions, continuation-in-part applications (but only to the extent however, that claims in the continuation-in-part applications are entitled to the priority filing date of the foregoing applications); any patents issuing on said applications including reissues, reexaminations and extensions; and any corresponding foreign applications or patents based on said applications.

1.2 “Licensed Product” means any material for which the manufacture, use, sale, or import would constitute an infringement of a Valid Claim within the Regents’ Patent Rights if not for the license granted to the Licensee under this Agreement.

1.3 “Licensed Method” means any method for which the use or sale would constitute an infringement of a Valid Claim within the Regents’ Patent Rights if not for the license granted to the Licensee under this Agreement.

1.4 “Net Sales” means the total of the gross invoice prices of Licensed Products sold or Licensed Methods performed by the Licensee, an Affiliate, or a Sublicensee, less the sum of the following actual and customary deductions where applicable: cash, trade, or quantity discounts; sales, use, tariff, import/export duties or other excise taxes imposed on particular sales; transportation charges and allowances (including insurance); or credits to customers because of rejections, returns, or expired goods. For purposes of calculating Net Sales, transfers to an Affiliate or Sublicensee for end use by the Affiliate or Sublicensee will be treated as sales to an independent third party for purposes of calculating earned royalties (as specified in Article 7)

1.5 “Affiliate” means any corporation or other business entity in which the Licensee owns or controls, directly or indirectly, at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors, or in which the Licensee is owned or controlled directly or indirectly by at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors; but in any country where the local law does not permit foreign equity participation of at least fifty percent (50%), then an “Affiliate” includes any company in which the Licensee owns or controls or is owned or controlled by, directly or indirectly, the maximum percentage of outstanding stock or voting rights permitted by local law.

1.6 “Field of Use” means all fields and uses.

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1.7 “Commercial Sale” means with respect to each Licensed Product in each country, a bona fide commercial sale of such Licensed Product following marketing approval by the regulatory authority in such country; provided that where such a first commercial sale has occurred in a country for which government pricing or government reimbursement approval is needed for widespread commercial sale (for clarification, the parties acknowledge that no such approval is required in the United States) then a sale shall not be deemed a Commercial Sale until such pricing or reimbursement approval has been obtained.

1.8 “IND” means an Investigational New Drug Application, as defined in the U.S. Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or comparable filing in a foreign jurisdiction, in each case with respect to a Licensed Product.

1.9 “NDA” means a New Drug Application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, and all subsequent supplements to that NDA, as well as any equivalent foreign application, registration or certification in the relevant country, such as a Marketing Approval Application (“MAA”) in Europe, in each case with respect to a Licensed Product.

1.10 “Phase I” means a clinical trial involving the initial introduction of a Licensed Product into humans and which is designed to determine the metabolism and pharmacologic actions of the Licensed Product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

1.11 “Phase III” means human clinical trials of a Licensed Product performed after obtaining preliminary evidence suggesting effectiveness of the drug, and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug, to provide an adequate basis for physician labeling, and to form the basis for approval to market such Licensed Product.

1.12 “Valid Claim” means a claim of an issued and unexpired patent or a claim of a pending patent application within the Regents’ Patent Rights which has not been held invalid or unenforceable by a court or other government agency of competent jurisdiction from which no appeal can be or has been taken, and has not been admitted to be invalid or unenforceable through re-examination, disclaimer or otherwise; provided that if a claim of a pending application has not issued as a claim of an issued patent within the Regents’ Patent Rights within ten (10) years after the filing date from which such claim takes priority, such pending claim shall not be a Valid Claim for purposes of this Agreement until such time as such claim issues.

1.13 “Sublicensee” means, with respect to a particular Licensed Product, a third party to whom Licensee has granted a right or license to make, use, sell or import such Licensed Product or practice the Licensed Method. As used in this Agreement, “Sublicensee” shall also include a non-Affiliate third party to whom Licensee has granted directly or indirectly a right to distribute such Licensed Product, provided that such third party is responsible for some or all of the marketing and promotion of such Licensed Product within the territorial region in which it has such sublicensed rights.

-3-

2. LIFE OF PATENT EXCLUSIVE GRANT

2.1 Subject to the limitations set forth in this Agreement, The Regents grants to the Licensee a world-wide license under Regents’ Patent Rights to make, have made, use, sell, offer to sell, import, have imported, and otherwise exploit Licensed Products and to practice Licensed Methods.

2.2 Except as otherwise provided in this Agreement, the license granted in Paragraph 2.1 is exclusive for the life of this Agreement.

2.3 The license granted in Paragraphs 2.1 and 2.2 is limited to methods and products that are within the Field of Use. For other methods and products, the Licensee has no license under this Agreement.

2.4 To the extent it is legally able, The Regents also grants Licensee a non-exclusive license to any proprietary know-how relating to Regents’ Patent Rights that The Regents has an interest in and is reasonably needed by Licensee to practice and/or commercially develop Licensed Products and/or Licensed Methods.

2.5 The Regents reserves the nontransferable right to use the Invention and associated technology for its own bona fide non-commercial research and education purposes.

3. SUBLICENSES

3.1 The Regents also grants to the Licensee the worldwide right to issue sublicenses to third parties to make, have made, use, sell, offer to sell, import, have imported, and otherwise exploit Licensed Products and to practice Licensed Methods, as long as the Licensee has current exclusive rights thereto under this Agreement. To the extent applicable, sublicenses must include, at a minimum, all of the rights of and obligations due to The Regents and contained in this Agreement.

3.2 In addition, Licensee shall pay The Regents a percentage of all compensation received by Licensee from Sublicensees, other than royalties on sales of products and Licensed Products, as direct consideration for the grant of a sublicense for Licensed Products or Licensed Methods under the Regents’ Patent Rights, as set forth below (“sublicense fees”).

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3.2.1 Sublicense fees shall consist of amounts received in the form of up-front fees and milestone payments, but shall not include any amounts received as support for research and development activities, as a loan, as income derived from debt financing, for the purchase of an equity interest in the Licensee, as reimbursement for patent and patent related expenses, as earned royalties on net sales, or as consideration for the grant of intellectual property rights and materials other than those claimed under Regents’ Patent Rights. Licensee shall pay The Regents the following percentages of sublicense fees:

Percentage	Aggregate Sublicense Fees
25%	< $250,000
10%	$250,000 -- $2,000,000
5%	> $2,000,000

3.2.2 For purposes of calculating the applicable percentage for the foregoing, “Aggregate Sublicense Fees” shall be the cumulative amount of sublicense fees stated in each sublicense of Regents’ Patent Rights entered into by Licensee and assuming that all milestone payments therein are made to Licensee. However, the actual sublicensee fee payments due The Regents from Licensee shall be determined based on the actual amounts of sublicensee fees received by Licensee in each calendar year during the term of this Agreement.

3.3 The Licensee shall promptly provide The Regents with a copy of each sublicense issued; collect all payments due The Regents from Sublicensees; and summarize and deliver all reports due The Regents from Sublicensees, provided that the Licensee may redact from such copy any terms which are not necessary to determine whether Licensee has complied with its obligations under this Agreement.

3.4 Upon termination of this Agreement for any reason, the Licensee shall assign to The Regents all sublicenses which are consistent with the rights and obligations due The Regents hereunder. The Regents, at its sole discretion, shall determine whether the Licensee shall cancel or assign to The Regents any sublicenses that are inconsistent with the rights and obligations due The Regents hereunder, provided however, that prior to terminating any such sublicense, The Regents shall discuss with the Sublicensee the terms under which such Sublicensee may retain such sublicense.

4. PAYMENT TERMS

4.1 Licensee shall pay to The Regents earned royalties (as specified in Section 7) on Net Sales of Licensed Products on a Licensed Product-by-Licensed Product and country-by-country basis. The earned royalty due pursuant to this Section will continue on such basis until the sale of a Licensed Product in such country does not infringe a Valid Claim within the Regents’ Patent Rights.

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4.2 Licensee shall pay earned royalties quarterly on or before February 28, May 31, August 31 and November 30 of each calendar year. Each payment will be for earned royalties accrued within the Licensee’s most recently completed calendar quarter.

4.3 Licensee shall pay the applicable percentage of sublicense fees to The Regents on or before February 28 of each calendar year. Each payment will be for sublicensee fees received by Licensee during the most recently completed calendar year.

4.4 Beginning in 2001, the Licensee shall pay the annual maintenance fee (as defined in Section 6.1) to The Regents on or before each anniversary of the Effective Date.

4.5 All monies due The Regents are payable in United States dollars. When Licensed Products are sold for monies other than United States dollars, the Licensee shall first determine the applicable earned royalty in the currency of the country in which Licensed Products were sold and then convert the amount into equivalent United States funds, using the exchange rate quoted in the Wall Street Journal on the last business day of the reporting period. In no event shall the Licensee be required to pay The Regents more than twenty-five (25%) of its total annual revenue derived from Licensed Products.

4.6 Earned royalties earned on sales occurring in any country outside the United States may not be reduced by any taxes, fees, or other charges imposed by the government of such country on the payment of royalty income. The Licensee is also responsible for all bank transfer charges. Notwithstanding this, all payments made by the Licensee in fulfillment of The Regents’ tax liability in any particular country will be credited against earned royalties or fees due The Regents for sales of Licensed Products in that country.

4.7 If at any time legal restrictions prevent the prompt remittance of earned royalties by the Licensee from any country where a Licensed Product is sold, the Licensee shall deposit the amount owed in an interest-bearing account within that country until such time as the restrictions are lifted, at which time the Licensee shall promptly convert the current balance of said account into United States funds and pay such amount to The Regents.

4.8 If any patent or Valid Claim within Regents’ Patent Rights is held invalid in a final decision by a court of competent jurisdiction and last resort and from which no appeal has or can be taken, all obligation to pay earned royalties based on that patent or Valid Claim or any Valid Claim patentably indistinct therefrom will cease as of the date of final decision. The Licensee will not, however, be relieved from paying any earned royalties that accrued before the final decision or that are based on another patent within Regents’ Patent Right or Valid Claim not involved in the final decision.

4.9 If payments, rebillings or fees are not received by The Regents when due, the Licensee shall pay to The Regents interest charges on the unpaid amount at a rate of ten percent (10%) per annum or the maximum permitted by law, whichever is less. Interest is calculated from the date due until actually received by The Regents.

-6-

5. LICENSE-ISSUE FEE

5.1 Within sixty (60) days after the Effective Date, the Licensee shall pay to The Regents a license-issue fee equal to the total amount of out-of-pocket costs and expenses of patent prosecution of the Regents’ Patent Rights incurred by The Regents through the Effective Date. This fee is non-refundable, non-cancelable, and is not an advance against earned royalties.

6. LICENSE MAINTENANCE FEE

6.1 The Licensee shall also pay to The Regents a royalty in the form of a license maintenance fee of five thousand dollars ($5,000) beginning on the second anniversary of the Effective Date and continuing annually on each anniversary of the Effective Date thereafter. This license maintenance fee is not due on any anniversary of the Effective Date if, as of that Date, the Licensee, its Affiliates, or its Sublicensees are engaged in Commercial Sales of a Licensed Product and paying earned royalties to The Regents on the sales of such Licensed Product. License maintenance fees are non-refundable and not an advance against earned royalties, except that, if Licensee completes the first Commercial Sale of a Licensed Product after making such License Maintenance Fee payment but before the next anniversary of the Effective Date, then Licensee may deduct such amount from the earned royalties that would otherwise be due The Regents.

7. EARNED ROYALTIES, MINIMUM ANNUAL ROYALTIES AND MILESTONE PAYMENTS

7.1 The Licensee shall also pay to The Regents an earned royalty of one percent (1%) of the Net Sales of Licensed Products worldwide, up to a maximum of one million dollars ($1,000,000) per year.

7.2 If it becomes necessary for Licensee to license intellectual property rights from an unaffiliated third party, and Licensee is required to pay a royalty to that unaffiliated third party in order to practice Licensed Methods and make, use or sell Licensed Products, and the combined earned royalty due The Regents and unaffiliated third parties exceeds eleven percent (11%), then the earned royalties to be paid to The Regents by Licensee shall be reduced by an amount equal to one-half (1/2) the excess over eleven percent (11%) of the royalty rate(s) due to the unaffiliated third party(ies). However, in no event shall the amount paid to The Regents be reduced below fifty percent (50%) of the original earned royalty amounts due The Regents.

7.3 No cumulation of earned royalties shall be made in the event a Licensed Product is covered by Valid Claims of more than one patent within Regents’ Patent Rights.

7.4 No earned royalty shall be payable under this Article 7 with respect to transfers of Licensed Product to customers or prospective customers for use in research and/or development, in clinical trials or other regulatory purposes, as samples, or in any other transfer that is not a Commercial Sale.

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7.5 In the event that a Licensed Product is sold in combination with other products, components or services (other than another Licensed Product) for which no amounts would be payable to The Regents if such other products, components or services were sold or performed separately, amounts invoiced for such combination sales for purposes of calculating Net Sales of the Licensed Product in such combination shall be the Net Sales of the Licensed Product calculated by multiplying the Net Sales of the combination product by the fraction A/B where A is the average price on a unit basis of Licensed Product containing a certain amount (by weight) of active ingredient, and B is the average unit price of the combination product containing the same amount of that active ingredient. In the event that such average sale price cannot be determined for both the Licensed Product and the other product(s) in combination, Net Sales for purposes of determining royalty payment shall be mutually agreed by the parties based on relative value contributed by each component, and such agreement shall not be unreasonably withheld.

7.6 Following the first Commercial Sale of the first Licensed Product, the Licensee shall pay to The Regents a minimum annual royalty equal to ten thousand dollars ($10,000), which shall be creditable against future earned royalties due for the term of Regents’ Patent Rights, beginning with the year of the first Commercial Sale of Licensed Product. For the first year of Commercial Sales, the Licensee’s obligation to pay the minimum annual royalty will be pro-rated for the number of months remaining in that calendar year when Commercial Sales commence and will be due the following February 28, to allow for crediting of the pro-rated year’s earned royalties. For subsequent years, the minimum annual royalty will be paid to The Regents by February 28 of each year and will be credited against the earned royalties due for the calendar year in which the minimum annual royalty payment was made. In the event that the minimum annual royalty due for a calendar year exceeds the earned royalties due The Regents for such calendar year, the excess amount of minimum annual royalty may be applied by Licensee against earned royalties due The Regents for the next year. Such minimum annual royalty shall cease to be due in the year in which Licensee or its Sublicensees or Affiliates cease all Commercial Sales of all Licensed Products. Such minimum annual royalty shall be decreased on a pro rata basis as this Agreement expires or is terminated on a Licensed Product-by-Licensed Product basis.

7.7 The Licensee shall pay The Regents the following milestone payments:

(a) Fifty thousand dollars ($50,000) upon the first filing of an IND for the first Licensed Product;

(b) One hundred thousand dollars ($100,000) upon first dosing of a patient in a Phase III clinical trial for the first Licensed Product in a major market (United States, Japan, Germany, France, Italy, Spain, or the United Kingdom);

(c) One million dollars ($1,000,000) upon first approval of a NDA, for a Licensed Product in a major market (United States, Japan, Germany, France, Italy, Spain, or the United Kingdom);

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(d) The foregoing milestone payments are creditable against earned royalties (but subject to reduction of no more than fifty percent (50%) of the earned royalties in any calendar quarter);

(e) In addition, Licensee shall pay The Regents non-creditable milestone payments should either of the following occur while Commercial Sales or commercialization of a Licensed Product by Licensee are continuing: (i) the closing of an Initial Public Offering (“IPO”) of the Licensee’s common stock pursuant to a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission; or (ii) the closing of (x) a consolidation or merger of the Licensee with any other entity, (y) sale of all or substantially all of the assets of Licensee, or (z) sale of all or substantially all of the outstanding stock of the Licensee, pursuant to which the shareholders of the Licensee receive cash or publicly traded securities. Upon the occurrence of such event, the Licensee shall pay to The Regents total cash payments equal to X times P, where X is equal to one percent (1%) of the number of shares of the Licensee’s common stock which have been issued or reserved for future issuance pursuant to then-existing incentive stock plans immediately prior to the Licensee’s first round of financing, and P is equal to either the IPO offering price per share of common stock, or in the case of a merger, acquisition, or sale, the average price per share actually received by shareholders of the Licensee’s common stock from the acquirer. Such payments shall be paid in three (3) installments, with one third (1/3) of the total to be paid twelve (12) months after the closing date of such transaction, one third (1/3) to be paid twenty four (24) months after such closing date, and the remaining one third (1/3) to be paid thirty six (36) months after such closing date. In the event that the transaction contemplated hereunder involves more than one closing date, the due date for payments owed to The Regents shall be measured from the date of the last closing.

7.8 Notwithstanding the foregoing Section 7.7, no milestone payments shall be due from Licensee under Section 7.7 in the event that: (i) a patent with a claim covering a Licensed Product has not issued under the Regents’ Patent Rights at the time such milestone payment is due; and (ii) Licensee is no longer funding active prosecution of the Regents’ Patent rights in the United States patent office or a foreign equivalent; and (iii) only with respect to the milestone payable under Section 7.7(e), the first Commercial Sale of a Licensed Product has already occurred.

8. DUE DILIGENCE

8.1 The Licensee, on execution of this Agreement, shall use commercially reasonable efforts to develop, manufacture and sell Licensed Products, or cause a Sublicensee to do so, and shall use the same level of effort to market the same within a reasonable time after execution of this Agreement.

8.2 The Licensee shall use commercially reasonable efforts to obtain all governmental approvals necessary for the manufacture, use and sale of Licensed Products.

8.3 The Licensee shall commit to use commercially reasonable efforts (either itself or through a Sublicensee) to develop and commercialize at least one Licensed Product, including achievement of the following milestones: (i) dosing of the first human patient with a Licensed

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Product in support of a Phase I clinical trials by the end of the third year after the Effective Date; (ii) filing at least one NDA by the end of the fifth year after the Effective Date; and (iii) commencing the marketing of at least one Licensed Product in one country by the end of the seventh year after the Effective Date.

8.4 If the Licensee fails to complete any of the above provisions, and The Regents do not otherwise extend or waive such period of performance, then The Regents has the right and option to either terminate this Agreement or reduce the Licensee’s exclusive license to a nonexclusive license. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (GRANT).

9. PROGRESS AND ROYALTY REPORTS

9.1 Beginning February 28, 2001 and semi-annually thereafter, the Licensee shall submit to The Regents a progress report covering the Licensee’s (and any Affiliate or Sublicensee’s) activities regarding the development and testing of all Licensed Products and the obtaining of any governmental approvals necessary for marketing. Progress reports are required until the first Commercial Sale of the first Licensed Product occurs in the United States, at which time the Licensee may discontinue such reports; provided that such reports may again be required by The Regents if Commercial Sales of such Licensed Product are suspended or discontinued.

9.2 Progress reports submitted under Paragraph 9.1 shall include, but are not limited to, the following topics, as they specifically refer to Licensed Products:

• summary of work completed

• key scientific discoveries

• summary of work in progress

• current schedule of anticipated events or milestones

• market plans for introduction of Licensed Products, and

• a summary of resources (dollar value) spent in the reporting period.

9.3 The Licensee has a continuing obligation to keep The Regents’ informed of the large/small business entity status (as defined by the United States Patent and Trademark Office) of itself and its Sublicensees and Affiliates.

9.4 The Licensee shall report to The Regents the date of first Commercial Sale of a Licensed Product in each country in its immediately subsequent royalty report (as described below).

9.5 After the first Commercial Sale of a Licensed Product anywhere in the world, the Licensee shall make quarterly royalty reports to The Regents on or before each February 28, May 31, August 31 and November 30 of each year. Each royalty report will cover the Licensee’s most recently completed calendar quarter and will show (a) the gross sales and Net Sales of Licensed Products sold during the most recently completed calendar quarter; (b) the number of each type of Licensed Product sold; (c) the earned royalties, in U.S. dollars, payable with respect to sales of Licensed Products; (d) the method used to calculate the earned royalties; and (e) the exchange rates used (if applicable).

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9.6 If no sales of Licensed Products have been made during any reporting period, Licensee shall provide a statement to this effect.

10. BOOKS AND RECORDS

10.1 The Licensee shall keep accurate books and records showing all Licensed Products manufactured, used, and/or sold under the terms of this Agreement. Books and records must be preserved for at least five (5) years from the date of the royalty payment to which they pertain.

10.2 Books and records must be open to inspection by mutually acceptable representatives or agents of The Regents at reasonable times. The Regents shall bear the fees and expenses of examination but if an error in royalties of more than five percent (5%) of the total royalties due for any year is discovered in any examination then the Licensee shall bear the fees and expenses of that examination.

11. LIFE OF THE AGREEMENT

11.1 Unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement will be in force from the Effective Date and shall expire on a country-by-country basis as to each Licensed Product on the date that neither the sale nor use of such Licensed Product would be covered by a Valid Claim in such country. This Agreement shall expire in its entirety, unless otherwise terminated or otherwise provided herein, upon the last expiration date of a patent licensed under this Agreement; or until the last patent application licensed under this Agreement is abandoned and no patent in Regents’ Patent Rights ever issues.

11.2 Any termination of this Agreement will not affect the rights and obligations set forth in the following Articles:

Article 1 Definitions

Article 10 Books and Records

Article 14 Disposition of Licensed Products on Hand on Termination

Article 15 Use of Names and Trademarks

Article 20 Indemnification

Article 24 Failure to Perform

Article 29 Secrecy

Article 30 Miscellaneous

12. TERMINATION BY THE REGENTS

12.1 If the Licensee fails to materially perform or materially violates any term of this Agreement, then The Regents may give written notice of default (“Notice of Default”) to the Licensee. If the Licensee fails to repair the default within sixty (60) days of the effective date of Notice of Default, The Regents may terminate this Agreement and its licenses by a second written notice (Notice of Termination). If a Notice of Termination is sent to the Licensee, this Agreement

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will automatically terminate on the effective date of such Notice. Termination will not relieve the Licensee of its obligation to pay any fees owing at the time of termination and will not impair any accrued right of The Regents. These notices are subject to Article 21 (Notices).

13. TERMINATION BY LICENSEE

13.1 The Licensee has the right at any time to terminate this Agreement in whole or as to any portion of Regents’ Patent Rights by giving notice in writing to The Regents. Notice of termination will be subject to Article 21 (Notices) and termination of this Agreement will be effective sixty (60) days from the effective date of notice.

13.2 Any termination under the above paragraph does not relieve the Licensee of any obligation or liability accrued under this Agreement prior to termination or rescind any payment made to The Regents or anything done by Licensee prior to the time termination becomes effective. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination.

14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION

14.1 Upon termination of this Agreement the Licensee is entitled to dispose of all previously made or partially made Licensed Products, but no more, within a period of one hundred and eighty (180) days provided that the sale of those Licensed Products is subject to the terms of this Agreement, including but not limited to the rendering of reports and payment of royalties required under this Agreement

15. USE OF NAMES AND TRADEMARKS

15.1 Nothing contained in this Agreement confers any right to use in advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of either party hereto (including contraction, abbreviation or simulation of any of the foregoing). Unless required by law, the use by the Licensee of the name “The Regents of the University of California” or the name of any campus of the University of California is prohibited.

16. LIMITED WARRANTY

16.1 The Regents, as represented by the actual knowledge of the undersigned on behalf of the Regents as of the Effective Date, warrants to the Licensee that that it owns all right, title, and interest in and to the Regents’ Patent Rights, and that it has the lawful right to grant this license.

16.2 This license and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT OF A THIRD PARTY.

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16.3 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION OR LICENSED PRODUCTS.

16.4 This Agreement does not:

16.4.1 express or imply a warranty or representation as to the validity or scope of any of Regents’ Patent Rights;

16.4.2 express or imply a warranty or representation that anything made, used, sold, offered for sale or imported or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents of third parties;

16.4.3 obligate The Regents to bring or prosecute actions or suits against third parties for patent infringement except as provided in Article 19;

16.4.4 confer by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents’ Patent Rights as defined in this Agreement, regardless of whether those patents are dominant or subordinate to Regent’s Patent Rights; or

16.4.5 obligate The Regents to furnish any know-how not provided in Regents’ Patent Rights.

17. PATENT PROSECUTION AND MAINTENANCE

17.1 As long as the Licensee has paid patent costs as provided for in this Article, The Regents shall diligently prosecute and maintain the United States and foreign patents comprising Regents’ Patent Rights using counsel of its choice, reasonably acceptable to Licensee. If Licensee objects to the choice of patent counsel, then The Regents may appoint a foreign choice of patent counsel with Licensee’s approval. The Regents shall provide the Licensee with copies of all relevant documentation and correspondence so that the Licensee may be informed of the continuing prosecution and submit timely comments and guidance for consideration by patent counsel. The Licensee agrees to keep such correspondence and documentation confidential. The Regents agrees to allow Licensee to submit advice, counsel, and guidance regarding patent prosecution to The Regents’ counsel, although such counsel will take instructions only from The Regents. All patents and patent applications under this Agreement which are based solely on research performed at UCSF and filed prior to the Execution Date will be assigned solely to The Regents, subject to the grant of exclusive rights hereunder.

17.2 The Regents shall use best efforts to amend any patent application to include claims reasonably requested by the Licensee to protect the products contemplated to be sold under this Agreement and shall ensure that the Licensee is kept apprised of patent-related activities so that it may provide such requests in a timely manner.

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17.3 The Licensee shall apply for an extension of the term of any patent included within Regents’ Patent Rights if appropriate under the Drug Price Competition and Patent Term Restoration Act of 1984 and/or European, Japanese and other foreign counterparts of this Law. The Licensee shall prepare all documents, and The Regents agrees to execute the documents and to take additional action as the Licensee reasonably requests in connection therewith.

17.4 If either party (in the case of the Regents, the actual knowledge of the Licensing Officer responsible for administration of this Agreement) receives notice pertaining to infringement or potential infringement of any issued patent included within Regents’ Patent Rights under the Drug Price Competition and Patent Term Restoration Act of 1984 (and/or foreign counterparts of this Law), that party shall notify the other party within ten (10) days after receipt of notice of infringement.

17.5 The Licensee shall bear the costs of preparing, filing, prosecuting and maintaining all United States and foreign patent applications contemplated by this Agreement incurred after the Effective Date, and as required under Article 5. Costs billed by The Regents’ counsel will be rebilled to the Licensee and are to be paid quarterly for the calendar quarter in which The Regents’ costs were incurred, within thirty (30) days after Licensee receives such rebilling. These costs include patent prosecution costs for the Invention incurred by The Regents prior to the execution of this Agreement and any patent prosecution costs that may be incurred for patentability opinions, re-examination, re-issue, interferences, or inventorship determinations. Prior costs will be paid subject to Article 5 and are at least approximately $37,000. Such prior costs may be paid in installments over the course of six (6) months from the Effective Date hereof.

17.6 The Licensee may request The Regents to obtain patent protection on the Invention in foreign countries if available and if it so desires. The Licensee shall notify The Regents of its decision to obtain or maintain foreign patents not less than sixty (60) days prior to the deadline for any payment, filing, or action to be taken in connection therewith. This notice concerning foreign filing must be in writing, must identify the countries desired, and must reaffirm the Licensee’s obligation to underwrite the costs thereof. The absence of such a notice from the Licensee to The Regents will be considered an election not to obtain or maintain foreign rights.

17.7 The Licensee’s obligation to underwrite and to pay patent prosecution costs will continue for so long as this Agreement remains in effect, but the Licensee may terminate its obligations with respect to any given patent application or patent upon three (3) months written notice to The Regents. The Regents will use its best efforts to curtail patent costs when a notice of termination is received from the Licensee. The Regents may prosecute and maintain such application(s) or patent(s) at its sole discretion and expense, but the Licensee will have no further right or licenses thereunder. Non-payment of patent costs may be deemed by The Regents as an election by the Licensee not to maintain application(s) or patent(s).

17.8 The Regents may file, prosecute or maintain patent applications at its own expense in any country in which the Licensee has not elected to file, prosecute, or maintain patent applications in accordance with this Article, and those applications and resultant patents will not be subject to this Agreement.

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18. PATENT MARKING

18.1 The Licensee shall mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws.

19. PATENT INFRINGEMENT

19.1 If the Licensee learns of the substantial infringement of any patent licensed under this Agreement, the Licensee shall call The Regents’ attention thereto in writing and provide The Regents with reasonable evidence of infringement. Neither party will notify a third party of the infringement of any of Regents’ Patent Rights without first obtaining consent of the other party, which consent will not be unreasonably denied. Both parties shall use their best efforts in cooperation with each other to terminate infringement without litigation.

19.2 The Licensee may request that The Regents take legal action against the infringement of Regents’ Patent Rights. Request must be in writing and must include reasonable evidence of infringement and damages to the Licensee. If the infringing activity has not abated within ninety (90) days following the effective date of request, The Regents then has the right to: commence suit on its own account; or refuse to participate in the suit, and The Regents shall give notice of its election in writing to the Licensee by the end of the one-hundredth (100th) day after receiving notice of written request from the Licensee. The Licensee may thereafter bring suit for patent infringement, at its own expense, if and only if The Regents elects not to commence suit and if the infringement occurred during the period and in a jurisdiction where the Licensee had exclusive rights under this Agreement. If, however, the Licensee elects to bring suit in accordance with this paragraph, The Regents may thereafter join that suit at its own expense.

19.3 Legal action as is decided on will be at the expense of the party bringing suit and all damages recovered thereby will belong to the party bringing suit, but legal action brought jointly by The Regents and the Licensee and fully participated in by both will be at the joint expense of the parties and all recoveries will be shared jointly by them in proportion to the share of expense paid by each party.

19.4 Each party shall cooperate with the other in litigation proceedings instituted hereunder but at the expense of the party bringing suit. Litigation will be controlled by the party bringing the suit, except that The Regents may be represented by counsel of its choice in any suit brought by the Licensee.

20. INDEMNIFICATION

20.1 The Licensee shall indemnify, hold harmless and defend The Regents, its officers, employees, and agents; the sponsors of the research that led to the invention; and the inventors of the patents and patent applications in Regents’ Patent Rights and their employers against any and all claims, suits, losses, liabilities, damages, costs, fees, and expenses resulting from or arising out of exercise of this license or any voluntary sublicense. This indemnification includes, but is not limited to, any product liability. Notwithstanding the foregoing, the Licensee shall have no obligations for

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any claim if the person (as listed above) seeking indemnification makes any admission or settlement regarding such claim without the prior written consent of the Licensee, which consent shall not be unreasonably withheld.

20.2 The Licensee, at its sole cost and expense, shall insure its activities in connection with the work under this Agreement and obtain (not later than the start of Phase I clinical trials of a product intended for Commercial Sale), keep in force and maintain insurance as follows, or an equivalent program of self insurance.

20.3 Comprehensive or commercial form general liability insurance (contractual liability included) with limits as follows:

• Each Occurrence $1,000,000

• Products/Completed Operations Aggregate $5,000,000

• Personal and Advertising Injury $1,000,000

• General Aggregate (commercial form only) $5,000,000

The coverage and limits referred to under the above do not in any way limit the liability of the Licensee. The Licensee shall furnish The Regents with certificates of insurance showing compliance with all requirements. Certificates must:

• Provide for thirty (30) days’ advance written notice to The Regents of any modification.

• Indicate that The Regents has been endorsed as an additional Insured under the coverage referred to under the above.

• Include a provision that the coverage will be primary and will not participate with nor will be excess over any valid and collectable insurance or program of self-insurance carried or maintained by The Regents.

20.4 The Regents shall notify the Licensee in writing of any claim or suit brought against The Regents in respect of which The Regents intends to invoke the provisions of this Article. The Licensee shall keep The Regents informed on a current basis of its defense of any claims under this Article.

21. NOTICES

21.1 Any notice or payment required to be given to either party is properly given and effective (a) on the date of delivery if delivered in person or (b) five (5) days after mailing if mailed by first-class certified mail, postage paid, to the respective addresses given below, or to another address as is designated by written notice given to the other party.

In the case of the Licensee:	NeurogesX, Inc.
	969C Industrial Boulevard
	San Carlos, California 94070
	Attn: Howard Palefsky

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In the case of The Regents:	Office of Technology Management
	University of California San Francisco
	1294 Ninth Avenue - Box 1209
	San Francisco, CA 94143-1209
	Attention: Director
	Referring to: UCSF Case No. SF00-056

22. ASSIGNABILITY

22.1 This Agreement may be assigned by The Regents, but is personal to the Licensee and assignable by the Licensee only with the written consent of The Regents, which consent will not be unreasonably withheld; provided that the Licensee may assign this Agreement without The Regents’ consent to an entity that acquires substantially all of the business or assets of the Licensee (or that portion thereof to which this Agreement relates), in each case whether by merger, acquisition, or otherwise the acquiring party assumes this Agreement in writing or by operation of law.

23. NO WAIVER

23.1 No waiver by either party of any default of this Agreement may be deemed a waiver of any subsequent or similar default.

24. FAILURE TO PERFORM

24.1 If either party finds it necessary to undertake legal action against the other on account of failure of performance due under this Agreement, then the prevailing party is entitled to reasonable attorney’s fees in addition to costs and necessary disbursements.

25. GOVERNING LAWS

25.1 THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application.

26. PREFERENCE FOR UNITED STATES INDUSTRY

26.1 Because this Agreement grants the exclusive right to use or sell the Invention in the United States, the Licensee agrees that any products sold in the U.S. embodying this Invention or produced through the use thereof will be manufactured substantially in the United States.

27. GOVERNMENT APPROVAL OR REGISTRATION

27.1 Licensee shall notify The Regents if it becomes aware that this Agreement is subject to any U.S. or foreign government reporting or approval requirement. Licensee shall make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

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28. EXPORT CONTROL LAWS

28.1 The Licensee shall observe all applicable United States and foreign laws with respect to the transfer of Licensed Products and related technical data to foreign countries, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.

29. SECRECY

29.1 With regard to confidential information (“Data”), which can be oral or written or both, received from The Regents regarding this Invention, the Licensee agrees:

29.1.1 not to use the Data except for the sole purpose of performing under the terms of this Agreement;

29.1.2 to safeguard Data against disclosure to others with the same degree of care as it exercises with its own data of a similar nature;

29.1.3 not to disclose Data to others (except to its employees, agents or consultants who are bound to the Licensee by a like obligation of confidentiality) without the express written permission of The Regents, except that the Licensee is not prevented from using or disclosing any of the Data that:

(i) the Licensee can demonstrate by written records was previously known to it;

(ii) is now, or becomes in the future, public knowledge other than through acts or omissions of the Licensee; or

(iii) is lawfully obtained by the Licensee from sources independent of The Regents; and

29.1.4 that the secrecy obligations of the Licensee with respect to Data will continue for a period ending five (5) years from the termination date of this Agreement.

30. MISCELLANEOUS

30.1 The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

30.2 This Agreement is not binding on the parties until it has been signed below on behalf of each party. It is then effective as of the Effective Date.

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30.3 No amendment or modification of this Agreement is valid or binding on the parties unless made in writing and signed on behalf of each party.

30.4 For the purposes of this Agreement and all services to be provided hereunder, the parties shall be, and shall be deemed to be, independent contractors and not agents or employees of either of the other parties. No party shall have authority to make any statements, representations or commitments of any kind, or to take any action which shall be binding on either of the other parties, except as may be expressly provided for herein or authorized in writing.

30.5 This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof. The Secrecy Agreement effective August 20, 1999 (U.C. Control No. 2000-20-0104) is hereby terminated.

30.6 In case any of the provisions contained in this Agreement is held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality or unenforceability will not affect any other provisions of this Agreement, and this Agreement will be construed as if the invalid, illegal, or unenforceable provisions bad never been contained in it.

IN WITNESS WHEREOF, both The Regents and the Licensee have executed this Agreement, in duplicate originals, by their respective and duly authorized officers on the day and year written.

LICENSEE		THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:	/s/ Howard D. Palefsky	By:	/s/ Joel B. Kirschbaum
	(Signature)		(Signature)
Name:	Howard D. Palefsky	Name:	Joel B. Kirschbaum
	(Please Print)		(Please Print)
Title:	CEO	Title:	Director – OTM
Date:	27 October ‘00	Date:	10/30/00

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EX-10.6.1

Exhibit 10.6.1

AMENDMENT NUMBER ONE

TO

EXCLUSIVE LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA AND NEUROGESX, INC.

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation having its statewide administrative offices at 1111 Franklin Street, Oakland, California 94607-5200, (“The Regents”), and acting through its Office of Technology Management, University of California San Francisco, 1294 Ninth Avenue - Suite 1, Box 1209, San Francisco, CA 94143-1209 (“UCSF”) and NEUROGESX, INC., a California corporation having a principal place of business at 969C Industrial Boulevard, San Carlos, California, (the “Licensee”) hereby amend that certain Exclusive License Agreement, dated as of November 1, 2000, by and between the parties hereto (hereinafter the “Agreement”) effective as of November 1, 2001 (the “Amendment Date”).

WITNESSETH

WHEREAS, The Regents and Licensee entered into the Agreement;

WHEREAS, The Regents has not been able to provide the exclusive rights to Regents’ Patent Rights for which Licensee had bargained for; and

WHEREAS, The Regents and Licensee wish to continue their relationship regarding the Regents’ Patent Rights but on modified terms reflecting the changed economic basis of their relationship;

NOW, THEREFORE, in and for consideration of the promises and covenants contained herein and pursuant to Section 30.3 of the Agreement, The Regents and Licensee agree to amend the Agreement as follows:

1. Section 4.4 is hereby deleted in its entirety.

2. Article 6 is hereby deleted in its entirety.

3. Section 7.1 is hereby amended by replacing “one percent (1%)” with “one-half percent (0.5%)”.

4. Section 7.6 is hereby deleted in its entirety.

5. Section 7.7 is hereby amended by deleting the first sentence and subsections (a) through (d) and by moving the text of subsection (e) to immediately follow the section number so that there are no subsections in Section 7.7.

6. Section 7.7 (after amending as above) is hereby further amended by deleting “In addition,” in the first sentence.

7. Section 7.8 is hereby amended by replacing, in clause (ii), “Licensee” with “The Regents”.

8. Section 7.8 is hereby further amended by deleting, in clause (iii) “only with respect to the milestone payable under Section 7.7(e),”.

9. Section 9.1 is hereby amended by replacing “February 28, 2001” with “February 28, 2002”.

10. Section 17.5 is hereby deleted in its entirety and replaced with the following: “The Regents shall bear the costs of preparing, filing, prosecuting and maintaining all United States and foreign patent applications contemplated by this Agreement incurred after the Effective Date, and as required under Article 5 and Section 17.6.”.

11. Section 17.6 is hereby amended by deleting the third sentence of the section and replacing it with “This notice concerning foreign filing must be in writing and must identify the countries desired.”.

12. Section 17.7 is hereby deleted in its entirety and replaced with the following: “Licensee may terminate its obligations with respect to any given patent application or patent upon three (3) months written notice to The Regents. If such a notice of termination is received from the Licensee, The Regents may continue to prosecute and maintain such application(s) or patent(s) at its sole discretion and expense, but the Licensee will have no further right or licenses thereunder. If Licensee does not provide such a notice of termination as to any given patent application or patent within The Regents’ patent Rights, then The Regents’ obligation to underwrite and to pay patent prosecution costs will continue for so long as this Agreement remains in effect.”.

13. Section 17.8 is hereby deleted in its entirety.

14. A new Section 30.7 is added as follows:

30.7 In the event that, within one (1) year after the Amendment Date, Licensee agrees, at its sole discretion, to accept an assignment or license of rights to US Patent Application Serial No. 08/746,207 from Messrs. Staats and Pappagallo (or their executors, successors, or assigns), named inventors on such Application, such that Licensee has exclusive rights under such Application, The Regents and Licensee agree that the foregoing paragraphs 1-8, 10-12 of this Amendment shall be rescinded as of the date such assignment or license is perfected, and the original terms of the Agreement shall apply thereafter. In addition, Licensee shall be entitled to deduct its costs and expenses incurred with respect to such assignment or license, as well as any on-going royalty obligations, from any amounts due The Regents hereunder after the date such assignment or license is perfected.

SIGNATURES AND AGREEMENT

THIS AMENDMENT AND THE LICENSE AS AMENDED BY THIS AMENDMENT SETS FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE REGENTS AND LICENSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERCEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND WRITINGS IN RELATION THERETO. ALL MATERIAL REPRESENTATIONS AND WARRANTIES ON WHICH THE PARTIES HAVE RELIED IN CONNECTION WITH THE NEGOTIATION OF THIS AMENDMENT, IF ANY, ARE STATED EXPRESSLY IN THIS AMENDMENT.

Except as stated in this Amendment, all other elements of the original Agreement remain unchanged. In the event of any conflict between the terms of this Amendment and the License, the terms of this Amendment shall prevail.

This Amendment may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Amendment.

NEUROGESX, INC. (“LICENSEE”)		THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:	/s/ Gerard Pereira	By:	/s/ Joel B. Kirschbaum
Name:	Gerard Pereira	Name:	Joel B. Kirschbaum
Title:	VP, Business Development	Title:	Director - OTM
Date:	Nov. 16, 2001	Date:	11/21/01

EX-10.6.2

Exhibit 10.6.2

AMENDMENT NUMBER TWO

TO

EXCLUSIVE LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA AND NEUROGESX, INC.

This Amendment Number Two is made effective December 2, 2003 (the “Amendment Date”) between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation having its statewide administrative offices at 1111 Franklin Street, Oakland, California 94607-5200, (“The Regents”), and acting through its Office of Technology Management, University of California San Francisco, 185 Berry Street, Suite 4603, San Francisco, CA 94107 (“UCSF”) and NEUROGESX, INC., a California corporation having a principal place of business at 981F Industrial Boulevard, San Carlos, California, (the “Licensee”) (together “the Parties”). The Parties hereby amend that certain Exclusive License Agreement, dated as of November 1, 2000 (the “Agreement”) and Amendment Number One dated as of November 1, 2001 (“Amendment One”).

WITNESSETH

WHEREAS, The Regents and Licensee entered into the Agreement and Amendment One;

NOW, THEREFORE, in and for consideration of the promises and covenants contained herein and pursuant to Section 30.3 of the Agreement, The Regents and Licensee agree to amend the Agreement as follows:

1. Section 26.1 is hereby deleted in its entirety

SIGNATURES AND AGREEMENT

THIS AMENDMENT NUMBER TWO, AMENDMENT NUMBER ONE, AND THE EXCLUSIVE LICENSE AGREEMENT AS AMENDED BY THIS AMENDMENT NUMBER TWO AND AMENDMENT NUMBER ONE SETS FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE REGENTS AND LICENSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERCEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND WRITINGS IN RELATION THERETO. ALL MATERIAL REPRESENTATIONS AND WARRANTIES ON WHICH THE PARTIES HAVE RELIED IN CONNECTION WITH THE NEGOTIATION OF THIS AMENDMENT, IF ANY, ARE STATED EXPRESSLY IN THIS AMENDMENT.

Except as stated in this Amendment Number Two, all other elements of the original Agreement, as previously amended, remain unchanged. In the event of any conflict between the terms of this Amendment Number Two and the License, the terms of this Amendment Number Two shall prevail.

This Amendment may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Amendment.

NEUROGESX, INC. (“LICENSEE”)		THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:	/s/ Stephen Ghiglieri	By:	/s/ Joel B. Kirschbaum
Name:	Stephen Ghiglieri	Name:	Joel B. Kirschbaum
Title:	Chief Financial Officer	Title:	Director - OTM
Date:	12/3/03	Date:	12/02/03

EX-10.6.3

Exhibit 10.6.3

AMENDMENT NUMBER THREE

TO

EXCLUSIVE LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA AND NEUROGESX, INC.

This Amendment (“Amendment Number Three”) is made effective July 29, 2004 between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation having its statewide administrative offices at 1111 Franklin Street, Oakland, California 94607 (the “Regents”), and acting through its Office of Technology Management, University of California San Francisco, 185 Berry Street, Suite 4603, San Francisco, California 94107 (“UCSF”) and NEUROGESX, INC., a California corporation having a principal place of business at 981F Industrial Boulevard, San Carlos, California 94070 (the “Licensee”) (together, the “Parties”).

WHEREAS, the Parties have entered into that certain Exclusive License Agreement, dated as of November 1, 2000 (the “License Agreement”) an Amendment Number One thereto, dated as of November 1, 2001 (“Amendment Number One”) and an Amendment Number Two thereto, dated as of December 2, 2003 (“Amendment Number Two”), and now desire the amend the foregoing documents.

In consideration of the promises and covenants contained herein and pursuant to Section 30.3 of the License Agreement, the Parties hereby agree to amend the License Agreement and Amendment Numbers One and Two as follows:

1. Clause (ii) of Section 8.3 of the License Agreement shall be replaced in its entirety with the following phrase: “(ii) filing at least one NDA by November 1, 2008”.

2. Clause (iii) of Section 8.3 of the License Agreement shall be replaced in its entirety with the following: “(iii) commencing the marketing of at least one Licensed Product in one country by November 1, 2010”.

3. Section 7.7 of the License Agreement, as amended, shall be replaced in its entirety with the following:

“7.7 Licensee shall pay The Regents non-creditable milestone payments should either of the following occur while Commercial Sales or commercialization of a Licensed Product by Licensee are continuing: (i) the closing of an Initial Public Offering (“IPO”) of the Licensee’s common stock pursuant to a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission; or (ii) the closing of (x) a consolidation or merger of the Licensee with any other entity, (y) sale of all or substantially all of the assets of Licensee, or (z) sale of all or substantially all of the outstanding stock of the Licensee, pursuant to which the shareholders of the Licensee receive cash or publicly traded securities. Upon the occurrence of such event, the Licensee shall pay to The Regents total cash payments equal to X times P, where X is equal to 16,400 shares (which number of shares shall be subject to adjustment from time to time for any stock split, stock dividends, recapitalizations and the like) and P is equal to either the IPO offering price per share of common

stock, or in the case of a merger, acquisition or sale, the average price per share actually received by shareholders of the Licensee’s common stock from the acquirer. Such payments shall be paid in three (3) installments, with one third (1/3) of the total to be paid twelve (12) months after the closing date of such transaction, one third (1/3) to be paid twenty four (24) months after such closing date, and the remaining one third (1/3) to be paid thirty six (36) months after such closing date. In the event the transaction contemplated hereunder involves more than one closing date, the due date for payments owed to The Regents shall be measured from the date of the last closing.”

THIS AMENDMENT NUMBER THREE, AND THE LICENSE AGREEMENT AS AMENDED BY AMENDMENT NUMBERS ONE AND TWO SETS FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE REGENTS AND LICENSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERECEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND WRITINGS IN RELATION THERETO. ALL MATERIAL REPRESENTATIONS AND WARRANTIES ON WHICH THE PARTIES HAVE RELIED IN CONNECTION WITH THE NEGOTIATION OF THIS AMENDMENT, IF ANY, ARE STATED EXPRESSLY IN THIS AMENDMENT NUMBER THREE.

Except as stated in this Amendment Number Three, all other elements of the original License Agreement, as amended by Amendment Numbers One and Two, shall remain unchanged. In the event of any conflict between the terms of this Amendment Number Three and the License Agreement, as amended by Amendment Numbers One and Two, the terms of this Amendment Number Three shall prevail.

This Amendment Number Three may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Amendment Number Three.

NEUROGESX, INC. (“LICENSEE”)		THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“THE REGENTS”)
By:	/s/ Stephen Ghiglieri	By:	/s/ Susan Y. Nakashima
Name:	Stephen Ghiglieri	Name:	Susan Y. Nakashima
Title:	CFO	Title:	Business Manager, UCSF OTM
Date:	8/2/04	Date:	July 29, 2004

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EX-10.7

EXHIBIT 10.7

[***] CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

CLINICAL SUPPLY, DEVELOPMENT AND LICENSE AGREEMENT

This CLINICAL SUPPLY, DEVELOPMENT AND LICENSE AGREEMENT (this “Agreement”), is entered into as of 15 day of Jan., 2004 (“Effective Date”) by and between

NeurogesX Inc., a California corporation with its principal place of business at San Carlos Business Park, 981 F Industrial Road, San Carlos, CA 94070, USA (“NeurogesX”)

and

LTS Lohmann Therapie-Systeme AG, a company existing under the laws of Germany and having its head office at Lohmannstraße 2, D-56626 Andernach, Germany (“LTS”).

Each of NeurogesX and LTS shall be a “Party,” and together shall be referred to as the “Parties.”

RECITALS

WHEREAS, NeurogesX and LTS have previously entered into the Memorandum of Understanding dated May 29, 2001 (“MOU”), pursuant to which the Parties cooperated on the development of a Patch containing capsaicin and wish to complete such development under this Agreement;

WHEREAS, NeurogesX desires to seek Marketing Approval for the Patches in the Territory;

WHEREAS, NeurogesX desires to exclusively purchase from LTS, and LTS desires to exclusively supply to NeurogesX, Clinical Samples of the Patches, all in accordance with the terms and conditions of this Agreement;

WHEREAS, the Parties desire to restate all of their rights and obligations with respect to the Patches in this Agreement, and for this Agreement to supersede the MOU with respect to the Parties’ rights, obligations and activities from this point forward.

NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained and intending to be legally bound thereby, NeurogesX and LTS agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

As used herein, the following terms will have the meanings set forth below:

1.1 “Affiliates” of an entity means the other entities that control, are under common control or are controlled by the subject entity. For purposes of this definition, an entity shall be regarded as in control of another entity if it owns or controls fifty percent (50%) or more of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority).

1.2 “Clinical Samples” means Patches supplied by LTS under this Agreement meeting the Specifications, that are intended by NeurogesX to be used in human clinical trials for purposes of obtaining Marketing Approval for the Patches.

1.3 “Clinical Program Patents” means patents worldwide owned or Controlled by LTS covering or claiming any subject matter which is incorporated into, or utilized as part of the operation of, the Patches, or any method of use of the Patches.

1.4 “Control” means the possession at any time during the term of this Agreement of the right or power to grant licenses of or within the scope set forth herein without violating the terms of any agreements with non-Affiliate third parties.

1.5 “Current GMP,” or “cGMP” means then current Good Manufacturing Practices promulgated by the United States Food & Drug Administration (FDA) or its counterpart governmental agencies in the Territory in the form of laws, regulations or guidance documents.

1.6 “Defect” or “Defective” when applied to Clinical Samples means the failure of such Clinical Samples to meet the warranty set forth in Section 9.2.

1.7 “Development Costs” means those costs paid by NeurogesX to LTS for the development of the Patch, solely as set forth in the Development Plan, attached hereto as Exhibit D.

1.8 “Development Plan” means the development plan set forth in Exhibit D.

1.9 “Development Team” has the meaning as set forth in Article 4.

1.10 “Field” has the meaning as set forth in Section 7.2.

1.11 “Kit” means the ultimate commercial product in the form sold by NeurogesX, its Affiliates or Sublicensees of which the Patch(es) is a component.

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1.12 “Marketing Approval” means all approvals, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacturing, use, storage, import, transport and sale of Patches in a regulatory jurisdiction.

1.13 “Net Sales” means the [***] of Kits sold by NeurogesX, its Affiliates or Sublicensees to a non-Affiliate third party in bona-fide, arms-length transactions, after deducting (to the extent actually incurred and to the extent not already deducted in the amount invoiced): (a) [***] and [***], (b) [***] and [***], including for [***], and [***], (c) [***] and other [***] or [***] and [***], (d) if included in the [***] of the Kits, [***] or [***] (including any such [***] as a [***] or similar [***] or [***]), (e) if included in the [***] of Kits, [***] and [***] on [***] of Kits, and (f) [***] determined in accordance with Generally Accepted Accounting Principles in the United States, consistently applied.

If mutually agreed in writing by the Parties, some or all such items may be estimated and subsequently adjusted. If a Kit is sold for consideration other than solely cash, the value of such other consideration attributable to the sale of the Kit shall be included in calculating Net Sales. In the event Kit is sold by NeurogesX to an Affiliate or Sublicensees for resale, Net Sales shall include the amounts invoiced by such entities to third parties on the resale (excluding (a) through (f) above), but not the amounts invoiced by NeurogesX to such entities. Net Sales shall not include any sales of Kits as samples, for clinical trials, or for research and development efforts by or for NeurogesX.

1.14 “Patch” or “Patches” means any TTS containing VRl-Ligands of the same design as patches developed for or delivered to NeurogesX under the MOU or this Agreement which meet any version of the Specifications.

1.15 “Patch Regulatory Information” means any and all information in the possession of LTS relating to the Patches, as reasonably necessary for NeurogesX’s efforts to obtain Marketing Approval therefor in any regulatory jurisdiction, including without limitation (a) such information as is required for the Chemistry, Manufacturing and Controls (CMC) section of an Investigational New Drug application (IND) or New Drug Application (NDA) for the Patches, (b) all data regarding stability, storage conditions and shelf life of Clinical Samples, and (c) all data reasonably required to qualify a manufacturing facility for the Patches under Regulatory Requirements.

1.16 “Quality Assurance Agreement” means the quality assurance procedures then currently, mutually agreed upon in writing. The Quality Assurance Agreement as of the Effective Date is attached as Exhibit C.

1.17 “Reasonable Commercial Efforts” means those reasonable commercial efforts employed by a Party, equivalent to at least that level of attention and care that it devotes to its other businesses and products of similar commercial potential and at a similar stage of progress of development.

1.18 “Regulatory Requirements” means all laws, regulations and other legal requirements applicable to the manufacture of Patches or components thereof, including without limitation cGMP,

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

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FDA regulations, any applicable local laws and regulations in the place of manufacture, storage and handling, and any requirements set forth in the IND, NDA, Marketing Approval Application (MAA) and other regulatory filings or approvals for the Patches.

1.19 “Specifications” means the specifications for the Patches and/or Clinical Samples as then currently, mutually agreed upon in writing under the MOU or this Agreement. The Specifications for the Patches at the time of execution of the MOU is set forth in Exhibit B-l, and the Specifications for the Clinical Samples at the time of this Agreement is set forth in Exhibit B-2 of this Agreement. Unless indicated to apply to only a particular batch of Clinical Samples, the Specifications then currently agreed upon for the Clinical Samples shall also be the Specifications men currently agreed upon for the Patches in general.

1.20 “Sublicensees” means non-Affiliate third party to whom NeurogesX has granted (i) the right to market and sell a Product purchased from LTS under this Agreement or the Supply Agreement, provided that such third party has primary responsibility for and has the right to direct and control the marketing and promotion of such Product in its distribution territory and the right to record sales of such Product for its own account or (ii) the right to make (to the extent that NeurogesX has the right to do so pursuant to Section 7.3 or the Supply Agreement) and sell a Product, with respect to Products that were manufactured and then sold by such third party, within the scope of the license from LTS hereunder. For the avoidance of doubt, Sublicensee shall exclude retailers, wholesalers, distributors or specialty distributors, but shall include marketing partners of NeurogesX.

1.21 “Supply Agreement” has the meaning as set forth in Section 6.2.

1.22 “Territory” means the United States, European Union (in one or more countries therein selected by NeurogesX) and Japan (at NeurogesX’s option). In addition, the Territory may be extended by NeurogesX to include additional countries and/or regulatory jurisdictions in accordance with Section 3.7.

1.23 “TTS” means [***] or other patch products for delivering drugs [***].

1.24 “VR1-Ligands” means compounds that bind to the vanilloid receptor subtype 1, as further described in Exhibit A. The parties may amend Exhibit A from time to time upon mutual written agreement.

ARTICLE 2

SUPPLY OF CLINICAL SAMPLES

2.1 Supply of NeurogesX Requirements of Clinical Samples. Subject to the terms and conditions of this Agreement, LTS shall manufacture for and supply NeurogesX’s requirements of Clinical Samples. However, LTS shall not be liable under this Section 2.1 for failure to meet such obligation to manufacture for and supply NeurogesX’s requirements of Clinical Samples so long as LTS used its Reasonable Commercial Efforts to comply with its obligation stated in this Agreement.

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

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2.2 Purchase Orders. All supply of Clinical Samples hereunder shall be initiated by a purchase order placed by NeurogesX. Purchase orders shall include the quantity of Clinical Samples ordered, requested delivery date(s), and shipping destination and/or instructions. LTS shall accept and fill all purchase orders for Clinical Samples placed by NeurogesX hereunder, and shall deliver the Clinical Samples by the delivery dates requested therein, unless (a) a purchase order includes substantially higher volumes and/or provides for substantially shorter lead times than those purchase orders previously placed by NeurogesX and accepted by LTS, and (b) LTS cannot fill such purchase order by using [***]. With respect to such purchase orders, LTS shall notify NeurogesX within [***] business days of receipt thereof, and NeurogesX shall have the option, to be executed with [***] business days thereafter, to either (i) modify the purchase order based on the parties’ mutual discussion, or (ii) in case of LTS acceptance of such order (which shall not be unreasonably withheld provided that LTS shall not be forced to breach any of its other obligations), NeurogesX shall [***] LTS for its [***] beyond those normally [***], if any, for LTS to meet such order. Such [***] shall be [***] and [***] prior to acceptance of the order, and it is understood that LTS shall use [***] to [***] any such additional [***]. In the event LTS does not so notify NeurogesX within such [***] business days, NeurogesX’s purchase order shall be deemed accepted by LTS, and Section 2.2(ii) above shall not apply thereto.

2.3 Delivery. All Clinical Samples for delivery will be placed at the disposal of NeurogesX at the relevant LTS manufacturing facility. Title and risk of loss, delay or damage to the Clinical Samples in transit shall pass to NeurogesX upon delivery of the Clinical Samples to the carrier. Unless NeurogesX requests otherwise, all Clinical Samples shall be packed for shipment and storage fit for the respective way of transportation using the packaging set forth in Exhibit E and any requirements set forth in the Quality Assurance Agreement. In the event NeurogesX has any special freight packaging requirements, it shall notify LTS, and LTS will use Reasonable Commercial Efforts to comply with any such requirements. All costs associated with any special freight packaging requirement shall be borne by NeurogesX. NeurogesX shall bear all costs of freight, shipping and insurance as well as indirect taxes, including import, customs, excise and sales taxes but not income taxes related to the sale and purchase of the Clinical Samples hereunder.

2.4 Quality Assurances. LTS shall comply with each requirement set forth in the Quality Assurance Agreement with respect to manufacturing (and associated support functions including without limitation testing, release, stability studies), storage, handling and delivery of Clinical Samples to NeurogesX hereunder; provided, however, the provisions concerning LTS responsibility and liability as set forth in this Agreement shall supersede any conflicting provisions in the Quality Assurance Agreement or any amendment thereof.

2.5 Manufacturing Facility. LTS’s manufacturing facilities for the Clinical Samples are and shall continue to be in compliance with cGMP and shall be available for governmental inspection if any competent authority or governmental organization so requests. LTS shall promptly provide to NeurogesX any cGMP certificate issued by the competent authority/authorities.

2.6 Audits. NeurogesX and its Sublicensees shall have the right to audit LTS, its Affiliates, and any sub-contractors and vendors of LTS with respect to the Patches, as shall other third parties designated by NeurogesX and approved by LTS in written form (which approval shall not be unreasonably withheld) for compliance with this Agreement, at reasonable times and on reasonable notice and during regular business hours.

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

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2.7 Supply of Capsaicin. NeurogesX shall provide LTS with the necessary amounts of the active principle capsaicin according to the specifications as set forth in Exhibit I (“Materials”), solely for LTS to fill NeurogesX’s purchase orders for Clinical Samples placed under this Article 2, and for performing the activities described in the Development Plan under Article 3. LTS shall only perform identity testing of the Materials. NeurogesX shall retain all right, title and interest in the Materials. The Materials shall be (i) clearly marked as property of NeurogesX, (ii) stored under conditions specified in Exhibit I, (iii) kept free of any liens and encumbrances, and (iv) subject to inspection by NeurogesX at any time during LTS’s business hours. LTS shall maintain an accurate inventory of Materials and shall be responsible for any and all loss, damage, or theft of Materials. Upon termination or expiration of this Agreement (or an earlier request of NeurogesX), LTS will promptly deliver to NeurogesX or NeurogesX’s designee all Materials F.O.B. NeurogesX’s address first set forth above.

2.8 Conflicting Terms and Conditions. The supply of Clinical Samples by LTS to NeurogesX and of Materials by NeurogesX to LTS shall be solely in accordance with the terms and conditions of this Agreement ANY TERMS OR CONDITIONS OF ANY PURCHASE ORDER OR ACKNOWLEDGMENT GIVEN OR RECEIVED WHICH ARE ADDITIONAL TO OR INCONSISTENT WITH THIS AGREEMENT SHALL HAVE NO EFFECT AND SUCH TERMS AND CONDITIONS ARE HEREBY EXCLUDED AND REJECTED BY EACH PARTY.

ARTICLE 3

DEVELOPMENT

3.1 Continuing Development of the Patch. The Parties agree to cooperate on the continuation of the development of the Patch in accordance with this Agreement. LTS shall use Reasonable Commercial Efforts to continue carrying out the activities set forth in the Development Plan in accordance with the schedules set forth therein and this Agreement, and NeurogesX shall use Reasonable Commercial Efforts to continue to pursue obtaining Marketing Approval for the Patch in the Territory, and, if elected, any additional countries in accordance with Section 3.7 below.

3.2 Changes to the Specifications. Each Party shall be available to consult, and shall cooperate with the other Party with respect to any changes to the Specifications NeurogesX requires to facilitate obtaining Marketing Approval for the Patches in the Territory. Without limiting the foregoing, neither Party shall unreasonably withhold its approval for any changes to the Specifications that (a) NeurogesX reasonably determines are necessary for its efforts to obtain such Marketing Approval for the Patches in the Territory or (b) LTS reasonably determines are necessary to meet the CMC section of any HMD or NDA for the Patch (or the equivalents thereof outside the United States).

The Party requesting such change shall be fully responsible for any reasonable delay, complications and/or cost increases connected to such change. Changes to the Specification which are mutually agreed upon in writing shall apply to all Patches and/or Clinical Samples ordered after the date of such change, unless otherwise agreed upon by the Parties.

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3.3 Patch Regulatory Information. LTS shall provide NeurogesX with Patch Regulatory Information upon NeurogesX’s request. To the extent such Patch Regulatory Information constitutes LTS’s manufacturing or patch trade secrets, LTS may notify NeurogesX and provide a general description thereof, and if requested by NeurogesX, LTS may, instead of providing the Patch Regulatory Information to NeurogesX, elect to directly provide such Patch Regulatory Information to the applicable regulatory authority.

3.4 Regulatory Issues. LTS will notify NeurogesX in due time (and no later than five (5) business days after LTS obtaining notice thereof) of any inspections, written notice of findings and/or actions by regulatory agencies or other enforcement bodies of LTS facilities and/or processes which will directly affect the Patch. Where reasonably possible, LTS shall afford NeurogesX the opportunity to be present at any such inspections. LTS shall consult with NeurogesX in responding to any such inspections, written notice of findings and/or actions that directly affect the Patch, including by providing NeurogesX copies of any responses thereto for NeurogesX’s review and comment in advance of their submission to the regulatory agency, and using reasonable efforts to incorporate therein NeurogesX’s comments as appropriate.

3.5 Changes by LTS to the Manufacturing Process. Notification of intent by LTS to change any aspect of manufacture, which to LTS’s best knowledge has the potential to substantially affect the Patch will be provided by LTS to NeurogesX prior to implementation of the change, which change shall further be subject to the approval of NeurogesX.

3.6 Reporting Safety and Toxicity Problems. Each Party shall promptly advise the other Party of any safety or toxicity problems of which it becomes aware regarding the Patches or raw materials used in the manufacture of the Patches.

3.7 Additions to the [***]. NeurogesX shall have the right to elect from time to time to pursue [***] for the Patches in [***] or [***] other than [***] upon written notice to LTS within a reasonable lead time. In the event NeurogesX’s decision to add any [***] or [***] to the [***] shall cause LTS to [***], as a result of specific [***] of such [***] or [***] (“ [***]”), and/or impose requirements beyond LTS’s standard manufacturing practice, LTS shall in due time notify and discuss with NeurogesX such [***] and such additional requirements. Upon such mutual agreement of the [***] and ways of accommodating such additional requirements, NeurogesX shall have the option to either (a) modify or limit such addition to the [***], or (b) include such [***] or [***] within the [***] and [***] LTS for the [***]. It is understood that LTS shall use [***] to [***] any such [***] and accommodate such reasonable requirements.

3.8 Delegation to LTS Affiliates. LTS shall have the right to delegate all or any portion of its obligations under this Agreement to its Affiliates, provided that such Affiliates shall be bound by all of the terms and conditions set forth herein as if named as a Party, and provided further that LTS remains responsible for the performance of such Affiliates under this Agreement or otherwise.

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ARTICLE 4

COORDINATION

4.1 Development Team. Promptly after the Effective Date, the Parties will form a team (the “Development Team”) to facilitate communications and decision making by the Parties regarding the activities to be carried out pursuant to this Agreement including, but not limited to, facilitating the transfer of information between the Parties relating to NeurogesX’s applications for Marketing Approval, discussing capacity constraints and other supply issues, discussing additions to the Territory, establishing, supplementing and modifying the Patch development or the Specifications, discussing intellectual property issues relating to the Patch in conjunction with a competent patent counsel of NeurogesX and/or LTS as appropriate.

4.2 Composition. The Development Team shall consist of [***] representatives from [***], one of which shall be a designated project leader for such Party (the “Project Leader”). Each Party shall provide the other Party written notice of, and contact information for, its representatives on the Development Team. In the event that a member of the Development Team resigns, or a Party desires to replace one of its members, such Party will provide the other Party written notice of such event and the name of the member’s replacement.

4.3 Meetings. The Development Team will conduct formal meetings via teleconference or in person on at least a [***] basis, and will issue minutes of those meetings within [***] days to the management of each respective company.

4.4 Decisions. All decisions made by the Development Team shall be based on the mutual agreement of the Project Leaders. Each Project Leader shall have the authority to fully represent the position of his company and the decision of his company management, except with respect to any aspects of liability, In case the Project Leaders do not agree, the principal executive officers of NeurogesX and LTS or their designees shall try to resolve the dispute. Notwithstanding the foregoing, no action, inaction, decision or inability to reach a decision by or of the Development Team shall vary the terms and conditions of this Agreement, nor the rights and obligations of the Parties hereunder.

ARTICLE 5

PAYMENT

5.1 Payment: Rates. In accordance with this Article 5, NeurogesX shall compensate LTS, at a rate of:

(a) [***] per person hour, and

(b) [***] per machine hour for work performed on the large scale TTS production equipment;

each plus [***], if applicable, for all hours actually expended by LTS on activities set forth in the Development Plan performed in accordance with this Agreement (“LTS Activities”), such as for example, the supply of Clinical Samples to NeurogesX under Article 2 and continuing development

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activities under Article 3. It is understood that the amounts to be paid by NeurogesX under this Section 5.1 are in lieu of any purchase price to be paid by NeurogesX for the supply of Clinical Samples, and LTS shall not charge NeurogesX any amounts for the supply of Clinical Samples or its other activities hereunder except as expressly set forth in this Agreement.

5.2 Advance Payments. [***] days prior to the beginning of each calendar quarter during the term of this Agreement, LTS shall provide the Development Team for its approval an estimate of the hours it expects to spend on activities under the Development Plan in such quarter, broken down by category of activity (as approved, the “Estimated Hours”). Within [***] days thereafter, NeurogesX shall pay LTS an advance payment (“Advance Payment”) equal to the amount calculated under Section 5.1 for [***] of the Estimated Hours. LTS shall verify and document the person hours and machine hours actually expended on the LTS Activities each quarter, and will submit such documentation to NeurogesX along with an invoice at the end of each calendar quarter. If the amount actually owed under Section 5.1 for LTS Activities is less than the Advance Payment, then the difference will be credited against the amounts due in the succeeding calendar quarters, including without limitation any future Advance Payments. If the amount actually owed under Section 5.1 for LTS Activities is greater than the balance of the Advance Payment, then NeurogesX shall pay such difference within [***] days after receipt of the invoice. All payments hereunder shall be in Euros. Upon termination or expiration of this Agreement for any reason, (a) LTS shall promptly refund to NeurogesX any unused Advance Payments or (b) in case the amount actually owed under Section 5.1 for LTS Activities is greater than the balance of the Advance Payment, then NeurogesX shall promptly pay such difference.

5.3 Audits. At NeurogesX’s request, NeurogesX shall have the right through an independent auditor, acting in confidence, to audit LTS’s allocation of person-hours and machine-hours for the LTS Activities.

5.4 No Setoff nor Suspension of Performance.

(a) NeurogesX shall not exercise any right of setoff, net-out or deduction, take any credit, or otherwise reduce the balance owed to LTS, in each case with respect to payments under Sections 5.1 and 5.2 of this Agreement, unless the Parties otherwise agree or until NeurogesX has obtained a final and non-appealable judgment against LTS in the amount asserted by NeurogesX.

(b) LTS shall not have the right to suspend performance (including without limitation refusing or withholding delivery of Clinical Samples) under this Agreement unless and until LTS has obtained a final and non-appealable judgment against NeurogesX holding that NeurogesX has materially failed to perform its obligations under this Agreement relating thereto.

ARTICLE 6

OTHER ASPECTS OF THE BUSINESS RELATIONSHIP

6.1 Memorandum of Understanding. The MOU shall continue to be in effect only with respect to rights and obligations of the Parties prior to the Effective Date arising from activities prior to the Effective Date, notwithstanding any survival provisions set forth in the MOU. With respect to

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(a) activities of the Parties after the Effective Date, and/or (b) rights and obligations of Parties after the Effective Date (including those arising from activities under the MOU prior to the Effective Date), this Agreement shall supersede the MOU and the MOU shall be of no further effect. For purposes of determining the rights and obligations of the Parties after the Effective Date arising from the MOU, all activities by the Parties under the MOU shall be deemed to have been activities under Article 3 of this Agreement.

6.2 Supply Agreement. In case NeurogesX is interested in continuing to commercialize the Patches, LTS will be NeurogesX’s exclusive (to be defined in the Supply Agreement) partner for manufacturing and supply of the Patch, and NeurogesX will be LTS’s exclusive (as defined in Section 7.2 below) partner for sale and distribution of the Patches; subject to terms and conditions, including but not limited to [***], as well as [***], to be negotiated between the Parties in good faith (the “Supply Agreement”). Notwithstanding the foregoing, in the event the Parties cannot in good faith agree on the terms and conditions of the Supply Agreement within [***] after such negotiation has commenced, which shall not be later than [***] after the Effective Date (“Failure to Agree”), NeurogesX shall be free to negotiate and enter into any manufacturing and supply agreement(s) with any third party(ies) and its rights set forth in Section 7.3 below shall become active.

(a) Milestone Payment. It is the Parties’ intent that the Supply Agreement would provide for a one time payment by NeurogesX in the amount of [***] within [***] days of first receipt by NeurogesX of Marketing Approval of a Patch in the first launch country.

(b) Royalties. It is the Parties’ intent that the Supply Agreement would provide for a royalty rate of [***] on the Net Sales of Kits sold by NeurogesX, its Affiliates or Sublicensees, containing Patch(es) purchased from LTS under the Supply Agreement. Royalties shall be paid according to Section 7.3(e).

(c) Transfer Price. It is the Parties’ intent that the transfer price for the Patches shall be negotiated at the time of the negotiation of the Supply Agreement based on the non-binding price offer for the Patch provided by LTS in its letter dated June 13, 2001, attached hereto as Exhibit H, and the email dated August 29, 2002 from [***] to [***] amending the non-binding price offer based on discussions between the Parties regarding insurance and liability issues, which states that the non-binding price offer for the Patch shall be increased by not more man [***] per [***] Patches.

(d) Other Terms. To the extent the rationale behind the provisions set forth in this Agreement are applicable to like provisions of the Supply Agreement, the Parties shall endeavor not to vary the terms and conditions of such provisions when negotiating the Supply Agreement.

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ARTICLE 7 LICENSES

7.1 Clinical Program License to NeurogesX. LTS hereby grants NeurogesX a worldwide, [***], [***] right and license under the Clinical Program Patents and the Patch Regulatory Information to use said patents and information, for purposes of obtaining Marketing Approval for the Patches, including without limitation for designing and conducting clinical trials, toxicological, pharmacological and other studies, inclusion in the CMC documentation and other regulatory filings, and preparing documentation regarding the preparation, manufacturing and/or use of the Patches or the delivery of services relating thereto. The license set form in this Section 7.1 shall be exclusive, for purposes of obtaining Market Approval for TTS in the Field.

7.2 Limited Exclusivity.

(a) LTS shall for the duration of this Agreement and any future Supply Agreement not develop for, sell or license to, any third parties any TTS with capsaicin with an [***] (such TTS, the “Field”).

(b) LTS shall not use, manufacture, sell, distribute or license for or to any third party any Patches, except as authorized in writing by NeurogesX.

(c) Except as set forth in this Section 7.2, LTS shall at all times have the right to develop and/or manufacture any other TTS’s or products developed by LTS and/or a third party, even if it contains VRl-Ligands.

7.3 Backup Commercialization License.

(a) Definitions. For the purpose of this Section 7.3, the following terms will have the meanings set forth below.

(i) “LTS Know-how” means instructions, specifications, know-how, technology, materials and intellectual property describing the composition and manufacture of the Patches, including a description of the suppliers, raw materials, processes, equipment and instruments used for such manufacture and all Patch Regulatory Information. It is understood that LTS Know-how shall include all information or materials disclosed or provided under this Agreement, the MOU and the Secrecy Agreement.

(ii) “LTS Technology” means LTS Know-how and any and all patents or other intellectual property worldwide owned or Controlled by LTS which cover, is incorporated in or is used as part of any of the Patches, or which relate to a method of use or manufacture of any of the Patches.

(b) Delivery of Technology. In the event of a Failure to Agree (as defined in Section 6.2), in order to permit NeurogesX to manufacture or have manufactured and commercialize the Patch, LTS shall, upon NeurogesX’s request, deliver to NeurogesX at no additional cost, [***]

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[***]. EXCEPT AS SET FORTH IN THIS SECTION 7.3(B), LTS SHALL IN NO CASE BE OBLIGED TO PROVIDE ITS PROPRIETARY KNOW-HOW WITH REGARD TO GENERAL TTS MANUFACTURING METHODS, BUT SHALL IF REQUESTED BY NEUROGESX AND AT NEUROGESX’S COSTS [***].

(c) License. LTS hereby grants NeurogesX a world-wide right and license, with right to grant and authorize sublicenses, under LTS Technology, to use, make, have made, sell, offer for sale, import, promote, market, develop, obtain regulatory approval for and otherwise commercialize Patches and any derivatives or improvements thereof made by or for NeurogesX, and to [***]; provided that NeurogesX shall not exercise any rights set forth in this Section 7.3 except in the event of a Failure to Agree (as defined in Section 6.2). NeurogesX shall not disclose any LTS Know-how to any third party except in connection with exercising the rights set forth in this Section 7.3(c), and subject to reasonable confidentiality obligations on the part of such third party. [***]

(d) Royalties. In consideration of the license set forth in this Section 7.3, NeurogesX shall pay LTS a [***] running royalty on the Net Sales of Kits by NeurogesX, its Affiliates or Sublicensees, in the event NeurogesX exercises the rights set forth in this Section 7.3 for such Kits after a Failure to Agree.

(e) Computation of Royalties. The royalties set forth in Section 6.2(b) and 7.3(d) shall be computed for each applicable [***] period ([***]), and shall be due and payable within [***] days after such [***] period. For purposes of computing royalties, the Patch will be considered sold when paid for NeurogesX shall report to LTS, within [***] days after the end of each such [***] period during the term of this Agreement and thereafter, until all dispositions made pursuant to this Agreement have been accounted for, any and all royalties under Sections 6.2 or 7.3 accruing during such [***] period. NeurogesX shall keep records in sufficient detail to enable the royalties’ payable under the Section 6.2 or this Section 7.3 to be determined. The records of NeurogesX shall be available during reasonable business hours for inspection not more than once every [***] month period, by an independent Certified Public Accountant reasonably acceptable to NeurogesX acting in confidence and retained by LTS at LTS’s expense, for the purpose of verifying royalty reports and payments due hereunder. In the event of an underpayment by NeurogesX of more than [***] of the total is found, NeurogesX shall bear the costs connected with the verification.

7.4 Sublicensing. In the event NeurogesX desires to grant a sublicense to any third party under the licenses set forth in Section 7.1 and/or 7.3, [***], provided that

(a) LTS is informed of [***] (as it relates to the scope of such sublicense); and

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(b) those Sublicensees shall be obligated to indemnify LTS regarding product liability to the extent NeurogesX is so obligated under Sections 10.2 and 10.3(b).

ARTICLE 8

INTELLECTUAL PROPERTY

8.1 Inventions from the LTS Development of the Patch.

(a) LTS Owned. All inventions developed by the Parties under this Agreement solely relating to LTS’s existing TTS technology, including but not limited to [***] of TTS, shall be the property of LTS (“LTS IP”). [***]. NeurogesX hereby irrevocably assigns, and agrees to assign to LTS any right, title and interest it may have in and to the LTS IP, and shall assist LTS, upon reasonable request and at LTS’s sole expense, to secure or perfect any and all such rights.

(b) NeurogesX Owned. All inventions developed by the Parties under this Agreement [***] uses of VRl-Ligands shall be the property of NeurogesX (“NeurogesX IP”). LTS hereby irrevocably assigns, and agrees to assign to NeurogesX all of its right, title and interest in and to NeurogesX IP, and shall assist NeurogesX, upon reasonable request and at NeurogesX’s sole expense, to secure or perfect any and all such rights.

(c) Jointly Owned. [***] inventions developed by the Parties under this Agreement shall be the joint property of the Parties (“Joint IP”), provided that it does not belong to [***]. Neither Party shall have any obligation to account to the other Party for profits with respect to, or to obtain any approval of the other Party to license or exploit, any Joint IP by reason of their joint ownership, and each Party waives any such right it might have under the applicable laws in any country; provided, that NeurogesX [***] have the right to [***] applications and products.

8.2 Prosecution of Patents Covering the Patch.

(a) As used in this Sections 8.2 and 8.4, “prosecute” means the procedure(s) involved in securing patent rights in patent offices worldwide.

(b) LTS shall have the right, but not the obligation, to file, prosecute and/or maintain any patent or patent application solely owned by LTS covering the Patches.

(c) If LTS elects to file, prosecute and maintain any such patent or patent application, the expenses of such action shall be borne by LTS.

(d) If LTS elects not to file, prosecute or maintain any such patent or patent application in any jurisdiction, it shall notify NeurogesX at least [***] prior to the due date for action or payment. NeurogesX shall then have the right, to file, prosecute and/or maintain any such patent or patent application.

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(e) If NeurogesX elects to file, prosecute and maintain any such patent or patent application in such jurisdiction, the expenses of such action shall be borne by NeurogesX, and NeurogesX shall have a non-exclusive (except as set forth in this Section 8.2(e)), transferable, sublicensable, royalty free, perpetual license under such patents or patent applications to make, use, sell, offer for sale, export, practice and otherwise exploit the subject matter thereof. The foregoing license shall be exclusive for the Field. NeurogesX shall have the first right to enforce such patents and patent applications in the Field and retain all revenues therefrom, notwithstanding Section 8.3 below.

8.3 Third Party Infringement in the Field. Each Party agrees to promptly notify the other Party if it becomes aware of any third party’s TTS in the Field that infringes LTS’s patents covering the Patch (an “Infringement”). LTS shall have the first right, but not the obligation, to enforce its patents against any Infringement. LTS shall solely control any such enforcement action. LTS shall keep NeurogesX informed of the proceeding of such enforcement. In case NeurogesX believes LTS is not diligently pursuing the enforcement, NeurogesX shall have the right to consult with LTS. LTS agrees not to settle or otherwise terminate or delay its enforcement against any Infringement in a manner which would permit the third party to continue manufacturing and/or selling infringing TTS in the Field in contravention of the exclusivity granted to NeurogesX under Section 6.2 or Article 7 of this Agreement or the Supply Agreement. LTS shall not settle any Infringement action without the prior written approval of NeurogesX. In the event LTS notifies NeurogesX within 120 days after notice of an alleged Infringement by either party that it intends not to file suit against any alleged Infringement, or does not give any notification whether it intends to file suit within one hundred and twenty (120) days after notice of an alleged Infringement by either party or drops any action against an alleged Infringement, then NeurogesX shall have the right, but not the obligation, to enforce LTS’s patents covering the Patch against such alleged Infringement. LTS agrees to use Reasonable Commercial Efforts to assist and cooperate with NeurogesX in any enforcement by NeurogesX under this Section 8.3, at NeurogesX’s cost and expense. If LTS decides to enforce its patents against Infringement and NeurogesX permits LTS to claim NeurogesX damages, then any proceeds recovered from any such Infringement action shall be divided [***] between NeurogesX and LTS after first subtracting all legal and attorney fees and expenses. In the event NeurogesX is given the right to enforce LTS’s patents against Infringement and LTS permits NGX to claim LTS’s damages, then again any proceeds recovered from any such Infringement action shall be divided [***] between NeurogesX and LTS after first subtracting all legal and attorney fees and expenses.

8.4 Cooperation. Each Party shall cooperate with the other Party at the other Party’s expense to execute all lawful papers and instruments, to make all rightful oaths and declarations, and to otherwise assist the other Party including without limitation participating in enforcement actions, as may be necessary and reasonably requested in the preparation and prosecution of any or all patents and patents applications regarding the Patches, and the enforcement thereof.

8.5 IP Review by LTS. LTS shall review on a regular basis the intellectual property rights relevant for LTS’s work LTS shall give NeurogesX a confirmation in writing [***] a year (on or about [***] of each year) that, to the best of its actual knowledge, [***] with respect to the Patches.

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ARTICLE 9

REPRESENTATIONS AND WARRANTIES; DISCLAIMER; LIMITATION OF

LIABILITY

9.1 General Warranties. Each party represents and warrants to the other party that it is a corporation duly organized and validly existing under the laws of the state or country of its incorporation, the execution, delivery and performance of this Agreement by such party has been duly authorized by all requisite corporate action, and it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each party warrants and represents to the other party that it has not previously granted and will not grant any rights in conflict with the rights granted herein.

9.2 Clinical Samples. Subject to the limited liability provisions set forth in this Agreement, LTS represents and warrants that the Clinical Samples delivered to NeurogesX shall be in conformity with the Specifications, shall be manufactured in accordance with Current GMP and the Quality Assurance Agreement, and shall comply with all Regulatory Requirements.

(a) Rejection of Defective Clinical Samples. NeurogesX may reject Defective Clinical Samples (subject to NeurogesX providing sufficient evidence of appropriate and correct storage at all times according to the storage conditions set forth in the applicable Specifications) by delivering to LTS written notice of rejection, and if practical, specifying the nature of the Defect and the Clinical Samples lot number, within [***] days after receipt by NeurogesX of the applicable shipment. In the case of Clinical Samples with Defects that are not reasonably discoverable upon NeurogesX’s customary incoming quality control testing (“Latent Defects”), NeurogesX may reject such Clinical Samples within [***] days after discovery of the Latent Defects.

(b) Replacement of Defective Clinical Samples. During the [***] period commencing on the date the Clinical Samples are delivered to NeurogesX, LTS shall promptly (and in any event within [***] of receipt of notice of rejection) deliver to NeurogesX, at LTS’s own cost and risk, including shipping costs, replacements for any rejected Defective Clinical Samples, up to the maximum of units contained in the applicable lot; but provided that NeurogesX can prove by sufficient evidence mat such Defect is not due to the mishandling or incorrect or inappropriate storage (i.e., not in accordance with the Specifications) of the Clinical Samples by NeurogesX and or any third party who has had access thereto.

LTS shall have the right to examine any Clinical Samples rejected by NeurogesX, provided such examination shall not delay the shipping of replacement Clinical Samples. In the case LTS disagrees that the rejected Clinical Samples are subject to this Section 9.2, the claim may be submitted for tests and a decision by a mutually agreed upon, independent and reputable third party laboratory in the United States, which appointment shall not be unreasonably withheld or delayed by either Party. The determination of such laboratory shall be final and binding upon the Parties. The Party against whom the determination is made shall be responsible for the fees and expenses of such determination, as well as the costs of the replacements for the rejected Clinical Samples at issue, including shipping costs.

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9.3 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE PATCHES, CLINICAL SAMPLES AND CAPSAICIN SUPPLIED HEREUNDER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE WARRANTIES GIVEN UNDER THIS AGREEMENT ARE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED.

9.4 Limitation of Liability. EXCEPT WITH RESPECT TO ARTICLE 10 AS RELATED TO THIRD PARTIES AND ARTICLE 11, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

ARTICLE 10

INDEMNIFICATION

10.1 Product Claims. LTS shall indemnify NeurogesX from any third party claims, damages, losses, costs, expenses arising from the development, manufacturing and supply under this Agreement of Patches and Clinical Samples which, at the time of delivery, do not conform to the Specifications (“Product Claims”). NOTWITHSTANDING THE FOREGOING, LTS’S AGGREGATE LIABILITY UNDER THIS SECTION 10.1 IN EACH CALENDAR YEAR FOR PRODUCT CLAIMS THAT DO NOT RESULT FROM LTS’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, SHALL NOT EXCEED THE LIMITS OF [***].

10.2 Intellectual Property Claims.

(a) NeurogesX Caused. NeurogesX shall indemnify and hold harmless LTS from any third party claims, actions, proceedings alleging the infringement of any patent, trade secrets or other intellectual property of a third party (“IP Claims”), arising from LTS’s development, manufacturing, sale and using the Patches for or to NeurogesX, which IP Claims are caused by LTS’s use of any technology or intellectual property owned or supplied by NeurogesX.

(b) LTS Caused. With respect to any third party IP Claims arising from the development, manufacture, sale and use of the Patches or Clinical Samples under this Agreement by or for NeurogesX, which IP Claims are caused by use of any technology or intellectual property owned or supplied by LTS, including without limitation the design of the Patch and any LTS Technology (as defined in Section 7.3(a)(ii)) (an “LTS Infringement”), the following shall apply:

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(i) If either Party is sued for an alleged [***], [***] is liable up to an amount of [***] for all costs and expenses (including reasonable attorney’s fees and disbursements) incurred by [***] in connection with the defense of such IP Claims. For all costs and expenses incurred by [***] in defense of such IP Claims in excess of [***], [***] is liable and shall indemnify and hold harmless [***]. In the event [***] is the Party sued for an alleged [***], and [***] desires indemnification from [***], [***] shall promptly notify [***] of the alleged [***], permit [***] sole control of the defense and/or settlement of the alleged [***] as requested (but [***] may participate in such defense and/or settlement with counsel of its choice and its own expense), and cooperate with [***] with respect to such defense and settlement.

(ii) [***] agrees to automatically [***] under this Agreement and any future Supply Agreement by the [***] a court may require [***] to pay to a third party claiming a [***] in satisfaction of a judgment against [***], or by the [***] owed by [***] in any settlement of the [***]; provided that the [***] under this Agreement or future Supply Agreement shall not fall below [***].

(iii) In case of a court judgment which prohibits [***] from [***] as a result of an [***], [***] shall reimburse [***] for [***] of the [***]. This obligation shall only be valid during the term of this Agreement and future Supply Agreement.

(c) Sole Remedy for IP Claims. Notwithstanding any other provision of this Agreement, this Section 10.2 shall state the entirety of each Party’s obligations to indemnify and/or hold harmless the other Party and the entirety of each Party’s remedy from the other Party, with respect to IP Claims arising from the development, manufacturing, sale and/or use of the Patches.

10.3 Other Indemnification.

(a) LTS. Without regard to LTS insurance, LTS shall indemnify and hold NeurogesX harmless from any claims, damages, losses, costs and expenses (including attorney’s fees) (“Claims”) that arise from LTS’s gross negligence or willful misconduct in connection with the use, development, manufacturing, sale, distribution or application of the Patch.

(b) NeurogesX. Other than to the extent that LTS is obligated to indemnify NeurogesX pursuant to this Article 10 or otherwise arising from LTS’s gross negligence or willful misconduct, NeurogesX shall indemnify and hold LTS harmless from any Claims that arise from the [***] which shall include claims under Article 10.1 to the extent that they exceed [***], and not falling within Section 10.3(a) above or those claims addressed in Section 10.2, provided that (i) LTS promptly notifies NeurogesX of the Claim, (ii) NeurogesX has sole control of the defense and/or settlement of the Claim (but LTS may participate in such defense and/or settlement with counsel of its choice and its own expense), and (iii) LTS fully cooperates with NeurogesX with respect to such defense and settlement.

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10.4 Insurance.

(a) NeurogesX. NeurogesX shall obtain sufficient clinical trial insurance coverage of an amount reasonable and customary in the pharmaceutical industry considering the nature and extent of the clinical trials in question, which insurance coverage can also be self insurance.

(b) LTS. LTS shall obtain and maintain during the term of this Agreement and thereafter liability insurance covering its activities under this Agreement at a level no lower than that set forth in Exhibit F, if such coverage is available at terms and conditions not substantially more unfavorable than LTS’s present insurance coverage. LTS shall certify to NeurogesX each year of the extent of its insurance coverage, and shall promptly notify NeurogesX in the event its liability insurance covering its activities under this Agreement falls below the level set forth in Exhibit F.

ARTICLE 11

CONFIDENTIALITY

11.1 Confidential Information. The parties agree that the Secrecy Agreement dated January 23, 2001 executed between LTS Lohmann Therapy-Systems Corp. and NeurogesX and herein attached as Exhibit G (“Secrecy Agreement”) shall govern the confidential information disclosed by each party under this Agreement; provided that the “Purpose” set forth therein shall mean performing obligations and/or exercising rights under this Agreement, and the term of the confidentiality obligations thereunder shall be for the term of this Agreement plus [***], and that the provisions in this Agreement regarding choice of law venue and liability shall supersede the corresponding provisions in the Secrecy Agreement.

11.2 Confidential Terms/Publicity. Except as expressly provided herein, each party agrees not to disclose to any third party the terms of this Agreement without the prior written consent of the other party hereto, except (i) as required by securities or other applicable laws, in which case the disclosing party shall seek confidential treatment to the extent available, or (ii) to advisors, investors and others on a need-to-know basis under circumstances that reasonably ensure the confidentiality thereof, or (iii) to the extent required by law.

ARTICLE 12

TERM AND TERMINATION

12.1 Term. Unless terminated in accordance with this Article 12, this Agreement shall be in effect until the earlier of (a) NeurogesX obtaining (or notifying LTS in writing that it has abandoned its efforts to obtain) Marketing Approval for the Patches in each regulatory jurisdiction in the Territory, or (b) June 30, 2006. NeurogesX shall have the option (exercisable multiple times, each time for an additional two (2) years) to extend the date set forth in clause (b) above upon written notice at least thirty (30) days prior to such date; provided that at the time of such date NeurogesX is continuing to use Reasonable Commercial Efforts to obtain Marketing Approval for the Patches in one or more regulatory jurisdictions in the Territory or as expanded in Section 3.7.

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12.2 Termination for Breach. Each Party shall have the right to terminate this Agreement upon written notice, in the event of the other Party’s material breach hereof which is not cured within thirty (30) days after notice specifying such breach.

12.3 Termination upon Failure to Agree. Either Party shall have the right to terminate this Agreement in the event of a Failure to Agree (as defined in Section 6.2).

12.4 Survival. Articles and Sections 1, 2.7 (last sentence), 3.3, 3.6, 5.2 (last two sentences), 6, 7 (except 7.2(a)), 8, 9, 10, 11, 12 and 13 shall also survive any expiration or termination of this Agreement.

ARTICLE 13

MISCELLANEOUS

13.1 Dispute Resolution. The Parties shall attempt in good faith to resolve promptly any dispute arising out of or relating to this Agreement by negotiation. If the matter cannot be resolved in the normal course of business, any interested Party shall give to the other Party written notice of any such dispute not resolved, after which the dispute shall be referred to the principal executive officers of both Parties or their designees who shall likewise attempt to resolve the dispute. If the dispute has not been resolved by negotiations within forty-five (45) days of such written notice, each party shall have full access to personal jurisdiction and service of process in any venue or in any court at the seat of the defendant. Both Parties waive any right to demand a trial by jury.

13.2 Governing Law. In case LTS is the defendant, this Agreement is subject to German law, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. In no event in such case shall choice of law analysis lead to the application of other than German law. In case NeurogesX is the defendant, this Agreement is subject to the law of the State of California, the United States of America (including U.S. federal law), regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. In no event in such case shall choice of law analysis lead to the application of other than the law of the State of California.

13.3 Assignment. Neither Party shall have the right to assign this Agreement or its rights hereunder without a prior written consent of the other Party, provided, however, that no consent is required in connection with a sale or transfer of all or substantially all of the assets, securities or business of the assigning Party whether by sale, merger, operation of law or otherwise.

13.4 Independent Contractors. The relationship of LTS and NeurogesX established by this Agreement is that of independent contractors. Nothing in this Agreement shall be construed to create any other relationship between LTS and NeurogesX. Neither Party shall have any right, power or authority to assume, create or incur any expense, liability or obligation, express or implied, on behalf of the other Parties.

13.5 English Language. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions of this Agreement in any other language shall not be binding on the Parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language.

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13.6 Force Majeure. Neither Party shall be responsible or liable to the other party for, nor shall this Agreement be terminated as a result of, any failure to perform any of its obligations hereunder, if such failure results from circumstances beyond the control of such party, including, without limitation, requisition by any government authority, the effect of any statute, ordinance or governmental order or regulation, wars, strikes, lockouts, riots, epidemic, disease, an act of God, civil commotion, fire, earthquake, storm, failure of public utilities, common carriers or supplies, or any other circumstances, whether or not similar to the above causes and whether or not foreseeable. The Parties shall use their Reasonable Commercial Efforts to avoid or remove any such cause and shall resume performance under this Agreement as soon as feasible whenever such cause is removed; provided, however, that the foregoing shall not be construed to require either party to settle any dispute with any third party, to commence, continue or settle any litigation, or to incur any unusual or extraordinary expenses.

13.7 Notices. Any notice or other communication required by this Agreement shall be made in writing and given by prepaid, first class, certified mail, return receipt requested, and shall be deemed to have been given on the date received by the addressee at the following address or such other address as may from time to time be designated to the other Party in writing:

If to NeurogesX:	NeurogesX, Inc.
	San Carlos Business Park, 981F Industrial Road, San Carlos, CA 94070 United States of America Attn: President & CEO
If to LTS:	LTS Lohmann Therapie-Systeme AG,
	Lohmannstraße 2, D-56626 Andernach, Germany Attn: Legal Department

13.8 Compliance with Law. Each Party shall comply with all applicable national and local laws and regulations in connection with its activities pursuant to this Agreement.

13.9 No Waiver. A waiver, express or implied, by either LTS or NeurogesX of any right under this Agreement or of any failure to perform or breach hereof by the other Party hereto shall not constitute or be deemed to be a waiver of any other right hereunder or of any other failure to perform or breach hereof by such other Party, whether of a similar or dissimilar nature thereto.

13.10 Severability. If any provision of this Agreement shall be found by a court to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement, and the remainder of this Agreement shall remain in full force and effect

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13.11 Entire Agreement. This Agreement together with the Exhibits attached hereto constitutes the entire understanding and agreement between the Parties as of the Effective Date with respect to the subject matter hereof and supersedes any and all prior and contemporaneous negotiations, representations, agreements, and understandings, written or oral, that the Parties may have reached with respect to the subject matter hereof. No agreements altering or supplementing the terms hereof may be made except by means of a written document signed by the duly authorized representatives of each of the Parties hereto.

13.12 Article and Section Headings, Language and Construction. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references in this Agreement to “Articles,” “Sections” and “Exhibits” refer to the articles, sections and exhibits of this Agreement. The words “hereof,” “herein” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any subdivision contained in this Agreement. The words “include” and “including” when used herein are not exclusive and mean “include, without limitation” and “including, without limitation,” respectively. This Agreement has been negotiated by the Parties and their respective counsel. Accordingly, this Agreement will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either Party.

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

IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Agreement on the dates set forth below.

NeurogesX, Inc.		LTS Lohmann Therapie-Systeme AG
By:	/s/ Anthony DiTonno	By:	/s/ F. Becher                     /s/ K. Haczkiewicz
Name:	Anthony DiTonno	Name:	F. Becher                          K. Haczkiewicz
Title:	President and Chief Operating Officer	Title:	General Counsel               Manager Strategic Business Development
Date:	1-21-04	Date:	15 Jan. 2004

Exhibits

Exhibit A: VRl-Ligands

Exhibit B-1: Specifications as of execution of the MOU

Exhibit B-2: Specifications as of the Effective Date

Exhibit C: Quality Assurance Agreement

Exhibit D: Development Plan

Exhibit E: Packaging of Clinical Samples

Exhibit F: LTS Liability Insurance

Exhibit G: Secrecy Agreement

Exhibit H: Prior Correspondence Re: Transfer Price of the Patches

Exhibit I: Specifications for Materials

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EXHIBIT A

VR-1 LIGANDS

VR-1 Ligand is a vanilloid or related molecule selected from the group consisting of capsaicin, [***] such as [***] such as [***] such as [***] .

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

EXHIBIT B-l

SPECIFICATIONS AT THE TIME OF THE MOU

Confidential

NeurogesX

Annex 2: Required Properties of Transdolor™ Pain Treatment System Patches

Patch properties:

[***]

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

[***]

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

EXHIBIT B-2

SPECIFICATIONS AS OF THE EFFECTIVE DATE

EXHIBIT C

QUALITY ASSURANCE AGREEMENT

Addendum

Reference to the Memorandum of Understanding

Due to the fact that in the mean time an agreement of clinical supply and development has been finished in reference to the no. 1.2 of chapter 1 the following clause shall be supplemented to the agreement:

This Agreement is entered into pursuant to and is supplemental to the Memorandum of Understanding dated, May 29, 2001. In the event of any conflict between the provision of this Quality Agreement and the provisions of the Memorandum of Understanding, then the provisions of the Memorandum of Understanding or other subsequent agreements as for clinical supply and development shall prevail.

I. INTRODUCTION AND SCOPE

1.1 The purpose of this Quality Agreement is to define and establish the obligations and responsibilities of Lohmann Therapie-Systeme AG (LTS) and NeurogesX, Inc. (NGX) as they relate to the development, manufacture and supply of drug product to NGX by LTS. All manufacture and supply of drug product will be performed in accordance with current Good Manufacturing Practices.

1.2 This Agreement is entered into pursuant to and is supplemental to the Memorandum of Understanding dated, May 29, 2001. In the event of any conflict between the provision of this Quality Agreement and the provisions of the Memorandum of Understanding, then the provisions of the Memorandum of Understanding shall prevail.

1.3 NGX and LTS are responsible for the steps involved in manufacture, control, packaging and final release of drug product as specified in the Appendices contained herein.

1.4 This Agreement and appendices will be accessible to competent Regulatory Agencies as required.

1.5 Both the NGX and LTS Quality Assurance Units are responsible for keeping this document current, and changes as such will be submitted through the NGX Quality Assurance Unit, who shall be responsible for maintaining this Quality Agreement and its revision control. Modifications will be agreed between the parties and reflected in written addenda. This Agreement may be revised independently from the Memorandum of Understanding.

Section		Revision	Date
I	Definitions	00	Dec 20, 2002
II	Overview of Functions and Responsibilities	00	Dec 20, 2002
III	Description of Functions and Responsibilities	00	Dec 20, 2002
IV	Batch Accompanying Documents	00	Dec 20, 2002
V	Conditions for Storage, Packaging, and Shipment	00	Dec 20, 2002
VI	Persons to Contact	00	Dec 20, 2002
VII	Supplementary Agreements and Attachments	00	Dec 20, 2002

Section I

Definitions

cGMP – current Good Manufacturing Practices, which shall include all applicable standards relating to manufacturing practices for intermediates, bulk products, or finished pharmaceutical products (i) in the form of laws or regulations, or (ii) in the form of guidance documents (including, but not limited to, advisory opinions, compliance policy guides and guidelines) which guidance documents are being implemented within the pharmaceutical manufacturing industry for like products; in each case, which are promulgated by the FDA or its counterpart foreign governmental agencies or entities, as applicable.

FDA – United States Food and Drug Administration, or any successor agency.

SOP – Standard Operating Procedures.

C of A – Certificate of Analysis.

OOS – a test result that is outside of the preestablished specification and is investigated and documented per Standard Operating Procedures for such results.

Significant Event – a planned or unplanned deviation from the specifications, quality control procedures or manufacturing processes known to, or reasonably likely to have an impact on the quality, stability, shelf life or other characteristics of drug product, or that would require the parties to make additional regulatory filings, including, to the Investigation^ New Drug (IND) Application.

Significant Change – a proposed change to a raw material, packaging or labeling component, equipment, manufacturing method or procedure, product or material specification or requirement, sampling method, test method or release requirements or procedures of any kind known to, or reasonably likely to have an impact on the quality, stability, shelf life or other characteristics of drug product, or that would require the parties to make additional regulatory filings, including to the Investigational New Drug (IND) Application.

Production demonstration – also known as validation batches.

Stability – the ability of the drug product to remain within its established specifications throughout its retest or expiration period, as appropriate.

Quality Unit – an independent unit within organization responsible for duties associated with assuring the quality of the product.

Batch (or Lot) – a specific quantity of drug product or other material that is intended to have uniform character and quality, within specified limits, and is produced according to a single manufacture order during the same cycle of manufacture.

Master Production Record – a set of specific and detailed instructions required to manufacture a batch of drug product.

Final Product Specification – the combination of physical, chemical, biological, and microbiological tests and acceptance criteria that a drug product should meet throughout its shelf life.

Reference Standard – substances selected for their purity, critical characteristics, and suitability for use in assays for quantification and identity.

Third Party Service Provider – an independent service contracted for any aspect of manufacturing or testing.

Supplier – Any third party who provides materials that will be used in products or as primary packaging or labeling components for NeurogesX products.

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Section II

Overview of Functions and Responsibilities

NeurogesX, Inc. San Carlos Business Park 981F Industrial Road San Carlos, CA 94070-4117 USA LTS Lohmann Therapie-Systeme AG
Lohmannstraße 2 56626 Andernach Germany Third Party
N/A

Responsibilities:	NeurogesX	LTS	T.P.
Sponsor	[***]	[***]
STARTING MATERIALS
Active ingredients
Purchasing	[***]	[***]
Quality Control testing	[***]	[***]
Specification + methods	[***]	[***]
Reserve samples	[***]	[***]
Inactive ingredients
Purchasing	[***]	[***]
Quality Control Testing	[***]	[***]
Specification + methods	[***]	[***]
Reserve samples	[***]	[***]
Packaging materials
Purchasing	[***]	[***]
Quality Control Testing	[***]	[***]
Specification + methods	[***]	[***]
Reserve samples	[***]	[***]
PRODUCTION
Current production formula	[***]	[***]
- Manufacturing of the bulk, product and in- process controls	[***]	[***]
- Primary packaging (incl. in-process-controls)	[***]	[***]
- Cleaning Confirmation	[***]	[***]
- Secondary packaging (incl. in-process-controls)	[***]	[***]
Labeling for clinical supplies	[***]	[***]
QUALITY CONTROL
Release of raw materials	[***]	[***]
Testing of the final product	[***]	[***]
Release of clinical trial supplies	[***]	[***]

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

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Responsibilities:	NeurogesX	LTS	T.P.
Reserve samples final product	[***]	[***]
Stability
Stability protocol development	[***]	[***]
Stability protocol review and approval	[***]	[***]
Stability testing of clinical trial supplies Starting with phase I	[***]	[***]
Stability report generation	[***]	[***]
Establishing retest date	[***]	[***]
Analytical method development	[***]	[***]
THIRD PARTY QUALIFICATIONS
Third party manufacturers qualification	[***]	[***]
INVESTIGATIONS
Deviation investigation	[***]	[***]
Deviation approval (significant)	[***]	[***]
Out of specification results investigations	[***]	[***]
VALIDATION
Facility / utility / equipment validation plans	[***]	[***]
Facility / utility / equipment validation execution	[***]	[***]
Cleaning validation	[***]	[***]
Computer validation	[***]	[***]
Analytical method validation execution	[***]	[***]
Process validation plan	[***]	[***]
Process validation	[***]	[***]
Process validation report	[***]	[***]
Development reports	[***]	[***]
CHANGE CONTROL
Process and Formulation	[***]	[***]
Equipment	[***]	[***]
COMPLAINTS AND RECALLS
Complaints and Recalls	[***]	[***]

X in both columns – [***]

X* – to be available for review by NGX prior to finalization

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

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Section III

Description of Functions and Responsibilities

Production of product

LTS shall manufacture and test NGX’s drug product in accordance with LTS’s SOPs, cGMPs, applicable laws and regulations, including all applicable FDA regulations, any applicable local laws and regulations in the place of manufacture, and any IND, NDA, MAA and other regulatory filings or approvals for the drug product (collectively, the “Regulatory Requirements”), and applicable contracts between LTS and NGX, including the parties’ Memorandum Of Understanding, as amended on May 29, 2002. The manufactured product shall adhere to the specification supplied by NGX or as mutually agreed upon and in compliance with all cGMPs and any other applicable Regulatory Requirements. LTS will prepare for each batch of product manufactured for NGX, the complete production record documentation (see section IV, Batch Accompanying Documentation). This completed documentation will be retained by LTS in accordance with its document retention policy and Regulatory Requirements, and in no event less than 10 years. The documentation will be readily accessible for review and inspection by NGX and regulatory authorities, and true copies of these records will be sent to NGX by LTS for each batch of product produced.

Control of Suppliers

LTS shall maintain an approved supplier’s list in accordance with LTS’s procedures. NGX’s approval will be required for any supplier change for materials used in NGX’s products. LTS shall notify NGX of intended change in suppliers at least 6 months in advance of implementing the change. LTS will provide the Material Name, Supplier Name and Manufacturing Location to NGX upon request. The initial approved supplier’s list shall be subject to NGX’s written approval.

Third Party Service Providers

Should LTS employ a third party service provider (TPSP) for any manufacture, testing or performance of any ancillary function related to NGX’s product, NGX and LTS and the TPSP will agree on the following:

1. LTS will not use any TPSP without a written consent by NGX.

2. LTS will be the primary contact with the TPSP.

3. LTS will adequately qualify the supplier according to LTS policies and procedures and this Quality Assurance Agreement.

4. LTS will be responsible for release and review of any one part or all parts of the process performed by TPSP, and shall be responsible for any actions performed by the TPSP with respect to NGX’s product as if performed by LTS itself.

5. LTS will perform appropriate process transfer according to their internal procedures and applicable regulations.

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6. NGX retains the right to review or obtain copies of documents created by TPSPs and retained by LTS.

7. The Quality Assurance Agreement with TSPS shall not have discrepancies to this Quality Assurance Agreement or other agreements between LTS and NGX.

8. NGX will not give analytical methods or procedures of LTS to TSPS without written consent of LTS.

Printed Materials

NGX will be responsible for, and provide LTS with, all copy content and artwork for all printed materials associated with the product, e.g. labels, etc. NGX will be responsible for compliance with all necessary laws and regulations concerning such materials. The products supplied to NGX hereunder shall be packaged and labeled in accordance with instructions from NGX.

Drug Product Specifications

The referenced drug product(s) must be manufactured, packaged, labeled (if necessary) and handled according to the written specifications and procedures as outlined in this agreement. Changes to the specifications shall be mutually agreed upon and approved by both parties.

In testing drug product(s) NGX and LTS will agree upon the analytical methods requiring validation. For those methods which appear in the current compendia or other recognized standard references, a statement indicating the reference shall suffice. For those analytical methods developed by LTS, documentation supporting the validation of the analytical method shall be supplied upon request, to NGX.

Each lot of drug product will be sampled and tested in accordance with the agreed upon LTS procedures, cGMPs and must meet the specifications as outlined in this agreement.

Reserve samples

LTS shall keep retention samples of raw materials as required by LTS’s SOPs and Regulatory Requirements. LTS shall commit itself to keep reserve samples of drug product for regulatory purposes for each batch of drug product produced.

If batches are reworked and/or reprocessed additional retention samples will be collected and retained by LTS. The quantity of critical intermediate and drug product retained should be at least three times the amount to be able to perform all physical and chemical tests according to the Certificate of Analysis.

Deviations, OOS and Non-Conformances (Significant Events)

All deviations from approved, product–specific procedures or specifications, Out-Of-Specification test results of any kind, and any non–conformances to specifications will be considered Significant Events and will be investigated and resolved, as applicable, by LTS in consultation with

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NGX, provided that such Significant Event occurs during the manufacture of NeurogesX product and have, to the best of the knowledge of LTS, the potential to substantially impact the NeurogesX product. Reprocessing or reworking of drug product or intermediates will always be considered a Significant Event. LTS must notify NGX within 5 working days of each Significant Event, and within within reasonable time of the completion and results of the investigation concerning such Significant Event. The documentation of the occurrence of the Significant Event, the investigation and any necessary actions required for resolution will be retained as part of the batch document for the batch(es) affected and a copy thereof provided to NGX. On mutual agreement additional and more in-depth investigation of the Significant Event will be performed by LTS. NGX shall review the documentation for each Significant Event and provide the required approval in writing for each Significant Event as soon as reasonably possible after the deviation has occurred, but in no event later than release of the relevant batch(es).

All actions investigating non-conformances and justifying the release of the batch of material must be fully documented to best of the knowledge of each party. The non-conformance documents relating to drug product or drug substance will be subject to approval by both LTS and NGX.

Release and Shipment of Product

LTS has the responsibility to release finished drug product to NGX. LTS will not ship any of NGX’s product to any destination other than NGX until NGX has released the product and authorized shipment or unless prior approval has been received from NGX to perform such shipments.

A Certificate of Analysis (CofA) or applicable documentation, as well as a Certificate of Production Compliance, shall be provided to NGX by LTS for each batch of drug product produced. The CofA, or equivalent, will be generated upon completion of all testing requirements and will contain the items tested, corresponding acceptance criteria, and test results. NGX is responsible for the approval and final release of all finished drug product after review of LTS’ CofA and other required documentation. Upon approval, NGX will notify LTS of such approval by forwarding to LTS the NGX completed and approved batch release checklist.

Reprocessing and Rework

Reprocessing and rework activity can only be performed per agreement between both LTS and NGX. Reprocessing and rework directions must be established to define the process. Reprocessing and/or rework of material or product must be documented to state reason and justification for processing. A reprocessing or rework Batch Record will be written and issued following standard procedures.

Change Control

All changes to this Quality Agreement must be documented as an addendum and reviewed and approved by authorized QAU representatives of LTS and NGX.

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Changes to raw materials, packaging materials, equipment, utilities, facilities, manufacturing methods and procedures, product and material specifications and requirements, sampling, test methods, and release requirements will be implemented according the LTS’s change control procedures and, in cases of Significant Changes, will require NGX’s approvals. Changes to the approved Master Production Records and Final Product Specifications will always require LTS’s and NGX’s approvals.

LTS and NGX will jointly determine the most efficient route for handling change notifications. LTS will notify NGX of significant proposed changes at least 10 working days prior to the date of proposed implementation. LTS will not implement any changes without NGX’s written approval, which will be given or withheld by written notice within 5 working days after NGX receives LTS’s notice.

Audits and Inspections of Facilities and Products

LTS and TPSP’s will notify NGX (and in advance if possible) of any inspections or actions by regulatory agencies or other enforcement bodies in due time, of LTS’s or any TPSP’s facilities and/or processes which will directly impact NGX’s products. Where reasonably possible, LTS and TPSP’s shall afford NGX the opportunity to be present at such inspections.

NGX reserves the right to audit LTS’s facilities, systems, documents and processes (including validation, investigation and qualification processes) as they relate to the manufacture and control of NGX’s products or otherwise relating to LTS’s performance of this Agreement. These audits will be performed on an annual basis or as mutually agreed upon by LTS and NGX and at times convenient to NGX and LTS under such conditions as LTS may reasonable require in order to protect the confidentiality of it’s and other customer’s proprietary and confidential information.

NGX also reserves the right to audit TPSPs (e.g. contract laboratories, third party manufacturers, etc.) if utilized by LTS for NGX’s product. NGX reserves the right to be on site at LTS during manufacture of NGX’s products and/or during and regulatory inspection specific to NGX’s products with adequate notice to LTS. LTS will respond to, and forward all responses to observations, generated during NGX’s audit within 30 days of issuance.

Storage of Products

LTS agrees to store NGX’s products under appropriate product label storage conditions and in a secure area, to ensure they comply with all the quality specifications, attributes and in compliance with all applicable regulations. If special storage conditions are necessary for special purposes, the conditions, timeframes and material requirements will be supplied in writing by NGX.

Stability Activities

The responsibility for writing of stability protocols, stability testing, data interpretation and reporting will belong to LTS and will be conducted in accordance with ICH guidelines and in consultation with NGX. Stability protocols will be approved by NGX prior to initiation of the stability study. Stability protocols and reports will be subject to approval by NGX. Stability reports

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will be provided to NGX by LTS at regular intervals and stability milestones. Updating of stability information to regulatory documents for the product is the responsibility of NGX. All stability related activities under the responsibility of LTS will be completed in a timely manner according to the agreed-upon stability protocols and applicable regulations. NGX will notify LTS to terminate stability programs at the end of clinical trial or when the lot on stability is no longer relevant.

Investigational Product Complaints

Each party shall provide any information regarding product complaints to the other party. LTS will assist NGX with any investigations required in regards to such complaints as a highest priority under this agreement. The results of the investigation will be documented in writing and be provided to NGX as soon as feasible in a timeframe to be agreed upon by LTS and NGX. NGX will communicate with the customers and/or regulatory authorities the results of the investigation, if necessary.

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Section IV

Batch Accompanying Documentation

LTS will give a copy of the batch records to NeurogesX for clinical and PD batches (Production Demonstration). The following documents shall be forwarded to NeurogesX with each delivery of the product:

• Certificate of Production Compliance

• Certificate of Analysis

• List of raw materials used, date raw materials were released and retest or expiration date

• Manufacturing record for lots released by LTS

• Packaging record (if applicable)

• Labeling record (if applicable)

• Translation of comments made on records

• Deviations, including investigation/resolution documentation

• Out of Specification test results including investigation/resolution documentation for lots released by LTS*

• Analytical testing results for in-process and finished product testing

• Lot production tree (i.e. a list of all the lots (post raw material lots) used toward production of the final lot of drug product)

• Certificate of Batch Review by Quality

• Batch Record Document Inventory Checklist (list of documents sent to NGX for each batch)

• Copy of any clinical labels applied to drug product

• Copy of the shipping labels

* If an OOS result is confirmed, the batch will be rejected by QC. This batch will not be shipped to NGX or other destination and therefore NGX will not receive batch documentation

Section V

Conditions for Storage, Packaging and Shipment

See

• May 29, 2001 Memorandum of Understanding

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Section VI

NeurogesX, Inc. (NGX)
[***]	VP, Regulatory Affairs [***] [***]
[***]	VP, Pharmaceutical Science [***] [***]
[***]	Sr. Manager, Quality Assurance [***] [***]
LTS LOHMANN Therapie-Systeme AG (LTS)
[***]	Head of Quality Control [***] [***]
[***]	Head of Production [***] [***]
[***]	Acting Head of Quality Assurance [***] [***]
[***]	Head of Regulatory Affairs [***] [***]

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

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Section VII

Supplementary Agreements

Attachment 1 – NeurogesX: Example of an order for Clinical Batches

Attachment 2 – Example of the Shipping Confirmation

Attachment 3 – Example of the Batch Record Document Inventory Checklist

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Example for Formula Assignment for Clinical Trials

Manufacturing Order (Attachment 1)

Address of Sponsor:

NeurogesX, Inc., 981F San Carlos, CA 94070-4117, USA

According to the existing Memorandum of Understanding for clinical Samples, dated May 29, 2001 the following joint project decision has been taken:

1. The following formula(e) of the patch, developed by LTS, will be used in a clinical study:

(in case of more than one formula, every one has to be listed separately)

Formulation	Capsaicin patch, active, composition as batch no.: XXXXXXX		IND XXXX
Shelf life: [***] after mass preparation, stability-data are available ([***], [***] °C/[***]% RH, [***]°C/[***]% RH and [***]°C/[***]% RH)
Batch size: Not less than XXXX patches		Size: XXX cm2, XX x XX cm2
Current manufacturing instruction LTS:		XXXXX

Imprint on cardboard boxes: (e.g.: (Drug)- xxx cm2, potency: xx mg xxx/, batch no., material no., for clinical trials only, for skin application only, 1 box contains xxx, address of LTS,)	NeurogesX, Inc. San Carlos, CA 24670 Capsaicin Dermal Patch Strength: xx mg/cm2 Quantity per Pouch: One patch, xxx cm2 Lot No. 811xxxxx Instructions: Apply as Directed in Protocol For Dermal Use Only Store At Controlled Room Temperature 20-25°C (68-77°F) CAUTION: New Drug – Limited by Federal Law to Investigational Use
Storage conditions before shipment to CRO: (humidity, temperature, others)	20-25°C
Storage conditions during shipment to CRO: (humidity, temperature, others)	nmt 30°C
Storage conditions at CRQ site: (humidity, temperature, others)	20-25°C
No. of samples to be shipped: Shipping date:

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

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This construction and the currently established process have been developed to establish a reasonable basis for further development. The study results will according to current knowledge lead to significant progress (e.g. formulation refinement or decision of alternatives). The ingredients selected are regarded to be acceptable for human use.

2. A clinical trial with above test formula will be performed at: n.a.

Date: n.a.

Clinical development phase
Shelf life: [***] after mass preparation, stability data are available ([***], [***] °C/[***]% RH, [***]°C/[***]% RH and [***]°C/[***]% RH
Study Design: (1-, 2-..armed, cross-over, no. of volunteers/patients)	n.a.
Sampling: (type (blood, urine), possibly sampling times))	n.a.
Studying objective: (e.g. preliminary pharmacokinetics of)	n.a.
Application period: (e.g. 24 hours)	n.a.
Reference Medication (if any): (e.g. IND, CTX, if applicable)	IND XXXX
There is a joint agreement that the study design is suitable to support further formula decisions in the development process
For GMP responsibilities, contact:	[***]
NeurogesX, Inc. orders to manufacture the above mentioned clinical batch/batches by LTS
(Project Manager LTS R&D)	Project Manager/responsible Person Partner Company)

Shipping Confirmation (Attachment 2)

SECTION 2: LOHMANN

Date Request Received:
Ship as Requested? Yes  ¨    No  ¨
(If no, explain)
Description of Units Shipped:
Material Description	Quantity	Lot Number

Date Shipped:	Method of Shipment:	Tracking No.:
AUTHORIZED SIGNATURE:		Date:
Immediately upon shipment of this order, complete section 2, and fax this form to:
, NeurogesX, Inc.
Tel no. 001-650-508-2116, fax no. 001-650-622-0998

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

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SECTION 3: MATERIAL RECIPIENT

Recipient:

Date Received:                                                                          Received by:                                                 

Any Discrepancies Noted? Yes  ¨    No  ¨

Condition of Shipment & Comments                                                                                                                                                        

AUTHORIZED SIGNATURE:                                                                                                           Date:                            

Immediately upon receipt, check shipment, complete section 3, and fax this form to:

                                                                                                              , NeurogesX, Inc.

Tel no. (650) 508-2116, fax no. (650) 622-0998

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EXHIBIT D

DEVELOPMENT PLAN

[Parties need to revise dates on the Development Plan]

EXHIBIT E

PACKAGING OF CLINICAL SAMPLES

Clinical Samples shall be supplied as unlabeled patches, within pouches without labeling or with labeling as specified by NeurogesX in the Quality Assurance Agreement. NeurogesX understands that some pouch marking such as a lot number will probably be required by LTS’ QA group. The patches themselves, however, must have no marking that could trace to dosage strength. Patches in pouches will be bulk packaged in suitable containers and shippers for shipment to NeurogesX.

EXHIBIT F

LTS LIABILITY INSURANCE

EXHIBIT G

SECRECY AGREEMENT

SECRECY AGREEMENT

between

LTS LOHMANN Therapy Systems Corp., 21 Henderson Drive, West Caldwell, New Jersey 07006 (“LTS”)

and Neurogesx Inc., 969 C Industrial Road, San Carlos, CA 94070 (“PARTNER”)

with respect to:

a [***] analgesic patch containing a natural product (“Information”)

the following Secrecy Agreement has been agreed upon herewith:

1.1 Insofar as a party provides such Information it will be referred to herein as the “DISCLOSING PARTY”; insofar as a party receives such Information it will be referred to herein as the “RECIPIENT”.

1.2 RECIPIENT shall treat as confidential and secret all Information including but not limited to data, know–how, formulas, processes, specifications, organization, mechanical equipment and/or trade secrets which have been or may hereafter be disclosed; directly or indirectly by DISCLOSING PARTY to RECIPIENT, either orally or in writing, or through inspection, as well as samples (“Information”), which might be necessary for experiments and tests concerning effectiveness and importance for the market and shall use the Information only for the purpose of evaluating its interest in making appropriate commercial arrangements (“Purpose”) with LTS.

1.3 Information disclosed to RECIPIENT must be identified as being confidential and if disclosed orally be reduced to writing by DISCLOSING PARTY and sent to RECIPIENT within 30 (thirty) days from disclosure.

1.4 RECIPIENT shall not copy or disclose any Information, without express prior written agreement of DISCLOSING PARTY, save that LTS may disclose any of the Information to any of its affiliated companies on the same terms as this Agreement.

1.5 RECIPIENT shall neither directly nor indirectly through its employees, agents, affiliates or other persons or entities connected to RECIPIENT use or put into production Information, which has been received from DISCLOSING PARTY, except for Purpose of this Agreement.

1.6 RECIPIENT shall not forward any Information to third parties without express prior written consent of DISCLOSING PARTY, save as stated above.

1.7 RECIPIENT shall limit access to the Confidential Information from the disclosing party to those of its officers and employees who need to know such Confidential Information for the purpose of this Agreement and who will be advised of the conditions of this Agreement.

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

1.8 RECIPIENT shall not use Information to contest or challenge any protected rights or applications for protection of rights concerning Information, and shall refrain from undertaking any action which, to its knowledge based on due diligence, could affect such protected rights or impede any applications by using Information.

1.9 RECIPIENT shall keep all Information in good condition and a safe place and return them on request, provided, however that the RECIPIENT may keep one copy thereof for purpose of maintaining records of Information received hereunder.

2. This Secrecy Agreement shall not apply for Information and know–how which RECIPIENT can show by competent proof that

(a) it was, at the time of disclosure, in the public domain;

(b) it has, subsequent to disclosure, become part of the public domain through no fault, act, omission or violation by RECIPIENT of the confidentially obligation;

(c) it was, at the time of disclosure, in the possession of the RECIPIENT and not otherwise acquired, directly or indirectly, from the DISCLOSING PARTY;

(d) it has been developed independently by the RECIPIENT without access to the Information;

(e) it has, subsequent to disclosure been obtained by RECIPIENT from any other third party, provided, however, that it was not obtained by said third party, directly or indirectly, from the DISCLOSING PARTY under any obligation of confidentiality.

3. Any information disclosed to the other party hereto which is a distinct use or evaluation of, or a distinct combination with non–proprietary information and/or with proprietary Information shall be deemed to be distinct proprietary Information subject to this Agreement.

4. In case the disclosure of confidential Information is necessary to allow either LTS or PARTNER to defend itself against litigation, or to file and prosecute health registration applications, patent applications or to comply with judicial decrees or government actions or regulations such disclosure shall not constitute a breach of the confidentiality obligations set forth herein provided, however, that prior written consent by the DISCLOSING PARTY has been obtained, which shall not be unreasonably withheld and shall be rendered as soon as practical.

5. No right or license to any patent, trade secret or intellectual property to either party is granted by this Agreement. Nothing in this Agreement shall be construed as an obligation to provide proprietary Information and/or as to grant any licensing agreement and/or any other agreement.

6. The unenforceability of one or more provisions of this Agreement shall not affect the enforceability of the remainder of the Agreement. Any unenforceable provisions or void provisions shall be replaced with comparable provisions that are enforceable and conform to the purpose and intention of this Agreement.

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7. This Agreement, and all rights and obligations of the parties under this Agreement, shall terminate five (5) years after the date of the latest signature under this Agreement.

8. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

The parties hereto unconditionally and irrevocably agree and consent to personal jurisdiction in any court that has jurisdiction within the state of New Jersey and waive any objection with respect thereto, for the purpose of any action, suit or proceeding arising out of or relating to this Agreement and/or the respective business relationship and further agree not to commence any such action, suit or proceeding except in any such court.

9. In the event that any dispute or claim of any sort arising out of this Agreement concerning the Information and or any dispute or claim concerning competent court and/or jurisdiction and/or execution of any award granted by a foreign court or arbitration panel should lie in a jurisdiction in which trial by jury is standard or may be demanded, each of the parties irrevocably waives any right to demand or request a trial by jury, and agrees to take such further action as it is necessary to petition or apply for a trial without a jury.

10. Under no circumstances shall LTS be liable for damages not specified in this Agreement, whether direct, indirect, special or consequential, lost profits and/or punitive damages unless covered by the insurance it maintains, provided, that this exclusion of liability does not apply if such agreement would be invalidated by stringent law as it may be the case of intentional misconduct or willful default.

11. PARTNER acknowledges that LTS has had prior experience with the Coating Foam/Tape technology and that in the event of any allegation by LTS of PARTNER’S breach of this Confidentiality Agreement, and the establishment of PARTNER having communicated or used Confidential Information related to LTS technology, the burden of proof that such information is not Confidential Information shall be borne by PARTNER.

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12. This Agreement embodies the entire understanding of the patties relating to the subject matter hereof and supersedes all prior understandings and agreements. No modification or amendment of this Agreement shall be valid or binding unless such modification or amendment is in writing and is signed by each of the parties hereto.

LTS LOHMANN Therapy–Systems Corp.	Neurogesx Inc.
/s/ Patrick A. Walters	/s/ Gerard Pereira
Patrick A. Walters, CEO	Gerard Pereira, VP Business Development
West Caldwell, ND 07006, 01-19-01	San Carlos, 01/23/01
Place, Date	Place, Date

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EXHIBIT H

TRANSFER PRICE OF THE PATCHES

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EXHIBIT I

MATERIAL SPECIFICATIONS

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EX-10.8

Exhibit 10.8

MANUFACTURING AND SUPPLY AGREEMENT

This MANUFACTURING AND SUPPLY AGREEMENT (this “Agreement”), effective as of December 22, 2005 (the “Effective Date”), is made by and between NeurogesX Inc., a Delaware corporation having a principal place of business at San Carlos Business Park, 981F Industrial Road, San Carlos, California 94070 U.S.A. (“NeurogesX”), and Contract Pharmaceuticals Limited Canada, an Ontario corporation having a principal place of business at 7600 Danbro Crescent, Mississauga, Ontario Canada, L5N 6L6 (“CPL”). NeurogesX and CPL may be referred to herein each, individually, as a “Party” or, collectively, as the “Parties”.

BACKGROUND

A. NeurogesX has developed a certain formulation and manufacturing process for a cleansing gel for use in connection with NeurogesX’s capsaicin products.

B. CPL has the capability and know-how necessary to manufacture and supply such cleansing gel in bulk and finished form, as well as to provide certain research, development and other services relating to such cleansing gel.

C. NeurogesX desires to engage CPL, and CPL desires to perform, the manufacturing and supply of such cleansing gel in bulk and finished form and related services for NeurogesX, all on the terms and conditions set forth herein.

NOW THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following capitalized terms shall have the meanings indicated below:

1.1 “Act” shall mean the United States Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.) and the regulations promulgated thereunder, as such may be amended from time to time.

1.2 “Approval” shall have the meaning as set forth in Section 7.1 below.

1.3 “Confidential Information” shall have the meaning as set forth in Section 10.1 below.

1.4 “CPL Background Technology” shall mean all patent rights, know-how and other intellectual property rights developed by CPL outside the scope of this Agreement (including outside the scope of any Services) without use of or reference to NeurogesX’s Confidential Information, or otherwise acquired or licensed by CPL, in each case to the extent controlled by CPL as of the Effective Date or at any time during the term of this Agreement.

1.5 “Deliverables” shall mean the information, materials, Product batches, Documentation, and other identified items that CPL is obligated to provide to NeurogesX pursuant to a Proposal.

1.6 “Documentation” shall mean all written materials generated in connection with the Services, including the Master Production Record, test results, Certificate of Analysis (“CoA”), analytical test methods, reports, protocols and any other documents related to the manufacturing process for the Product, as well as such other documents reasonably necessary for NeurogesX to complete its regulatory filings or technology transfer.

1.7 “Facility” shall mean CPL’s GMP manufacturing facility located at 7600 Danbro Crescent and/or testing laboratory (Innopharm) at 1 Valleywood Drive.

1.8 “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereto.

1.9 “GMP” shall mean current good manufacturing practice and standards as provided for (and as amended from time to time) in the Current Good Manufacturing Practice Regulations of the U.S. Code of Federal Regulations Title 21 (21 CFR §§ 210 and 211) and in European Community Directive 91/356/EEC (Principle and guidelines of good manufacturing practice for medicinal products) in relation to the production of pharmaceutical products, as interpreted by the ICH Harmonized Tripartite Guideline, any U.S., European, or other applicable laws, regulations or respective guidance documents subsequently established in the Territory, and any arrangements, additions or clarifications agreed from time to time between the Parties.

1.10 Master Production Record” shall mean that certain document approved by NeurogesX that defines the manufacturing methods and procedures, test methods, specifications, materials, and other procedures, directions and controls associated with the manufacture and testing of Product.

1.11 “NeurogesX IP” shall have the meaning set forth in Section 6.1 below.

1.12 “Product” shall mean the Bulk Product or Finished Product, as applicable.

(a) “Bulk Product” shall mean the bulk cleansing gel product meeting the applicable Specifications.

(b) “Finished Product” shall mean the packaged cleansing gel product meeting the applicable Specifications.

1.13 “Quality Agreement” shall mean that certain Quality Assurance Agreement between the Parties dated March 25, 2003, which is attached hereto as Exhibit A and as such may be modified pursuant to the terms set forth therein.

1.14 “Raw Materials” shall mean all raw materials, supplies, components and packaging necessary to manufacture the Product in accordance with the Specifications.

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1.15 “Regulatory Requirements” shall mean (i) compliance with all applicable laws, rules, guidelines, regulations and standards of governmental authorities, including GMP, and (ii) obtaining and maintaining all licenses and other authorizations required by regulatory authorities, that in each case are applicable to the manufacturing, processing, and supply activities hereunder, the Facility, or any other facilities at which any of the manufacturing or process activities hereunder may be performed or are applicable in the Territory.

1.16 “Services” shall mean the development, validation, manufacturing and/or other services performed by CPL pursuant to a Proposal.

1.17 “Specifications” shall mean (i) with respect to Bulk Product, the specifications set forth on Exhibit B hereto, or (ii) with respect to Finished Product, the specifications set forth on Exhibit C hereto; in each case as such may be modified pursuant to Section 3.6 below.

1.18 “Proposal(s)” shall have the meaning set forth in Section 4.1 below, as such may be modified pursuant to Section 4.3 below.

1.19 “FTE” shall mean ‘full-time equivalent’ and provide the basis for charging CPL personnel to NeurogesX for services performed. The charge out rate will be $100 USD per hour.

1.20 “Territory” shall mean Canada, United States and European Union (EU) collectively. In addition, the Territory may be extended by NeurogesX to include countries and/or regulatory jurisdictions in accordance with Section 3.6(b) below.

ARTICLE 2

SUPPLY

2.1 Product Supply. Subject to the terms and conditions of this Agreement, CPL shall supply to NeurogesX all quantities of the Product ordered by NeurogesX under this Agreement.

2.2 Raw Materials. CPL shall be responsible, at its expense, for procuring, inspecting and releasing adequate Raw Materials from vendors approved by NeurogesX, which approval, shall not be unreasonably withheld or delayed, as necessary to meet NeurogesX’s purchase orders, unless otherwise agreed to by the Parties in writing. CPL shall conduct tests on each Raw Material and shall provide NeurogesX with results of such tests.

2.3 Forecasts. At least one hundred eighty (180) days before the commercial launch of the Product or a product incorporating the Product, NeurogesX shall provide CPL with an initial forecast of the quantities of Product estimated to be required from CPL during the four (4) calendar quarter period following such launch. Thereafter, at least ninety (90) days prior to each calendar quarter (“Q1”), NeurogesX will provide CPL with a rolling forecast of the quantities of Product estimated to be required during Q1 and the next three (3) calendar quarters (“Q2”, “Q3” and “Q4”, respectively). For clarity, all forecasts provided to CPL under this Section 2.3 are for advisory purposes, with the exception of Q1 demand which will be binding on all required raw materials and packaging components to make the Product or a product incorporating the Product, and Q2 which will be binding on tubes only. Should orders for Product or a product incorporating the Product for Q1 not materialize within the period for which CPL has purchased materials per this Agreement, NeurogesX will reimburse CPL for the cost of all materials (raw materials and packaging components) purchased against the applicable forecast for Q1 and not used within six (6) months.

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2.4 Orders. NeurogesX’s orders for Product shall be made pursuant to a written purchase order on its standard form specifying the desired quantity of Bulk Product and/or Finished Product, and will provide for shipment in accordance with reasonable delivery schedules and lead times as may be agreed upon from time to time by CPL and NeurogesX so long as the maximum lead time shall not exceed ninety (90) days unless otherwise agreed to by the Parties. ANY ADDITIONAL OR INCONSISTENT TERMS OR CONDITIONS OF ANY PURCHASE ORDER, ACKNOWLEDGMENT OR SIMILAR STANDARDIZED FORM GIVEN OR RECEIVED PURSUANT TO THIS AGREEMENT WILL HAVE NO EFFECT AND SUCH TERMS AND CONDITIONS ARE HEREBY EXCLUDED UNLESS THE PARTIES SPECIFICALLY AGREE IN WRITING FOR SUCH TERMS OR CONDITIONS TO SUPPLEMENT OR SUPERCEDE THE TERMS AND CONDITIONS OF THIS AGREEMENT.

2.5 Packaging. Product shall be shipped packaged in containers in accordance with the applicable Specifications or as otherwise agreed by the Parties in writing. Each such container will be individually labeled in accordance with any regulatory requirements which may include a description of its contents, including the manufacturer lot number, quantity of Product, and expiration date.

2.6 Delivery. CPL shall deliver the quantities of Product ordered by NeurogesX on the dates specified in NeurogesX’s purchase orders submitted in accordance with Section 2.4 above. All Product shall be delivered F.C.A point of shipment, CPL’s loading dock, Mississauga, Ontario. Upon CPL’s delivery of the Product F.C.A. point of shipment, NeurogesX will bear all risk of loss, delay, or damage in transit. NeurogesX shall select the carrier. All Product delivered hereunder shall be suitably packed for shipment by CPL in accordance with good commercial practice, and instructions provided to CPL by NeurogesX, with respect to protection of such Product during transportation and marked for shipment to NeurogesX’s specified receiving point. NeurogesX shall pay all shipping and insurance costs, as well as any special packaging expenses identified in advance by CPL.

2.7 Cost Reduction. The Parties will participate in cost reduction projects pertaining, but not limited to, the manufacture and supply of Product for NeurogesX. If a Party identifies a potential cost reduction measure, the identifying Party shall disclose the details to the other Party so that both Parties can evaluate whether such measure should be implemented and agree upon the costs of implementing such measure and the resulting cost savings. In the event the Parties agree on implementing a cost saving measure, the Parties agree to come together and discuss who will pay for the cost implementation and negotiate how to share the cost savings and the Parties shall adjust the price of the Product and revise Exhibit E accordingly.

2.8 Alternate Source(s). The Parties agree that this Agreement is not an exclusive supply agreement, and NeurogesX shall have the right to manufacture itself or designate third party(ies) as alternate source(s) for the supply of the Product (each, an “Alternate Source”). Upon NeurogesX’s request at any time, CPL shall cooperate with NeurogesX and the Alternate Source to fully transfer to such Alternate Source all manufacturing technology, know-how and information relating to the Product and its manufacture. CPL agrees to provide reasonable technical assistance to the Alternate

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Source for such purposes as requested by NeurogesX, including without limitation, assisting the Alternate Source to successfully manufacture three (3) validation batches of Product conforming to the Specifications. NeurogesX shall pay to CPL reasonable FTE and out-of-pocket costs associated with such transfer and assistance in accordance with a budget approved in advance by NeurogesX; provided, however, if either (i) the need for an Alternate Source arises from a material breach of this Agreement by CPL and/or (ii) subject to Article 13.5, CPL fails to deliver two successive batches of Product of at least eighty percent (80%) of the quantities of Product specified in a purchase order submitted in accordance with this Agreement, to CPL hereunder within thirty (30) days after the delivery dates specified therein, then NeurogesX shall not be obligated to make any such payments associated with the FTE costs of CPL and CPL shall bear the FTE costs associated with transfer and up to a maximum of 20 FTE days, of FTE costs associated with assistance. In any case, CPL shall not be responsible for any costs associated with fee for service activities beyond the assistance described in this Section 2.8, performed on behalf of NeurogesX, for the Alternate Source nor any out-of-pocket costs (including, but not limited to, travel expenses) associated with the transfer. Any additional assistance requested by NeurogesX above the 20 FTE days described in this Section 2.8 shall be at NeurogesX’s expense.

ARTICLE 3

QUALITY

3.1 Quality. All Product supplied by CPL shall meet the current Specifications and shall be manufactured, packaged, tested and stored at the Facility in accordance with the Quality Agreement, all applicable Approvals and Regulatory Requirements, including GMP manufacturing and record keeping procedures.

3.2 Quality Control. Prior to each shipment of Product, CPL shall perform quality control testing procedures and inspections to verify that the Product to be shipped conforms fully to the Specifications, as set forth in the Quality Agreement. Each shipment of Product shall be accompanied by a certificate of analysis (“COA”), in a form acceptable to NeurogesX, describing all current requirements of the Specifications, results of test performed certifying that the Product supplied have been manufactured, controlled and released at the Facility in accordance with the Specifications, all Approvals and applicable Regulatory Requirements.

3.3 Acceptance. Acceptance by NeurogesX of Product delivered by CPL shall be subject to inspection and applicable testing by NeurogesX or its designee. If on such inspection or testing NeurogesX or its designee discovers that any Product fails to conform with the Specifications or otherwise fails to conform to the warranties given by CPL in Section 8.1 below, NeurogesX or such designee may reject such Product, which rejection will be accomplished by giving written notice to CPL that specifies the manner in which the Product fails to meet the foregoing requirements. Upon request from CPL, NeurogesX shall return the rejected Product in accordance with CPL’s reasonable instructions at CPL’s expense, provided that such instructions comply with all applicable laws, regulations and Regulatory Requirements. In the event of a dispute between the parties over the validity of a rejection, NeurogesX and CPL agree to submit a sample of the rejected Product to an independent test facility to be agreed by both parties, and to accept the results of the testing performed by that facility as binding with regard to that lot of Product. The expense of such testing shall be borne by the losing party. CPL shall use reasonable commercial efforts to replace rejected Product within the shortest possible time within thirty (30) days after CPL’s receipt of notice thereof

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provided materials are available, and in any event within ninety (90) days. The replacement of rejected Product shall have priority over the supply of Product ordered for shipment not more than ninety (90) days before, or any time after, the rejection of such nonconforming Product. If a Product shipment or part thereof is rejected before the date on which payment is due therefor, NeurogesX may withhold payment for such shipment or the rejected portion thereof. If a Product shipment or portion thereof is rejected after payment, NeurogesX may credit the amount paid therefor against other amounts due to CPL hereunder. If, subsequent to investigation, a Product deemed by NeurogesX to be rejected is found to meet Specifications, than NeurgesX will not only pay for the originally shipped Product but also any replacement Product made, or in process, while the investigation was being conducted. The warranties given by CPL in Section 8.1 below shall survive any failure to reject by NeurogesX under this Section 3.3. Subject to Section 3.4 and Article 8 below, Product shipments shall be deemed accepted if no notice to the contrary is received by CPL within sixty (60) days of NeurogesX’s receipt of such Product.

3.4 Latent Defects. As soon as either Party becomes aware of any defect in any Product that is not discoverable upon a reasonable inspection or quality control testing as set forth in the Specifications (“Latent Defect”), but in no case later than thirty (30) days after reaching such awareness, it shall immediately notify the other Party and, at NeurogesX’s election, shall be deemed rejected as of the date of such notice. In the event of such rejection by NeurogesX, the applicable provisions of Section 3.3 shall apply. Notwithstanding anything herein to the contrary, CPL will only be responsible for Latent Defects resulting from an act or omission of CPL, reasonably demonstrated, relative to its manufacturing, packaging, and testing services responsibilities according to this Agreement. Any Latent Defect solely related to compatibility issues will not be the financial responsibility of CPL. The term “compatibility issues” as used in this Section 3.4 shall mean a surprise chemical reaction between the Product’s chemical components and packaging.

3.5 Presence At Facility. Upon at least fifteen (15) days’ prior written notice given by NeurogesX to CPL, NeurogesX shall have the right to assign a reasonable number of employees or consultants of NeurogesX (not to exceed three (3) persons) to inspect and audit the Facility in order to verify CPL’s compliance with Regulatory Requirements and other agreed requirements. At all times, NeurgoesX personnel or consultants will be accompanied by CPL representatives and access will be limited to areas and documentation applicable to NeurogesX Product or Proposals.

3.6 (a) Changes to the Specifications. NeurogesX shall have the sole right to modify the Specifications with respect to all Bulk Products and Finished Products. All modifications shall be in writing and shall be signed by an authorized representative of NeurogesX and CPL, and shall be effective for purchase orders for Product placed after the effective date of the changes. If the modifications result in a change in CPL’s manufacturing costs, the Parties shall agree upon an appropriate adjustment to the price of the Product under this Agreement. If the modifications result in a delay in delivery, there shall be a reasonable extension of the affected lead times. If residual inventory of a raw material or packaging component results from a change to Specifications, NeurogesX shall reimburse CPL at cost plus 15% (to cover CPL’s administrative, finance, and warehousing) for all residual inventory or restocking charges at suppliers, for materials that CPL cannot use elsewhere or returned without charge.

(b) Changes to the Territory. NeurogesX may expand the Territory upon written notice to CPL, with reasonable lead time. In the event, NeurogesX’s decision to expand the territory

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will cause CPL to incur additional costs, as a result of specific regulatory requirements of such country or regulatory jurisdiction (“Territory-Specific Costs”), and/or impose requirements beyond CPL’s standard manufacturing practice, CPL shall immediately notify and discuss with NeurogesX such costs and ways of accommodating such additional requirements, NeurgoesX shall have the option to either (1) modify or limit such addition to the Territory, or (2) include such country or regulatory jurisdiction within the Territory and reimburse CPL for the Territory-Specific Costs. It is understood that CPL shall use reasonable efforts to mitigate any such Territory-Specific Costs and accommodate such reasonable requirements.

3.7 Lot Records; Samples. Subject to Article 7.6, CPL shall maintain lot records sufficient to trace the history of each lot, and representative samples from each batch of Product manufactured hereunder in sufficient quantity to perform ten (10) tests each of, for record keeping, stability testing, and other regulatory purposes, including as may be required by the Specifications, Approvals or Regulatory Requirements, for as long as required by applicable law. Such samples will be stored in cGMP storage facility at specified storage conditions up to two years after NDA approval, termination or discontinuation or one year beyond expiration date, whichever is later. Subject to the foregoing, CPL shall notify NeurogesX before disposing of any of the foregoing, and NeurogesX shall have the option of having such records and samples delivered to NeurogesX or its designee. Upon the request of NeurogesX, CPL shall provide NeurogesX reasonable access to and copies of such records and samples.

ARTICLE 4

SERVICES

4.1 Scope of Services. From time to time during the term of this Agreement, NeurogesX may request and CPL may agree to perform certain services for NeurogesX relating to the Product or its manufacture (the “Services”), all as described in one or more mutually agreed workplans which shall be attached hereto as Exhibit D (each, a “Proposal”). Each Proposal shall be numbered consecutively (for example, the initial Proposal would be Proposal #1 and set forth in detail the Services to be performed by CPL, including without limitation, the timeline for delivery of reports and other Deliverables, the fees to be charged, and the like. The Parties may modify Exhibit D hereto to revise an existing Proposal pursuant to Section 4.3 below or otherwise add a new Proposal, provided, that no Proposal, or any modification thereto, shall be attached to or made a part of this Agreement without first being executed by the Parties hereto in writing which specifically references this Agreement.

4.2 Standards of Performance. CPL will use reasonable commercial efforts to perform Services and deliver to NeurogesX the completed Deliverables, all in accordance with the respective Proposal, including without limitation, the specifications and the timelines set forth therein. All Services shall be conducted in a good, scientific manner in compliance with all applicable Regulatory Requirements, laws and regulations.

4.3 Changes to Proposals. NeurogesX may, at any time, submit to CPL a request for changes to any Proposal. NeurogesX agrees to pay CPL the reasonable costs associated with such change, as mutually agreed in advance by the Parties in writing. CPL shall use its commercially reasonable efforts to make all changes requested by NeurogesX, and to minimize the time and additional charges required as a result of such changes. Without limiting the foregoing, if CPL can

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implement the requested changes without resulting in increases in CPL’s time or cost, and without affecting CPL’s ability to meet the Services timeline as set forth in such Proposal, CPL shall implement such changes in accordance with such timeline at no additional cost to NeurogesX.

4.4 Acceptance of Deliverables under a Proposal. CPL shall timely deliver to NeurogesX or its designee each Deliverable resulting from the Services. Acceptance by NeurogesX of such Deliverables shall be subject to inspection and other testing by NeurogesX or its designee. If on such inspection or testing NeurogesX or its designee discovers that the Deliverable fails to conform with the applicable specifications, NeurogesX or such designee may reject such Deliverable upon written notice. Upon request from CPL, NeurogesX shall return the rejected Deliverable in accordance with CPL’s reasonable instructions at CPL’s expense, provided that such instructions comply with applicable laws, regulations and Regulatory Requirements. If NeurogesX rejects a Deliverable, CPL shall promptly correct the failure(s) specified in the rejection notice and re-deliver to NeurogesX, at CPL’s cost and expense (including re-delivery costs), a replacement Deliverable that meets the applicable specifications, for acceptance testing under this Section 4.4. If CPL disagrees with NeurogesX’s determination, the Parties agree proceed according to Section 3.3. above.

4.5 Reporting/Transfer of Results.

(a) In connection with the Services, CPL will provide NeurogesX with regular written reports, as part of the Proposal or as requested by NeurogesX, and a final written report upon completion of each Service, of all results and NeurogesX IP developed or generated during the course of the Services. Upon request by NeurogesX from time to time and at NeurogesX’s expense, CPL shall provide reasonable assistance to NeurogesX in NeurogesX’s efforts to understand and use the information contained in such reports. CPL agrees that the first time CPL provides any information in such reports that CPL believes to be CPL Background Technology or CPL Improvements, they shall be fully described in a separate section in such report.

(b) CPL will also respond to NeurogesX’s reasonable inquiries, at CPL’s expense, regarding the status of the Services on an ongoing basis, and CPL will endeavor to keep NeurogesX reasonably informed of interim results on an informal basis, including, if requested, periodic meetings at CPL’s facility to discuss results and progress of the Services, and CPL will follow any reasonable instructions or direction of NeurogesX with regard to the Services.

ARTICLE 5

PAYMENTS

5.1 Product Orders.

(a) Price. The price to be paid by NeurogesX per unit of Bulk Product and per unit of Finished Product ordered by NeurogesX shall be as set forth on Exhibit E hereto. The parties agree that increases or decreases in the price may be made by mutual agreement of the parties on an annual basis (applicable to the ensuing 12-month calendar year) during the term of this Agreement based on CPL’s increase in the cost of raw materials, packaging components, labor and allocable

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overhead in the last twelve (12) months; provided, however, that any increase will not exceed the United States Producer Price Index for Pharmaceutical Preparations (“PPI”) measured at the beginning of such 12-month period. Further adjustments may be made to price to account for changes in the quantity of Product to be supplied or applicable run sizes provided such increases are agreed by NeurogesX in advance. Also, price adjustments may occur upon modifications to the Specifications requested by either party to the extent of any increase or decrease in the cost of manufacturing or raw materials or packaging components resulting from such changes in Specifications, consistent with Sections 2.7 and 3.6(a).

(b) Any special one-time increases in raw material or packaging component costs, provided the impact to total cost of goods for that Product exceeds 3%, will be incorporated into the price upon ninety (90) days notice and NeurogesX’s confirmation of such increase in cost. It is understood that such one-time increases in costs which are so incorporated in the price will not be taken in account when making the adjustment according to Section 5.1(a) above shall apply once only per year during the three (3) years of the terms of this Agreement thereafter all other increases will be incorporated into the annual price evaluation according to Section 5.1(a) above.

(c) Invoicing; Payment. CPL shall submit an invoice to NeurogesX upon shipment of Product ordered by NeurogesX under this Agreement. All invoices will be sent to the address specified in the applicable purchase order, and each invoice will state the aggregate and unit price for Product in a given shipment, plus any taxes, or other costs incident to the purchase or shipment to be borne by NeurogesX under this Agreement. All payments under this Agreement shall be made in U.S. dollars within thirty (30) days of NeurogesX’s receipt of the Product.

5.2 Services. In consideration for the Services performed by CPL, NeurogesX agrees to pay to CPL by wire transfer the amounts set forth in the applicable Proposal in accordance with the terms and conditions set forth therein.

ARTICLE 6

OWNERSHIP AND LICENSES

6.1 NeurogesX IP. Subject to Section 6.2 below, NeurogesX shall own all Deliverables, as well as all Product specific information, inventions (whether or not patentable), technology, data, documents, processes, protocols, methods, assays, techniques, Product specific operating procedures and materials created, reduced to practice or compiled by CPL in the course of performing activities under this Agreement or that is based on NeurogesX’s Confidential Information, including without limitation, any Documentation, records, reports and other materials that CPL generates or provides to NeurogesX in the course of any Services, and any modifications, additions or improvements to the Product or the manufacturing process for the Product created by CPL in the course of performing this Agreement, and all intellectual property rights in any of the foregoing (collectively, the “NeurogesX IP”). CPL hereby assigns, and agrees to assign, to NeurogesX, all right, title and interest in and to the NeurogesX IP. CPL shall assist NeurogesX, or its designee, at NeurogesX’s expense, in every proper way to secure NeurogesX’s rights in the NeurogesX IP and any patent rights relating thereto in any and all countries, including the disclosure to NeurogesX of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments that NeurogesX deems necessary in order to apply for and obtain such rights and in order to assign and convey to NeurogesX the sole and exclusive right, title and interest in and to such NeurogesX IP.

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6.2 CPL Technology. Subject to the terms of this Agreement, all CPL Background Technology that is used, improved or modified by CPL in the course of performing its obligations hereunder, which improvements are of a general nature and unrelated to NeurogesX, NeurogesX’s products or Confidential Information, or the Product, including for example, standard operating procedures, software or laboratory methodologies (the “CPL Improvements”) shall be and remain the sole and exclusive property of CPL. CPL hereby grants NeurogesX a non-exclusive, perpetual, irrevocable, royalty-free, worldwide license, with the right to grant and authorize sublicenses, under the CPL Background Technology and CPL Improvements, solely as necessary or useful to make, have made, use, sell, have sold, import, and export the Product or any derivatives or new versions thereof and to use and fully exploit the NeurogesX IP. Such CPL Background Technology and CPL Improvements cannot be used to develop and commercialize any other NeurogesX product without the approval, in writing, of CPL.

ARTICLE 7

REGULATORY MATTERS

7.1 Regulatory Approvals. NeurogesX, itself or through its agents, shall have the sole right to correspond with and submit regulatory applications and other filings to the FDA or other regulatory authorities to obtain approvals to import, export, sell, or otherwise commercialize the Product alone or with other products (each, an “Approval” and collectively, “Approvals”) as NeurogesX deems useful or necessary. Accordingly, except as otherwise required by law, CPL shall not correspond directly with the FDA or any other regulatory agency relating to the process of obtaining Approvals or any obtained Approval for the Product without NeurogesX’s prior consent. Notwithstanding the foregoing, CPL shall assist NeurogesX, as requested by NeurogesX and at NeurogesX’s expense, in preparing, submitting, and maintaining applications for such Approvals.

7.2 Information. Without limiting Section 7.1 above, CPL shall promptly provide NeurogesX all written and other information other than information developed for other CPL clients and subject to a confidentiality obligation, in CPL’s possession or control that is necessary or useful for NeurogesX to apply for, obtain, and maintain Approvals for the Product, including without limitation, Documentation, information relating to the Facility, process, methodology, or components used in the manufacture, processing, or packaging of the Product or other information required to be submitted to the FDA or other regulatory authorities in the form of a marketing application. In addition, CPL shall immediately inform NeurogesX when any such information is no longer current and reflective of current manufacturing practices, procedures, or the Specifications and provide updated information to NeurogesX through agreed channels for managing change per the Quality Agreement attached hereto as Exhibit A.

7.3 Inspections. CPL shall permit the FDA and other regulatory authorities to conduct inspections of the Facility as the FDA or other regulatory authorities may request, and shall cooperate with the FDA or other regulatory authorities with respect to the inspections and any related matters, in each case relating to the Product. CPL shall give NeurogesX prior notice, to the

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extent practicable, of any such inspections, and keep NeurogesX informed about the results and conclusions of each regulatory inspection, including actions taken by CPL to remedy conditions cited in the inspections. In addition, CPL shall allow NeurogesX or its representative to assist in the preparation for and be present at the inspections to participate in discussion directly related to the Product or its manufacture. CPL will provide NeurogesX with copies of any written inspection reports issued by the regulatory agency and all correspondence between CPL and the regulatory agency, including, but not limited to, FDA Form 483, Notice of Observation, and all related correspondence, in each case relating to the Product or general manufacturing concerns (i.e., facility compliance or the like). NeurogesX and its regulatory consultants, agents, marketing partners, and other third parties, under reasonable confidentiality requirements, shall have access to all regulatory and quality assurance and GMP audits of CPL to assess regulatory compliance and to the buildings, records, and areas of the Facility or other facilities involved in the manufacture, testing, storage, and shipment of the Product.

7.4 Maintenance of Approvals. Notwithstanding anything in the Agreement to the contrary, CPL shall not undertake any modifications to the Product manufacturing or testing processes or use any subcontractors or vendors in any way that could delay or otherwise impact the Approvals or other regulatory submissions, including without limitation, regulatory product reviews, Investigational New Drug applications (INDs), New Drug Applications (NDAs), or any other compliance status without the prior written agreement of NeurogesX.

7.5 Reporting. Pursuant to the FDA’s and other applicable regulatory agency’s regulations and policies, NeurogesX may be required to report information that reasonably suggests that a Product may have caused or contributed to the death or serious injury. Accordingly, CPL shall inform NeurogesX of any such information promptly after becoming aware of it so that NeurogesX can comply with such reporting requirements.

7.6 Records. CPL shall maintain adequate and accurate records covering the manufacture, stability programs, quality control testing and release of Product supplied hereunder and all other Services provided hereunder, in accordance with GMPs and all Regulatory Requirements, for as long as required under applicable laws and regulations, for a period of ten (10) years thereafter. CPL will make such records available to NeurogesX, its designees and regulatory agencies as requested by NeurogesX, at no additional cost to NeurogesX. Subject to the foregoing maintenance requirement, CPL shall notify NeurogesX before destroying any such records, and NeurogesX shall have the option of having such records delivered to NeurogesX or its designee at NeurogesX’s cost.

ARTICLE 8

PRODUCT WARRANTIES

8.1 Product Warranties. CPL represents and warrants that:

(a) Specifications. All Product supplied hereunder shall comply with the Specifications and shall conform with the information shown on the COA provided for the particular shipment pursuant to Section 3.2 above;

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(b) Regulatory Requirements. The Facility, the manufacturing and supply activities contemplated herein and all Product supplied hereunder shall comply with the Regulatory Requirements and the Quality Agreement, and all Raw Materials used in the manufacture of Product hereunder shall comply with the applicable specifications, Regulatory Requirements, and the Quality Agreement;

(c) Compliance with FFDCA. None of the Product supplied to NeurogesX under this Agreement shall be adulterated or misbranded within the meaning of the Act; and

(d) No Encumbrance. Title to all Product supplied under this Agreement shall pass as provided in this Agreement, free and clear of any security interest, lien, or other encumbrance.

(e) As of the Effective Date, to its knowledge, CPL’s method of manufacturing the Product does not infringe any patent, trademark, trade secret, or other proprietary rights of third parties to the Product.

8.2 NeurogesX represents and warrants that:

(a) NeurogesX’s Specifications are the property of the NeurogesX organization and will, upon marketing authorization conform to all applicable regulatory and legal requirements and Approvals, and will continue to so conform during the term of this Agreement; and

(b) As of the Effective Date, to its knowledge, NeurgoesX has the right to contract with CPL for the manufacture of the Product using NeurogesX’s formula without infringing any patent, trade mark, trade secret or other proprietary rights of third parties to the Product or NeurogesX’s formula provided CPL has manufactured the Product in strict compliance with NeurogesX’s formula.

8.3 Recalls. If NeurogesX is required by any regulatory agency to recall the Product or if NeurogesX voluntarily initiates a recall of the Product and, in either case, if such recall is a result of a breach any of the warranties set forth in Sections 8.1(a) through 8.1(d) above, CPL shall bear the out-of-pocket costs of such recall. The parties agree that CPL shall have no responsibility for any recall resulting from artwork or Specifications for Product provided by NeurogesX to CPL so long as Product complies with the Specifications and artwork provided by NeurogesX to CPL.

ARTICLE 9

TERM AND TERMINATION

9.1 Term. The term of this Agreement shall commence on the Effective Date and continue in full force until the fifth (5^th) anniversary of the Effective Date, unless terminated earlier in accordance with this Article 9 of this Agreement. This Agreement may be extended for additional two (2)-year periods at NeurogesX’s option upon written notice to CPL at least six (6) months prior to expiration of the then-current term.

9.2 Termination for Breach. Either Party may terminate this Agreement upon written notice in the event that the other Party shall have materially breached this Agreement, and such breach is not cured within sixty (60) days after receiving written notice of such breach.

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Notwithstanding the foregoing, if during such sixty (60) day period, the allegedly breaching Party disputes that it has materially breached this Agreement, then the other Party shall not have the right to terminate this Agreement until it has been finally determined in accordance with Section 13.2 below that the allegedly breaching Party has materially breached this Agreement, and such Party fails to comply herewith within sixty (60) days thereafter.

9.3 Permissive Termination.

(a) Services. NeurogesX may terminate the Services, or any part thereof, without charge or penalty upon written notice to CPL; provided that if such termination occurs after CPL has initiated work on a particular task within the Services, NeurogesX will reimburse CPL for actual, reasonable out-of-pocket expenses incurred by CPL that are directly allocated to such task to the extent such obligations cannot reasonably be mitigated.

(b) Agreement. NeurogesX may terminate this Agreement upon one hundred eighty (180) days’ prior written notice to CPL. In the event of a termination by NeurogesX, NeurogesX will continue to be obligated under this Agreement for all open purchase orders and continue to be obligated under Section 2.3 for any residual inventory.

CPL may terminate this Agreement upon twenty four (24) months prior written notice to NeurogesX.

9.4 Effect of Expiration or Termination.

(a) Rights and Obligations. Termination or expiration of this Agreement shall not relieve a Party from any liability that, at the time of such termination or expiration, has already accrued to the other Party. Upon expiration or termination of this Agreement: CPL shall, as promptly as practicable (i) cease all work on the Services, and (ii) turn over to NeurogesX all Deliverables, Documentation and NeurogesX IP (whether in written or electronic form, including any work in progress) which are then in CPL’s possession or control. CPL shall have the right to retain a copy of all relevant Product related documentation for legal purposes.

(b) Survival. The provisions of Sections 1, 2.8, 3.7, 6, 7.2, 7.3, 7.5, 7.6, 8, 9, 10, 11, 12, and 13 of this Agreement shall survive the termination or expiration of this Agreement for any reason. Section 3.3, 3.4, 4.4, 4.5 shall survive any termination or expiration of this Agreement with respect to Products or Deliverables delivered pursuant to this Agreement.

ARTICLE 10

CONFIDENTIALITY

10.1 Confidential Information. The Parties may from time to time disclose to each other Confidential Information. “Confidential Information” means any information disclosed by one Party to the other Party that, if disclosed in tangible form, is marked “confidential” or with other similar designation to indicate its confidential or proprietary nature or, if disclosed orally, is indicated orally to be confidential or proprietary by the Party disclosing the information at the time of the disclosure and is confirmed in writing as confidential or proprietary by the disclosing Party within forty-five (45) days after such disclosure. For avoidance of doubt, all Deliverables and NeurogesX IP shall be

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deemed the Confidential Information of NeurogesX. Notwithstanding the foregoing or anything herein to the contrary, Confidential Information shall not include any information that, in each case as demonstrated by written documentation: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; or (d) was subsequently lawfully disclosed to the receiving Party by a person other than the disclosing Party.

10.2 Confidentiality. Each Party shall hold and maintain in strict confidence all Confidential Information of the other Party. Without limiting the foregoing, neither Party shall use or disclose the Confidential Information of the other Party, except as otherwise permitted by this Agreement or as may be necessary or useful to exercise its rights (including in the case of NeurogesX, its rights to NeurogesX IP) or perform its obligations under this Agreement. Nothing contained in this Article 10 of this Agreement shall prevent either Party from disclosing any Confidential Information of the other Party to the extent reasonable necessary in prosecuting or defending litigation, complying with applicable governmental laws, regulations, such as SEC regulations, or court order or otherwise submitting information to tax or other governmental authorities, in submissions to regulatory authorities, or as a part of patent applications filed on inventions made under this Agreement; provided that if a Party is required by law to make any such disclosure, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the other Party of such disclosure and, save to the extent inappropriate in the case of patent applications or the like, will use its reasonable efforts to secure confidential treatment of such information.

10.3 Confidential Terms. Each Party shall treat the terms of this Agreement as the Confidential Information of the other Party. Notwithstanding anything to the contrary, however, each Party may disclose the terms of this Agreement (a) to advisors, actual or potential investors, lenders and potential lenders, acquisition partners, sublicensees, and others on a need to know basis under circumstances that reasonably ensure the confidentiality thereof, or (b) as required by securities or other applicable laws or regulations, such as SEC regulations.

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

11.1 CPL. CPL represents and warrants that: (a) it has full power to enter into this Agreement and to grant to NeurogesX the rights granted to NeurogesX under this Agreement; (b) it has the corporate authority to enter into and execute the Agreement; (c) CPL shall fully comply with the requirements of any and all applicable federal, state, local and foreign laws, regulations, rules, and orders of any governmental body having jurisdiction over the activities contemplated by this Agreement or having jurisdiction over the Territory and to the extent applicable to CPL, including all Regulatory Requirements; (d) it shall perform all Services in a professional manner in accordance with industry standards; and (e) it has not been debarred under the Generic Drug Enforcement Act of 1992 and that it will not employ any person or entity that has been so debarred to perform any activities under this Agreement.

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11.2 NeurogesX. NeurogesX represents and warrants that: (a) it has full power to enter into the Agreement; (b) it has obtained all necessary corporate approvals to enter and execute into this Agreement; and (c) NeurogesX shall fully comply with the requirements of any and all applicable federal, state, local and foreign laws, regulations, rules and orders of any governmental body having jurisdiction over the activities contemplated by this Agreement and to the extent applicable to NeurogesX.

11.3 Disclaimer. EXCEPT AS PROVIDED IN THIS ARTICLE 11 AND SECTION 8.1 ABOVE, NEITHER PARTY MAKES ANY REPRESENTATIONS, WARRANTIES OR CONDITIONS (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO THE SUBJECT MATTER HEREOF AND EACH PARTY EXPRESSLY DISCLAIMS ANY SUCH ADDITIONAL WARRANTIES.

ARTICLE 12

INDEMNIFICATION

12.1 NeurogesX. NeurogesX shall indemnify, defend, and hold harmless CPL, its directors, officers, employees, agents, successors and assigns from and against any liabilities, expenses, or costs (including reasonable attorneys’ fees and court costs) arising out of any claim, complaint, suit, proceeding, or cause of action brought against any of them by a third party resulting from: (a) the negligent or intentionally wrongful acts or omissions of NeurogesX; and (b) breach by NeurogesX of any of its representations and warranties under this Agreement, in each case subject to the requirements set forth in Section 12.3 below. Notwithstanding the foregoing, NeurogesX shall have no obligations under this Section 12.1 for any liabilities, expenses, or costs to the extent arising out of or relating to claims covered under Section 12.2 below. NeurogesX shall indemnify and hold harmless CPL from any third party claims, actions, proceedings alleging the infringement of any patent, trade secrets or other intellectual property of a third party (“IP Claims”), arising from CPL’s manufacturing, sale and using the Product for or to NeurogesX, which IP Claims are caused by CPL’s use of any technology or intellectual property owned or supplied by NeurogesX.

12.2 CPL. CPL shall indemnify, defend, and hold harmless NeurogesX, its directors, officers, employees, agents, successors and assigns from and against all liabilities, expenses, and costs (including reasonable attorneys’ fees and court costs) arising out of any claim, complaint, suit, proceeding, or cause of action brought against any of them by a third party resulting from: (a) the negligent or intentionally wrongful acts or omissions of CPL; and (b) breach by CPL of any of its representations and warranties under this Agreement, in each case subject to the requirements set forth in Section 12.3. Notwithstanding the foregoing, CPL shall have no obligations under this Section 12.2 for any liabilities, expenses, or costs to the extent arising out of or relating to claims covered under Section 12.1 above. CPL shall indemnify and hold harmless NeurogesX from any tIP Claims arising from the manufacturing, sale and use of the Product under this Agreement by or for NeurogesX, which IP Claims are caused by use of any technology or intellectual property owned or supplied by NeurogesX.

12.3 Indemnification Procedure. A Party that intends to claim indemnification (“Indemnitee”) under this Article 12 shall promptly notify the indemnifying Party (“Indemnitor”) in writing of any third party claim, suit, or proceeding included within the indemnification described in this Article 12 (each a “Claim”) with respect to which the Indemnitee intends to claim such

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indemnification, and the Indemnitor shall have sole control of the defense and settlement of the Claim. The Indemnitee shall have the right to participate, at its own expense, with counsel of its own choosing in the defense or settlement of the Claim. The indemnification obligations under this Article 12 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the consent of the Indemnitor. The Indemnitee and its employees, at the Indemnitor’s request and expense, shall provide full information and reasonable assistance to Indemnitor and its legal representatives with respect to Claims.

ARTICLE 13

GENERAL

13.1 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the United States and the State of California, without reference to conflict of laws principles and excluding the 1980 U.N. Convention on Contracts for the International Sale of Goods.

13.2 Disputes. In the event of any dispute or claim arising out of or in connection with this Agreement, or the performance, breach or termination thereof, either CPL or NeurogesX may, by written notice to the other Party, have such dispute referred to the Chief Executive Officers (or equivalent) of CPL and NeurogesX, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received by such other Party.

13.3 English Language. This Agreement shall be made in the English language, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding upon the Parties. All communications and notices to be made pursuant to this Agreement shall be in the English language.

13.4 Implied Obligations. This Agreement sets forth all of the rights and obligations of the Parties with respect to the subject matter hereof.

13.5 Force Majeure. Nonperformance of any Party shall be excused to the extent that performance is rendered impossible by strike, fire, earthquake, terrorism, blackout, flood, governmental acts, orders, or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control of the nonperforming Party excluding any monetary default, provided that the services or goods for which the money is being paid has been performed or delivered.

13.6 Assignment. The rights and obligations of each Party under this Agreement may not be assigned or otherwise transferred to a third party without the prior written consent of the other Party. Any assignment in violation of this Section 13.6 shall be null and void. Notwithstanding the foregoing, either Party may transfer or assign its rights and obligations under this Agreement, without the consent of the other Party, to a successor to all or substantially all of its business or assets relating to this Agreement whether by sale, merger, operation of law or otherwise if the assignee or transferee has agreed to be bound by the terms and conditions of this Agreement.

13.7 Subcontractors. CPL agrees not to subcontract its performance of any activities under this Agreement, including the Services and the supply of Product to NeurogesX pursuant to Article

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2, without NeurogesX’s prior written approval, such approval not to be unreasonably withheld or delayed. Innopharm, CPL’s analytical laboratory, is a wholly owned entity of CPL. CPL shall ensure that Innopharm is bound by all the terms and conditions of this Agreement, including Articles 6 and 10 as if named in place of CPL. Subject to the foregoing, Innopharm is a permitted subcontractor of CPL.

13.8 Notices. Any notice or report required or permitted to be given or made under this Agreement by either Party shall be in writing and delivered to the other Party at its address indicated in this Agreement (or to such other address as a Party may specify by notice under this Agreement) by courier or by registered or certified airmail, postage prepaid, courier service, or by facsimile, which facsimile is promptly confirmed, in writing, by registered or certified airmail, postage prepaid. All notices shall be effective as of the date received by the addressee.

If to CPL:	7600 Danbro Crescent, Mississauga, Ontario, Canada, L5N 6L6 Attn: CEO Fax: (905) 821-7602
If to NeurogesX:	San Carlos Business Park 981F Industrial Road San Carlos, California, 94070 U.S.A. Attn: President Fax: (650) 649-1798

13.9 Limitation of Liability. EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER ARTICLE 12 ABOVE OR IN THE CASE OF WILLFUL BREACH OF THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

13.10 Headings. Headings included herein are for convenience only, do not form a part of this Agreement, and shall not be used in any way to construe or interpret this Agreement.

13.11 Non-Waiver. Any waiver of the terms and conditions hereof must be explicitly in writing. The waiver by either of the Parties of any breach of any provision hereof by the other shall not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself.

13.12 Severability. Should any section, or portion thereof, of this Agreement be held invalid by reason of any law, statute, or regulation existing now or in the future in any jurisdiction by

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any court of competent authority or by a legally enforceable directive of any governmental body, such section or portion thereof will be validly reformed so as to approximate the intent of the Parties as nearly as possible and, if unreformable, will be deemed divisible and deleted with respect to such jurisdiction, but the Agreement will not otherwise be affected.

13.13 Independent Contractors. The relationship of NeurogesX and CPL established by this Agreement is that of independent contractors. Nothing in this Agreement shall be construed to create any other relationship between NeurogesX and CPL. Neither Party shall have any right, power, or authority to assume, create or incur any expense, liability, or obligation, express or implied, on behalf of the other.

13.14 Entire Agreement. This Agreement, together with the Exhibits hereto, constitutes and contains the entire understanding and agreement of the Parties respecting the subject matter hereof and cancels and supersedes any and all prior and contemporaneous negotiations, correspondence, understandings and agreements between the Parties, whether oral or written, regarding such subject matter. Notwithstanding the foregoing, to the extent the terms and conditions of the body of this Agreement conflict with the terms and conditions of any Exhibit hereto (including without limitation, the Quality Agreement and any Workplan), the terms and conditions of the body of this Agreement shall govern. No agreement or understanding varying or extending this Agreement shall be binding upon either Party, unless set forth in a writing which specifically refers to the Agreement that is signed by duly authorized officers or representatives of the respective Parties, and the provisions of the Agreement not specifically amended thereby shall remain in full force and effect.

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

IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Agreement.

NEUROGESX INC.		CONTRACT PHARMACEUTICALS LIMITED CANADA
By:	/s/ Stephen Ghiglieri	By:	/s/ Paul Pickles
Name:	Stephen Ghiglieri	Name:	Paul Pickles
Title:	Chief Financial Officer	Title:	Chief Executive Officer

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EXHIBIT A

QUALITY ASSURANCE AGREEMENT

EXHIBIT B

BULK PRODUCT SPECIFICATIONS

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EXHIBIT C

FINISHED PRODUCT SPECIFICATIONS

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EXHIBIT D

WORKPLAN 1

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EXHIBIT E

PRICES

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EX-10.9

Exhibit 10.9

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Anthony DiTonno (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of July 15, 2004 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as President and Chief Executive Officer of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of twelve (12) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) twelve (12) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:	/s/ Anthony DiTonno
	Title:	CEO
EXECUTIVE	By:	/s/ Anthony DiTonno
		Anthony DiTonno, President and Chief Executive Officer
/s/ Stephen Ghiglieri
CFO

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EX-10.10

Exhibit 10.10

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Stephen Ghiglieri (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of July 15, 2004 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as Chief Financial Officer of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of nine (9) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) nine (9) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:	/s/ Stephen Ghiglieri
	Title:	CFO
EXECUTIVE	By:
		Stephen Ghiglieri, Chief Financial Officer
/s/ Anthony DiTonno
CEO

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EX-10.11

Exhibit 10.11

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Karen Harder (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of July 15, 2004 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as Vice President, Regulatory Affairs and Quality Assurance of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) six (6) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:
	Title:
EXECUTIVE	By:	/s/ Karen Harder
		Karen Harder, Vice President, Regulatory Affairs and Quality Assurance
/s/ Anthony DiTonno
CEO

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EX-10.12

Exhibit 10.12

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Keith Bley (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of July 15, 2004 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as Senior Vice President, Nonclinical Research and Development, of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) six (6) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:	/s/ Keith Bley
	Title:	Senior Vice President
EXECUTIVE	By:	/s/ Keith Bley
		Keith Bley, Senior Vice President, Nonclinical Research and Development
/s/ Anthony DiTonno
CEO

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EX-10.13

Exhibit 10.13

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Michael Markels (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of June 2, 2006 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as Vice President, Commercial Affairs and Business Development of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of nine (9) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) nine (9) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:
	Title:
EXECUTIVE	By:	/s/ Michael Markels
		Michael Markels

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EX-10.14

Exhibit 10.14

NEUROGESX, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is made and entered into by and between Jeffrey Tobias (the “Executive”) and NeurogesX, Inc., a California Corporation (the “Company”), effective as of November 30, 2005 (the “Effective Date”).

RECITALS

WHEREAS: It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

WHEREAS: The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

WHEREAS: The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

WHEREAS: Certain capitalized terms used in the Agreement are defined in Section 12 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or by law.

3. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive will serve as Chief Medical Officer of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as will reasonably be assigned to him by the Company’s Board.

(b) Obligations. During such time as the Executive is employed by the Company, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. During such time as the Executive is employed by the Company, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any material direct or indirect remuneration without the prior approval of the Board.

4. Compensation.

(a) Base Salary. During such time as the Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretion of the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

(c) Equity Compensation. Executive will be eligible to receive stock and option grants, and other equity compensation awards, as determined by the Board or any committee thereof in the Board’s or such committee’s sole discretion.

5. Employee Benefits. During the time that Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the Benefit Plans it offers to its employees at any time.

6. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

7. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

8. Acceleration of Vesting Upon a Change of Control. Upon a Change of Control of the Company:

(a) The vesting of each of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (each, an “Option Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which such Option Grant would continue vesting as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Vesting Months”), minus (ii) the lower of (A) eighteen months or (B) the Vesting Months; and

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(b) The lapse of the Company’s right of repurchase with respect to each restricted stock grant pursuant to which the Executive holds shares of the Company’s Common Stock (each, a “Restricted Stock Grant”) shall immediately be accelerated by a number of months equal to (i) the number of months over which the Company’s right of repurchase would continue to lapse with respect to any such Restricted Stock Grant as of the date of the Change of Control if the Executive remained a service provider to the Company during such period (the “Lapsing Months”), minus (ii) the lower of (A) eighteen months or (B) the Lapsing Months.

9. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If within eighteen (18) months following a Change of Control (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and (Y) Executive signs and does not revoke a standard release of claims with the Company in a form reasonably acceptable to the Company, then Executive shall receive the following severance from the Company:

(i) Severance Payment. Executive will be entitled to (i) receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary rate, as then in effect, for a period of nine (9) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) a lump-sum payment equal to 100% of Executive’s target annual bonus as of the date of such termination.

(ii) Options; Restricted Stock. All of Executive’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable (that is, in addition to the shares subject to the Options which have vested and become exercisable as of the date of such termination), but in no event shall the number of shares subject to such Options which so vest exceed the total number of shares subject to such Options. Additionally, all of the shares of the Company’s Common Stock then held by Executive subject to a Company right of repurchase (the “Restricted Stock”) shall immediately vest and have such Company right of repurchase with respect to such shares of Restricted Stock lapse (that is, in addition to the shares of Restricted Stock which have vested as of the date of such termination), but in no event shall the number of shares which so vest exceed the number of shares of Restricted Stock outstanding immediately prior to such termination.

(iii) Continued Employee Benefits. Executive shall receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans for a period equal to the shorter of (i) nine (9) months or (ii) such time as Executive secures employment with benefits generally similar to those provided in the Company’s Benefit Plans.

(b) Timing of Severance Payments. Any lump-sum severance payment to which Executive is entitled shall be paid by the Company to Executive in cash and in full, not later than ten (10) calendar days after the date of the termination of Executive’s employment as provided in

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Section 9(a), and any other severance payments shall be paid in accordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination for Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive shall not be entitled to receive severance or other benefits except for those as may then be established under the Company’s then existing severance and Benefits Plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his or her death, then Executive shall not be entitled to receive severance or other benefits except for severance amounts paid to Executive prior to the date of such termination and except for those as may then be established under the Company’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.

(e) Termination Apart from Change of Control. In the event Executive’s employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the eighteen (18) month period following a Change of Control, then Executive shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and Benefits Plans, if any, or pursuant to any other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment within eighteen (18) months following a Change of Control, the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment following a Change in Control other than those benefits expressly set forth in this Section 9.

10. Conditional Nature of Severance Payments.

(a) Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee of the Company or any successor entity or cause an employee to leave his or her employment either for Executive or for any other entity or person. Additionally, Executive acknowledges that Executive’s right to receive the severance payments set forth in Section 9 (to the extent Executive is otherwise entitled to such payments) are contingent upon Executive complying with this Section 10 and upon any breach by Executive of this Section 10: (i) Executive shall refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement shall immediately cease.

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(b) Understanding of Obligations. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of such covenant.

11. Limitation of Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section 11, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits hereunder shall be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 11, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 11. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11. If there is a reduction pursuant to this Section 11 of the severance benefits to be delivered to Executive, such reduction shall first be applied to any cash amounts to be delivered to the Executive under this Agreement and thereafter to any other severance benefits of Executive hereunder.

12. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 12, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that

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the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump-sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

(b) Cause. “Cause” means any of the following: (i) the failure by you to substantially perform your duties with the Company (other than due to your incapacity as a result of physical or mental illness for a period not to exceed 90 days); (ii) the engaging by you in conduct which is materially injurious to the Company, its business or reputation, or which constitutes gross misconduct; (iii) your material breach of the terms of this Agreement, the Invention Agreement or any other agreements between you and the Company; (iv) the material breach or taking of any action in material contravention of the policies of the Company adopted by the Board or any committee thereof, including, without limitation, the Company’s policies adopted by the Board of Directors or any committee thereof (including, without limitation, a Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Procedures or Corporate Governance Guidelines, if any such policies are adopted by the Board of Directors); (v) your conviction for or admission or plea of no contest with respect to a felony; or (vi) an act of fraud against the Company, the misappropriation of material property belonging to the Company, or an act of violence against an officer, director, employee or consultant of the Company; provided, however, that in the event that any of the foregoing events in (i), (iii) or (iv) is capable of being cured, the Company shall provide written notice to you describing the nature of such event, and you shall thereafter have thirty (30) business days to cure such event.

(c) Change of Control. “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding anything to the contrary in this Agreement, a sale and issuance of capital stock of the Company in one transaction or a series of related transactions in a bona fide venture capital financing for capital raising purposes in which the holders of capital stock of the Company before the financing do not hold at least a majority of the voting power of the Company after the financing shall not constitute a “Change of Control” for purposes of this Agreement

(d) Disability. “Disability” shall mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason. “Good Reason” means any of the following unless such event is agreed to, in writing or as set forth below, by you: (i) a material reduction in your salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting employees of the Company, or its successor entity, generally; (ii) a material diminution of your duties or responsibilities relative to your duties and responsibilities in effect immediately prior to the Change of Control, provided however, that a mere change in your title or reporting relationship alone shall not constitute “Good Reason;” (iii) relocation of your place of employment to a location more than 35 miles from the Company’s office location at the time of the Change of Control; and (iv) failure of a successor entity in any Change of Control to assume and perform under this Agreement. If any of the events set forth above shall occur, you shall give prompt written notice of such event to the Company, or its successor entity, and if such event is not cured within thirty (30) days from such notice you may exercise your rights to resign for Good Reason, provided that if you have not exercised such right within 45 days of the date of such notice you shall be deemed to have agreed to the occurrence of such event.

13. Arbitration.

(a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal

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law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

(c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys fees.

(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

14. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise, and including, without limitation, a parent entity of any successor to the Company) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 14(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15. Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 15(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice).

16. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except as otherwise contemplated in this Agreement, shall any such payment be reduced by any earnings that Executive may receive from any other source.

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(b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement and the Invention Agreement constitute the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mentioned this Agreement.

(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions) shall govern the validity, interpretation, construction and performance of this Agreement.

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

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

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	NEUROGESX, INC.
	By:	/s/ Jeffrey Tobias
	Title:	CMO
EXECUTIVE	By:	/s/ Jeffrey Tobias
		Jeffrey Tobias, MD, FCCP

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EX-10.15

Exhibit 10.15

SEVERANCE AGREEMENT AND RELEASE

RECITALS

This Severance Agreement and Release (“Agreement”) is made by and between Wendye Robbins, M.D. (“Employee”) and NeurogesX, Inc. (“Company”) (collectively referred to as the “Parties”):

WHEREAS, Employee was employed by the Company;

WHEREAS, the Company and Employee executed an offer letter dated June 21, 2000 (the “Employment Agreement”);

WHEREAS, On July 15, 2000, the Company and the Employee entered into an Employee Proprietary Information and Invention Agreement (the “Invention Agreement”);

WHEREAS, the Company and Employee (or entities affiliated with Employee) have entered into the following agreements for the purchase of shares of Common Stock of the Company (collectively, the “Plan Stock Agreements”), subject to the terms and conditions of the Company’s 2000 Incentive Stock Plan (the “Plan”): Exercise Notice dated as of January 31, 2003; Investment Representation Statement dated as of January 31, 2003; Restricted Stock Purchase Agreement dated as of January 31, 2003; and the Joint Escrow Instructions dated as of January 31, 2003, Exercise Notice dated as of April 8, 2002; Investment Representation Statement dated as of April 9, 2002, Security Agreement dated as of April 9, 2002 and the Promissory Note (the “Second Note”) dated as of April 9, 2002;

WHEREAS, the Company and Employee have entered into a Founder Stock Purchase Agreement dated as of July 8, 2000, subject to a Stock Restriction Agreement dated June 28, 2000, and a Common Stock Purchase Agreement dated as of September 28, 2000 (collectively, the “Founder Stock Agreements”) pursuant to which the Employee purchased shares of the Company’s common stock subject to the terms and conditions of the Plan;

WHEREAS, the Employee purchased 16,000 shares of Series A Preferred Stock pursuant to that certain Series A Preferred Stock Purchase Agreement, dated as of June 28, 2000 (collectively, the “Preferred Stock Agreement,” along with the Plan Stock Agreements and the Founder Stock Agreement, collectively, the “Stock Agreements”);

WHEREAS, the Employee has transferred shares purchased pursuant to the Stock Agreements to Craig and Wendye McGahey (Trustees of the Trust of Craig and Wendye McGahey dated March 19, 1997), which subsequently transferred such shares to the following trusts for estate planning purposes: Craig & Wendye McGahey (TTEES of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended 9/17/01; Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Elena Marron McGahey; Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Robin Jenna McGahey; Craig McGahey, TTEE of McGahey Family

Trust dtd 12/26/02 for primary benefit of Simon Edward McGahey; and Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Jennifer Robbins Bolding (collectively, the “Trusts”), with each of such Trusts agreeing to be bound to the restrictions of Employee set forth under the Stock Agreements as if such Trusts were the Employee;

WHEREAS, the Company and Employee have entered into promissory notes dated September 28, 2000 (the “First Note,” along with the Second Note, collectively, the “Promissory Notes”). The obligations under the First Note are secured pursuant to a Security Agreement dated September 28, 2000, by shares of Company common stock purchased pursuant to the Common Stock Purchase Agreement dated as of September 28, 2000;

WHEREAS, the Parties, and each of them, wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that Employee may have against the Company as defined herein, including, but not limited to, any and all claims arising or in any way related to Employee’s employment with, or separation from, the Company;

NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows:

COVENANTS

1. Consideration.

(a) Employee hereby represents and warrants that she has executed and delivered to the Company her resignation as a member of the Board of Directors effective the date of the Company’s Board of Director’s approval of this Agreement. The terms and conditions of this Agreement are expressly contingent upon the execution and delivery of Employee’s resignation from the Board of Directors. Employee’s employment with Company will terminate on or about February 15, 2004 (the “Termination Date”), at which time the Company will pay Employee all outstanding salary, wages, accrued vacation, and submitted reimbursable expenses. Upon reasonable written request, the Company’s CEO will make himself or herself reasonably available on a not more than once a month basis during normal business hours to answer Employee’s questions concerning the Company’s business until the earlier of (i) the date the Employee ceases to be a shareholder of the Company; (ii) that date the Company effectuates an IPO, or (iii) the sale or merger of the Company, wherein the Company’s then current shareholders do not maintain a 50% interest or more in the surviving entity or that involves the sale or license of all or substantially all of the assets of the Company. Employee shall be able to keep her current telephone number and email address at the Company for six (6) months after the Effective Date of this Agreement. The Company also agrees to use reasonable efforts to permanently and prominently list Employee on its website as the sole founder of the Company. On an ongoing basis, the Company will also use reasonable efforts to reference the Employee as the sole original founder of the Company in all other mediums, as appropriate.

(b) Severance. Within 10 days of the Effective Date of this Agreement, the Company agrees to pay Employee a lump sum payment equivalent to six (6) months of the Employee’s base

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salary in effect as of the Termination Date, less applicable withholding (the “Lump Sum”). As additional consideration for the execution of this Agreement and in consideration of the services to be provided as set forth in section 1(c) below, the Company agrees to pay Employee $133,900.00 without any withholding in equal monthly payments over a twelve month period following February 15, 2004 consistent with the Company’s regular payroll practices. These payments will be due and owing regardless of whether the Company requests utilization of Employee’s services. The first payment will be made on the first regular payroll date following the Effective Date of this Agreement and will continue, thereafter, in accordance with the Company’s regular payroll practices, for the twelve (12) month period (the “Payment Period”). During the Payment Period, Employee will not be entitled to accrual of any employee benefits, including, but not limited to, vesting in stock options or vacation benefits. Employee and the Company agree that a 1099 shall issue with respect to all payments made during the Payment Period under this section, other than for the Lump Sum payment specified above. As further severance, the Company will continue providing medical insurance for Employee and her family through February 15, 2005. To the extent that the Company cannot maintain Employee on the Company’s medical insurance plan, and the Employee elects to continue her health insurance under COBRA, the Company will reimburse Employee for payments made by Employee pursuant to COBRA in accordance with the terms set forth in Section 1(f) below.

(c) Consulting Relationship. Employee agrees to remain with the Company as a consultant from the Termination Date through February 15, 2005 (the “Consulting Period”). It is the express intention of the Company that Employee performs services during the Consulting Period as an independent contractor to the Company. Nothing in this Agreement shall in any way be construed to constitute Employee as an agent, employee or representative of the Company. Without limiting the generality of the foregoing, Employee is not authorized to bind the Company to any liability or obligation or to represent that Employee has any such authority. Employee acknowledges and agrees that Employee is obligated to report as income all compensation received by Employee pursuant to this Agreement. Employee agrees to and acknowledges the obligation to pay all self-employment and other taxes on such income. During the Consulting Period, upon the request of the Company’s then current CEO, Employee shall be required to provide up to two days of service per month to the Company, without carryovers. Should the Company’s then current CEO reasonably request that Employee provide additional days of service beyond the two days in any given calendar month, Employee will be compensated at the rate of two thousand dollars ($2,000) per day for each day beyond the two days specified herein. During the Consulting Period, the Company shall reimburse Employee for travel related expenses incurred and submitted during the Consulting Period, provided however that the total amount reimbursed during the Consulting Period shall not exceed six thousand dollars ($6,000.00), unless the Company consents in writing otherwise. Employee shall be permitted to accept other employment or consulting relationships during the Consulting Period. However, Employee agrees that, during the Consulting Period, she will not, without the prior written consent of the Company, (i) serve as a partner, employee, consultant, officer, director, manager, agent, associate, investor, or (ii) directly or indirectly, own, purchase, or organize, or (iii) build, design, finance, acquire, lease, operate, manage, invest in, work or consult for or otherwise affiliate himself/herself with any business, in competition with the Company’s business in the peripheral neuropathic pain/capsaicin space, which shall be more specifically defined as

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involving any work concerning the TRPV1 (formerly known as the VR1) receptor, capsaicin, capsaincinoids, or other molecules active at this TRPV1 receptor on peripheral nerves. Subject to the Company’s removal of any Company property and proprietary information contained in such devices, Employee shall be allowed to keep the Company’s laptop computer and blackberry device currently used by her upon termination of the Consulting Period.

(d) Stock. The Parties agree that for purposes of determining the number of shares of the Company’s common stock which have been released from the Company’s Repurchase Option under the Stock Agreements (the “Released Shares”) as of the Effective Date the Employee shall be considered to have vested in, and the Company’s Repurchase Option shall be considered to have been terminated as to, 100% of the total shares subject to the Stock Agreements and purchased by the Employee. Notwithstanding anything to the contrary in this Agreement, all shares, including those no longer subject to the Repurchase Option, shall continue to be subject to all other terms of the Stock Agreements, as applicable.

(e) Bonus Payment. Within 10 days of the Effective Date of this Agreement, the Company agrees to pay to the Employee a lump sum payment in the total amount of forty thousand dollars ($40,000.00.)

(f) Benefits. Employee’s health insurance benefits will cease at the end of February 2004, subject to Employee’s right to continue her health insurance under COBRA. Should Employee elect COBRA, the Company shall reimburse Employee for up to 12 months of health care coverage under COBRA, upon submission to the Company. Reimbursement shall be grossed up if necessary to ensure that Employee is fully reimbursed for any COBRA premium and any tax incurred on the part of Employee in connection with the reimbursement payment. Employee’s participation in all other benefits and incidents of employment ceased on the Termination Date. Employee ceased accruing employee benefits, including, but not limited to, vacation time and paid time off, as of the Termination Date.

(g) C101 Article. The Company and Employee hereby agree that with respect to authorship of the C101 article submitted by the Company to the journal “Pain,” that Alan Basbaum (the “Reviewer”) shall review the C101 article and the contributions to such article made by the various authors of such contributions and determine whether the Employee should be considered the senior author of such article. The Company and Employee hereby agree to be bound by the decisions of the Reviewer. If Mr. Basbaum notifies the Company and the Employee that he cannot serve as the Reviewer, then the Company and the Employee shall choose a person to fill the role of the Reviewer that is mutually acceptable to the Company and the Employee.

2. Repayment of Promissory Notes. Within thirty (30) days of the Effective Date of this Agreement, Employee agrees to fully repay all principal and interest on the Promissory Notes executed by Employee in favor of the Company.

3. Stock Ownership. Employee hereby represents and warrants that: (i) all stock owned by Employee and the Trusts is as set forth on Exhibit A; (ii) Employee has no right to receive any capital stock of the Company in addition to the stock set forth on Exhibit A, other than through the

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Right of First Offer contained in the Investors’ Rights Agreement by and between the Company and the parties named therein, dated as of January 18, 2002, as may be amended from time to time (the “IRA”); and (iii) Employee, Trusts and all holders of stock initially purchased pursuant to the Stock Agreements remain bound by the Stock Agreements and the Voting Agreement by and between the Company and the parties names therein, dated as of January 18, 2002, as may be amended from time to time, and remain subject, as applicable, to the co-sale provisions of the IRA.

4. Confidential Information. Employee shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the Confidentiality Agreement between Employee and the Company. Employee shall return all of the Company’s property and confidential and proprietary information in his/her possession to the Company on the Effective Date of this Agreement. Employee agrees to execute by the Effective Date of this Agreement a Confidential Information and Invention Assignment Agreement in the form attached hereto as Exhibit B (the “Consultant Invention Agreement”).

5. Payment of Salary. Employee acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions, reimbursable expenses and any and all other benefits due to Employee once the above noted payments and benefits are received.

6. Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company and its officers, managers, supervisors, agents and employees. Employee, on his/her own behalf, and on behalf of his/her respective heirs, family members, executors, agents, and assigns, hereby fully and forever releases the Company and its officers, directors, employees, agents, investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns, from, and agree not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation:

(a) any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

(b) any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c) any and all claims under the law of any jurisdiction including, but not limited to, wrongful discharge of employment; constructive discharge from employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

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(d) any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, Older Workers Benefit Protection Act; the California Fair Employment and Housing Act, and the California Labor Code;

(e) any and all claims for violation of the federal, or any state, constitution;

(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

(h) any and all claims for attorneys’ fees and costs.

The Company and Employee agree that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement.

Employee acknowledges and agrees that any material breach of any provision of this Agreement shall entitle the Company to cease the severance benefits and payments provided to Employee under this Agreement, and to pursue such other remedies as are available at law or equity, provided that the Company, in good faith, informs Employee of the breach in writing and Employee fails to cure the breach within fifteen (15) days.

7. Acknowledgement of Waiver of Claims Under ADEA. Employee acknowledges that he/she is waiving and releasing any rights he/she may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he/she has been advised by this writing that

(a) he/she should consult with an attorney prior to executing this Agreement;

(b) he/she has up to twenty-one (21) days within which to consider this Agreement;

(c) he/she has seven (7) days following his/her execution of this Agreement to revoke this Agreement;

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(d) this Agreement shall not be effective until the revocation period has expired; and,

(e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.

8. Civil Code Section 1542. The Parties represent that they are not aware of any claim by either of them other than the claims that are released by this Agreement. Employee acknowledges that he/she had the opportunity to seek the advice of legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee, being aware of said code section, agrees to expressly waive any rights he/she may have thereunder, as well as under any other statute or common law principles of similar effect.

9. No Pending or Future Lawsuits. Employee represents that he/she has no lawsuits, claims, or actions pending in his/her name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Employee also represents that he/she does not intend to bring any claims on his/her own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

10. Application for Employment. Employee understands and agrees that, as a condition of this Agreement, he/she shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he/she hereby waives any right, or alleged right, of employment or re-employment with the Company, its subsidiaries or related companies, or any successor.

11. Confidentiality. The Parties acknowledge that Employee’s agreement to keep the terms and conditions of this Agreement confidential was a material factor on which all parties relied in entering into this Agreement. Employee hereto agrees to use his/her best efforts to maintain in confidence: (i) the existence of this Agreement, (ii) the contents and terms of this Agreement, (iii) the consideration for this Agreement, and (iv) any allegations relating to the Company or its officers or employees with respect to Employee’s employment with the Company, except as otherwise provided for in this Agreement (hereinafter collectively referred to as “Settlement Information”). Employee agrees to take every reasonable precaution to prevent disclosure of any Settlement Information to third parties, and agrees that there will be no publicity, directly or indirectly, concerning any Settlement Information. Employee agrees to take every precaution to disclose Settlement Information only to those attorneys, accountants, governmental entities, and family members who have a reasonable need to know of such Settlement Information. Notwithstanding the foregoing (i) Employee shall be entitled to show the contents of this Agreement to her spouse, legal counsel, and accountants legally obligated not to disclose Settlement Information and (ii) Employee shall be entitled to disclose to third parties that Employee is or was a consultant to the Company.

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12. No Cooperation. Employee agrees he/she will not act in any manner that might damage the business of the Company. Employee agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so. Employee further agrees both to immediately notify the Company upon receipt of any court order, subpoena, or any legal discovery device that seeks or might require the disclosure or production of the existence or terms of this Agreement, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or legal discovery device to the Company.

13. Non-Disparagement and Non-Interference. Employee and the Company each agree to refrain from any defamation, libel or slander of each other or tortious interference with the contracts and relationships of each other. All inquiries by potential future employers of Employee will be directed to the Chief Executive Officer of the Company. Upon inquiry, the Company shall only state the following: Employee’s last position and dates of employment.

14. Non-Solicitation. Employee agrees that for a period of twelve (12) months immediately following the Effective Date of this Agreement, Employee shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage, take away or hire employees of the Company, either for him/herself or any other person or entity.

15. No Admission of Liability. The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Parties hereto, or either of them, either previously or in connection with this Agreement shall be deemed or construed to be: (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by either party of any fault or liability whatsoever to the other party or to any third party.

16. No Knowledge of Wrongdoing. Employee represents that he/she has no knowledge of any wrongdoing involving improper or false claims against a federal or state governmental agency, or any other wrongdoing that involves Employee or other present or former Company employees.

17. Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

18. Pleading of Agreement in Certain Legal Proceedings. Employee agrees that in any action or proceeding contrary to the provisions of the release in Sections 6 and 7 above which may be commenced, prosecuted or threatened by Employee or for Employee’s benefit, upon Employee’s initiative, or with Employee’s aid or approval, this Agreement may be pled by the Company as a complete defense, or may be asserted by way of counterclaim or cross-claim.

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19. Arbitration. The Parties agree that any and all disputes arising out of, or relating to, the terms of this Agreement, their interpretation, and any of the matters herein released, shall be subject to binding arbitration in Santa Clara County before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes. The Parties agree that the prevailing party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award. The Parties agree that the prevailing party in any arbitration shall be awarded its reasonable attorneys’ fees and costs. The Parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury. This section will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Employee’s obligations under this Agreement and the agreements incorporated herein by reference.

20. Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Employee represents and warrants that he/she has the capacity to act on his/her own behalf and on behalf of all who might claim through him/her to bind them to the terms and conditions of this Agreement. Each party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.

21. No Representations. Each party represents that it has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

22. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision so long as the remaining provisions remain intelligible and continue to reflect the original intent of the Parties.

23. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Employee concerning the subject matter of this Agreement and Employee’s relationship with the Company, and supersedes and replaces any and all prior agreements and understandings between the Parties concerning the subject matter of this Agreement and Employee’s relationship with the Company, with the exception of the Invention Agreement, the Consultant Invention Agreement, the Stock Agreements and the Promissory Note.

24. No Waiver. The failure of any party to insist upon the performance of any of the terms and conditions in this Agreement, or the failure to prosecute any breach of any of the terms and conditions of this Agreement, shall not be construed thereafter as a waiver of any such terms or conditions. This entire Agreement shall remain in full force and effect as if no such forbearance or failure of performance had occurred.

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25. No Oral Modification. Any modification or amendment of this Agreement, or additional obligation assumed by either party in connection with this Agreement, shall be effective only if placed in writing and signed by both Parties or by authorized representatives of each party.

26. Governing Law. This Agreement shall be deemed to have been executed and delivered within the State of California, and it shall be construed, interpreted, governed, and enforced in accordance with the laws of the State of California, without regard to conflict of law principles. To the extent that either party seeks injunctive relief in any court having jurisdiction for any claim relating to the alleged misuse or misappropriation of trade secrets or confidential or proprietary information, each party hereby consents to personal and exclusive jurisdiction and venue in the state and federal courts of the State of California.

27. Attorneys’ Fees. In the event that either Party brings an action to enforce or effect its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including the costs of mediation, arbitration, litigation, court fees, plus reasonable attorneys’ fees, incurred in connection with such an action.

28. Effective Date. This Agreement is effective after it has been signed by both parties and after eight (8) days have passed since Employee has signed the Agreement (the “Effective Date”), unless revoked by Employee within seven (7) days after the date the Agreement was signed by Employee.

29. Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

30. Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that:

(a) They have read this Agreement;

(b) They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c) They understand the terms and consequences of this Agreement and of the releases it contains; and

(d) They are fully aware of the legal and binding effect of this Agreement.

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

	NEUROGESX, INC.
Dated: 2/12/04	By	/S/    ANTHONY DITONNO
		Anthony DiTonno
		Chief Executive Officer
	Wendye Robbins, M.D., an individual
Dated: 2.12.04	/S/    WENDYE ROBBINS

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EXHIBIT A

Wendye Robbins, M.D.: 1,000 shares of Common Stock

Craig & Wendye McGahey (TTEES of the Trust of Craig & Wendye McGahey, dtd 3/19/97, as amended 9/17/01: 3,109,167 shares of Common Stock and 32,000 shares of Preferred Stock

Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Elena Marron McGahey: 50,000 shares of Common Stock

Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Robin Jenna McGahey: 50,000 shares of Common Stock

Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Simon Edward McGahey: 50,000 shares of Common Stock

Craig McGahey, TTEE of McGahey Family Trust dtd 12/26/02 for primary benefit of Jennifer Robbins Bolding: 50,000 shares of Common Stock

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EXHIBIT B

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EX-21.1

Exhibit 21.1

Subsidiaries of NeurogesX, Inc.

Name	Jurisdiction of Incorporation/Organization
NeurogesX UK Limited	United Kingdom

EX-23.1

Exhibit 23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated February 5, 2007, in the Registration Statement (Form S-1) and related Prospectus of NeurogesX, Inc. for the registration of its shares of common stock.

/s/    Ernst & Young LLP

Palo Alto, California

February 7, 2007